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Did the school district's 2013 bond issue stay within its budget? A look at what voters were told then and now

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When it comes to budgets, I know the one in my household works best when it is written in pencil. However, I’ve maybe picked up a few other pieces of budget knowledge over the years as I’ve covered a variety of governmental budgets in Douglas County.

That’s why my curiosity has been piqued for a few weeks now as I’ve heard more about the Lawrence school district’s budget for its $92.5 million bond issue that was approved by voters in 2013. It became more piqued as I discovered numbers that showed construction spending at one Lawrence school was off more than 70 percent compared to what voters had been told prior to the election, and several were off more than 30 percent. As school district leaders work to convince voters to approve a new $87 million bond issue — the deadline to deliver your mail ballot is noon on Tuesday — a key selling point has been that the 2013 bond issue was completed within budget.

As I’ve looked at that question — was the bond issue on budget? — I’ve come to the conclusion that it really depends on what budget you look at and how you define the phrase “within budget.” One point that is clear is that the district has made good on what was likely its most important pledge: to not raise the tax rate to pay for the 2013 bond issue. The tax rate has not gone up. (To be clear, it is projected to rise about 2.4 mills, if the new bond issue is passed next week.)

So, if the tax rate is all you care about, there is not much else for you to see here. But, if you want more details on where the dollars were spent and how that compares with what voters were told prior to the 2013 bond election, here’s a look:

• Budget No. 1: At Monday’s school board meeting, the board and public were provided an update on how much bond money has been spent at each school as part of the 2013 bond issue. The chart also shows the bond issue budget so you can compare how close actual spending was to the budget.

School2013 Bond Issue BudgetBond Revisions and Interest EarningsTotal Adjusted Bond BudgetExpenditures 4/13/2017Balance of Bond Funds
Broken Arrow1,208,448146,1891,354,6371,354,637(0)
Cordley8,499,29229,0108,528,3028,528,3020
Deerfield3,773,629572,0104,345,6394,345,6380
Hillcrest8,022,590(13,596)8,008,9948,008,9940
Kennedy8,640,931183,5928,824,5238,824,523(0)
Langston Hughes3,261,322(48,379)3,212,9433,212,9430
New York5,548,899120,2565,669,1555,669,1550
Pinckney6,772,730240,1537,012,8836,985,83027,053
Prairie Park763,406130,333893,739893,740(0)
Quail Run3,966,172376,0184,342,1904,342,190(0)
Schwegler2,876,75494,6972,971,4512,971,4510
Sunflower3,337,699393,3603,731,0593,731,059(0)
Sunset Hill9,503,579(228,648)9,274,9319,274,9310
Woodlawn2,354,883133,2232,488,1062,488,106(0)
LMCMS281,07455,797336,871336,871(0)
SMS386,839(21,200)365,639365,6390
SWMS415,093(8,466)406,627406,627(0)
WMS1,497,02781,3931,578,4201,578,420(0)
LCCC5,475,1891,530,8527,006,0417,006,0410
LFHS4,010,02027,8354,037,8554,037,8550
LHS3,672,600(49,219)3,623,3813,623,381(0)
Technology/Security/Projectors5,230,935(303,520)4,927,4154,927,4150
Food Service Equipment1,000,889183,3181,184,2071,184,2070
Phasing/Unallocated Interest2,000,000843,3052,843,3052,575,065268,240
Total Bond Issue Expenditures92,500,0004,468,31296,968,31296,673,019295,292

As you can see, the chart conveys that the district was almost spot on with its budgeting. It shows that in 20 out of the 23 individual projects, the amount the district spent matched exactly the “total adjusted bond budget.” (More on that phrase in a moment.) The few that didn’t match were only off by a few dollars. Such accuracy is tough to do.


• Budget No. 2. An important point to remember about Budget No. 1 is that it is not the budget that was presented to the Lawrence school board in December 2012 when it agreed to put the issue on the ballot. A different budget was presented to the board, and, importantly, it was this different budget that was used to communicate the size and scope of projects to voters prior to the 2013 election.

Getting my hands on that different budget was difficult. But after a couple of weeks of thinking, I finally figured out the right document to ask for — a 2013 bond master plan — and it included a copy of the building-by-building cost estimates that were presented to the board when it agreed to move ahead with the bond campaign.

The chart below is one I’ve created. It shows the 2017 spending figures, compares them with the 2012 budget as presented to the board, and then shows how much over or under spending is compared with the budget.

