Munster school leaders blame state for deficit

Aug. 17--MUNSTER -- Munster school leaders blame the district's $8 million deficit on a state funding formula, a 2008 state take over of the general fund and millions of dollars in education cuts by Gov. Mitch Daniels.

Munster Schools Treasurer Janice Swanson told the School Board this week the district is in debt, behind on utility payments and will not be able to continue supporting programs.

It was an oft-repeated statement from retired Superintendent Richard Sopko.

Munster School Board President Judith Florczak, who has been on the board since 1996, said members were surprised. The per-pupil cost to educate a Munster student is about $4,750 -- nearly $1,000 behind the state's average per-pupil-cost of about $5,800, she said.

"We've been toward the bottom all along," Florczak said. "We have a deficit, and it builds every year. We are not getting what it takes to educate each child. Something has to be done about the funding formula."

She said she thinks the funding formula is the biggest problem.

Florczak said new Superintendent Jeffrey Hendrix has an expertise in financing and budgets. That's one of the main reasons he was chosen.

She said the district doesn't have a large transportation fund but can't charge bus fees, which used to cover fuel.

"It may have seemed like a drop in the bucket, but every little bit helps," she said. The district stopped with the Indiana Attorney General's office told them they couldn't charge bus fees anymore.

Florczak said Hendrix will do a thorough financial review. She said the district has tried to reduce expenses without cutting into programs, by trying to cut energy costs, reducing some hours and charging extracurricular activity groups to use a bus, she said.

In 2013, the general fund budget problems spurred the district to have the referendum. Munster voters approved it, raising taxes 19.9 cents per $100 of assessed valuation to generate $3 million a year for seven years, a total of $21 million for the general fund.

The district began receiving the extra tax dollars earlier this year, and Sopko said Wednesday that, even after just six months, it has helped. The $8 million deficit is now about $7.6 million, he said.

An Indiana State Board of Accounts audit released in March noted the district had an increasing number of negative cash balances in the general fund. It noted debt obligations totaling $18,447,652, including principal and interest on capital leases, pension bonds and tax anticipation warrants.

The report said the district transferred $2.3 million from its rainy day fund to the general fund, an unapproved use.

District Treasurer Janice Swanson replied in a written response, "Supporters of the School Town of Munster were able to pass a general fund referendum which, with further spending reductions, will be a significant resource to the general fund for the next seven years."

Sopko said in terms of test scores, it's the No. 3 district in the state. In terms of per-pupil funding, it's 358th out of 367 school districts.

"We should have asked for a referendum sooner by two or three years," Sopko said. "We thought funding at the state level would improve, but it didn't."

Board member Mary Yorke said what is so frustrating is that the district kept losing revenue every year as it tried to maintain quality programs.

"The irony is that we did cut. We cut from the superintendent all the way down to the office staff, maintenance, and our teachers didn't get increases," Yorke said.

Munster Teachers Association President Ryan Ridgley said "if Munster had received even the state's average of $5,800 per pupil, we would not be in this financial mess."

Ridgley, who teaches math at Wilbur Wright Middle School, said if his numbers are correct, Munster has lost about $4 million from its general fund annually.

Ridgley said teachers have had their pay scale frozen since 2010.

"In 2010, the teachers ratified a contract that rolled back a 3 percent raise and froze the salary schedule at the 2009 pay amounts," he said. "We are now back to negotiating our contract this year, and we could see a continuation of the cuts that were supposed to be temporary."

The district began the year with a reduction of five teaching positions and another six that were absorbed, Ridgley said, noting that's nearly 5 percent of the total teaching staff.

"Currently for our teachers, insurance is running between $1,200 to $11,000 annually depending if they are on a single plan up to our family insurance plan," he said. "I had heard about not paying some of the bills. I honestly don't know what would have happened if the referendum would not have passed. It would have been a very different school district, and where we are right now, there could still be some drastic changes."

Munster School Board member John Friend said these days, it's not unusual for a school corporation to be in debt. He said there are also many school corporations, cities and other public entities behind on utility payments.

"Oftentimes they don't pay until the new budget comes around," he said. "Richard (Sopko had a plan worked out to catch it up over a four- to five-year period. We really waited too long to do the referendum."

Friend said, had they know it would pass on a 2-1 margin, they would have sought more money.

"If we hadn't gotten that referendum passed, only God knows what we would have done."

Hendrix said his previous district -- Sunman-Dearborn Community Schools in St. Leon, Ind., near Cincinnati, is similar in size to Munster and had a $2.4 million deficit when he started in 2009. He said it escalated to $5 million after Daniels cut $300 million in K-through-12 education in 2010.

He said they were able to reduce the deficit over four years with cost-cutting and cooperation from the teachers union, which included a reduction in staff and early retirement incentives. Hendrix said when he left in June, the district was $1 million in the black in the general fund and had a rainy day fund of $1.5 million.

Some lose, some gain

While Munster's school board and administrators lay the blame squarely at the state's door for the deficit, just four years ago several Munster school leaders and teachers took advantage of a provision in state law that allowed them to retire -- then return to work in 30 days at their same job and pay level, while also collecting their pension. And because they retired and were rehired before the law change, they were able to get two checks until they retired permanently.

Former Munster administrators -- William Pfister, Sopko, Michael Smith and Maureen Stafford -- all retired and returned to their jobs in a month.

Sopko retired as an assistant superintendent in February 2009, a month after Pfister did, and returned. Sopko said the district saved money because the school district didn't have to continue paying into their pension fund once they retired.

Five years ago as assistant superintendent, Sopko said he earned $118,731, and he also received his monthly pension check for about $2,500. Pfister had a base salary of $148,443. Stafford earned $102,406 and Smith earned $100,922. All also received pension checks at the same time.

"I think we came out ahead with those who retired and were rehired. We were in a position where we didn't have to pay any more into their retirement. That's my recall on that," Friend said.

Board member Mary Yorke said the state Legislature set that up, and it was acceptable and legal.

"When people want to say you shouldn't have done that, once again, they need to look to the Legislature," she said. "Should they have approved that concept? They caused it but nobody likes the effect. Go back to the agent of cause. We couldn't have done it if the Legislature hadn't allowed it."

After July 31, 2010, the law changed.

Jennifer Dunlap, a spokeswoman for the Indiana Public Retirement Systems, said if there is an agreement to return to the same job, the original retirement is deemed void and any pension payments must be repaid to the plan from either the Public Employees Retirement Fund or the Teachers Retirement Fund.

Asked how they prove or disprove if someone has an agreement in place, Dunlap said, "We would review any cases reported to us, but it would be difficult to prove existence of informal agreements."

Munster bonuses also a bonus

In a superintendent salary survey conducted in 2010 by The Times, the School Town of Munster was the only one in Lake or Porter counties that gave its superintendent a bonus.

That year, Pfister had a base salary of $148,443 and received a bonus of $33,485. His 240-day contract also included an annuity of $18,813, a corporation car, cellphone, laptop and health and insurance benefits for a total package of $213,101.

Sopko said this week he earned $125,000 as superintendent with an additional $25,000 as a "stipend."

Board President Florczak said the stipend, or bonus, has been in place for many years.

Hendrix said the language in his contract does not talk about a bonus. He earns a base salary of $155,000.

"Right now, I don't expect to get any increase in salary," he said. "I would not ask for any extra dollars from this school corporation. The teachers have been flatlined. We have too much of a deficit for me to ask for money for myself. That would be unethical and wrong from my perspective."

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