Susan Handelsman Provides Cost-Benefit Info on Clay Academy D200 Did Not

Susan Handelsman, who has been bird-dogging Woodstock School District 200 for several years is presenting the following information on Clay Academy to make sure it is on the public record.

Public Comment to the Woodstock School Board

Clay Academy

Facility review committee was given incomplete information about the costs of running Clay Academy. Clay building has operating capacity for 300 students.

It currently hosts enrollment of 70, and only 11 (or 16%) of those students are from our own D200 taxing district.

The tuition these other 59 students pay does not begin to cover the cost of their enrollment.

D200 Taxpayers must pay for all additional costs to educate out-of-district students.

Rather than debating the Clintonesque interpretation of the word ‘operates’ in the Superintendent’s assertion that Clay ‘operates’ at a breakeven, let’s attempt to quantify all the costs to D200 taxpayers which were NOT included in the equation underlying that ‘operational’ breakeven assertion:

  1. Costs of the building.

Unless Clay classes are held in public parks and alleys, the costs of keeping Clay building compliant with life&safety standards must be factored in to the costs of maintaining a discount rate tuition-based school for other districts’ taxpayers’ benefit.

There is over $2 million demanded in improvements for the next ten years for Clay building, and the $10.5 million Life&Safety bond issued in 2010 described in large part Clay building projects as needed basis of debt.

We can assume a minimum of $200,000 per year just to keep old, according to administration zero value real estate, up to code.

  1. Costs of Exterior Maintenance.

Figures distributed to FRC included $2 million annual budget for exterior maintenance.

There are 12 school buildings.

Assuming the two high schools cost half the total exterior maintenance budget ($1/2million each), splitting the remaining $1 million over the remaining 10 schools allocates $100,000 per year exterior maintenance budget to Clay building.

  1. Costs of liability (insurance).

Tort fund taxes $700,000 per year. Some portion can be attributed to Clay. On a straight percentage of enrollment basis, that is 1% or $7000 per year.

  1. Use of District Resources.

Does Clay operate as an island without any use of D200 IT workforce, or software, or hardware, or infrastructure? Does Clay command any portion of the work-time of the District-wide Special Ed Administrators employed at D200 taxpayer expense? What about Superintendent and Financial managers of the District? What about Clay building share of the hundreds of thousands of tax dollars in consultant fees paid for mandatory building inspections and other consultations?

Conservative estimates indicate minimum $100,000 per year of annual workforce time value/ assets and resource value attributable to Clay.

(It is tempting to say it is ‘free’ because it is ‘surplus capacity’ (time, resources, etc’).

That is false logic. Start deleting those time/resource allocations and see whether D200 could eliminate even just 1 FTE…that would equate to $100,000 present value annual taxpayer dollars right there.

OR, answer this: what OTHER uses of these resources which might benefit in-district student are being neglected because those resources are given away for free to Out-Of-District –Discount-Tuition-Students?).

  1. The BIG COST THAT DWARFS ALL COSTS:  UNFUNDED PENSION LIABILITY.

Even before the 2017 Illinois Law was passed which shifts all pension burdens to local taxpayers, D200 was assuming the first priority guarantor liability of OPEB: which stands for Other Post Employment Benefits. Right now, D200 taxpayers pay about half a million dollar$$ a year for OPEB.  That is a cost in part to pay for $6600 per year health insurance premiums every year from when a TRS employee retires at age 53 until they turn age 65. The current premium rate is determined by State agency which has posted a 5% increase per year for near future years.

How much of that $500,000 per year is attributable to some of the 35-40 Clay Academy employees? How will that $500,000 grow in the future?

But OPEB is peanuts compared to PENSION LIABILITY and ACTUARIALLY DETERMINED UNFUNDED PENSION LIABILITY which has now been shifted from being an ILLINOIS STATE TAX liability to being a local property tax liability.

38% of salary is now local taxpayer responsibility, which is in addition to current local taxpayer responsibility to contribute 8% OUT OF THE 9% STATE REQUIRED EMPLOYEE PENSION CONTRIBUTION.

