Our View: District needs finance help

 

Our View: District needs finance help

 

Date: July 20, 2011
by: Observer Staff

 
 

Manatee schools may need a financial intervention.

As the district has struggled to cobble together a budget for next year, it comes to light that the district’s self-funded workers’ compensation plan has a deep deficit. It joins the district’s self-funded health insurance plan, which is worse. Both have been operating at deficits for the past four years, yet neither has been corrected, in spite of several attempts to do so.

This gives Manatee County the dubious distinction of being the only county in the state that is deficient in both health insurance and workers’ comp plans. Both funds have been flagged in state audits. That should give the school board serious concern about financial management at the top.

“It’s unfortunate that both are in the red at the same time,” said Jim Drake, assistant superintendent for business services.

Drake explains that the workers’ comp fund, which has a $2.5 million deficit, is a whole different setup from the health insurance fund, which is approaching a $10 million deficit. Health insurance is funded by employee premiums like all health insurance, and claims are usually paid off in about three months.

Employees do not make any contribution to the state-required workers’ comp program. It is paid for out of the district’s general fund, currently set at 1.37% of the district salary budget. Plus, $1 million extra is being put into the fund next year.

But the problem is on the expense side. Claims can take three years to resolve, and the district has some at 15 years and still going. A claims reserve is estimated for each claim by an independent adjuster, and that can be adjusted each year, but it is carried on the books.

If the adjuster estimates an accident will cost $1 million, the district must carry that amount on the books as though it is paying it, even if it actually comes to less than that.

And the fund can fluctuate dramatically based on how the estimates pan out. “It can be a crap shoot,” Drake said.

To help clear up the books, the district is trying to close out lengthy claims, having done so with 16 this year, about three times the normal rate.

Nonetheless, this has the look of more than just a bookkeeping issue, particularly with Manatee being the only district in the state with both funds running deficits.

Superintendent Tim McGonegal was the district’s chief financial officer before being made superintendent in 2009, so he bears significant responsibility for the current financial situation — the economy notwithstanding. The school board just extended his contract to 2013.

Still, board members need to ask some serious questions of McGonegal. How did this happen? Who is responsible — the superintendent, the previous school board? The answers will reveal McGonegal’s fate.

 

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