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Foster: Stegeman's commentary offered all the TUSD drama but only half the story

Recently I had an opportunity to read Mark Stegeman’s commentary about the state of TUSD’s finances in the Tucson Sentinel. As I read, it was almost as if I had been transported to some alternative reality where COVID-19 never hit the district, the Tucson Unified School District hadn’t been shorted millions in desegregation funds by the state, and that the assessment of our external auditors, Clifton Larsen & Allen, on the state of our finances for the 2019 fiscal year, all of a sudden had ceased to exist.

In his recent piece “TUSD must reckon with cash problems,” Mark does a good job painting the picture of on an oncoming financial crisis, but his claims seem more rooted in his enthusiasm to see the district in dire financial peril than our actual financial situation.

First, Mark notes that our TUSD internal auditor, Martha Smith, reports that “long standing weaknesses in internal controls” remain widespread. What he fails to mention is that this quote comes from the Cash Handling Internal Audit Report that Martha submitted in May this year, which is focused on financial issues at the site level for certain schools, not the overall financial state of the district. It is misleading to insinuate that our internal auditor has rendered a comprehensive report on the financial state of the district. She has not. From this cash handling audit, we learned that our district has challenges with school-level financial transactions such as the sale of theater tickets, concessions at athletic events, and student-led fundraising events. I am glad we know this now so we can begin to address them.  

The other aspect of this audit highlights the $7million in accrued tax credit funds by different site councils throughout the district.

Governing Board policy gave school site councils absolute authority and control over the expenditure of their respective tax credit funds, prohibiting district administration from implementing effective internal controls over these monies. In May 2020, after Mark left the Governing Board, we revised and approved Policy JQ: Student Fees, Fines and Charges, which now requires public transparency and a spending plan for school site councils to ensure they allocate their tax credit and donation dollars annually.

Our community graciously contributes to different schools and programs, and are under the impression their gifts are being used accordingly, not saved year after year.

The fact that Stegeman served as president of the Governing Board 2-3 times during his 12 years of service, and never proposed (or from what I understand he actually blocked) the revision of this policy, of perhaps this biggest internal control challenge we face, makes one question his leadership and true intentions.

Next, Mark voices his concern over the depletion of the district’s cash balances from $31 million in 2016 to $11 million in mid-2019.

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The majority of this balance was from Prop. 301 monies and had been accrued before HT Sanchez was hired as the superintendent. It was actually Sanchez and our former director of finance, Karla Soto, who "uncovered," if you will, this balance when Soto replaced Yousuf Awwad. When I was a first-year Board member, the then-president of the teacher’s union tried to convince me that there was over $20 million of Prop. 301 monies "missing." I remember the day when Sanchez said, "She’s right."

Sanchez and Soto drafted a plan that would allocate these funds to ensure both a healthy cash balance as well as years of a sustainable, annual salary supplement for our teachers. (This was when the fate of Proposition 301 was largely up in the air and set to expire at the end of the 2021.) 

But instead of adopting that sustainable plan, Mark was the Board member who led the charge to deplete TUSD’s cash reserves that year by $20 million for the purpose of “zeroing out” the district’s Prop. 301 funds.

Along with Mark’s concern about the district “amassing” $20 million of the teachers’ 301 money, as a member of the TUSD Employee Benefits Trust (EBT) Board, he never brought to the Governing Board’s attention that the EBT balance had ballooned to almost $26 million. In fact, he lauded this committee’s work on different radio shows and held them, and himself, in high regards. The sole purpose of these funds is to lower the cost of benefits and premiums for our employees. So, I’m left to ask: Isn’t this the employees’ money too, Mark?

A self-insured district the size of TUSD should average $15-18 million in their respective EBT, according to both CBIZ and Valley Schools, our benefit consultants. When learning we had accrued close to $26 million, under Adelita Grijalva and Superintendent Gabriel Trujillo’s leadership, we started to draw this account down, and have re-allocated $4 million over the last two years back to staff, lowering insurance premiums and medical costs for our employees.

That $4 million plus actual medical claims that were paid out to employees, for maternity costs, hospitalizations, and long-term illnesses (or rather, how the money is supposed to be spent) is how Stegeman calculates his convoluted statement that we’ve mismanaged $15 million over the last 3 years.