TO MAKE THAT MORE CLEAR: TRS BENEFIT ENTITLEMENT RECIPIENTS ARE NOT REQUIRED TO DEDUCT 6% OF THEIR SALARIES FOR SOCIAL SECURITY, AND THEY ARE NOT REQUIRED TO DEDUCT 9% OF THEIR SALARY FOR COLA PENSIONS which are worth multimillions of dollars in present value according to annuity calculators:

THEY ARE REQUIRED TO DEDUCT 1% OF THEIR SALARY FOR PENSIONS WHICH WILL PAY MULTIPLES OF SOCIAL SECURITY EXPECTED BENEFITS AND MAY BEGIN COLLECTING AT AGE 53 RATHER THAN AGE 65.

AND, THEY ONLY PAY 10% OF insurance premiums, and Zero% after they retire at age 53.

Illinois now has the right to demand that at any time in the future the actuarial defined unfunded liability of the pension fund exceeds 90% of funded value, the difference will be demanded from local taxpayers.

Let that sink in. IF the stock market ever crashes again, OR the pension managers make bad bets or even if the pension managers engage in fraud…LOCAL TAXPAYERS MUST BAIL THEM OUT.

How can we determine the quantifiable value of this encumbrance?

Clay has 35-40 employees for 11 in-District enrollment. Would Clay need this many employees if 59 of other Districts’ taxpayers’ students  were NOT HERE?

Let’s assume that 11/70= 15.7%= the proportion of Clay TRS employees to whom local taxpayers would be obligated to pay OPEB and constitutionally guaranteed pension benefit entitlements.

Are half of Clay employees TRS entitled?

35/2 X .16 = 2.8

That is, ordinarily D200 taxpayers would be on the hook to guarantee, with their homes as collateral, 2.8 TRS employees’ pension benefit entitlements for our 11 students?

That leaves 14.7 employees for whom the taxpayers of D200 are being required to guarantee pension contributions AND to guarantee that when the stock market crashes or poor judgment or fraud by pension fund managers occurs in the future, our home value should serve as collateral to guarantee these pension and benefit entitlements for benefit of teachers teaching other districts’ children .

Let’s assume that the guarantee of multimillion dollar present-value benefits for which State of Illinois used to pay 38% of salary, AND OPEB which was always locally guaranteed,  are valued at payment of $10,000 per year per employee.

That indicates a total $147000 per year contribution obligation for D200 taxpayers.

TOTAL ASSUMPTIONS COST OF 59 NON-D200 TUITION STUDENTS NOT INCLUDED IN SUPT. COSTS:

$554,000 per year tax burden solely on D200 taxpayers, THE FIRST YEAR. (amortized over 11 D200 students).

That is, $50,000 per in district Clay Student is the additional cost charged to D200 taxpayers in order to run Clay Academy as a discount tuition choice for other districts taxpayers.

Look at this another way:

if another District offered D200 the choice to send its own 11 students to that school for a net cost of $16,000 per each student per year, WOULD YOU ON THE SCHOOL BOARD OBJECT? That is what Clay is offering to the 59 out-of-district students enrolled, at a cost of at minimum $300,000 per year to your community, rising annually in excess of rates of inflation and limitless in terms of future liability.

Contracts, as you know, contain inflationary escalation, so the costs next year will be 4-5% higher (=$576,160…the next year, $599206).

So whatever the cost per each of  11 D200 students Superintendant Moan asserted, add $554,000 divided by 11 students, which is over $50,000 per D200 student.

Now you school board members know the magnitude of the taxpayer liability which YOU are responsible for inflicting on local taxpayers in order to maintain a discount alternative for other wealthier districts’ tuition students, if you choose to ignore it.

This Board should actively, not passively, decide whether it is a good forced allocation of D200 taxpayers’ limited Special Ed Funding to subsidize other district’s students when so many good alternatives exist

Here are alternatives which should be discussed by this Board:

  1. Give Clay building to Allendale School, which is one of many Clay competitors.

(D200 has listed a great many schools which offer special education services in your FRC report online.  Time for School Board Members who sought election to responsibly oversee a $100,000,000+ budget to do some research on cost efficiencies being willfully overlooked).

Allendale could takeover Clay Academy operations intact.

  1. A parents group may form a charter school operation to take over operating Clay Academy.
  2. Send 11 D200 students to Allendale, or to SEDOM. The tuition minus State reimbursements total a big savings for D200 taxpayers.

