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Paynesville Press - November 19, 2003

District runs in black for second straight year

By Michael Jacobson

For the second straight year, the Paynesville Area School District ran in the black financially.

The school district's annual audit - presented to the school board last week - indicates that the district had an excess of revenues to expenditures in its general fund of $124,797 for its 2002-03 financial year, which ran from July 1, 2002, to June 30, 2003. This profit, so to speak, raised the district's fund balance in its general fund to $260,853, its highest amount since June 30, 2000.

The district is in OK shape financially but needs to continue to make appropriate spending reductions to compensate for declining enrollment, superintendent Howard Cald-well told the school board last week.

District #741 has run in the black financially in 2001-02 and 2002-03 after running deficits for four straight years. The district's general fund peaked with a balance of $1,663,464 in June 1997, but that balance was reduced to $57,081 in June 2001 after four years of deficit spending by the district.

School Audit Chart Following the audit for the 2000-01 school year, the district was in statutory operating debt, since despite having a fund balance of $57,081, its unreserved fund balance was $243,000 in deficit. Being in statutory operating debt, the district had to make a plan, approved by the state, on how it was going to return its finances to the black.

The district escaped statutory operating debt after one year.

Running in the black financially for the last two years is attributable to the budget cuts the school district has made over the past few years. Since the district operated at a deficit of over $500,000 in 2000-01, general fund revenues for the district have increased by $227,500 and general fund expenditures have decreased by $400,300, a positive net change of $625,000.

"I'm happy to see us turn it around as quickly as we have," said Caldwell, of escaping statutory operating debt and running in the black the past two years.

Still, he warned, the district is not in an ideal situation financially. The district still has a deficit of $13,304 in its unrestricted fund balance. The current general fund balance of $260,853 relies on reserve funds, mainly money designated for capital improvements and the Carol Weaver Trust Fund.

The district needs to continue to work towards having an eight percent balance of yearly expenditures in its unreserved fund balance, a goal set by the school board, said Caldwell.

The district's voter-approved levy - which should provide the district with an additional $500,000 in revenue this year - should help this, but it is just taking affect in the 2003-04 school year. With that, and additional spending cuts to adjust for declining enrollment, said Caldwell, the district should run in the black this year, too. Under current district financial projections, the district should have an unreserved fund balance of $275,141 by the end of the 2003-04 school year, which would represent 3.67 percent of yearly expenditures.

Without a general fund balance, said Caldwell, the district has no cushion and could find itself back in statutory operating debt very quickly if some emergency or change in its finances occurred. Once in statutory operating debt, the district's only real option would be to cut spending, not based on program needs but based solely on financial needs, said Caldwell, who is retiring at the end of June 2004 after 15 years with the district.

A better way to manage its finances is to make appropriate cuts when the district can, including looking at whether to replace retiring staff, said Caldwell, who came to the district when it was in tight financial straits in the late 1980s and is pleased that the district should be on an upswing when he retires.

Currently, the district budget for 2003-04 predicts running in the black by $155,000. In the past few years, though, the district's actual fiscal performance has exceeded its budget projections. According to the 2002-03 audit, the district's actual performance exceeded the budgeted projections by nearly $400,000, as revenues were underbudgeted by $220,000 and expenditures were overbudgeted by $175,000.

Budgeting conservatively is necessary, as overbudgeting revenues and underbudgeting expenditures could be disastrous, said Caldwell.

Based on that approach, the district could do much better than its budgeted margin in 2003-04.

The school district is currently working on its reorganization for the 2004-05 school year, reducing administration to two principals. Once that is done, the district can start looking at other budget reductions this winter, said Caldwell, who will be working on next year's budget with elementary principal Todd Burlingame, who will start as the new superintendent in July 2004.

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