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Sharing the wealth

For almost a decade, a rural Minnesota district has been practicing an unusual form of workers' compensation: When it posts a healthy budget surplus, it rewards school employees by handing out bonuses.

If the 1,100-student St. Charles district near Rochester, Minn., ends the fiscal year with more than a set amount--currently $500,000--the remainder is divvied up among all its 100 employees except the superintendent.

The arrangement was written into employee contracts in 1991, but until this summer no one paid much attention. Now the practice, apparently unique among Minnesota districts, is under attack.

Judith H. Dutcher

In July, after an investigation prompted by a complaint, state Auditor Judith H. Dutcher questioned the bonuses. In a letter to legislative leaders, she wrote that while the deal appeared to be legal, it created potential conflicts of interest. "It's a situation where you don't want the perception that you're not going to buy a new computer" in order to preserve a surplus, she said.

The district started the bonuses when, by state law, any surplus over a certain amount effectively had to be returned to the state. That law was recently repealed, but St. Charles Superintendent Tom Ames says he still favors the plan.

Bonuses help retain teachers without salary hikes the district can't afford, helping avoid midyear budget cuts and layoffs, Mr. Ames said. They have been given every year since 1991, with the total pot ranging from a low of about $90,400 in 1991-92 to a high of $317,400 in 1995-96.

As for conflicts of interest, the superintendent noted that he or the school board makes most spending decisions, and neither stands to gain from a surplus.

Henry M. Levin, an education economist at Teachers College, Columbia University, called the bonuses legitimate. But he said that tying them to teacher performance might do more to improve student achievement.

Since the auditor's criticism hit the press, Mr. Ames has had some explaining to do. "We're gearing up for a building referendum this fall," he said, "and some people say this will really hurt."

—Bess Keller

Vol. 19, Issue 1, Page 16

Published in Print: September 8, 1999, as State Journal

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