Norwalk BOE satisfies ‘debt’ to Norwalk, BET

NORWALK, Conn. – The debt has been paid, as far as the Norwalk Board of Education’s notorious insurance fund deficit is concerned.

While Norwalk Public Schools Chief Financial Officer Rich Rudl said in June that the BOE would owe $100,000 after the fiscal year accounting was justified, that number is now zero, BOE Chairman Mike Lyons confirmed.

The debt stems from a $4 million deficit in the insurance accounts was uncovered in early 2012 by then-Chief Operating Officer Elio Longo. The BOE had already been facing $5.8 million in cuts to then-Superintendent Susan Marks’ proposed operating budget. With nearly $10 million in cuts looming, the Board of Estimate and Taxation eased the burden by allowing the BOE to take three years to come up with $3.1 million to cover the insurance deficit.

Those three years turned into one. Presto!

Lyons explained the lack of mystery in that disappearing act by recapping information relayed by Rudl in June.

“Basically, through (i) cost controls that generated surplus funds and (ii) better than expected claims histories the last two years, we ‘overfunded’ our insurance reserve payments,” he said in an email.

The BOE is significantly self-insured, he said. Longo based the insurance reserve payments on conservative early assumptions. The BOE covered actual insurance claims and had a surplus.

“The city makes a quarterly ‘sweep’ of the insurance accounts, and the ‘overpayments’ were treated by the city as payments against the ‘debt’ we owed to the reserve,” Lyons wrote.

The city grabbed $1.2 million in June, after the state came through with additional funding to the BOE while the budget reconciliation was underway.  At that point, Longo said the BOE was $2 million ahead of its scheduled repayment plan.

In August, a $1.6 million BOE surplus was unveiled, the result of paying all the bills that came in after the close of the fiscal year. Rudl recommended using $500,000 of that to pay down the insurance “deficit,” lowering the amount owed at that point to $100,000.

Rudl based that $100,000 figure on a projected $1.996 million in IBNR (incurred but not reported) expenses for fiscal year 2012-2013, Lyons said. The final IBNR figure, which is booked in late August, was $100,000 less than projected.

Voila! Debt gone.

Lyons also said that the board’s decision to fix two portable classrooms at Jefferson Elementary School rather than replace all of them is part of the reason the deficit has been paid sooner than expected.

Rudl had built the purchase of new portables into his cost estimates. Further research by BOE maintenance personnel showed only two portable classrooms had significant problems, which could be fixed.