My Goal: Improve the financial management of our $1.4 billion school district budget and $800 million Capital Program.

Problems with the Management of our Operating Budget

I'll start with a very telling point: Until the arrival of Jeffco's new CFO, the district had been managing a $1.4 billion budget using a series of spreadsheet models. And research has found that spreadsheet models typically contain many errors. Unfortunately, that is just what the new CFO found in Jeffco's. The good news is that the new CFO is in the process of replacing Jeffco's spreadsheets with a modern financial management system.

Here's another telling point. Despite falling enrollment (due to both a declining birth rate and more students choicing out of district-run schools), for years Jeffco has kicked the can down the road and refused to close and consolidate schools. As a result, today we have a stunning 57 schools operating at under 65% of capacity. If we applied the industry standard for low capacity utilization of 80%, Jeffco would have far more.

In preparation for community discussions about closing elementary schools, Jeffco compiled a large set of public data that you can access here. When you look at it, a number of things jump out.

Did you know that Jeffco spends an average of $16,177 per year per elementary student? Neither did I. That's one of the benefits of having a new financial management system and a CFO who has been digging into the district's costs.

Unfortunately, all that spending (and the very high staffing levels you can also see in the data set) have not produced great academic results. On the 2019 CMAS assessment, 54% of Jeffco 3rd graders didn't meet state standards in reading, and 65% of 6th graders failed to meet them in math. And that was before COVID learning losses.

There is no doubt in my mind that there are many opportunities to improve the financial efficiency of our $1.4 billion school district.

Recently, I was the only board member to vote against the district's budget for the fiscal year beginning on July 1, 2022. Let me explain why.

This budget will draw down about $28 million in reserves, as the economy heads into what could easily become an extended downturn.

The reserve drawdown was needed for two main reasons.

First, falling enrollment (due to a combination of a declining birth rate, and more students choicing out of district-run schools) is placing downward pressure on our revenues.

Second, the budget allocated millions for a substantial increase in teacher pay. Depending on how current negations with the teachers union turn out, the actual amount we need to spend on compensation may become even higher. Given that teachers typically increase salary steps over time, compensation costs will further increase in the years ahead.

Critically, the budget strains we face are poised to become much worse.

Colorado calculates state aid on the basis of school districts' rolling five year average enrollment. As Jeffco's previous enrollment declines continue to reduce the average enrollment used by the state, we will face further reductions in state funding.

Moreover, the unprecedented federal aid that districts received because of COVID (e.g., ESSER funding) will run out in the next few years. Some of this aid has been used to pay for recurring rather than one-time costs. In the absence of higher enrollment or other new sources of revenue, when the federal aid runs out, other costs will have to be cut to pay for these recurring costs.

Based on all these factors, the district currently forecasts that in fiscal year 2024 (which begins on July 1, 2023), we will have to draw down a further $44 million in reserves, which will put us below the minimum level of reserves recommended by the Government Financial Officers' Association.

Last but certainly not least, I believe that the district's current budget does not allocate sufficient funding to meet our most important challenge: Recovering students' learning losses, and substantially increasing the percentage of our children who graduate able to proficiently read and write, and do math and science.

In my work, I hold an SEC Series 50 Municipal Financial Advisor license. This obligates me to act at all times with a fiduciary duty of care towards my clients. As such, I could not recommend that a client of mine accept the financial and educational risks that Jeffco is taking with this budget. I therefore could not vote in favor of having Jeffco's children and taxpayer take them.

Let's move on to problems with the management of Jeffco's Capital Improvement Program.