School begins budget cutting process;
looking at a minimum cut of $500,000

This article submitted by Linda Stelling on 12/6/00.

Financial History | Solutions | Board Discussion | Ten Years Ago | Timeline

Facing a possible operating shortfall of close to $1 million, the Paynesville Area School Board approved exploring budget cuts of at least $500,000.

At a special meeting on Monday, Nov. 27, the board discussed what steps needed to be taken to make major budget cuts and established a timeline for making those cuts. The board approved initiating the budget cutting process at their regular meeting on Tuesday, Nov. 28.

The district will likely be cutting a minimum of $500,000 for the next school year and possibly more.

This is the fourth year of deficit spending for the district. The district has been living off its general fund balance while operating in the red for the past three school years.

In June, the board approved a deficit budget of $500,000 for the current school year, but the latest district projection shows the school district could lose $949,324 this year.

District finances Superintendent Howard Caldwell doesn't believe the deficit will be as great as projected once the audit is completed. "There are dollars in program areas that are not always spent. I feel we will have funds in some of the reserve funds at the end of the fiscal year," he said.

At a meeting last week, board member Deb Glenz questioned how the district could go from losing $315,000 a year ago to a deficit of $949,000 this year without anything changing within the district.

Caldwell explained loss of students has attributed to the deficit along with increased daily operating expenses. The school district lost 75 students in enrollment this year. (Read The Press story about declining enrollment by clicking here.)

"Fewer students dictates fewer dollars," Caldwell informed the board. "The district has been going through a steady decline since 1996."

Financial history
With a fund balance of over $1.6 million in 1997, the board feared the district would be penalized for having a large surplus. As a result, the board approved a major technology program, spending about $400,000 on fiber optic cables, linking the school buildings and wiring them for Internet service.

With those technology outlays, the first year of deficit spending occurred during the 1997-98 school year with expenditures exceeding revenue by $538,333. That wasn't a concern with an excess fund balance of $1.1 million at the time.

Since then, though, the district has run in the red for two straight years, with this year threatening to make it three. (See chart at right.)

The general fund balance got good news at the audit in early November by having $370,000 more than expected, with $560,038 in it as of June 2000. The general fund, though, will be in the red by the end of the year if the financial losses are as great as currently projected.

Caldwell told the board it has two options: cutting the budget or asking district voters to raise the district's excess levy.

The district currently has an excess levy of $315 per pupil unit, which is matched by state equalization aid. This levy was passed in 1997 and still has seven years to go before renewal.

The district could approve a larger excess levy referendum; however, any levy over $415 is not matched by state equalization funds.

Caldwell told the board that district voters cannot vote in an excess levy referendum until November 2001. A levy approved then would not go into effect until the 2002-03 school year.

According to the education funding team at the Department of Children, Families, and Learning, an excess levy can only be put before the public at another time of the year if the vote is done through mail-in ballots.

In the meantime, administrators will look at their respective areas to see where cuts can be made. Each principal will talk to their staff to see what can be cut and a list will be compiled for the board to review in January.

"From my experience, we won't get a whole lot of recommendations," Caldwell told the board. "It is difficult to say whether the district can or cannot do without one position or another."

Board discussion
Board member Bob See stressed the need to achieve a balanced budget, no matter how much they have to cut.

"We don't want to get into such dire straights that we need to establish a statutory debt plan which gets the state involved," Caldwell said. "There are a lot of variables which play into the budget," added Caldwell, listing enrollment and revenue from the state and federal governments. Caldwell reminded the board that the state will budget education funding for the next two years at this year's session.

Board chairman Pat Flanders said the board could go back into the budget cutting process and cut more if they find they did not cut enough originally. High school principal John Janotta told the board he would like to have an idea of what the cuts will be before he puts together a curriculum for the next school year. High school students are scheduled to select their classes for the next year during conferences on Feb. 5. According to the timeline adapted by the board, the cuts will not be finalized until the end of February. "The board doesn't want to alarm people. We need to use common sense when making budget cuts," Caldwell said.

Ten years ago
It has been ten years since the school district made major budget cuts for financial reasons. The board was given a handout on the cuts from 1990.

Facing a budget deficit, the district approved its first excess levy referendum of $248 per pupil in 1989, which generated $186,102 per year for five years. Increasing enrollment also raised additional funds for the district.

In 1990, the district approved cutting $150,000 from the budget. With the additional revenue, that was enough to erase a budget deficit of $463,639.

In making those cuts, the board was presented with more than 40 possible items to cut, which totaled $350,000. The board approved cutting 28 items which resulted in a net savings of $150,000 to the district.

Since then, district voters have approved two more excess levy referendums. The second excess levy referendum of $339.50 per pupil unit raised $348,000 per year. It passed in November 1993. With debt equalization in effect, the district paid for 20 percent and the state paid 80 percent.

Voters approved a 10-year excess levy for $488,389 per year in November 1997. This levy raises $315 per pupil unit. Of the total, only $128,511 is raised locally and state equalization aid covers 75 percent or $359,878.

Timeline for budget cuts
Nov. 27-28, 2000: District begins exploring budget cuts. School board approves timeline for making cuts.
Dec. 2000 to Jan. 15, 2001: Information gathering by the administration.
Jan. 16 to Jan. 31: Information review by the board.
Feb. 1: Public hearing to discuss possible cuts.
Feb. 1 to Feb. 16: Board analyzes input from hearing.
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