A Depleted Reserve; Nebulous Goals

Loren Martell

During the school board’s October HR Committee meeting, the district’s HR Manager, Tim Sworsky told the Board: “I’ve worked with the Board Chair on some particulars (of the Superintendent’s contract,) using the current contract as the basis.” Despite his claim that he “would not call it--we’ve not been in--a negotiation process, it sure sounded liked he and the Chair had, at least to the minority members of the Board.
MN Statute 179a.14, subdivision 3 states: “All negotiations, mediation sessions, and hearings between public employers and public employees or their respective representatives are public meetings, except when otherwise provided for by the commissioner.”
Needless to say, this apparent breach of protocol, if not State law, engendered a bit of “discussion” in the boardroom, which has continued on for a few months--until now, the December Committee meeting: As usual, board members fell into their set positions on either side of the Board’s intractable divide--the four DFL-endorsed majority members versus the three minority members.

Let the debate begin

HR Manager Sworsky told the Board the Superintendent’s pending contract had been included on the evening’s agenda under a “placeholder.” Placeholders are standing, reserved spaces on the agenda, that allow administration to insert items with very little advance notice. Member Oswald has been raising the issue as of late, and did again during this discussion, that important items shouldn’t be sprung on the Board with little notice. (This contract was emailed out at 3:34 pm, only 41 minutes before the HR meeting started.)
“It’s the same contract you received in October,” Mr. Sworsky said. “The only difference…is the December date, (changed) from the October date, when it was first brought forward to the school board.”
The contract the HR Manager sent out was the one the majority members have been pushing for, since October. The fact that it popped up on the agenda less than an hour before the meeting began seemed to make minority members feel as though they were once again being harried and rushed along to an already-decided conclusion.
Member Welty started off a round of Board comments: “This (contract) is apparently intended to be considered at the December meeting. I’ve already shared with the Chair of the Board that I would prefer that we do this at the beginning of the new school year.” (He later clarified he meant the beginning of the new calendar year.) “If I do have to make the decision to vote for the contract this year, in December, before we have our (Board) organizational meeting (in January,) I will probably feel compelled to vote against the contract at this time.”
Mr. Welty has been lobbying for some indication that the Board majority and the Superintendent will show more respect to minority members, when the Board’s power positions are divvied up for the coming year, in January. The Board’s power players--the DFL-endorsed club--have given little indication of hearing his concerns.
Board Clerk Loeffler-Kemp, one of the Superintendent’s biggest supporters, argued for moving forward, full speed. She told the Board that she’d been informed by the Minnesota School Boards Association that several school districts are in the process of settling Superintendent contracts. “Many will pass them this month…so it’s very reasonable that we pass it in December, here--both for us, for planning purposes, as well as for our Superintendent and his Administration. And so, again…I feel very confident that we should move forward this month with this contract.”
Member Sandstad, one of the majority members also pushing for the contract, agreed: “I am ready to go forward with this contract. I’m wondering, member Welty, what would be the difference between now, and January?…This contract was raised in October,” she pointed out, “and we decided as a group it should wait until after the evaluations of the Superintendent, which took place last month. And so I think the understanding, in October, was we would immediately follow the evaluation with the contract. We’re bound by the (existing) contract to offer a contract, so there’s no question that we will be offering a contract--it’s just what’s in the contract. And I don’t have a problem with anything that’s in the proposed contract, as it is. And I’m ready to move forward and vote for it, now. And if you have specific things you’d like to change, I don’t know why that wouldn’t be possible now, instead of in January.”
On the other hand: why not January, instead of December?
The Superintendent’s existing contract does stipulate that the Board was required to inform him with a written notice by November 1st, if it did not intend to offer him a new contract.  No notice was tendered, which means the Board is now committed to offer him a contract. The Board is not bound, however, to any contractual language, or any date by which the contract is offered. Technically, the Board could offer Mr. G. a new contract on June 30th, 2017, the last day of his present contract--though obviously the Superintendent wouldn’t be happy and could conceivably sue for breach of trust.
Giving a reasonable notice is proper procedure, but even from my seat in the audience, I’ve felt as though I’ve been prodded along. Right out of the box, in October (eight months from the current contract’s expiration date,) the Superintendent, the HR Manager and Chair Harala tried to make it sound as though the November 1st deadline meant the contract itself had to be quickly passed. I’ve sat through all these public discussions, and the only members I’ve heard agree to “immediately follow the evaluation with the contract” were the DFL-endorsed majority members.
As the Board’s resident attorney accurately stated, the contents of the contract were still on the table, but when to offer the contract was still a legitimate point of discussion.
Member Welty responded to member Sandstad’s query this way: “Thank you, member Sandstad. I think much of what you said is accurate. And it’s been clear to me--because I can count noses--that the Superintendent would be extended a contract (with the majority approving it, 4-3.) I see no reason to doubt that, (but) that does not necessarily mean all through the process that we’ve been engaged in since October, I have been entirely pleased. More importantly, I’m concerned about the direction of the Duluth school board…”
Mr. Welty elaborated about the evaluation process he and his fellow Board members had been engaged in as they sat in closed meetings, sharing “the pros and cons of the Superintendent’s actions as the leader of our school district’s administration.” He told his colleagues he’d refrained himself, and “did not elaborate in public on my sense of the last three years I have served as a member of this school board.” The way the discussions had progressed, and some curt exchanges he and the Chair of the Board had exchanged about his concerns, he said had only served to undermine his confidence in letting the status quo continue for three more years.
“I plan at this point to run for reelection,” He announced, “and I just think that until the school board as a whole demonstrates more interest in sharing equally with all members, that I am not satisfied that we have a Superintendent who operates at the whim of the majority, to the detriment of the minority…”
Stand up and applaud your Superior, masochistic souls of the world: Harry Welty intends to come back! The intrepid, self-flagellating Mr. Welty has already logged more time than most. He served two terms in the notorious bureaucratic boardroom loony bin, back in the nineties. And now he’s announced he’s trying for two more terms (another eight-year stretch!) If he makes it (both with his reelection bid, and with surviving four more years,) I would be willing to contribute as a taxpayer for his bust set in bronze in the entrance of Old Central, along with the following, simple inscription: Through boredom, insanity and tears, he endured 16 years!

