State legislators may have a solution to a bureaucratic catch that could wind up penalizing Methuen at least $1.4 million in state school funding.
State Sen. Kathleen O’Connor Ives, D-Newburyport, whose district includes Methuen, said a recent funding bill approved in the Senate fixes a problem in how school spending is counted by the state for Methuen and dozens of other communities. But Methuen is among a handful where that problem could result in penalties.
“It addresses cities that did not include retired teachers heath care costs,” O’Connor Ives said. “For those that didn’t, it would remove the penalties and the costs associated with that accounting mistake. Now the goal is to get it in the House bill.”
The problem dates back two decades to the 1993 education reform bill. Methuen and many other communities checked a box on a form stating they would not include retired teachers’ health care costs toward the total amount of education spending the city must spend. State regulations prevent the box from being unchecked, requiring action by the Legislature.
In 1993, and even 2003, that was not an issue. But as retirees’ health care costs have soared beyond $10 million a year, it is stretching Methuen’s school budget, which the city annually has set at the minimum required by the state.
Total health insurance spending for retired teachers tripled over 10 years, from $4 million in 2002 to $12.8 million in 2012, according to Methuen officials.
In the last few years, Methuen technically has not spent what the state requires on education. The cost of retirees’ health care, which the city covers, has not counted toward the minimum spending requirement. For the years when the city was less than 5 percent under the minimum, the difference carried over to the next year. But when the difference surpasses 5 percent, the state withholds education funding.
Last fiscal year, which ended June 30, 2013, Methuen was 6.9 percent, or $5.2 million, below minimum spending, according to the Department of Elementary and Secondary Education.
Methuen Auditor Thomas Kelly has been working with state officials for several years to resolve the issue and prevent the state from assessing penalties.
The city would have been hit with a penalty this year, but state Rep. Linda Dean Campbell, D-Methuen, said the state Department of Elementary and Secondary Education waived the penalty, which would have been about $1.4 million in 2013, to give the Legislature time to take care of the issue. She is working to make sure the same fix appears in the House bill.
“We’re making a full effort at this point to make sure we get it addressed,” she said.
State Rep. Diana DiZoglio, D-Methuen, said there are two possibilities in the House, one part of the appropriations bill and another as a separate bill.
“I support either or, but I want to make sure whatever is passed is going to provide relief to my district,” she said.
More than 100 communities checked that box back in 1993, but most of them fund schools above the minimum requirement, meaning the fact that retirees are not counted has not put them under the line. But a handful, including Methuen, are being squeezed.
The penalties continue to carry over year to year, meaning if the issue is not resolved, Methuen’s hit could get worse until either the Legislature acts or the city adds the funding to the School Department budget.
State aid to Methuen this year is $40.2 million, according to the state.
Follow Douglas Moser on Twitter @EagleEyeMoser. To comment on stories and see what others are saying, log on to eagletribune.com.