One lesson I’ve learned from my experiences in this town is the importance of having an alternative media, locally owned and free from outside, corporate bosses. I assume Art Johnston understands (and appreciates) just how much the alternative media of Duluth, especially the Reader, saved his reputation. As far as the mainstream media was concerned, Mr. Johnston was a reprobate who had committed dastardly deeds. In their eyes, he was already tried and convicted and suitable as a cellmate for former head shop owner, Jim Carlson.
I think the alternative media should ban together, at least loosely, in some kind of association. I’m probably overlooking the real-world scramble for limited advertising dollars, but I don’t really see the other alternative papers as competitors to the Reader. I see them more as compliments. All these scrappy little papers occupy common space in the entrance of food co-op and nearly everywhere else in town, and good writing in one seemingly would reflect well on all the others.
Recently an excellent article about the “nuclear option” Art Johnston employed during ISD 709’s fiscal ‘17 budget debate appeared in one of these other papers. Out of respect to my publisher I won’t mention the name. I’ll just say it starts with a “Z” and is defined in Webster’s as “the highest point, or peak.” I hope I’ll be allowed to add some perspective on the subject raised in that article, here, in the Reader.

The Red Plan is half free!

For years – aside from district administration – Art Johnston and I and former Board member Richard Paulson (who was focused primarily on the teachers’ contracts and healthcare) were the only people in Duluth actually following ISD 709’s revenue streams and expenditures. The Lone Ranger and I kept trying in vain to raise RED flags about the millions being robbed from education to pay for big, fancy schools.
At one point, district 709 was actually pulling a levy out of its general fund. This unusual fiscal arrangement was essentially a way to pretend (for a while) that the Red Plan’s promised tax burden of $9.22 + $3.00 wasn’t what it actually was: a specious misrepresentation of fact. The levy payment being made out of the fund was for the 2009a lease-levy C.O.P. The total amount of debt owed on that bond was $96 million. From fiscal year 2010, through fiscal year 2013, the district pulled more than $13 million out of the general fund to make the levy payment. The rest of the money (nearly $83 million) has since been moved to the tax base, without voter approval.
Three days before he left town, Keith Dixon encouraged the Board to break its tax promise and move the money: “The Department (MDE) authorized you tax capacity above the blue line” is the way he put it. The movement of the 2009a levy onto the backs of the people of Duluth is by far the biggest scam involving public funds I’ve ever witnessed first hand.
This is the breakdown of the 2009a heist: $13.2 million robbed from the classrooms; $82.8 million robbed from the “tax capacity” of Duluth citizens.
While millions were being transferred out of its general fund to cover the 2009a levy payment, the district was also appropriating about $2.9 million annually to cover payments on two bonds: the 2009b and 2010d lease-purchase C.O.P.s. The total combined annual withdrawal from the fund for all Red Plan bond payments at the time I compiled my report for the State Auditor’s Office (in 2012) was: $7,518527.
During the 2013 school board election, while the “audit” I’d arranged with the State was working its way through the system, the school board majority sent some of its minions out into the public to claim repeatedly that Red Plan debt was completely separate from the rest of the budget. I dubbed one of these talking heads “Professor Spin.” He was a parrot who knew absolutely nothing, but quickly became a darling of the mainstream media. “There’s a WALL between operations and facilities!” he went around baldly declaring.
It was an absurd claim. A wall only exists to prevent money moving in one direction: you cannot use construction bond money for operations, but you can use operational money for construction. Prompted by former Board member Gary Glass, the News Tribune printed this statement on 10/22/08: “According to the district’s business director, state law would allow the district to transfer money from the levy to cover the costs of the Red Plan…” The petition engagement I arranged with the State Auditor’s Office proved indisputably that “other (district) general fund resources have offset the deficit in the designated account.”

The “free” money became a dry sponge.

The designated account was set up to pool all the free money projected in the Red Plan’s funding scheme, such as proceeds from bond investments, sales of district property and savings supposedly generated by the new “efficiencies” achieved by the consolidation project. All of these projections have fallen far short of what was predicted. The biggest promise – $122 million of savings--is largely an exaggerated joke. There has been absolutely no independent verification of the figures. District 709 can not back up its claims with any credible documentation.
The holes in the Red Plan savings claims are so multiple and huge, I could fill up a good part of the Reader laying out the details. The State Auditor’s Office refused to open up this Pandora’s Box publicly. The most our auditor watchdogs would do is meekly admit, during the 7/22/14 school board meeting, that the savings are “significantly less” than projected.
In the hour-and-a-half, private conference I had with Auditor’s Office (which I have recorded) the Audit Manager was more blunt: “It was very clear from the information you sent that the savings claims are an issue, that there might have been a lot of things done and presented that things were going to be a certain way that are not coming to fruition. In relation to the savings claims, those are based on estimates and assumptions. The minute one estimate or assumption changes – which clearly that has happened – the whole projection is skewed.”
I’ve dubbed this situation (pulling money out of the general fund under the rubric of fantasy savings) the “shadow deficit.” These numbers may work on the debit and credit sides of the ledger, but if play money is used to pay bills, a real deficit has to show up somewhere in the budget.
The 2009b and 2010d bonds are still being paid out of the general fund, and another payment – for the 2012b C.O.P. – was added a few years ago. The current amount coming out of the fund is just under $3.4 million. ISD 709’s money managers would quickly move these payments to the tax base if they could, but these bonds cannot be moved without voter approval. The district is therefore stuck pulling this money out of the general fund and pretending the withdrawal is covered by “savings.”
Only zealots can deny forever.

