At the December 16, 2024, Stafford Board of Education meeting, Chair Sara Kelley informed the public via a statement that Stafford’s schools are implementing a budget freeze. The statement, which you can read in its entirety below, indicated that due to increased special education costs and the ongoing issues with the self-insurance fund (which you can read about here). Additionally, the statement said the board and the district are “implementing stronger procedures to prevent future errors and ensure accountability.”
Special education costs are typically a source of stress on schools' budgets. Stafford, like many districts across the state, has seen the rate of outplacement for special education students rise and often provides the special education services that are legally required via contracted services rather than in-district staff. In fact, during the Bills & Grants portion of the BOE meeting, board member Aaron Hoffman questioned a line item for homebound instruction provided through Oak Hill School, a private provider of special education services.
At a budget committee meeting held before the regular meeting, Interim Superintendent Dr. Laura Norbut told the committee members about Effective School Solutions (ESS), which claims it can prevent 95% of therapeutic outplacements and reduce absenteeism by, on average, 34%. According to the minutes from that meeting, “Mr. [Chris] Paradiso asked if a program like ESS would allow for students who are currently outplaced to be returned to the district. Dr. Norbut explained that, in the first year of a program such as this, the focus is on providing proactive services that allow students to remain in Stafford Public Schools instead of being out-placed at a significant cost to the District. She surmised that as this program moves into subsequent years, there is strong potential for cost savings and for providing services to other districts as space is available, for which tuition costs would be assessed.”
Much later in the meeting, the discussion returned to this year’s budget report, which, according to Dr. Norbut, is projected to run a deficit of $274,100 by the school year’s end. She indicated that the budget freeze is due to this projected deficit. In addition to special education costs being higher than projected, the electricity budget is an issue. Dr. Norbut said last year’s electricity budget line was “overspent by $128,905,” and that line item was not increased for the 2024-2025 budget.
She said there are several line items the district has drawn on to reduce the deficit to its current projected level:
Not hiring a Supervisor of Special Education
Not hiring additional paraeducators (this may not be possible if individual student needs require the district to hire paras)
Purchased services (such as professional learning, conferences, etc.) were reduced
Curriculum writing reduced to $0
Instructional supply lines cut by 50%
Dr. Norbut indicated that these changes are not sustainable for the district, “but we are in a place where we have to make some difficult decisions to be able to reduce the deficit.” She said she would also look at substitute lines, many of which are already over budget or close to.
Interim Business Manager William Hoff, attending via Zoom, added that there is not much left for the district to leverage without cutting into staff — and longtime, close observers of the schools will know there are already many unfilled positions in the district. Almost as if to drive the point home, Dr. Norbut pointed out that at the beginning of the year, the district did not have any registered behavior technicians included in the budget. However, the schools have had to hire them based on student needs. That has added to the deficit in other ways, including the need for additional contracted services.
“This doesn’t make people in our town comfortable to hear freezes in the middle of December,” said Hoffman. He added, “The most concerning thing to me is money being taken away from our 1,291 students and the work that we’re trying so hard to do in this district.”
“The district has to do some real soul searching of some of the ways we go about prioritizing how we’re spending money and how we can best service our students, every single student, not just a handful here, not just a handful there,” Hoffman added. “We need to be able to give our absolute 100% to every student.”
Dr. Norbut brought the discussion back to the aforementioned ESS program that could bring services back to the district and keep students in their home schools but reminded the board that it comes with a cost. She said more information would be available at the January budget workshop.
Accounting issues come to light
In addition to the special education costs and self-insurance fund, accounting issues from previous years came to light during this meeting, including the cafeteria’s profit and loss statements. Hoff said, “The numbers didn’t seem to add up to me. The only thing I could think of was that we were double counting some of the sales…that should have been attributed to the previous year.” He indicated Stafford could benefit from a better reporting structure, ensuring that they are reporting revenues and expenses by month.
A memo to the board read, "The identified revenue for 2023-24 was $820,242 rather than the $968,060 previously reported. It appears that the revenue from May and June 2023 that should have been included in 2022-23 was included in the 2023-24 amount. The expenses remained essentially the same as reported previously. The net impact is that Food Service had a loss of $156,536 rather than the loss of $5,273 previously reported. This deficit was paid from available funds in the Food Service account. There are no remaining funds in the Food Service account. Any losses in the current year will need to be subsidized from the BOE budget."
The issue impacted more than just the 2023-2024 budget, as the memo also said, “The 2022-23 report showed a profit of $139,588. However, the revenue amounts are again higher than the amounts actually received and deposited in the Food Service account. Mr. Hoff does not believe the 2022-23 report is accurate.”
