School Board member's view: The Red Plan: Where did the money come from?

We have nearly finished the Red Plan. But rather than hearing about what a great plan it turned out to be, the main discussion from the public is why we have such large class sizes and why we have been cutting curriculum. The News Tribune has done stories on the impact reduced curriculum and increased class sizes have had on our students.

Are the Red Plan and these negative educational impacts related? The answer is a resounding yes.

Last year, more than $7 million that was in the school district’s general fund (the money used for classrooms) was transferred to cover debt obligation payments for the Red Plan. These transfers and their impact routinely have been explained away by the administration and kept out of budget-deficit discussions.

The administration tries to justify the transfers of money from the general fund for Red Plan payments by saying the Red Plan resulted in general-fund savings. But a reality check shows those savings to be less than predicted. There have been no reported energy-cost savings. The new buildings grew in size — and so did maintenance costs. Transportation costs are up. The old school buildings were to be sold for $27 million, but that estimate has been lowered to $16 million. And few buildings have yet sold.

Worse, the Red Plan’s financial scheme has general-fund savings (as questionable as they are) plowed into paying for the Red Plan debt obligations.

So what did we get for $315 million? By design, no help for classrooms but fancy buildings Duluth may not be able to afford.

During their promotion of the Red Plan, the school administration and the district’s Red Plan consultant and architect, Johnson Controls, implied and directly stated that taxes would not increase over an initial bump in 2009, that class sizes would remain the same or go down, and that curriculum would be able to be expanded. In fact, Johnson Controls said in its Jan. 24, 2006, response to the Duluth school district’s request for proposals that what came to be known as the Red Plan could be built “in both a budget- and tax-neutral manner”; the company even vowed to “guarantee the financial solution in writing.”

It is time to do a sober reassessment of our options. We can continue taking $7 million a year out of the $80 million general fund to pay Red Plan debt obligations, with the possibility of continued larger class sizes and more reduced curriculum. And we can hope to sell Central High School, its windfall saving the district for one year.

It is correct to put part of the blame for the school district’s financial troubles on a lack of state funding, but begging the state is an unlikely way to get us more money. I call this the “Waiting for Godot” option.

We also can refinance the Red Plan by bringing in independent financial experts to analyze extending the payment schedule from 20 years to 30 years. This could result in lower general-fund transfers and the ability to keep property tax rates down without increasing the cost of the Red Plan. At the low interest rates of today, this is a real option.

In addition, we can ask for accountability and repayment from Johnson Controls. What happened to its guarantee “in writing”? Asking for accountability from Johnson Controls is not unprecedented. Other schools in the state have asked Johnson Controls for that, and the city of Duluth took Johnson Controls to task over work it did related to the city’s steam plant — and the city received $2.3 million for savings promised but not entirely delivered.

The school administration and Johnson Controls have used voodoo economics in an apparent attempt to hide the funding and the true cost of the Red Plan from the taxpaying public and school staffs.

We have new, fancy buildings that must be paid for. If none of the above options are taken, larger class sizes may continue or property tax increases may be needed to cover Red Plan debt obligations.

Art Johnston represents the 4th District on the Duluth School Board.

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