School board considers how to fund retirement benefits; balanced budget also topic at Jan. 23 meeting

The Stillwater School District is beginning to consider options to help grow its Other Post Employment Benefit (OPEB) trust fund to pay obligations to retirees.

When the fund began in 2009, $18 million was put into it. This past year the fund paid out $1.7 million, mainly for health insurance costs, according to Director of Administrative Services Cathy Moen and District Finance Director Kristen Hoheisel. The fund was originally expected to cover retirement benefit costs for 20-40 years, but costs have been higher than expected.

“At this point the fund is serving its purpose, but it won’t be for long,” Hoheisel said. “At the rate we’re going, we’ll expire the trust before the liability expires.”

To counteract this, Hoheisel said that the finance committee, along with former finance director Ray Queener and herself, had determined that the best way to continue the trust might be to invest in more aggressive equities.

“From the inception of the account we’ve gotten a 3.28 percent return on our money markets and 9 percent in equity with $420,000 per year in interest,” Hoheisel said. “We could do nothing different, but we are at a point where we can take a risk in the market with 10 percent in equity.”

She recommended a 10 percent increase in investing in equities, which Hoheisel said is something that can legally be done now because of legislation introduced by the governor’s office.

“We did agree last March that we were comfortable with the amount suggested,” said Board Chair Tom Lehmann, who serves on the finance committee.

Hoheisel said the district could lock into a two-year investment to make this happen.

Board member Mike Ptacek said he’d have to look into the issue more before the board moves forward. The decision will be discussed and voted on at a future school board meeting.

Another financial decision was discussed at the board meeting on Jan. 23. The district has emphasized the importance of maintaining a balanced budget for the past year.

“As we looked at this, the balanced budget philosophy was discussed in December, and the approach to hold the line at the balanced budget. We want to make the revenue equal expenses going forward,” Hoheisel said.

The district is aiming to maintain a fund balance of 5 percent of its annual budget and to make the revenue equal the expenses. If there were extra money leftover at the end of the year, that money would be rolled forward into the next year’s operating budget.

Hoheisel discussed several budget philosophies, including line-item budgets which has been the district’s approach in the past; percentage add-on, which adds percentages to the previous year’s funding level; a zero-based budget started from zero each year and determined by individuals and staff; and a program and planning budget, which bases expenditures on programs and on objects. Hoheisel also mentioned the possibility of  creating a transitional form between traditional line-item and performance-based budgets.

Whatever decision is made, board members made it clear that they wanted to move to a balanced-budget approach.

“The weight of this needs to be considered in a broader worldview,” said board member Amy Burback, who serves on the financial committee. “We asked the community to invest a lot of money in our schools, and it’s our responsibility to make sure that they know that we are using their money responsibly.”

The board also:

• Approved the use of bonds to begin the school security improvements. The bonds that will be issued will allow the school to finish all the security upgrades slated to take place across the district. The bonds will be repaid with money from the levy voters approved last fall. The bonds will be paid off over the eight years that the levy is in existence in $420,000 increments each year.

• Learned about the grant that was recently received to help with mental health programming in the schools. The grant will provide for a therapist in each of the schools in the district.

• Heard a mid-year update on the progress of the Bridge to Excellence plan. The plan has decreased in action steps due to the fact that the original 90-some steps proved too much to take on.


Contact Avery Cropp at [email protected]