School2017 Spending2012 BudgetOver/Under
Broken Arrow1,354,6371,683,100UNDER 328,463
(under 19 percent)
Cordley8,528,3028,984,823UNDER 456,521
(under 5 percent)
Deerfield4,345,6383,283,593OVER 1,062,045
(over 32 percent)
Hillcrest8,008,9948,449,700UNDER 440,706
(under 5.2 percent)
Kennedy8,824,5238,565,432OVER 259,091
(over 3 percent)
Langston Hughes3,212,9432,442,856OVER 770,087
(over 31 percent)
New York5,669,1555,739,500UNDER 70,345
(under 1.2 percent)
Pinckney6,985,8306,850,251OVER 135,579
(over 1.9 percent)
Prairie Park893,7401,983,483UNDER 1,089,743
(under 54 percent)
Quail Run4,342,1902,645,496OVER 1,696,694
(over 64 percent)
Schwegler2,971,4512,846,779OVER 124,672
(over 4.3 percent)
Sunflower3,731,0592,728,580OVER 1,002,479
(over 36 percent)
Sunset Hill9,274,9319,371,657UNDER 96,726
(under 1 percent)
Woodlawn2,488,1062,548,436UNDER 60,330
(under 2.3 percent)
Food Service Equip1,184,207945,000OVER 239,207
(over 25 percent)
Career and Tech Education7,006.0415,747,416OVER 1,258,625
(over 21 percent)
Free State4,037,8554,239,893UNDER 202,038
(under 4.7 percent)
LHS3,623,3813,930,909UNDER 307,528
(under 7.8 percent)
Liberty Central336,8711,061,384UNDER 724,513
(under 68 percent)
South Middle365,639424,322UNDER 58,683
(under 13 percent)
Southwest Middle406,627682,720UNDER 276,093
(under 40 percent)
West Middle1,578,420911,165OVER 667,255
(over 73 percent)
Technology4,927,4154,093,195OVER 834,220
(over 20 percent)

This chart looks quite a bit different from the district’s chart. None of the projects exactly matches the budget, and eight of them are off by more than 30 percent. One of them is off by 73 percent.


• Total spending. It would be unreasonable to expect a pre-bond budget made in 2012 to exactly match actual construction spending that won’t be completed until later this year. Master planners don't have the benefit of detailed construction plans. Those come later in the process. As you get into a project you are going to realize some buildings are going to cost more than you expected, and you are going to have to trade money from one line item to another. A natural question is whether the total amount of spending matched the 2012 budget.

It did not. The total project cost presented to the board in December 2012 was $92,622,220. At its meeting in December 2012, the board instructed the 2012 budget to be lowered to $92.5 million. As of April 13, the district had spent $96,673,019.

The $92.5 million price tag is what was advertised to voters prior to the vote, and it is still how the 2013 bond issue is commonly described. Total spending, though, has come in at $96.6 million. District officials contend, however, that it has stayed within budget.

The key to understanding that claim goes back to the phrase you find in Budget No. 1: “total adjusted bond budget.” What didn’t show up in the 2012 budget is that the district received about a $4.4 million bonus in bond money. That is primarily bond interest money. (There is also something called a bond premium.) When the district issues bonds, it gets an infusion of cash upfront from bond buyers. That large amount of cash is put in a bank account and earns interest.

Thus far, it has earned about $4.4 million in interest. This was not an unexpected windfall for the district. It was known beforehand that the bond would generate interest, although an exact amount wouldn’t have been possible to know. The district notes that state law allows it to spend bond interest money on bond projects. That is accurate.

There are other ways the district could have dealt with the bond interest money. The district could have estimated how much it would be and added it on to the 2012 budget, which would have given the public a more complete picture of expected spending levels. In an email exchange, Superintendent Kyle Hayden said that issue was never considered by the district. He said because the district didn’t know exactly how much that money would be he was uncomfortable including it as a part of any budget. The district also could have chosen not to spend the bond interest money on projects but rather used the money to help pay off the bond debt. Hayden via email said that option also was not considered. He provided no explanation why it was not considered. In a separate email board president Marcel Harmon said he thought that option wasn't pursued because the board knew there were additional needs to be met, and it would be cost-effective to use the bond money to pay for them.


• Shifting spending, shifting priorities? It is not uncommon for construction project costs to differ from initial estimates. In fact, most construction projects have contingency funds built into them to help cushion against unknown costs. However, some of the differences in the 2013 bond project were striking.

Improvements at Prairie Park Elementary are an example. The 2012 budget estimated that $1.98 million worth of improvements would be made at Prairie Park. Instead, a little a more than $890,000 in improvements were made. Prairie Park parents may be wondering if their school received all the improvements that were originally envisioned in 2012. Hayden, via email, said that both Prairie Park and Southwest Middle School, which saw its spending decline by 40 percent, both received appropriate improvements.