Goals, schmoals

The district’s tax levy has jumped by $19 million since the start of the Red Plan; the reserve fund is nearly depleted; the district just had to cut operations again to adjust to $3.3 million of red ink and is hinting at another deficit in the coming year; also, by next spring, when the Superintendent’s new contract begins, our public school system will have thrown away over a million dollars for utilities and maintenance on the vacated Central school property.
And that’s just a thumbnail sketch of ISD 709’s problems.
Member Oswald questioned the idea of extending the contract of the man who’s been running the show, by three more years. She first pointed out that she would like to see the Board’s evaluation process change: “I don’t think our evaluation should be based on who (the Superintendent) is; I’d rather focus on what he does and set goals. Towards that end, I see no rush to pass this.”
Member O. explained further that “there are some things I would like to discuss about changing the contract.” She brought up the Denfeld/East high school inequity issue, which is becoming an increasingly hot topic in Duluth. “I’m uncomfortable offering a three-year contract to you (looking at Mr. G.,) knowing that under your leadership this (problem) has developed. She said she wanted to keep an “open mind,” but frankly stated: “I’m not ready to say I want to give you three more years…”
Member Johnston also jumped in, on the topic of goals. “I certainly appreciate the awkwardness of the situation,” the Lone Ranger began, referring to a comment made by Mr. Gronseth that “having a very public discussion about one’s contract is probably one of the most awkward things that a person can possibly go through.”
“I find (that comment) ironic,” Mr. Johnston pointed out in his gravelly voice, “since I’ve been put in an awkward position (even accused of racism,) by this administration--extremely awkward, for two years running. Nobody seemed to care about that.”
“That” off his chest, the Lone Ranger continued: “More specifically, I’d like to make if very clear that the discussion we’re having here has nothing to do with the evaluation that we went through.” He pointed out that the minority members have been trying for “a long time” to change the evaluation process. “One important point of the evaluation process, member Johnston maintained, should “of course be goals…One of the goals I want for the Superintendent’s (contract) is enrollment. I think everybody knows the dismal enrollment that we’ve had continuously, certainly for the six years he’s had (administrative control.) That is something I expect the Superintendent to change. Before I vote for this contract, I want to know if the Superintendent is willing to put his job on the line that he will stop the enrollment decline. If we don’t stop the enrollment decline, the situation is going to continue getting worse and worse and worse.”
As soon as they laid their eyes on the Super’s contract, in October, the DFL-endorsed majority members decided to approve it. The whole evaluation process has been another dog-and-pony show. By the time this article goes to press, the December regular Board meeting will have convened, and Mr. G.’s three-year contract (with the pay raises he wanted) will have passed, 4-3. I wouldn’t bet a penny otherwise, on a billion-to-one odds.

