“It’s important to know how we got here, so we never get here again,” said the Interim Superintendent of Schools, Dr. Laura Norbut, during Monday night’s Board of Finance (BOF) meeting. For those following along, you can probably guess that she was talking about the school district’s self-insurance fund. Much of the meeting was spent debating exactly how the fund ended up in its current position.
As we have reported in the past, the town has had to dip into its General Fund to pay bills related to the schools’ self-insurance fund to the tune of about $1.2 million. (Read more about the self-insurance fund here and here.) However, Dr. Norbut pointed out that the schools do not manage the self-insurance fund – the town does – and have not had insight into how much was being paid toward claims. Dr. Norbut suggested that if the schools had known the fund was running dry, steps could have been taken to remedy that.
Rather than putting all of the Board of Education (BOE) allocated funds for the self-insurance fund into the account when they receive the money, the schools transfer the funds in chunks along with employee contributions from payroll. Theoretically, the schools could move funds earlier if they knew the account was running out of money. However, if the overall amount budgeted for the year is insufficient to cover the year’s claims, it seems the account would still run short – just further down the road – without an additional allocation of funds.
So, how did we get here? It seems clear that, at some point in the past, the district cut the contributions to the self-insurance fund recommended by One Digital, the district’s insurance consultants, to pass the budget. Dr. Norbut, who inherited this problem when she began her position as interim superintendent a little over a month ago, echoed what has been said in the past and pointed to old meeting minutes to back it up: the decision was made in consultation with a former CFO for the town."These decisions were not made in isolation," she said.
Shelley H. West, a BOF alternate who was in the audience, later said, “No one was looking at this on either side.” The school district now has read-only access to the accounts and receives a statement.
BOF member Tony Pellegrino expressed his surprise that there was no oversight until earlier this year when John Lund, Stafford's CFO, who recently left for another job, brought the issue to the BOF's attention. Since then, the BOF has been pressuring the BOE to devise a plan to not only create solvency for the fund but also pay back the General Fund.
As reported last month, the BOE put $625,000 of its end-of-year balance into the insurance account. At the time, Lund explained the importance of properly funding that account to reduce the likelihood that the General Fund will need to advance more money to pay more claims. In other words, it stops the bleeding but does not do anything to pay back the money already expended from the General Fund. Tensions over this matter rose at that same meeting as the BOF asked why the BOE moved more than $77,000 of its balance to the non-lapsing fund rather than using it to pay down the debt to the General Fund.
Whatever happened in the past, Dr. Norbut said she wants to “come up with a multi-year plan to create solvency.” First Selectman Bill Morrison pointed out that the district is already moving in the right direction by budgeting more than the One Digital recommended amount to put the fund back in a better position. Dr. Norbut was also eager to get the town attorney to draft an agreement to not only make the fund solvent but to put “procedural safeguards” in place.
On a related note, a disagreement arose about whether the town could use the money in the self-insurance fund to pay back the General Fund. Dr. Norbut doubted its legality and echoed Lund’s sentiments from the past, saying the fund needs a healthy operating balance to avoid borrowing from the General Fund again. And while she alluded to possibly transferring the board-appropriated amount for the self-insurance sooner rather than later, Norbut was concerned doing so would leave the funds open to transfer to the General Fund rather than being used to pay claims.
For their part, the BOF seemed to feel the BOE was arguing whether or not they even owed the General Fund. “In some ways, I feel like you’re saying you don’t have to pay it back,” said Geryk.
Anthony Armelin, BOF member, said, “In the course of a month, we went from talking about when we will get a check to whether or not you owe us.”
The school district seemed wary of committing without the advice of the town’s attorney and Marcum, the town’s auditing agency. In other words, Dr. Norbut is looking for a formal agreement for both sides to abide by. That agreement is imminent as the discussion moved on to a new Memorandum of Understanding (MOU), which would move some of the burden for paying for shared services to the BOE budget. Geryk said the MOU should be in place by the end of the year to inform budget discussions early next year and include language about how the schools will pay back the town.