(Compare the total costs to the other districts’ taxpayers sending their children to Clay, at a net cost to those taxpayers of about $16,000 per student. If those 59 students were absorbed by Allendale or SEDOM, they may lower the overall tuition costs for all students there.)


Comments

Susan Handelsman Provides Cost-Benefit Info on Clay Academy D200 Did Not — 16 Comments

  1. I guess my first question is: what is Allendale’s per student cost for an enterprise similar to Clay School?

    All I can get out of their audited 2016 financials is that they spent $33,000,000 providing services of all kinds to just over 1,000 children.

    Some of those children received services for one day; some receive residential care.

    If Ms. Handelsman thinks Allendale can do better- show the public some numbers.

    As to IL public pensions for staff there- could Ms. Handelsman show us what percentage of the employees there are participating in the legacy pension program, the percentage of more recent hires participating in the 401K program, and the percentage of employees who have chosen to stay out of the program.

    She may be surprised to learn that not all municipal employees participate in the pension program.

  2. What do you mean 38% of salary is now local taxpayer responsibility?

    Haven’t heard the state is no longer picking up the local employer contribution to the pension fund?

    ++++++++

    There are some changes to the way state pensions are handled when Senate Bill 42 (SB 42) which was signed into law as Public Act 100-0023 (PA 100-0023) when the General Assembly overrode the Governor’s veto of the bill on July 6, 2017.

    SB 42 was passed by the Senate on May 23rd, amended and passed by the House on July 3rd, the Senate concurred on July 4th, and the Governor vetoed the bill on July 4th.

    SB 42 (Budget Implementation Bill aka BIMP) is one of 4 budget bills that passed into law this year.

    The others being:

    SB 6 (Spending Bill aka appropriations bill aka Democrat Budget), PA 100-0021.

    SB 9 (Revenue Bill), PA 100-0022.

    SB 1947 (Education Funding Reform), PA 100-0465.

  3. SB 42 page 348 onward describes pension shift.

    Superintendent indicated net cost of $30,000 per student to Allendale in figures given to facility review committee.

    Illinois school report cards indicate over 14% annual teacher turnover rate.

  4. Can’t understand that jargon at first look.

    May be referring to the new Tier III?

    Doubt it applies to current employees…that would have been headline news.

  5. Here are some websites that go over the TRS changes in SB 42 / PA 100-0023.

    ++++++++++

    Pensions & Investments

    Illinois Budget Implements Pension Reforms for Certain State, Chicago Plans

    July 7, 2017

    by Megan Kilroy

    http://www.pionline.com/article/20170707/ONLINE/170709934/illinois-budget-implements-pension-reforms-for-certain-state-chicago-plans

    +++++++++++++++++

    Glen Brown blog

    July 12, 2017

    Tier II (Tier III) Optional Benefit Structures for TRS of Illinois (from Senate Bill 42, Public Act 100-0023 “Budget Implementation Act” Pages 270-83)

    teacherpoetmusicianglenbrown.blogspot.com/2017/07/tier-iii-benefit-structure-for-trs-of.html

    +++++++++++++++++++

    Glen Brown blog

    July 17, 2017

    Let’s Review the Creation of the So-Called Tier III Pension Plan

    teacherpoetmusicianglenbrown.blogspot.com/2017/07/lets-review-creation-of-so-called-tier.html

    ++++++++++++++++++

    TRS

    Creation of TRS Tier III

    July 7, 2017

    trsil.org/node/833

    +++++++++++++++++++

    IEA

    Tier III Pensions: Frequently Asked Questions and Answers

    July 13, 2017

    ieanea.org/2017/07/13/tier-iii-pensions-frequently-asked-questions-and-answers

  6. Handel’s man is another most interested in convincing the unknowing public that she is some sort of intellectual as opposed to a somewhat dense and stupid person

  7. Doodie, must you dirty up this blog with your inanities?

    Are you one of the Bobby Miller clan?

    Miller got booted; go find a new host to parasitize!

  8. I will agree I’m stupid and dense.

    It takes me a long time to study and try to understand complex issues behind our property tax rate crisis, especially school funding.

