School districts finding a new way to save money: Outsource finances

Most of the day-to-day operation of the Brooklyn Center School District hums around its district offices just off Interstate 94. But the bulk of the number-crunching may be happening in Rochester, or in a home office elsewhere in the metro area.

Brooklyn Center, Fridley and Columbia Heights are among a handful of smaller districts and charter schools around the state that are outsourcing all or part of their financial management to a private company, School Management Services, based in Rochester.

It's a trend that may reflect a shortage of qualified school professionals, as baby boomers retire, said Sue Crockett, executive director of the Minnesota Association of School Business Professionals. And as school finance specialists become more in-demand, they become harder for small districts to attract and retain.

"It's hard to attract someone to a smaller district when they can make more money in other districts," she said. "So I think they [School Management] do fill that need."

Shortly after Keith Lester took the helm of Brooklyn Center schools in 2005, the district's business manager announced an intent to retire.

At the same time, Todd Netzke was working in the financial department of the Red Wing schools, managing finances for a handful of charter schools and thinking about how he could expand a school management business.

Smarter money management

Ron Parrucci, formerly business manager for North St. Paul Schools, works in the Brooklyn Center district one or two days a week; a school management accountant is on site one day a week. The bulk of the meetings are scheduled for those days; other days, problems are resolved via phone or e-mail from Parrucci's home office in Centerville.

"Financially, it's one of the smartest things we've done," Lester said. "We're getting more than our money's worth."

Since taking on Brooklyn Center Schools, Netzke's company has grown by nine full- and part-time school finance professionals, who work with 20 traditional K-12 school districts and three charter schools. Netzke's niche, or his "sweet spot," is schools ranging from 300 to 2,000 students. His largest district is Fridley. His smallest is Grand Meadow in south-central Minnesota with about 360 kids.

Stewartville schools, one of Netzke's clients, recently was honored with a School Finance Award, which the state Department of Education gives to districts that exhibit sound fiscal health.

"As [districts] get larger, there are more political issues, more meetings to attend," Netzke said. "We work best when we can come in and do our work and not get pulled into board meetings and cabinet meetings and so on."

'A new way of thinking'

In Fridley, Superintendent Mark Robertson had an accountant and a business manager both leave within a month of each other. He had heard about School Business Management from Lester.

"We wanted stability," he said. "I did not want to start over and retrain someone from the get-go."

School Management does not seek to replace existing district staff members, Kreye said. Most of the time, a full-time staffer leaves, or districts find they need extra help.

"This is a really new way of thinking about school finance," he said, adding that the smaller districts benefit from economies of scale and standardized reports. "Schools outsource transportation, they outsource food service, they outsource copying services. Schools are already doing a lot of outsourcing. We're providing a service to school districts that allow smaller districts to have an expertise they never thought possible at a cost they can afford. That's the bottom line."