When Kelley asked if he would look into the 2022-2023 numbers, Hoff said it would not be worth it. That audit is complete, and the numbers were corrected there, but the numbers initially reported to the board were incorrect.
“We’re doing better this year than we did last year,” he said.
Dr. Norbut added, “While we are facing challenges, and while what was reported is a significant loss for the ‘23-’24 school year, there are several corrective action steps that I think are important for us moving forward so that we are not back in this place again.”
Self-funded insurance
The meeting then moved on to self-funded health insurance. We have already covered this extensively and have provided links below, but essentially, the town extended $1.2 million from the General Fund to cover shortfalls in the self-insurance fund and expects the school district to pay it back.
As Dr. Norbut updated the BOE, she said that in 2018 and 2019, the reserve balance in the self-insurance fund was over $2 million. The ending balances dwindled over the years, but in 2023 and 2024, the funds had negative reserve balances, as shown below:
2023: - $284,757
2024: - $222,482
Dr. Norbut attributed the problem to higher claims and the district not following the insurance consultant's advice when budgeting the health insurance premiums. She also reminded the board that the district sent $625,000 of its remaining budget to the fund in June and that for 2024-2025, the district budgeted slightly over the recommended amount. At the time of the meeting, Dr. Norbut said the fund had a balance of $808.363.68.
As we have covered previously, the fund will continue to operate organically rather than having the district infuse cash into it now. To address the $1.2 million that the town paid from the General Fund, Dr. Norbut said one possibility is that at the end of the year, if there is any money left in the board-appropriated line items for the self-insurance fund, that money would go back to the Town of Stafford. She also said that the board would need to decide if the self-funded model is the best option going forward. As the number of employees in the district has declined, the risk has increased. This means One Digital, the district’s consultant, is conducting a Request for Proposals (RFP). Dr. Norbut also indicated she had spoken with the three unions in the school district to ensure the benefit levels remain the same and avoid collective bargaining issues.
Dr. Norbut also told the board One Digital is projecting a 21.2% increase in the insurance premiums if the BOE stays with the self-insured model. One Digital has said joining the state partnership plan (the plan town employees are on) would be roughly the same increase. However, the benefits would be better for employees. Dr. Norbut said that One Digital should have other proposals by the end of January or early February.
Hoffman said, “Last year, when that line went up by 10%, this board questioned self-insurance. It just didn’t seem possible that we could continue to have this percentage to go up by this much every year and adding that into our budget. Now they’re talking a 21% increase…it’s clearly not sustainable.” He then asked why One Digital is “conducting the audit of opportunities or different options that we have? Is there a reason they’re the ones conducting it, because they’re the ones seemingly steering us in the wrong direction over the past few years?”
Dr. Norbut clarified that One Digital is not an auditor and explained it is an insurance broker advising the district on the percent increase that should be built into the budget based on several variables. She explained that One Digital suggested a percentage the district and town CFO had decided to lower. In other words, One Digital’s advice was ignored.
Good to Know
In late October of 2023, CNN reported that insurance premiums were expected to rise 8.5% in 2024. Stafford’s suggested increase outpaced that number; however, considering it had not increased its insurance budget enough in the previous years, that is not entirely surprising.
The school’s self-funded insurance plan is administered by Anthem. Whatley Kallas reported, “Elevance Health, Inc. (formerly known as Anthem) reported strong fourth quarter 2023 profits of $856 million and strong fourth quarter revenues of $2.6 billion in revenue, beating analysts’ expectations. Its revenues were up nearly 7% from the prior year quarter. As a result of these strong earnings, Elevance raised its quarterly dividend by 10.1% to $1.63 a share.”
Dr. Norbut said she spoke to other districts that use self-funded insurance models and conveyed the reserve balance is integral. While the district no longer needs $2 million in reserve, maintaining a balance is important so that the district can ride out any years when claims are higher than expected or premiums increase. She added, “That really is a very important component when we’re thinking about long-term planning. Having that reserve balance and keeping it intact is essential to the account functioning in a healthy way and keeping the account solvent.”
Toward the end of the meeting, the board voted to have Hoff continue working with the district as a financial consultant, a change from his current position, which has now been filled permanently. He would audit various accounts and help provide transparency into any issues — such as those he has already uncovered — under a contract extending from January 1 to September 30, 2025. Dr. Norbut said that if the services are no longer needed, the contract can be terminated, but that a series of financial reports are due to the state during that contract period. She said it was more fiscally responsible to contract with Hoff directly than to hire an outside firm to do the work.