“We met the scope of both projects without sacrificing any program elements,” Hayden said.

Prairie Park Elementary School, pictured Friday, April 28, 2017.

Prairie Park Elementary School, pictured Friday, April 28, 2017. by Nick Krug

But in a separate question asking how the Prairie Park initial project estimate could be off by more than $1 million — 54 percent — Hayden answered in a way that suggested some of the originally envisioned improvements at Prairie Park didn’t happen.

“Pre-bond planning provides project cost estimates based upon the anticipated degree of improvements,” Hayden said via email. “Numbers can change significantly once design and construction teams go through a more detailed assessment of needs and work with district staff to address those needs.” An attempt to interview Hayden to clarify what that that specifically meant for improvements at Prairie Park was unsuccessful.

What happened to the more than $1 million in cost savings from Prairie Park? It was not booked as a cost savings. Instead, those dollars were applied to other projects in the district.

As for why some schools had budgets that far exceeded 2012 estimates, district officials made the post-election decision to add two classrooms each to four schools based on projected enrollment trends: Deerfield, Quail Run, Langston Hughes and Sunflower. Those costs, which weren’t budgeted in 2012, were paid for through the unbudgeted bond interest money, from cost savings at other schools or a combination thereof.

Details about why other projects exceeded the 2012 budget weren’t readily available, Hayden said.

Harmon, via email, said much of this issue goes back to understanding the difference between a master plan and construction planning.

"The master planning process is a visioning exercise of what could be, not a design exercise of what will be," Harmon said.

Hopefully, voters understood that. Harmon thinks they did. Regardless it is something for voters to keep in mind as they look at the master plan for the 2017 bond issue and decide how to cast their vote.

If the new $87 million bond issue passes on Tuesday, voters will have a new set of numbers to examine in a few years. If history is a guide, when voters go to reconcile what they were told prior to this election with what actually was spent, it is likely that more than $87 million in bond funds will have been expended. It is likely that the amounts expected today to be spent at individual schools will be different.

I am not saying that is inappropriate. But I am saying it is something that voters should know. Hopefully, the next time around, the information will be easier for all to understand.

Comments

Ken Lassman 2 months, 3 weeks ago

Thanks for the excellent in-depth reporting: the explanations were clear but not over-simplifying a complex topic. It was even a little entertaining, which is difficult to do digging around all those projections, visions and expenditures. Dare I say your article on the education bonds was educational? I think I'd better stop there.

Deborah Snyder 2 months, 3 weeks ago

Alright. Fine. I now understand what was not clear to me at all in 2013. Does anyone at USD497 understand how much distrust this kind of "budget shifting" can generate?

My thanks to Chad Lawhorn for helping me see that, while questionable, the district was not misspending its capital funds, nor were they doing a lousy job managing the expenditures available in that bond.

Richard Heckler 2 months, 3 weeks ago

MEANWHILE Kansas citizens should organize to demand that we the Kansas taxpayers want our public education system back as it was prior to any budget cuts. Presented as a referendum subject to ballot approval on a November 2017 0r 2018 ballot. PRINT A SPECIAL BALLOT IF NECESSARY.

Further the ballot should include reinstatement of all taxes prior to any budget cuts and payment of all back taxes that have accrued since 2007. This reimbursement will and or can be applied to wages of the teaching staff.

Further the reinstatement of any union rights should also declared on this document iF such applies.

Further any changes or funding to the public education system must be approved by voters of the state of Kansas no matter what.

WE the Kansas Taxpayers understand we are the owners of our public education system which therefore designates the Kansas Taxpayers as the final authority.

We The Kansas Taxpayers Accept Our Responsibility as the Public Education Final Authority for the next 500 years.

Steve Jacob 2 months, 3 weeks ago

I have said before the bond is basically a blank check and they can do whatever they want with it.

Ken Lassman 2 months, 3 weeks ago

Interesting opinion, Steve; this article provides no evidence whatsoever that supports your opinion.

Andrew Applegarth 2 months, 3 weeks ago

What is the point of issuing all of the bonds at once and putting so much money in the bank that you accrue over 4 million in interest? How much extra is it going to cost us in debt service for the time it was just sitting in the bank? Unless we are in a miraculous situation where we can issue bonds with a lower interest rate than what the bank pays on our savings account, it seems to me to be a bad investment.

Is there a reason the actual issuance of bonds couldn't have been spread out over the same time frame as the projects they were designed to pay for?

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