Audit reports that schools need $4M from city
A third-party auditing duo has confirmed in their finalized report – now available to the public – that the Warwick School Department needs a little more than $4 million in additional funding from the city of Warwick to meet its obligations and restore recent drastic cuts made to balance its budget that were direct violations to the state’s Basic Education Plan (BEP).
It must be noted that this recommendation assumes that the schools either do not accept the $1.75 million recently offered by Mayor Joseph Solomon or that offer is rescinded pending new negotiations. If those funds were to be officially allocated (which, to this point, they have not been), the actual funding shortfall would be around $2.3 million.
The audit compared Warwick’s fiscal situation and programmatic practices to other districts in what the Rhode Island Department of Education (RIDE) refers to as the Urban Ring, which consists of Warwick, Newport, Johnston, West Warwick, East Providence, North Providence and Cranston.
Among the findings in the report are a few key observations and conclusions that will likely shape the discussion when the school department appears before the Warwick City Council at their Sept. 17 meeting. It should be noted that fiscal data relating to salaries in this report come from FY17 data, which covers the 2016/17 school year, as the FY18 data has not yet been released.
Most importantly, the audit found that a total of $4,216,758 in cuts made by the Warwick School Committee in June to balance its budget were unallowable under the purview of the state’s BEP, and would need to be restored. These include:
- 15 custodians cut to save $750,000
- Professional development cut for $357,000
- Ice rink and pool rentals cut for $55,253
- One professional cut at the Warwick Early Learning Center for $100,000
- Pathways transportation/tuition attempted cut for $690,000
- Moneys placed into unspecified “contingencies” account for $514,505
- Debt service for 2006 bond amounting to $1.75 million
Not included in that list, as some may have noticed, is the $104,000 cut that would have funded support staff to conduct the Mentor Rhode Island mentoring program. Hicks explained that such a cut was allowable under the BEP, and the audit focused solely on requirements.
“The report looks at not what you want to do, not what you'd like to do, but what you have to do,” he said. “This is really looking at what you minimally are required to do.”
While the audit identified over $4 million in necessary restorations to the budget, it also was only able to identify $184,027 in readily available cuts that could be made immediately, which would come from an additional 1 percent slash to the department’s building maintenance budget. This drops the grand total needed by the department down to $4,032,731.
Some of the most important findings from the audit will be outlined below.
Teacher salaries, not administrators, driving higher spending in district
While a lot has been said over the years about how the district’s administration has irresponsibly handled its budget, the audit revealed that Warwick is quite comparable to like districts in many ways, except for one key area – spending per pupil.
Out of seven Urban Ring districts, Warwick spends the second highest amount per pupil – $18,538, which is behind only Newport, which spends $19,726 per student. Cranston, for comparison, spends the lowest amount per pupil among like districts, at $15,969. The average, however, is $17,508 spent on each student.
These higher per pupil costs, according to the audit report, are primarily driven by teacher salaries being significantly higher than comparable districts, to the tune of what amounts to a $5.1 million higher fiscal impact than the average cost of teacher salaries in Urban Ring districts, a figure that accounts for Warwick matching pension and Social Security benefits for its staff. This number can also be expected to climb following the receipt of FY18 data, as it does not reflect salary increases recently bargained.
Warwick has over 45 percent of its 852 teachers at the top step for pay (20 years), which earn $87,166 in salary compared to the Ring average of $80,147. Another 42 percent are on Step 10, which earn $81,427 compared to the average of $76,478. This means that a full 87 percent of teachers are at or above the top step in Warwick.
“Budgetarily, this has two effects,” Hicks writes in the report. “1) It creates a high per teacher cost, adding to the cost of the higher salaries; and, 2) from year to year it minimizes total wage growth, as teachers only receive overall salary increases, and do not receive yearly step raises.”
Warwick Teachers’ Union president Darlene Netcoh said on Wednesday that another reason for so many teachers at the top step is because it is more difficult for teachers to achieve a full pension, and so they must therefore stay in the district longer.
In terms of administrative pay, while the superintendent position in Warwick is paid $35,000 higher than the average superintendent in like districts, principals are paid $809 less than the average.
Interestingly, despite the oft-repeated criticism from school department detractors that believe too much money is wasted on administrators’ salaries and that there are an excessive number of administrators, the audit data revealed that Warwick actually has about one fewer administrator than the average for Ring districts.