Our tiny, tiny nest egg

During the Business Committee meeting, which followed the HR meeting, the Board received the report from its annual auditor. First the good news: the reserve fund has inched up a speck from the basement of fiscal year ‘13, when it dropped below a million. The reserve that year was $781,808, or enough to cover operations for about three days. For perspective, when Keith Dixon stepped into Duluth, at the end of fiscal year ‘05, district 709 had a incredibly robust reserve fund of $30,151,202, enough to run operations for about three months. In ‘05, interest income from the invested fund actually brought $620,551 into the district, which would go a long way towards reinstating seven periods in the high schools.
The auditor admitted on the record during this business committee meeting that, just a few years back, the district’s fiscal state had grown so precarious, administration was forced to use an accounting gimmick to avoid statutory operating debt. Our financial wizards decided to un-designate the Employee Severance Insurance Fund, so that the money, no longer mandated for a specific use, could flow into the unassigned General Fund. The auditor explained the accounting maneuver this way: “The total fund balance was so low, that assignment for Severance created a negative, so we got rid of it.”
It has been very instructive to watch my government operate for the past decade, but I still don’t know how to apply these lessons to my own budget. How do I just get “rid of” this or that fiscal obligation?
The district’s reserve has inched up now, to $2,359,436, which is still nearly $28 million less than when the wonderful, cotton-topped Mr. D. descended into our midst, and enough to cover expenses for about a week. The auditor recommended (as she has for years) a minimal reserve of $8,117,905, or 8% of General Fund expenditures, which would cover operations for about a month. Board policy 3017 dictates that the district keep a minimal balance of 10% of General Fund expenditures in reserve. According to the audit report, the district’s “minimum fund balance policy goal on June 30, 2016 was $9,456,451,” which means the Board finished out last year more than $7 million below the reserve amount dictated by its own policy.
All these numbers bring to surface another fact that is quite staggering to contemplate: the depletion of the reserve happened over the six years of Dixon’s tenure. During that time period, the Board could have blown more than $20 million (or nearly three and a half million dollars a year) out of the district’s reserve fund and still stayed within the bounds of its own policy, but failed to exercise enough fiscal diligence to even manage that. What has occurred in the boardroom since the Red Plan’s inception is unquestionably--with no exaggeration--the worst management of public funds I have ever witnessed first hand.

Can he lead us out?

Is Mr. G. the right man with the right plan to lead us out of the fiscal mess he inherited more than five years ago? His strategy, backed by the DFL-endorsed majority, is to implement new, unique programs (like Spanish immersion and aviation aerodynamics) in the curricula to make the district more competitive and stem enrollment loss. The Board DFL-endorsed members see their job as being boosters and promoters of these programs.
The problem, of course, is obvious: you are very limited in how much new programming you can introduce when you are broke. The new programs (which are providing terrific opportunities for students,) have not been enough to turn the tide, in the face of all the other district challenges--big class sizes, lack of seven periods in the school days, failure to make significant headway in the achievement gap and the festering East/West inequity, to name a few.
The DFL-endorsed majority rules the roost, so the Superintendent will get his contract extension with three years and pay raises locked in. Because no specific goals have been outlined, there is no way to find cause to terminate his contract if finances continue to go south. If his contract is terminated without cause, Mr. G is backed up by a golden parachute clause: he will receive a full year’s pay with benefits, compliments of Duluth taxpayers.
Of course there is one contract the people of Duluth will still have some say about, come next year’s election. The public will be able to decide whether or not a four-year job extension should be granted to the two Board members (Clerk Rosie Loeffler-Kemp and Chair Annie Harala.) who have been going behind closed doors with administration and running the show.