Atlanta Public School CFO Chuck Burbridge accepts position as Executive Director of the Chicago Teachers Pension Fund

February 26, 2015

chuck burbridgeThe Chicago Teachers Pension & Retirement Fund (CTPF) announced today that Chuck Burbridge will become the Executive Director of CTPF effective March 16th. Burbridge has served as the Chief Financial Officer for the Atlanta Public Schools since August 2007.

Burbridge will replace Peter A. Driscoll who has been serving as the Interim Executive Director for CTPF and who had previously announced he would be leaving  the interim position in March.

CTPF, with an administrative budget of approximately $10-12 million, manages the pension funds for the teachers in the Chicago school district and has assets under management of approximately $10.8 billion and actuarial liabilities of approximately $19.5 billion. The $9.5 billion actuarial funding shortfall leaves the pension plan at a 51.6% funded level. Burbridge will have his work cut out for him as he tackles the significant deficit in funding.

Per the press release,

“Our trustees are confident Mr. Burbridge’s extensive, senior-level financial experience in both the public and private sectors will be a valuable asset to the fund going forward,” said Jay C. Rehak, president of the CTPF Board of Trustees. “In addition, Chuck’s leadership and strong background working in Chicago and Illinois will help us navigate the many challenges and opportunities facing the CTPF in the current pension fund environment.”

“I’m excited to be leading the Chicago Teachers’ Pension Fund into its next chapter,” said Mr. Burbridge, the incoming executive director of the Chicago Teachers’ Pension Fund. “For more than 100 years the fund has been a key part of Chicago and the education community. I look forward to serving our 63,000 members and working with the trustees and the staff to ensure that our pension plan’s funding gets back on track, so we are able to deliver on the promise made to our members.”

In Atlanta, Burbridge has had experience with underfunded pension plans and has worked with the Atlanta Public School Pension Task Force to develop alternatives for enhancing the funding of APS’ portion of the City Pension Plan. Currently, APS’ portion of the City Pension Plan is only 20% funded and has an actuarial liability of approximately $530 million.

Per his bio at the APS website,

Chuck Burbridge joined Atlanta Public Schools as Chief Financial Officer in August 2007. Prior to moving to Atlanta, he served as Chief Financial Officer for the Los Angeles Unified School District, the nation’s largest independent school district with approximately 700,000 students and an annual operating budget of over $7.5 billion. He has also held the Deputy CFO position at Chicago Public Schools, was also the Deputy Chief Financial Officer for Cook County in Illinois, and was the Chief Economist for the Illinois Economic and Fiscal Commission.

A Certified Information Systems Auditor, Mr. Burbridge received his Bachelors and Masters degree in economics for the University of Illinois. He is a member of the Council of Great City Councils and serves on the Microsoft K-12 Advisory Council.

I have had the privilege of getting to know Chuck well. He is a man of impeccable integrity, has a deep understanding of education finance and is extremely well liked by his staff, peers and the community at large.

We will miss his leadership in APS and we wish him well as he returns home to Chicago.

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Atlanta Public School Budget Commission increases projected revenues by $14 million to $682.8 million for FY16 – no tax increase at this time

February 26, 2015

The Atlanta Public School Budget Commission, chaired by Matt Westmoreland, convened yesterday to consider how to fund additional educational priorities that remained unfunded under the original revenue projection of $668.8 million. The Commission decided to include up to $14 million owed by the Beltline in its revenue projections for FY16 which raises the total revenue to $682.8 million.

The $14 million Beltline payment that has accumulated over the last two years remains unpaid and is the subject of a dispute between APS and the City of Atlanta. The Beltline currently does not have the funds to make the payment and the City of Atlanta – led by Mayor Reed who is the chief negotiator – is a party to the original contract and is liable for the amount due to APS. For more background on the dispute, see the AJC article here.

The Commission is taking the position that the amount is due to APS and that the revenue should be included in the FY16 budget. However, the Commission has also determined that in the event the payment is not received, the General Fund reserves of $14 million will be used to cover the additional expenditures added to the FY16 Preliminary Budget.

