Comprehensive Annual Financial Report - Harford County Public ...

Harford County Public Schools
Management's Discussion and Analysis (MD&A)
June 30, 2012
School districts in Maryland are in the uncommon position of owning assets but not the debt
associated with those facilities as they are fully fiscally dependent on the state and county
governments. Accordingly, HCPS carries no bond rating, but has an approved debt policy for
lease transactions. HCPS refinanced the capital lease for the Administration Building from an
interest rate of 4.974% to lower rate of 3.27%, resulting in a savings of $1,146,908 in the
remaining term of the debt and did not extend the term of the debt.
Current Issues
Significant legislation by the federal and state governments has impacted public education in
Maryland. The federal “No Child Left Behind” act requires that the all students meet standards
and that each school and sub-group of students show adequate yearly progress. In addition, the
act requires that teachers be highly qualified in their content areas.
Maryland enacted the “Bridge to Excellence” statute which requires that each school district
adopt a master plan. This plan is to be reviewed by the County governments, and then submitted
to the Maryland State Department of Education for approval. A component of the plan is the
fiscal impact of each new initiative contained in the plan.
Future Issues
The Governmental Accounting Standards Board (GASB) has issued Statement No. 45,
Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than
Pensions, which addresses how state and local governments should account for and report their
costs and obligations related to postemployment healthcare and other non-pension benefits.
Collectively, these benefits are commonly referred to as other postemployment benefits, or
OPEB.
HCPS made several policy changes with respect to benefits provided to retirees and committed
to using excess monies in the health insurance rate stabilization account and federal Medicare
Part D reimbursement to at least partially fund the OPEB liability. Currently HCPS is
participating in a multi-employer OPEB Investment Trust administered by the Maryland
Association of Boards of Education (MABE). We believe this structure is unique in the country.
While we have the vehicle to invest OPEB funds, the issue will be whether or not the County
will fund OPEB contributions to meet our proposed 15 year timeframe to achieve full funding.
The current economic climate has been, and is forecast to continue to be, prohibitive to this
objective. Meanwhile the unfunded liability continues to grow.
Federal grant programs, notably Education Jobs program, are further clouding the fiscal picture.
While the additional funds were welcome, restrictions on their use and the intended purpose of
preserving classroom teaching positions are less applicable at HCPS than in other parts of the
nation. We have reduced the workforce in FY 2012 and FY 2013.
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