He also leaves out the fact that every year when our 8,000 employees pay their benefit costs, the EBT is replenished and that total amount of revenue flowing back into the fund exceeds the amount paid out for claims. For all of his hyperbole regarding the depletion of the Employee’s Benefit Trust, its balance decreased by 3% between 2016-2020, after it had swelled more than 43% higher than it should have under his leadership.

Mark conveniently leaves out another large financial obstacle we face in TUSD which the Board has no control over.

In March of 2018, the Arizona Legislature passed SB 1529, which changed the wording of state statute from “primary” to “secondary" with regard to the tax levy for desegregation funds. This change would increase the tax burden for homeowners within the Tucson Unified School District by $8 million. We joined Pima County and challenged this and in July 2019, the Arizona Tax Court ruled in our favor. However, Arizona has yet to begin paying TUSD these monies, and as time has passed, the state now owes TUSD over $11million in taxpayer funds.

Considering the findings of our external auditors, by way of their Comprehensive Annual Financial Report (which is public record and available to view online as part of our February 18, 2020 Board meeting), one comes away with a very different picture of the financial state of our district than Mark Stegeman tries to paint for our community weeks before an election.

Giving the district credit for increasing our total net financial position by adding $14.6 million in revenue in 2019, increasing classroom spending to 53%, and achieving a 20-year low in administrative costs at 8.9% is really good news — difficult good news for Mark to congratulate us on in his commentary published days before people begin voting for new school board members.

There is no doubt TUSD will face significant financial challenges brought on by COVID-19 and its related enrollment loss. Every public school district in our state will be impacted by these unexpected, yet necessary, costs.

Yet, the apocalyptic financial forecast posited by my former boardmember colleague is convoluted at best, and don’t forget, very calculated in time for your three votes on the ballot for TUSD.

Kristel Ann Foster is a member of the TUSD Governing Board, and currently its president. She is not seeking re-election in 2020.


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Latest comments on this storyRead all 6 »

6
16 comments
Oct 15, 2020, 1:24 pm
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Ms. Foster, I doubt that Frances Banales would appreciate your dragging her name into this. Sanchez and Soto’s misappropriation of TUSD teachers’ 301 performance money was an embarrassing fiasco for TEA.

Your claims make you look even worse.. You claim the TEA
president told you about the misappropriation your first year on the Board. That was 2013!

If your story is the truth, it’s really hard to understand why you sat by and allowed more and more 301 performance money to be misappropriated all the way through 2017!

Not only did TUSD teachers make less money thsn they were entitled to, every teacher who retired during that time will be paid less retirement money for the rest of their lives!

(The amount of money teachers earn determines how much both they & TUSD pay towards their retirement!)

Shame on you, Ms. Foster! You’ve never even had the grace to apologize to the teachers and the retires who were cheated..

The total of misappropriated 301 money was huge! It was far more than the TOTAL of all the pay raises teachers got during
Sanchez’s years as superintendent.

None of the facts support your claims. Anyone who wants to can look up the external auditor’s’ report, where year after year it says 301 (Classroom Site Fund) was loaned to cover overspending of other funds!

The AFR (Annual Financial Report) to the state signed annually by you, Sanchez, and Soto, show the unspent 301 performance money skyrocketing during Sanchez’s administration.

Anyone who wants to read about it can look up article after article in The 3 Sonorans or read Tim Steller’s 2017 column. Ms. Soto didn’t tell him the whole truth, but there’s enough truth to show that your story isn’t true.

5
19 comments
Oct 15, 2020, 11:32 am
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This week Fitch Ratings confirmed its negative outlook on TUSD’s institutional debt rating (currently BBB+), citing its “declining enrollment base and weak fiscal management.” Fitch writes that “spending is likely to be well above the district’s revenue trends,” “the district’s previously slim reserve cushion has eroded,” and “its financial operations are at risk to becoming distressed.” These assessments confirm those in my oped.

4
2 comments
Oct 14, 2020, 7:22 am
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I wouldn’t expect you, of all people, to believe me, Ms. Fox. But, please reach out to Frances, the former TEA president to verify the info I have shared here. If you’d like her contact info, feel free to email me.

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Foster during a 2017 TUSD Governing Board meeting.

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