Lately, the majority controlling the Board and district Administration – long in denial – have begun to at least admit that the money coming out of the general fund is contributing to fiscal problems. A sizeable amount of additional revenue has flowed into district 709 over the past few years, but the Board just had to cut operations again to adjust to a $3.3 million deficit. Another deficit is likely lurking in the near future.
Since Mr. Dixon came to town, eleven years ago, district 709 has spent over a billion dollars on operations and run up another half billion dollar bill, with bond interest, on facilities. The Red Plan predicted enrollment to “stabilize at 9600 students” in fiscal year 2022. We’re in fiscal year 2017 now, and enrollment is 8167. At the rate this investment is paying off, we’ll be lucky if enrollment hasn’t plummeted well below 7600 in another five years.
Three days before he left, Dixon famously said, “I don’t see how this is going to get much better in the next few years.” I frankly don’t think any con man pulled out of any prison facility could have made things much worse.
The district has to stop crying and pretending it’s a victim. The Board has to become more proactive in finding funding (besides hitting the taxpayers.) Somehow, the professional grant writer position foolish Dixon eliminated has to be reinstated. (The district has to write a grant for a grant writer, if need be.) The Board has to start lobbying harder for more help from the State. After Johnson Controls pulled another scam on the St. Louis County School District, Iron Range Representative Tom Bakk secured some additional aid for that district. I personally think the State should file a class action suit against Johnson Controls.
Local DFL legislators bent the rules to secure a State sales tax break on the Central High School property. (I personally believe this action was taken, at least in part, to bail out their DFL school board colleagues, who refused to sell the property to Edison.) If they can suspend this rule, legislators should be able to bend statutory law. They should be able to make an exemption that would allow ISD 709 to consolidate and refinance all of its debt at a lower rate, which is what Board member Johnston has been advocating.
District 709 has to find a way to solve its fiscal problems, so it can get competitive in the educational marketplace. The only way to stop the bleeding enrollment is to bring back seven-period days and lower class sizes. To accomplish this, the Board also has to begin reining in expenses. The first place to start is the teacher contract talks, which will be coming up again before long. The Board cannot allow Rosie Loeffler-Kemp (if she’s still on the Board) to go into these “negotiations” again, wearing a Santa Claus suit.
Damn, that’s a nasty smell.

The cartoon character of Mr. Johnston as a skunk was cute and very humorous, on the cover of that alternative paper that starts with the letter “Z.“ However it should be noted that all the spin – the fuming, hot air--emanating from ISD 709 for years now has also had very putrid odor. The garden depicted in the article’s cover art should have been planted with Stinking Corpse Lilies and Skunk Cabbage – pretty flowers that smell bad.
Art Johnston has never been happy about what’s growing in the garden and speaks his mind about it. Art Johnston is intelligent and has a pretty good track record about being right, but he isn’t always right, and – (I feel a stiff breeze from vigorously nodding heads) – the Lone Ranger can definitely be overbearing.
The greatest value of the stink Art Johnston raises is that it wakes up all the people who want to sit around the garden, daydreaming. The fourth district representative is no wallflower, sweet-smelling or otherwise. Fearless about digging in and asking questions, he keeps calling out administration and the Board majority and forcing debate. None of the discussion about Red Plan debt – either during the public bond meeting or the June Board meeting – would have happened without Art Johnston’s insistence.
For years we’ve been subjected to an endless stream of happy talk from Judy Seliga-Punkyo and the other pushers of the Red Plan: “Things are good, except that there is still anger about it (the Red Plan)…It’s been a big difference for our city, too. It’s been really good!”
Compare those flighty statements to this observance by Board member Nora Sandstad, during the June Board meeting: “I think that probably all of us have some disagreement with decisions that were made in the past that we’re paying for now…,” or this comment, added by Superintendent Gronseth: “If we had a time machine, we might go back and make some changes…”
These modest admittances of long-denied mistakes struck my ears as a nascent willingness to start dealing with reality, and are traceable to the stink raised by you-know-who. Opponents have made mocking faces at him. More than once he’s made them roll weary, watery eyes and turn up their noses, but nearly every acknowledgment of truth in the boardroom is attributable to Mr. A. J. Le Pew’s take-no-prisoners nature and relentless, indomitable will.