In addition, the Budget Commission determined that if the Beltline payment is received, the total expenditures will increase to $696.8 million and the $14 million in General Fund reserves will be used to balance the budget. The administration anticipates that the General Fund reserves at the end of FY15 will be $61-66 million and the use of the $14 million in reserves will bring the balance down to the minimum threshold set by APS policy of approximately $50 million in reserves.

However, even with the incremental funding source, additional priorities – including the pay parity issue (see here) – remain unfunded. The Board is considering adopting a plan to restructure the Pension Liability and, if a restructuring plan is adopted and subsequently approved in a voter referendum, the restructuring could increase available cash flows by approximately $20 million in the first year and $10 in the second year – and the amount would increase over time. In the event this occurs, then the funding structure for the FY16 budget will be revised.

The alternatives presented above have multiple dependencies on the different payment streams and the following flowchart attempts to lay out the complex decisions and incremental expenditure funding under each scenario (click to enlarge).

 

Revenue and expenditure flow chart

Based on the expenditure proposals under each scenario, it is clear that Board and the Administration are placing the funding of educational priorities first. Next in-line for funding are pay raises for teacher and other personnel, but they are dependent on receiving the Beltline monies and restructuring the pension liability. Also, based on the $7.7 million in cuts announced in administrative expenditures, Superintendent Carstarphen is taking steps to “right size” these functions and reallocate the cost to other educational funding priorities.

Additionally, the Board appeared unwilling to adjust the property tax millage rate and, at this time, tax rates will stay at the same level as this past year.

The Administration will incorporate the changes that have been agreed upon and present the revised FY16 Preliminary Budget at a public hearing that will be held on Monday, March 2 at 12 p.m. prior to the regular Board of Education meeting that will begin at 2 p.m.

The Budget Commission has made substantial progress and, due to the critical nature of the discussions, all nine Board members were in attendance for part or the entire Commission meeting.

My sense is that a conclusion will me reached in the very near future.

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Atlanta Public School Budget Commission reviews FY16 Preliminary Budget – choices will be difficult

February 20, 2015

The Atlanta Public School Budget Commission met yesterday to review the FY16 Preliminary Budget (see prior post here). The information provided by the Administration was at summary level and the specific change in spending for all departments was not fully disclosed..

The Commission is now focusing on establishing the revenue estimate for FY16. Currently the revenue for the General Fund is estimated at $668.8 million. However, there are a number of other priorities that the Board and Administration wants to fund and, if the decision is made to do so, the funding source must be established.

The Commission will meet next Tuesday to consider the following funding sources:

  • Raise property taxes –each one point increase in the millage rate would generate an additional $18 million.
  • Use the General Fund reserves – APS policy states that the General Fund reserve will not go lower than 7.5% of expenditures which places the floor on the General Fund reserve at approximately $50 million. The current projection is that the General Fund balance will be at approximately $62-66 million at the end of FY15 – and the $12-16 million over the $50 million threshold could be used to fund additional activities in FY16.
  • Reallocate the proposed spending plan – the Board could request that the proposed spending plan be reallocated to fund other Board priorities by making additional cuts in other programs.
  • Include the $13.5 million Beltline payment – the current budget proposal does not include any payments that are due from the Beltline (and the City of Atlanta) as the amount due is under dispute. Inclusion of this amount in the budgeted revenues would cover a substantial portion of the other priorities under consideration but yet unfunded.
  • Generate some savings from the Pension Liability payment by restructuring the debt – this alternative could generate some incremental cash flow, however the timing and the amount of the savings cannot be determined as the Pension Committee Task Force has not yet reached a conclusion or provided a recommendation to the Board.

The decision to include additional resources in the FY16 budget is a tough one – raise taxes, reduce other costs, use the General Fund reserve or rely on potential resources that may not materialize during FY16.

On the expenditure side, the Board and Administration have four priorities that it would like to fund, but cannot do so until a decision on the revenue side is made. The four priorities are as follows:

  • It is estimated that it will cost approximately $13.0 million to address the “pay parity” issue that will bring APS employees affected by the pay freeze instituted in 2010 to the same salary level of employees hired subsequently.
  • $5.0 million in additional resources for the 10 clusters in APS – these resources would be provided to school leaders who would then have the flexibility to use the funds to address specific issues they are encountering in their schools.
  • The Board has indicated a desire to expand the Pre-K program by eliminating the current waiting list and improving employee quality and retention by increasing compensation. The cost of the expansion and compensation increases is approximately $2.6 million.
  • Increased spending on extracurricular activities and enrichment programs – the approximate cost of the incremental spending was not disclosed in the meeting.

