School Dept. 3rd in cost to city / Maintenance of Effort charges explained

In an Election Year there is a tendency of some Councilors to try to paint the School Dept. as the Big Bad Spender of City Funds and outrageous spending. I’m going to show that the School Department is the 3rd not the 1st costliest dept using CITY tax dollars and try to explain what the Maintenance of Effort charges are that allows the City to meet or exceed their required Net School spending.

The TRUTH is the State of Massachusetts under Chapt. 70 Funding Pays for the LARGEST PORTION of our School Budget! NOT the City!

This current year 2018/2019 that amount was $150,935,483.00

If you look at the Projected Revenue from Taxes of $145,955,966 in the City of Lowell 2018/2019 Budget then look at how much of those tax dollars in CASH get assigned to the School Department you will see how little cash from city taxes are being used to fund School Operations.(Just under 10.5% BEFORE you subtract TRANSPORTATION)

In the City Budget, you will see that in CASH contribution from Taxes (Real Estate,Personal Property, Motor Vehicle, Hotel, Meal Tax) you will find that the School Dept. ranks 3rd after Police and Fire.

Lowell Police $25,152,640.00

Lowell Fire Dept $18,200,692.00

Lowell Public Schools – $15,736,053

People need to understand that the Cost of Charter Schools, Greater Lowell Tech and Essex Agricultural DOES NOT COUNT against the City’s Required Net School Spending for the District. Those cost are separate and in addition too.

Lowell DPW – $11,194,825.00

The City Manager’s Office gets 1/3 of what the School Dept. Does $5,229,152.00

To meet or exceed their “Required” Net School Spending under Ed Reform the City is allowed to “Charge” the School Dept. for Services under Education Laws and Regulations 603 CMR 10.00:School Finance – 10.04: Financial Accounting and Reporting: Other Municipal Departments which states:

expenditures from local revenues by a municipal department other than the school department which result in services to or on behalf of the school district shall be reported to the Department on or before September 30 of each year in accordance with the expenditure categories and cost allocation methods set forth in guidelines published by the Department. The cost of insurance and retirement benefits for non-school district employees shall not be included or reported.

What generally happens is when the Chapt. 70 funding increases, so does the requirement of the city to increase their funding for the Schools. For example in Governor Baker’s proposed 2019/2020 education budget Lowell would receive an additional $7.7 Million dollars while the City’s obligation increases from $47,400,845 to $49,626,890 or $2,226,045. The chances of the city being able to meet that requirement in the form of a cash contribution is very unlikely.

The School Committee used to receive from Deputy Supt. Jay Lang a report showing these charges from the City. Here’s the report from 2011-2014.
City of Lowell NSS (FY11 – FY15) and at the request of Bob Hoey, the Murphy Administration also provided us a report from 2015 thru 2017
2015-2017 Mainten of Effort

There is NO CASH being transferred or set aside per each department. In many cases a percentage of the Departments total budget gets “charged” to NET School spending requirements.

What these charge are in most cases is what the City believes is the cost for these various departments for school dept related work or a % set by some formulas in the agreement that is at least 8 years old. These numbers are reported to the state so the City can say they met or “exceeded” Net School Spending with very little documentation to support these numbers presented to the School Committee.

So in 2011 the charges total $22,931,539.00 – in 2014 it was $21,594,054 by 2017 it reached $23,971,160.22

Based in looking at what the City “charges” for their Maintenance of Effort I wholeheartedly support the motion to review the existing Agreement.

I’ve always found it difficult to understand how any department let alone the School Dept. could plan a budget without knowing what the Maintenance of Effort charge for that year. Currently because of the formula and in my view discretionary ability to adjust charges we are not given a figure until AFTER the School year is over. I would want that changed but “THAT’S THE WAY WE’VE ALWAYS DONE IT” mentality here in Lowell is going to make that challenging.

The change in the charges from year to year in some cases are AMAZING and VERY QUESTIONABLE!

For Example: The Treasurer’s Office – in 2011 the City “charged” $353,151 – in 2012 $367,801 – in 2015 $336,956 in 2016 it climbed to $358,506.86 but dropped to $348,604.71 in 2018 the charge was $355,909.05 The Total Budget for that dept in the 2018 budget was $877,997

The MIS dept – in 2011 $481,220 – In 2012 $517,273 – in 2013 $578,440 – in 2015 $578,196.44 in 2016 it jumped to $631,724.24 and in 2017 it escalated to $832,890.98 and another increase in 2018 to $836,243.49

The Auditor’s Dept – in 2011 $188,665 – in 2012 $195,767 – in 2015 $207,295.65 – in 2016 $223,223.19 – in 2017 that almost DOUBLED to $418,329.45… The Total Budget of the Auditors Office in 2017 was $560,621.. roughly 74.5% of the dept. budget was charged to NET School spending .In 2018 the charge was dropped down to $232,276.25

Cost of Trash Pick up at the City’s Schools went from a High of $191,286.00 in 2012 down to $169,064 in 2014 but SKYROCKETED to $322,037.00 in 2015, $341,095.25 in 2016 and $339,942.88 in 2017 and down to $330,487.24 in 2018

With the large increases in certain departments that seem generally tied into Chapt. 70 increases the School Committee believes we need to review and revise the existing agreement and if necessary vote to follow item 3 under 10.04: Financial Accounting and Reporting: Other Municipal Departments which states:

3) When school and municipal officials cannot agree on the correct reporting, allocation and documentation of expenditures by municipal agencies for educational purposes, they shall so notify the Department. The Commissioner shall, upon receipt of such notice, appoint a designee to conduct an informal hearing to encourage the parties to reach an agreement and make a final determination on the issues in dispute if no agreement is reached within a reasonable time period. The Commissioner shall consult with and seek assistance from the Commissioner of Revenue or his designee in attempting to resolve such disputes.

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