The failure of Measure 28 last week represented approximately $400,000 to School District 55, leaving the district’s budget for 2002-03 $68,000 in the red.
Cuts in state spending remain in place with the failure of Measure 28. Those cuts would have been backfilled by the measure had it passed using a three-year income tax increase of .5 percent.
Supt. Larry Horton said the district should underspend its budget for the year by about $300,000 if the district freezes spending except for emergencies. That would leave an ending fund balance and cash carryover of $232,000, less than the minimum, $450,000 or 3 percent of the general fund, he would recommend.
Of that total, about $40,000 would be saved from the spending freeze. The remainder of the $300,000 is being saved by the resignation of higher-paid personnel. Those personnel are replaced by employees lower on the salary schedule.
To cover short-term revenue losses, Supt. Horton identified four options, including the spending freeze. Other options include cutting school days, using a legislatively created accounting maneuver to accrue money this year from next year’s revenues or cut staff.
Board members agreed generally during a work session Monday night that the district should implement the spending freeze. They were split on whether the district should cut school days or use the accrual to gain up to $850,000 from next year’s revenues. Board members generally did not want to cut staff this year.
The accrual would allow the district to count July’s payment from the state school fund in June to balance this year’s budgets, Business Manager Russ Allen said. Many districts have already taken that option.
That creates accounting problems, Allen said. The district would need to keep two sets of books, and auditors would note that the district is not in keeping with Generally Accounting Principles (GAP).
If someone wanted to look at the district’s finances, Allen would have to ask whether they want the budget according to Oregon budget law or GAP.
“Do you want funny money or the real money,” Supt. Horton said.
The accrual would show in the district’s annual audit and could present problems with the district’s credit rating, Allen said.
The district would need to continue accruing money in subsequent years, Allen said, or it would need to cut spending enough to offset the accrual should it want to quit accruing the money.
Other than accounting effects, as long as cash is available to pay the bills, the accrual would have little additional impact, Allen said.
The district could accrue the money as late as June if necessary.
To cut school days, the district must negotiate with teachers. For each student-contact day cut, the district could save $60,000. For each non-contact day, the district would save $40,000. The district could legally cut up to five days without a waiver from the state.
Each of these steps would increase the ending fund balance for 2002-03. That money becomes a cash carryover into 2003-04 and the district’s next beginning fund balance. It is usually placed in a contingency line item for emergency spending.
Normally, a district would want to keep a minimum reserve of 5 percent, $750,000 for District 55, Supt. Horton said. A 3-percent, $450,000, contingency is prudent. The district could finish with less, but roofs falling or special education students who could cost $50,000 or $130,000 moving into the district could wipe out a smaller contingency.
“I have a very difficult time with reducing contact days,” Chairman Don Hopkins said. “If kids aren’t in school, they’re not getting educated, and that’s the business we’re in.”
Hopkins preferred accruing money as opposed to cutting school days.
“I see the accrual as the least impact to the kids in school,” Hopkins said.
Barbara Snow was interested in cutting school days, she said. Parents would prefer losing a couple of days over larger classroom sizes and textbook shortages. She wanted to wait until later in the year before deciding to accrue funding, about which she remains unconvinced.
Dave VanDerlip said the district’s current financial situation could be considered an emergency and justify its small contingency, if it finishes with the $232,000. It is appropriate at times like this to use the reserves.
Board members asked Supt. Horton to open discussions with the teachers on cutting school days so it could be an option later.