Budget Commission Chair Matt Westmorland indicated that he wanted more time for all Board members to consider the issues they face and a meeting to consider the alternatives shown above has been scheduled for Wednesday, February 25th at 9:00 a.m.

I will add that the Board now finds itself in an interesting position. The Administration has taken certain steps to reduce the cost of the administrative functions by a total of approximately $7.7 million; however these savings have been used to fund State and other mandates (Special Education, increase in pension costs, etc.)  The reallocation of cost begins to fulfill one of the major campaign promises from last year’s election. However, except for the mandates noted above, the budget does not actually increase the number of staffing resources in direct instruction or address prior inequities in compensation practices.  If the Board intends to fund additional changes, it will have to make some very tough decisions.

On a technical note regarding the information provided by the Administration on the FY16 Preliminary Budget – while some specifics were included in the presentation, approximately 30% of the spending was grouped in an “Other” category and the specific expenditures for Program included in “Other” was not shown. Additionally, the FY15 Amended Budget – which was used for comparison to the FY16 Preliminary Budget – has changed substantially from the information released in December and again, it is unclear how the FY15 projected expenditures will look by Program.

The Board did request that additional detail at the Program level be provided in advance of the next Commission meeting – the Administration indicated that it would comply with the request.

I would add that until more comprehensive information is in the hands of the Board and the public, it is impossible to come to any conclusions on the FY16 Preliminary Budget. The Administration does get credit for generating the initial budget on a very timely basis and for using the FY15 Amended Budget as a comparison to next years spending levels. My understanding is that Finance is working hard to generate better expenditure forecasts and the information they are providing is far more relevant than the FY15 Original Budget that has been transformed by the new Administration.

In addition, it is very clear that the Administration is making every effort to produce an accurate representation of the FY16 spending and wants to be very open with the disclosure of any contingency funds included in the budget. This is a refreshing change from prior budgets that were chock full of hidden budget cushions.

As Superintendent Carstarphen stated as she was being introduced to the community last spring – “if you want to know the district’s priorities. follow the money”. By presenting a true estimate of next years spending by Program, she is providing the Board and the public with a clear roadmap to the district’s priorities.

My sense is that by presenting an open, detailed and honest budget for FY16, it will go far in moving the needle on establishing the integrity of this new Administration – and doing so is consistent with a component of the new APS mission that calls for “the community has trust in the district”.

While there are many components to this, an open and honest budget that truly reflects the direction this Administration is a great start.

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Atlanta Public Schools to release FY16 Preliminary Budget proposal today – General Fund revenues at record levels

February 19, 2015

The Budget Commission of the Atlanta Public Schools will convene this morning at 9:00 a.m. and will review the FY16 Preliminary Budget proposal that will be presented by Superintendent Carstarphen. Initial indications are that General Fund revenues will be $668.8 million or $11.2 million higher than the previous years $657.6 million in budgeted revenues and $14.8 million higher than the currently forecasted $654.0 million in actual revenues for FY15.

The $668.8 million in projected General Fund revenues for FY16 are at record levels and exceed the $657.5 million peak in General Fund revenues in 2009. However, Special Revenues – that include Federal and other grants – will be lower than in previous years and total revenues (excluding SPLOST revenues that are used for capital projects) will be approximately $20 million lower than the total peak of $743.2 million reached in 2009 prior to the recession.

All indications are that the proposed expenditures will be equal to the projected revenues for FY16 and no General Fund reserves will be used in the budget proposal. If this holds, this will be the first budget in many years that will be balanced without the use of reserves. Superintendent Carstarphen has a track record of presenting balanced budgets and her first budget submission will be consistent with her record in previous districts.

