EagleTribune.com, North Andover, MA

February 25, 2013

School money at risk in Methuen

State says city is not spending enough

By Douglas Moser
dmoser@eagletribune.com

---- — METHUEN — The city and the state are working through a technicality that, if unresolved, could result in the city losing a portion of its state education aid next year, according to state and city officials.

Data from the state Department of Elementary and Secondary Education show that in the last fiscal year, which ended June 30, 2012, Methuen funded the schools by $4.7 million, or 6.5 percent, below the minimum required by the state. The city underfunded the schools for two fiscal years before that as well, but not by enough to risk a reduction in Chapter 70 education aid.

City Auditor Thomas Kelly said the problem is bureaucratic and dates back to the education overhaul of 1993 and a checked box about retiree insurance. As a result of checking that box, an error made 20 years ago “has come back to haunt us,” he said in an email to state education officials last month.

“This will require a legislative fix,” Kelly said in an interview Friday.

Methuen is not alone in its predicament, though the local problem has become acute.

The box in question was checked, “no,” which meant that health insurance for retired employees was not counted toward education spending totals. Kelly said that check was incorrect to begin with, but it was not an issue in 1993, or even 2003.

“But 126 communities checked no and now they need to change it because health care has become a major expense,” Kelly said.

State accounting rules require health care spending on current and retired employees to be reported separately. Kelly said Methuen had an understanding with state education officials that because of the checked box, which cannot be unchecked under state regulations, Methuen would count all health insurance, including retirees, as current employees as long as the city detailed all its health care spending to the state in a supplemental letter.

But in 2010, the local reporting on spending, under a new business manager and following an outside audit, was done according the state-mandated manner – separating current from retiree. But because of the checked box, the state did not count the now substantial retiree health care costs towards the minimum required spending for that year.

For every year since, that roughly $1.6 million has snowballed into $4.7 million last year, enough to trigger a sanction from the state if the issue is not cleared up before the fiscal year 2014 budget is completed.

“Methuen has been under its net school spending (NSS) requirement for a few years, since FY10,” J.C. Considine, a spokesman for the state Department of Elementary and Secondary Education, said in an email last week.

Kelly said has been working with state officials for more than a year to resolve the problem and get credit for the 2010 retiree spending. Total health insurance spending has gone from $4 million in 2002 to $12.8 million in 2012, he wrote in a letter to state education Commissioner Mitchell D. Chester dated April 27, 2012.

State Rep. Linda Dean Campbell, D-Methuen, said the education department is working on a fix for the Legislature that would help Methuen and the 126 other communities who checked no and may find themselves in a bind.

“We’re very hopeful we are going to be looking at it this budget cycle,” she said.

According to DESE, Methuen spent $64,509,506.20, about $1.86 million, or 2.8 percent, below the state required minimum of $66,364,728 in fiscal year 2010, which ran from July 1, 2009 to June 30, 2010. In fiscal year 2011, the city spent $67,639,208.80, about $3.1 million, or 4.3 percent, under the $70,765,264.80 state minimum.

Those years fall within a 5-percent buffer defined by state law. School systems funded between 95 and 100 percent must carry over the difference the following year. For example, if Methuen funded 97.2 percent in 2010, it must add the 2.8 percent difference onto its minimum spending in 2011.

In fiscal 2012, Methuen spent $67,748,595, about $4.7 million, or 6.5 percent, below the $72,453,180. That is beyond the 5-percent buffer, and according to state law, the amount over that buffer – 1.5 percent in this case, which amounts to $586,663.53 using this year’s state aid – will be deducted from future Chapter 70 state education aid. The difference between actual and required spending also would be carried over and added to required spending for the following year.

Follow Douglas Moser on Twitter @EagleEyeMoser. To comment on stories and see what others are saying, log on to eagletribune.com.