Fiscal crisis looms for high-tax Bossier schools

Over the past four years, things deteriorated for the high-tax, burgeoning-deficit, above average-performing Bossier Parish School District. That recent elections returned largely the same cast of School Board members calls into question whether the situation will improve any time soon.

Only two new faces will grace the Board when it convenes in the near future, although one of the remaining ten joined only last year and was the only one to face a reelection challenge, and another newcomer slid in unopposed. In essence, nine incumbents sailed back into office without opposition despite some uninspiring data concerning their policy-making.

On the performance side, in academic year 2018 Bossier schools ranked 21^st out of 70 in the state with a district performance score of 82.8 (state average: 76.1) or graded “B.” Last AY, the district jumped to 11^th out of 64 (Lafourche, St. Charles, St. Helena, St. James, St. John the Baptist, and Terrebonne didn’t report; four ranked ahead of Bossier in AY 2018) with a score of 86.4 (state average: 77.1). Both in an absolute sense and relative sense, there was minor improvement.

That’s the good news. The bad news is the district’s financial position eroded. In AY 2018, the district eked out about $12 million more collected than spent on $263 million in revenues (48 percent from the state). Up until that year, it carried a modest $90 million deficit in net position, almost entirely reflected by unfunded accrued liabilities for retirees, but starting that year changes to accounting standards forced a more realistic assessment of what the district would owe in the future. This caused a one-time change increasing liabilities by about $300 million, and with other changes that year more than doubled the UAL to about $560 million and ballooned the deficit to $378 million.

By AY 2021, things had become worse. The UAL had increased about $200 million more, driving the deficit to $557 million, as the impact of accounting for the UAL increasingly bit. Only debt, about $172 million, and associated payments held steady. Classroom teacher salaries advanced from $75.2 million to $80.1 million.

Teacher pay had been a point of some contention in this period, as the Board proposed a massive property tax hike that went to voters in 2019 in two parts, most of which proceeds would have gone to salaries. Passage of both would have made the district’s property tax millage, which presently brings in over $50 million annually to the general fund (roughly $15 million more goes to debt), the state’s highest by far; then and now at nearly 65 mills it’s the fourth-highest in the state. Teacher salaries as recently as AY 2016 ranked 45^th highest on average in the state, but by the time voters crushed by 3:1 both increases it had shot up to nearly the top ten and the latest AY 2021 figures placed it 13^th at just over $54,000 annually.

Finding extra money for pay without tax increases didn’t seem to hurt general fund reserves, either. These went from around $33 million in AY 2018 to $56 million in AY 2021. And the fiscal year 2023 budget sees a small operating deficit of less than a million bucks with the reserve down to $44 million only because $12 million will be siphoned and set aside for future construction.

Keep in mind, however, that the budget doesn’t take into account future obligations that will come directly from the general fund. So, while the general fund might be sitting on $44 million in real cash, the budget doesn’t consider the $764 million in paper losses (what remains unfunded of post-employment liabilities for pensions in two statewide retirement systems of $313 million and retiree health care liabilities of $919 million) predicted ahead currently.

Note also as these project decades ahead, the actual amount could vary considerably; for example, in the high-inflation, high-interest rate environment created by Democrats controlling Washington fiscal policy for the past two years actually could cause a significant decrease in the amount eventually paid out, as, unless cost of living increases doled out to employees and retirees exceed this, investments in debt by state pension funds could come at a higher rate of return. At the same time, with equities being the asset class with the most investment in both systems, steep losses in these over the same time period may wash away this advantage.

Another factor driving these paper losses higher is the constitutional requirement that the defeasance of the UAL in the pensions accumulated prior to 1988 would be paid off by 2029, and statute dictates any remaining UAL be paid off by one system in 2040 and the other in 2044. These, constitutional and statutory dictates, are about half and half and total over $11 billion to be paid off. As a result to compensate, rather than paying into retirement around the 8 percent range of employment salary, the district has to foot in the 26 to 29 percent range, costing an extra $27 million or so a year.

The biggest wild card is retiree health care expenses, which are covered in pay-as-you-go fashion. Even more sensitive to changes in rates, both in return and medical cost inflation, this can be exemplified in that while the district predicts total general fund expenses for this of around $86 million a year for the next few, the actual cost for AY 2021 was $127 million. Just a few years not much over the forecast without any good fortune in the opposition direction wipes out the reserve (and well before that butts up against Board policy that has it no lower than 12 percent of general fund expenditures reserved, or at next year’s budget level about $31 million) and begins cuts to classroom delivery.

This amount ballooning out should ring alarms, especially as the BPSD already taxes at a rate substantially above the state’s average on property. While this is ameliorated somewhat by a lower median sales tax rate – along with two other districts at 1.75 percent, which brings in for Bossier an amount similar to that drawn by the non-debt portion of its ad valorem tax, only seven are lower and the state average is just above 2 percent – this demonstrates that as far as local revenue sources go there’s not really any room to grow in a tax environment already above average (the average state millage is only about 40).

Over the last term, Board members showed little inclination to address this ticking time bomb other than try to nickel-and-dime other area governments for expenses they should incur. That they drew so little in the way of electoral composition suggests they won’t change on this unless forecasts prove too optimistic and/or the public pressure them to start paying attention.