Even with near record level revenues, there are State mandates and other requirements that are consuming all the incremental resources.  These mandatory increases in spending include:

  • The Special Education program will see a $4.8 million increase to bring the program into compliance with Federal and State regulations.
  • The required contribution to the Teachers Retirement System (TRS) will increase from 12.18% to 13.15% of eligible employee’s salaries (almost all full-time APS employees are participants) and will increase employee benefit costs by at least $3.4 million.
  • The Elementary PE program will be brought into compliance with State regulations and will see a $0.8 million increase.
  • Projected enrollment is increasing in the district by 923 students with the charter school enrollment increasing by 1,220 and the traditional schools enrollment dropping by 297 students. As a result of the shift towards charters schools – by statute, the charter schools share of the resources will increase by $21.2 million to $92.2 million. It is estimated that the charter school enrollment will be approximately 16.1% of the district.
  • The City Pension Liability payment will increase by $1.4 million to $50.4 million.

In total, the above increases in expenditures amount to $31.0 million, which leaves $416.9 million for all other expenditures in FY16 as compared to $438.4 million for all the other programs in FY15. As a result of the lower level of resources available to fund the rest of the district priorities, Carstarphen is undertaking a program of “right-sizing” the districts cost structure to conform with the changing enrollment patterns as more students are choosing to attend charter schools.

The “right-sizing” expenditure initiative likely will result in expenditure cuts to the Central Office School Administration and to the General Administration. The budget proposal is expected to include a total of approximately $7.7 million reductions in these two functions.

Additionally, there are a number of other initiatives that the Board and the Administration would like to pursue, but due to resource limitations, the following initiative are not included in the initial budget proposal:

  • It is estimated that it will cost approximately $13.0 million to address the “pay parity” issue that will bring APS employees affected by the pay freeze instituted in 2010 to the same salary level of employees hired subsequently.
  • $5.0 million in additional resources for the 10 clusters in APS – these resources would be provided to school leaders who would then have the flexibility to use the funds to address specific issues they are encountering in their schools.
  • The Student Support Team (SST) and RTI programs that was implemented at a cost of $4.1 million is not funded in the FY16 draft budget. Carstarphen has noted that the results for these program are mixed.
  • The Board has indicated a desire to expand the Pre-K program by eliminating the current waiting list and improving employee quality and retention by increasing compensation. The cost of the expansion and compensation increases is approximately $2.6 million.
  • There is a proposal to improve the service levels provided by custodians with a cost of approximately $2.5 million.
  • A new program for 3 year olds with a cost of approximately $3.9 million is also under consideration.

All of these could be topics of conversation in the Budget Commission meeting this morning. However, my sense is that the two most likely issues that will be debated are the $5.0 million incremental resources for the clusters (a parent “hot button” issue) and the $13.0 million needed to reach “pay parity”.

I think it is also important to note that, unlike in prior administrations,  Carstarphen is deeply involved in the numbers and appears to be running a tight ship in the budget development process. As an example, the budget requests made by the division chiefs amounted to $725 million or $36 million more than the available resources. Carstarphen pushed back hard on these requests and to her credit is presenting a balanced budget.

As the Board considers its next steps, it has three alternatives for funding the incremental priorities noted above – cut costs in other areas, use the $12 million of available General Fund reserves or raise taxes.

It should be an interesting meeting. See you there.

[Follow me on Twitter @Financial_Decon & Facebook]


Mayor could hold back another property deed in near future and up the ante to $837 thousand

February 5, 2015

According to records received from the Atlanta Public Schools, the district has a $425 thousand offer on the Milton Avenue property and plans to act on the offer to sell the surplus property in the upcoming March Board of Education meeting. However, this property sale may also be blocked by Mayor Reed who is refusing to turn over to APS the deed for the Adair property which is currently being held by the City of Atlanta (see more here and here).

Without the property deeds, the proposed sales cannot be completed. Reed has stated that he will not release the property deeds until the APS/Beltline dispute is resolved. With the inclusion of the Milton property and the Adair property, Reed’s blocking maneuver could result in a loss of $837 thousand of proceeds to APS from the property sales.

Mayor Reed has escalated the war of words on the APS/Beltline issue and his latest move to block APS from selling surplus and dilapidated properties is being met with strong resistance from the community. Community leaders have urged the Mayor to live up to the contractual commitments made by the City, but Reed consistently refers to any statements made to attempt to resolve the matter as “political stunts” – along with other insults to community leaders.