    But you are mistaken I’m trying to convince anyone of anything intellectual about me; public opinion does not have impact on my life such as it is.

    Perhaps you are misinterpreting reasons for the (overly long)details/descriptions and source citations.

    This is not to ‘cast an impression’ on readers, this is to provide facts (which can be checked by skeptics) for consideration by readers.

    We have a horrible property tax rate crisis (over 4.2% of total home fair market value) in Woodstock.

    The D200 school board hired many employees on a consent agenda without discussion at latest meeting.

    They do not seem to do independent research on expemditures or implications of new hiring under new Illinois law before voting in expenditure

    One notable exception: thank you for your integrity Board Member John Parisi. He pulled a consent agenda item out for discussion:

    One item the Facility Review Committee voted to do nearly unanimously was to stop leasing an Administrative Annex building across the street from the district owned administrative office building.

    There have been 8 meetings ostensibly to get public input on all options which committee had considered.

    Cancellation of the annex lease was barely mentioned and not discussed, because it was assumed this no-brainer tax savings of over $70.000 annual expense for office space when wings of school buildings sit empty was a foregone conclusion.

    At meeting 4 Superintendent let slip the annex lease would be cancelled next year, not this September as implied.

    When I asked him, he told me school board had voted to renew the lease for a year on half the building.

    I asked board member Parisi at next meeting which agenda has included this lease renewal vote.

    He said it was up for vote the following night, it was on the consent agenda and he would ask it to be pulled.

    By his efforts, taxpayers were saved $35,000.

    I don’t know any other way to bring what looks like profligate waste and inefficiency to the attention of 7 people who vote without looking into these matters themselves.

    But i am not trying to be prrceived intellectual.

    I’m trying to be practical.

  9. Susan, D-200 does charge a fairly large rate for outside students.

    I am guessing that it varies by the type of program.

    You would have to pull apart each program to identify specific costs and match it with any outside tuition revenue.

    In general, the outside tuition rate is supposed to be at the break-even point.

    Accepting outside students helps absorb fixed costs the district would otherwise incur.

    As to OPEB costs, it might be interesting to have the finance staff breakout the $546K in OPEB costs.

    Based on the audit report, it looks like D-200 pays the insurance costs of retired administrators until they’re 65 and other insurance costs for IMRF retirees.

    A quick check of other districts’ OPEB costs shows: Huntley D-158 at $0, Cary D-26 at $0, D-155 at $41K, and Crystal Lake D-47 at $567K. $546K seems like an awfully expensive, unnecessary benefit.

    As to SEDOM, many districts are pulling out and SEDOM will be dissolved/reorganized in some manner.

    At the August SEDOM Board meeting member districts voted on the upcoming Budget submission which reflected a deficit.

    I argued rather sternly against approving another deficit.

    I believe I only convinced 1 other district to vote No.

    SEDOM has a significant unfunded IMRF liability of $3.4 million with a like amount remaining in Fund Balance.

    I thought it might be a great idea to preserve that fund balance to cover the unfunded liability during the dissolution process.

    Because that liability just doesn’t go away once SEDOM dissolves.

    The IMRF lawyers are already trying to determine how portions of that liability get pushed back to the member districts.

    So, Susan, when you look at D-200’s reported IMRF unfunded pension liability number of $10.6 million, it will likely go higher once D-200 eats their allocated share of SEDOM’s number.

  10. Below is another article that discusses changes to the TRS pension plan that were part of Senate Bill 42 which was signed into law as Public Act 100-0023 on July 6, 2017 with the General Assembly’s override of Governor Rauner’s veto of the bill.

    The article does a good job at explaining how the state will no longer pick up the normal (current year, not including unfunded liability) portion of TRS pension contribution for the portion of an employees creditable earnings (pensionable income) that is greater than the Governor’s salary.

    ++++++++++++++

    Scariano, Himes and Petrarca

    Illinois Legislature Shifts High salary TRS Pension Costs to Local Districts and Creates New Tier III TRS Plan

    by Adam Dauksas

    July 31, 2017

    http://www.edlawyer.com/eblackboard/2017/7/31/illinois-legislature-shifts-high-salary-trs-pension-costs-to-local-districts-and-creates-new-tier-iii-trs-pension-plan

    ++++++++++++++

    This is a cost shift back from state to local that only effects the employer pension contributions of highly compensated employees.