Further, since the 2015/16 school year, the number of administrators in Warwick has consistently gone down, from 69 to 60 for the upcoming school year, a reduction of 13 percent. That reduction is larger even than the percentage of instructional teachers who have been laid off, which is 92 since 2015/16, or 10 percent in that same span.
According to the audit, Hicks found that an additional 16.5 teaching positions could potentially be examined for elimination next year to increase efficiency at the secondary level (7.1 at the middle schools and 9.4 at the high schools). He said that no significant inefficiencies were found at the elementary level. The data revealed one thing for certain to Hicks.
“Your instructional costs, your salary costs, are not driven by having too many people,” he said. “The data does not support that those higher costs are driven by having more people in the district.”
The audit concluded that, “Comparative data, combined with the administrative cuts made to FY19 indicate that administrative reorganization is not a feasible route to budget resolution.”
Health care reserve funds good budgetary practice
Sometimes referred to by department critics as a “slush fund,” the audit touched upon the reserve funds located in the department’s account with West Bay Health (WBH), which accrues money when coverage for a school year goes unused due to low claim volume. At the close of FY17, the department had $1.46 million in its reserve account, which the audit called “not excessive.”
Referencing the unaudited FY18 reporting from the department, that reserve rook a significant $894,257 hit this past year due to several large claims, leaving just $568,014 (2.4 percent of overall expenditures in the budget), which the report categorized as “precarious as opposed to excessive.”
“Consequently,” the report continued, “the health care reserve is not a funding source available to draw upon.”
Where are the consolidation savings?
A major critique levied by the Warwick City Council at its recent meetings where the school department budget situation has arisen is the accusation that the school department has either frittered away savings accrued from closing multiple schools as part of its consolidation efforts or that it is inaccurately reporting the actual savings realized in order to make the need for funding appear greater.
The audit, however, points to data showing that Warwick is the only community in the seven Urban Ring districts to realize a decrease in per pupil spending for FY17 and FY16. Over those two years, Warwick’s per pupil spending has decreased by 1.8 percent, while every other district has increased in spending from 0.4 percent to as much as 6.7 percent.
“You are seeing savings, they're just not in that big massive lump that some people were expecting or asking for,” Hicks said.
The report states that converting junior high schools to middle schools as part of the consolidation process “absorbed” some of the savings achieved, as middle schools are more expensive models than junior high schools due to the higher number of students requiring services and how those students are organized.
Audit calls for better collaboration
The audit confirms a few long-maintained points of view by the school committee, including their assertion that administrative positions are not overstaffed in the district and that the department isn’t covering up significant savings within their budget. School Committee member at-large David Testa called the report “validating.”
School Committee Chairwoman Bethany Furtado said she was optimistic and looking forward to meeting with the council in September to further discuss the budget.
“I thought it was clear, concise and factual,” she said of the audit. “In all the years I've been involved with the school department and the school committee we have not done a program audit. I think it was absolutely time that we did. It showed how responsible the administration has been and is being and what is actually needed.”
City Council president Steve Merolla said on Wednesday he hadn’t yet been able to review the documents, and would need to review the audit report prior to commenting on the issue.
Netcoh said that she was taking the salary figures reported in the audit “with a grain of salt.”
“I am taking that cross comparison on teacher salaries with a grain of salt because there are too many variables and I am not sure they even factored in the 0 percent increases in salary that we had for the last couple of years,” she said, adding that “Because they did not post the audit as a public document prior to the meeting, I have not had the chance to study it in detail.”
Hicks gave one final recommendation in his presentation, which stemmed from a state law that mandates school committees and city councils to meet between 60 and 90 days prior to budget hearings commencing in order to share how much revenue would be raised by the municipality and how much money would be needed for the schools. He said he found “no record” of Warwick engaging in this legally obligated process.
“If those communications had been ongoing, I think it's likely that you might not be in this place, or at least you would have known you were going to be here a lot sooner,” Hicks said. “You might have made different choices about contracts and collective bargaining if you knew what was coming down the road.”
The audit report, which commenced in June at the request of the school committee, was prepared by Robert Hicks and Thomas Conlon. Hicks, who handled the programmatic side of the audit, has about 40 years of experience in education, including stints as superintendent of schools for Block Island, South Kingstown and Exeter/West Greenwich. Conlon, who handled the fiscal side of the audit, has about 50 years of experience in finance, including stints as the controller of the town of Warren and 20 years as the business manager for the Pawtucket School Department.
To view the audit report and relevant data, click HERE