re: Runnels School Closing - Not Just High School

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No, the reality is you aren’t a private school if you are being publicly funded.

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A lot of private schools take a bit of government money. Some of them are part of the USDA school lunch program. Some of them get some money from the state for textbooks.

It's not a lot of money.

You could even argue in LA, that they are "subsidized" indirectly via the $5,000 per student state income tax deduction. That helps the families afford tuition.

I don't like vouchers because in the current iteration, it is just a giveaway to private schools with no ability to account for that money. The bizarre thing is that public schools are held to more accountability standards than the voucher-funded private school are.

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the private school whose board I was on did not give free tuition to staff or faculty, barely a negligible discount.

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Most good private schools are the same way.

Schools like Runnels and others, typically have a large percentage of the faculty are not certified. They are paid barely above min wage, but get free tuition. It's a way for these schools to not have to pay a lot of staff costs.

That model probably works when you have high enrollment and little to no debt.

It starts to fall apart when your fixed costs (like debt service) go up.

If I have 28 kids in a class, and 26 are paying tuition and 2 are free teacher kids, and my variable costs especially are low, the foregone income is probably cheaper than paying a legit salary.

But if I have 14 kids in a class and 12 are paying tuition, and my fixed costs are higher... I need more tuition paying students to cover the fixed costs.

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clear nationwide trend of declining enrollment for 25 years...... the demographic is shrinking too

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Tuition is increasing faster than wages, and unlike college, you can't defer payment for years

Improving public school options

The high school I went to, used to be the majority of teachers were Brothers. Their labor costs are REAL cheap. But that labor pool is dried up. Gotta pay for teachers now, which means, higher tuition.

More and more people can't afford it. Especially if there is an "almost as good" magnet or charter school nearby.

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Yep. They emphatically misrepresented to people that the K-8 school would remain open in order to gain financially from the parents of those students. I'd love to know where all that money was spent because this has all the makings of criminal fraud. Dr. Runnels may not want to open his books, but he soon may not have any choice. And what's unbelievable is that just a six months or so ago none of us had any idea that the school was in trouble. This is surreal.

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As best I can piece it together:

Parents of HS students (and current 8th graders) were pressured to commit to next year and to do whatever they could to prepay next years tuition. The hope was that enough would do so to keep the HS viable. These monies were apparently put in escrow and when the decision to close the HS was made parents were refunded.

However, the parents of elementary and junior high kids who paid next years tuition did not have their money escrowed. Instead it went to the general operating account where it was used for payroll, operating expenses, and debt service. Now that they have no way to keep the school open that mismanagement is coming back to bite them in the arse. You never spend next years operating funds this year.

The sad part is Kelly Runnels still doesn’t seem to understand why this is wrong.

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Somewhat of a hijack, but did the reason for their firing of Greg Brandao as principal a few years ago ever surface? I remember reading a quote from Runnels implying that he was running the school like a military academy, but that always sounded like bullshite.

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He was probably the last chance to save the school. One big thing he wanted was to make teacher's kids pay some tuition. That caused an uproar. Some of the teachers have 3 or 4 kids all going to school for free. Any talk of Brandao running the school like a military academy is, as you said, bullshite.

" And what's unbelievable is that just a six months or so ago none of us had any idea that the school was in trouble. This is surreal."

I think a lot of people knew the school was in trouble 7-8 years ago. If not then, if you had any meetings with parents and Brandao, you had a feeling that he was working over time to catch the school up and be fought on all sides by the Board, and runnel's favorites. Brandao first year enrollment went up because new people came in and those looking to leave stayed. 2 years later he was gone and they took about a 20% hit in enrollment.

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Balance today + monthly income - monthly expenses. When that is zero the lights are out.

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They should just blame coronavirus and make everyone take online courses the rest of the semester.

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As I understand it piecing together things from various sources, that day is today. Not March 10th specifically, but I believe the school has no money to operate past March unless Dr Runnels brother steps up with an infusion of money. I am led to believe the accounts are basically empty. That may not be totally accurate and I hope it isn’t. But if you ask my honest appraisal the school will struggle to complete this year.

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We’ve heard some of the same rumors from reliable sources that the end of the month is when the money runs out.

Not promising but not terribly surprising based on what I’ve seen now that the curtain is pulled back.

Tax Return Fiscal Year ended 6/30/18

Tax Return Fiscal Year ended 6/30/17

So these are kinda hard to analyze, because they both involve financial issues from the flood (I could not find the one for fiscal year ended 6/30/19, it has not yet been posted).

But we can glean a few things that, to me, don't mean much, but they may mean something to the families who are looking for answers.

1) They had over 200 employees. I'm sure this includes a bunch of part-timers such as cafeteria workers and janitors, but for a school that size... that seems like a lot of employees.

2) They estimated their flood damages to be about 4.4 million (recognized over 2 tax years). They also received FEMA Money of about 1.37 million. (dixiechick ain't gonna like that). They also received insurance proceeds of about 1.55 million. Further, they disclose that they expected to be fully reimbursed for all disaster losses via additional FEMA money and other disaster relief funds. This would be monies received after 6/30/18, so we don't yet know if that occured.

Keep in mind that while they may be made whole on their property losses, they likely incurred losses of revenue and other operating expenses that may not be covered.

3) dixiechick also isn't going to like that they are getting government grants of 60K - 70K per year. (This is probably things like food and book support that just about every "private" school in LA gets).

4) At 6/30/18 they had cash of about 159K and A/P of about 133K. That's not healthy.

5) They owed about 1.3 million to related parties and about 2.8 million to unrelated parties. Most of the related parties debt is to "Lynn K. Runnels and Runnels Properties". So someone related was absolutely propping up the school.

The movement of the unrelated debt leads me to believe that they borrowed money while waiting for the FEMA money to come in, and were repaying it with FEMA money. Again, we don't know how this story ends. If the rest of the FEMA money didn't come in, that alone could be a death blow.

6) They had $365K of equity on 7.5M in assets. That's not a really good place to be. They weren't insolvent, but they had no cushion for error. They had no savings to speak of. If they bled cash, they would need to borrow more, or sell fixed assets. If the family was already lending money, they may have decided to stop throwing "good money after bad".

7) One last thing, and this may be the most telling of all. They had 2.85M of deferred revenue. My initial assumption is that represents those who prepay tuition in full.

Accounting tells us when someone prepays, we take in the cash, but we don't immediately recognize the revenue. It's deferred, meaning unearned. As the school year progresses, we would move these amounts into earned revenue, and then incur expenses.

If we have collected 2.85M in tuition prepayments, and haven't incurred the expenses related to that tuition... we should have... 2.85M in cash.

I said earlier that they had about 159K in cash.

Looking at their expenses and cash burn, this probably was not a new problem. But it may have gotten too bad to handle.

The "good" news is that, especially if the balance of FEMA money came in, they should be able to sell the buildings and repay everyone their tuition prepayments.

This is just the quick analysis of a guy who needed a few min break from the 3/15 deadline. And the data is admittedly outdated. But maybe, if someone has other information, they can use this to fill in the gaps.

The 200 employees include lots of teachers who teach one or two classes. They get free tuition just like full time teachers.

There is no cafeteria at Runnels. Lunches are contracted with local vendors and the parents charged separately.

Question- I haven’t looked at those returns. Did they specify if for Pre-school and K-12 or just K-12?

The number I’ve heard is that debt is “over 6 million.” Of that’s true then selling the properties somewhere near appraised value should make everyone whole, or close to it.