    The cost shift is small, but will more cost shifts follow, given the state’s miserable financial condition?

    One of the big structural problems with the TRS pension system is the state picks up almost all of the employer contribution to TRS (the local school district only contributes .58%, which is a little over 1/2 of 1%).

    This has resulted in the historic problem of large compensation packages in a lot of Chicago area school districts, and large end of career salary increases in a lot of Chicago area school districts, since the state, not employer, is responsible for almost all of the employer pension contributions and the resulting unfunded liability.

    TRS is under 40% funded, which is awful for a pension fund.

    As an analogy, think of carrying a credit card balance of 60% of what was charged.

    Imagine the interest you would rack up month after month, year after year.

  11. Mr. C.:

    If there were 59 in-district students being served by Clay, and 11 out-of-district tuition students enrolled, I might agree with the argument that they ‘help.defray expenses.’

    But the numbers are reversed.

    For 11 in-district students, D200 is running a school with 35-40 employees, charging nothing in tuition toward enormous costs of keeping a very old building up to code, and using D200 resources (personnel and equipment and the soft cost of liability) without any compensation by tuition payers.
    Also, several actual costs were inexplicably simply ignored.

    A $2.6 million annual cost is put to,D200 taxpayers to run what amounts to a competitor to Allendale, and at much lower tuition rate than Allendale is said by D200 Superintendent to charge in tuition $45,0000).

    Here are the numbers given to us on facility subcommittee of Facility Review Committee by D200 Admin:
    ( of the 3 sets of financials we were given, I’m including only the last set which was most favorable to the Admin persistent assertion that ‘Clay Academy operates at a break even’. )

    33 FTE staff costing $1.873 million.
    Reimbursement $211,200
    Total staff cost $1661874

    Building budget $23072
    O&M cost. $76200

    “Total cost to operate Clay” $1761146
    “Tuition Revenue ” $1,719109

    “Net cost to,operate Clay” $42037
    “D200 cost per student” ( meaning, the 11 in-district children ). $3821.55

    But here’s the problem with that number: it doesn’t include all the real costs which must be paid by D200 to run Clay Academy.

    Those costs I have described above.

    And I believe my estimates are deliberately low.

    If we take the $550,000 of actual costs absorbed by d200 taxpayers alone to keep Clay open, and spread it over the actual in-district enrollment, we arrive at a total $53821.55 cost per each of 11 d200 students.

    Look at it another way:

    Superintendent Moan claims Allendale charges $45,000 per student.

    Clay charges $29,000 per student.

    Illinois rebates $14,717-$15,492 per student sent to another district.

    Therefore, 59 out- of -district students are paying a net cost of $14,000 per student to attend Clay.

    11 D200 students are paying equivalent of $53,821 to attend Clay.

  12. Lets clean up a couple of issues.

    First you asked: “How much of that $500,000 per year is attributable to some of the 35-40 Clay Academy employees?”

    I believe the answer is Zero.

    The audit report indicates OPEB costs are recognized on a “pay as you go” basis, so its only for current period expenses incurred for retired employees, not active employees.

    A useful exercise would be to ask the finance department to provide the breakout on what was spent on OPEB and then ask questions as to why the district has programs that incur substantial expense for staff that no longer work for the district.

    Second, if Clay were to close, I don’t think there would be any variable headcount savings attributable to administrative functions such as IT, Finance, HR, etc.

    Third, Allendale still has at least 2 more years left on its lease of a building in Woodstock owned by SEDOM.

    They may or may not have capacity (or even the desire) to absorb some or all of the students and programs currently at Clay.

    With outsourcing, D-200 will still be stuck with the ongoing costs of owning a shuttered building.

    Fourth, closing Clay and moving elsewhere in the district or even outsourcing might generate some minor savings on the district’s premiums for general liability and workers comp insurance.

    Fifth, your estimate for exterior maintenance of $100K/year seems astronomically high for that property.

    It is just a building and parking lots, there are no fields to maintain.

    More deetail is needed there.

    Sixth, future Capital costs for an older building can be significant.

