Investment interest exceeds Waukesha & West Allis schools' profits

Amy Hetzner & Avrum Lank:

Two area school districts are paying more in interest than they are receiving this quarter in a complex investment program they undertook two years ago to help pay retirement benefits, a Journal Sentinel analysis found.

The investment plans implemented in the Waukesha and West Allis-Milwaukee districts are the same as a program that an outside analyst said was causing a loss for the Kenosha Unified district in the current quarter.

For part of their investments in the complicated programs, all three districts borrowed money at fixed rates that now exceed what they receive in income. In addition, because the value of the investments has fallen substantially over the last year, the interest rate on debt issued by district-run trusts has increased enough to cut into profits they had expected to make.

As a result, Waukesha and West Allis-West Milwaukee could be obligated to pay out thousands of dollars more in interest than they are receiving from the investments for the quarter ending this month.

The article notes that Erik Kass, Waukesha's executive Director of Business Services will soon become assistant superintendent of business services in Madison. A significant decline (from $48M in 2000 to $24M in 2006; annual budgets were $252M and $333M) in the Madison School District's "Equity Fund" balance (the difference between assets and liabilities) has been an issue in recent board races and meetings.

It will be interesting to see how both the past experiences of Erik Kass and incoming Superintendent Dan Nerad frame their approach to local governance and community interaction.

Posted by Jim Zellmer at June 20, 2008 9:18 AM
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