APS is about to enter into next years budget process and has identified an extensive list of priorities that the Board of Education wants to fund. Reed’s unwillingness to stand by the City’s contractual commitment on the Beltline and now his actions to block the sale of APS surplus properties will further constrain the Board as it works on next years budget.

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Mayor Reed doubles down – Carstarphen “doesn’t know what she’s talking about”

February 4, 2015

In a follow-up to an earlier story, the AJC reported that, in remarks after the State of the City address, Mayor Reed said,

Atlanta Public Schools Superintendent Meria Carstarphen “doesn’t know what she’s talking about” in a dispute over deeds the city holds to APS property.

 He went on to say,

Reed called her remarks “an unfortunate political stunt” and blamed it on her relatively short time in Atlanta…“I thought that one, she’s new, she’s inexperienced in this city and doesn’t know what she’s talking about,” Reed said.

Atlanta has held the deeds since 1996 and is under no legal obligation to release them, he noted. “So I’m not the first mayor not to turn over the deeds. Clearly there is a reason they haven’t been turned over,” he said.

Reed said Wednesday that he is focused on resolving the Beltline conflict, noting the property deeds will be part of the solution.

Reed’s comments raise some interesting questions. What specifically did Carstarphen say that was incorrect? He did not say. Under what legal authority does he withhold the property deeds? Again, he does not say.

As he has done in the past on the Beltline issue, Reed goes to his preferred playbook – insults and irrelevancies.

Let him know what you think – his email and phone number are mayorreed@atlantaga.gov and (404) 330-6100.

[Follow me on Twitter @Financial_Decon & Facebook]


Mayor Reed blocks sale of Atlanta Public School surplus property

February 4, 2015

The Atlanta Public School Board of Education voted on Monday to sell three surplus properties, but Mayor Reed – who holds the deed to one of the properties – is refusing to turn the deed over to APS. Without the deed, the property sale cannot be completed.

The AJC reported,

…Superintendent Meria Carstarphen says Mayor Kasim Reed is blocking the district’s ability to sell surplus property. …But Reed’s administration has so far refused to turn over a deed to a long-shuttered school in Adair Park, Carstarphen told the school board on Monday night.

Pullman Historic Development is under contract to buy the former elementary school in Southwest Atlanta for $412,000, with plans to convert it into a live-work rental development. The property has sat vacant for decades, Carstarphen said.

“I can’t close a deal if I don’t have the deed,” Carstarphen said. “I am deadly serious about this job. I want the very best for our kids. I need every obstacle moved out of my way to have it done.”

The AJC contacted the Mayor’s office and received conflicting answers,

… the mayor’s spokeswoman, said that some of the vacant properties are the subject of negotiations between the city and APS in an ongoing dispute over millions the city owes in connection with the Beltline. Atlanta has the deeds because the school district was once under the city’s purview. Torres said the mayor is reviewing APS’s request, which was initially made in October.

That’s in conflict with an email Atlanta’s real estate director John Lavelle sent APS last week. According to documents obtained by The Atlanta Journal-Constitution, Lavelle wrote: “I regret to tell you I have been informed by the administration that it will not consider the matter of the proposed quit-claim deeds at this time.” [emphasis added]

It is clear that Reed is using the property deed as additional leverage in the ongoing dispute over the amounts owed by the Beltline to APS. However, his action hurts not only APS, but the local community as well. The AJC further reports that,

Selling the properties is important not just for APS’s bottom line, but for communities who have long lived with abandoned buildings that have become “eye sores “ and “dangerous sites,” [Carstarphen] said. I’m not able to do what I have to do because we are at the mercy of another entity,” Carstarphen said on Monday.

It is also interesting to note that the Board of Education spent a long time in Executive Session considering “pending litigation” this past Monday. The Board should come out forcefully with immediate action against Reed to recover all the property deeds that are rightfully owned by APS.

Mayor Reed’s actions in the Beltline dispute have now gone from irresponsible to a petty personal grievance. Every parent with a child at APS should flood his office with the outrage this action deserves. His email and phone number are mayorreed@atlantaga.gov and (404) 330-6100.

It is time to heap the scorn on him that he so richly deserves for his handling of both of these matters.

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