    I assume the

    ]disrict has identified a projects list specific to this building with costs and timeframes. I would also assume that the district doesn’t want to invest more cash into a aging building when there are alternatives.

    In general, it would be better to move out too soon rather than too late.

    Has the district generated a financial model forecasting what an outsourced scenario would look like?

    If D-200’s 11 students were absorbed at $45K/year by Allendale and the district had to eat the maintenance/operating costs related to maintaining a vacant building, is that more or less than where D-200 is today?

  13. Mr. C.,
    Thank you for engaging on this. Your input is valuable.

    1. Clay has been operating with tuition students for many years.
    OPEB vesting period/obligation is not clear to me, perhaps you know.

    But each year that those OPEB entitlements grow for the staff who are ONLY employed because there are 59 tuition students, and that OPEB future cost burden is not factored into tuition these students pay, we are building a future entitlement which must be paid by D200property taxpayers, right?

    2. No Variable headcount savings projection if Clay closes. I can’t speculate on that,I am not made aware of the time and attention to Clay is required from each of the MANY MANY District Special Ed administrators and secretaries, as well as IT and more general Admnin staff employed at D200 taxpayer expense.
    But that still does not answer the question: is it equitable to devote ANY D200 resources, paid for and guaranteed (OPEB, unfunded pensions and all) by D200 taxpayers, without any compensation from those out-of-district taxpayers receiving those free resources?
    The next such support worker hired, would they have been needed if the others had time/resources free which are otherwise devoted to Clay duties?

    Look at a reasonably likely extreme: should d200 taxpayers be required to keep Clay open at full expense and liability if there is ZERO in-district enrollment?

    3. You say a building is owned by SEDOM? Why is D200 stuck with the entire cost of a shuttered building owned by SEDOM?
    But costs of a shuttered building can be quantified. Costs of demolition can be quantified.
    These costs can be weighed against the ongoing enormous costs now and in the future of keeping Clay as a D200 enterprise.
    For example, Clay building is said to be of negative value for that very reason,and taxpayers will be required to pay at least $2 million to get it to life&safety specs.
    The cost of demolition is far less than $2 million.
    Allendale may NOT want to take over Clay. I assume YOUR district would ALSO not want to take over Clay!
    Apparently SEDOM is not doing well?
    How is it Clay in D200, a district in the worst financial shape in the county, obligated to take on a business model that others are reluctant or unwilling to take on, with 84% of enrollment coming from out-of-district
    4. every bit helps. And this is high risk enrollment, isnt it? We were told on Facility Review Committee they must have their own separate building with metal detectors. One incident would generate a huge liability, I believe, and our community must pay amounts above policy limits.

    5. $100 K IS astronomically high!!! Here is my explanation written above:

    Costs of Exterior Maintenance.

    Figures distributed to FRC included $2 million annual budget for exterior maintenance.

    There are 12 school buildings.

    Assuming the two high schools cost half the total exterior maintenance budget ($1/2million each), splitting the remaining $1 million over the remaining 10 schools allocates $100,000 per year exterior maintenance budget to Clay building.”

    (and. those costs do not include the future OPEB and unfunded pension liability.)

    (ps our Board has never been willing to even discuss outsourcing trans, maintenance, or anything).

    6. Yes the Admin gave FRC lists of Life&Safety costs coming up: $2 million for Clay.

    (PS there was a $10.5 million bond in 2010 for L&S. Much of that was for stated Clay projects, and we are still paying off the bond. SO the $2 million is on top of the remainder owed from some portion of $10.5 million 7 years ago).

    7. financial model froecast? You must bew joking. They do not entertain such notions.

    What I can figure based on Admin info given us at FRC meetings is:
    1. Allendale at $45,000- $15,000 rebated= net $30,000 per 11 students= $330,000
    2. 59 other Clay students looking to enroll somewhere might enroll there too and serve to lower those tuition rates, but who knows.
    Right now, the 59 Clay tuition students pay $29,000-$15,000= $14,000 each.
    3. Cost to demolish Clay $200,000.
    Cost to shutter Clay $70,000/year.
    Cost to keep it open: $2 million capital commitment.

    so as it stands something doesn’t add up, right? Right now, the 59 Clay tuition students pay $29,000-$15,000= $14,000 each. Where can our own students get that deal?

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