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Mehlville '05-'06 budget assumptions indicate potential for $2 million in cuts


March 23, 2005 - By MIKE ANTHONY

Executive Editor

Expenditure reductions of more than $2 million would be needed for the coming school year to maintain a 3 percent operating fund balance, according to preliminary budget assumptions recently presented to the Mehlville Board of Education.

While the district anticipates a net increase in revenue of $400,000 for the 2005-2006 school year, expenditures are expected to increase by $2.16 million, according to the assumptions presented last week by Randy Charles, assistant superintendent for finance and the district's chief financial officer. For the current school year, an operating fund balance of 5.63 percent is projected. Under the revenue and expenditure assumptions presented to the board for the coming school year, an operating fund balance of 0.51 percent would result, Charles said. Under state law, school districts are required to maintain a 3 percent operating fund balance or be considered financially distressed.

"... Those assumptions would take our operating fund balance to about 0.5 percent. That's not 5.1. That's 0.51 percent if we just live with those assumptions and make no expenditure reductions or anything,'' Charles said. "Obviously the state requires that we maintain a 3 percent balance. For us to attain that 3 percent balance, we would need to identify expenditure reductions of a little over $2 million. If we wanted a more desirable balance, something in the neighborhood of 5 percent, close to what we're expecting this year, then we would need to identify expenditure reductions in the neighborhood of $3.7 million.''

During his roughly hourlong presentation, Charles discussed both statewide and local issues impacting the development of the school district's budget for the 2005-2006 school year.

However, Charles did not discuss a March 1 simulation by the Missouri Department of Elementary and Secondary Education that indicated Mehlville's state aid could increase by about $6.8 million if the Legislature approves a Senate proposal to revamp the state's formula for funding education. That proposal is subject to change and likely will. And there's no certainty that it would even be approved.

Superintendent Tim Ricker cautioned board members March 17 that Charles' assumptions were extremely preliminary in nature.

"... I want to say these are assumptions. These are not etched in stone. These are projections that we're looking at ..,'' Ricker said.

Charles agreed with Ricker about the tentative nature of the figures.

"... We've made some very reasonable, what we feel are very reasonable, in some cases middle-of-the-road assumptions, and our purpose is to show you that even making these reasonable assumptions, we want you to see the challenge that the district is facing financially next year,'' Charles said.

The assistant superintendent's revenue assumptions projected new revenue of $1.5 million for the coming school year from the Consumer Price Index tax-rate adjustment and new construction. But anticipated reductions of $750,000 from the voluntary transfer student program, $200,000 in Proposition C sales-tax revenue and $150,000 in state funding would result in a net increase of $400,000 in revenue, Charles said.

The Board of Education voted last May to reduce voluntary transfer student enrollment by 15 percent annually beginning with the 2005-2006 school year.

Expenditure increase assumptions for the coming school year total $2.16 million and include a salary increase of 3 percent, which would equal about $630,000 for certified staff and roughly $375,000 for classified staff. An increase in benefits corresponding to the salary hike would total $130,000, while an increase in retirement contributions for support staff would total about $230,000.

Other expenditure increases assumed for 2005-2006 include $50,000 for workers' compensation and $85,000 for contracted services.

"At this point we're considering building into the budget an increase in the district's contribution to employee insurance of $300,000. That will not cover all of the increase that we will expect ...,'' Charles said.

The district's cost for employee insurance has increased by 77 percent over the past four years — to $6,086,701 for the current school year from $3,444,828 in fiscal 2001.

Other projected expenditure increases Charles noted include $190,000 for property and liability insurance, $100,000 for energy costs and $70,000 for food supplies, though he noted that an increase in food supplies often is offset by the revenue generated by the food service program.

In evaluating proposed expenditure reductions, Charles noted administrators are adhering to the following criteria:

• Missouri School Improvement Program minimum standards.

• Federal and state statutes and district policy.

• Focusing on recurring expenditures.

• Focusing on maintaining "direct-core'' services to students.

• Safety issues — maintaining a safe environment.

Earlier in his presentation, Charles noted that expenditure reductions totaling $4,574,023 have been since the 2003-2004 school year.

For the 2003-2004 school year, cuts totaling $526,668 were made. Those reductions were carried over to the current school year, resulting in a savings of $724,428.

Also for the current school year, six administrative positions were eliminated for a savings of $498,000, while 42.5 teaching positions were eliminated for a savings of $1,806,796. In addition, 15.5 support services positions were reduced for a savings of $518,131. "Miscellaneous'' reductions estimated at $500,000 also were made for the 2004-2005 school year.

At one point, board Vice President Matthew Chellis asked, "Does it make sense to look at salary increases that are less than your assumption or does it make sense to look at further position reductions like the 42 that were eliminated last year?''

Charles replied, "In my opinion, just to be really honest with you, with the large number of reductions that we made last year, I don't see how we ... would be able to deliver adequate services to the kids if we made similar types of reductions this year. So the second piece of the answer is I think it's going to very, very difficult for us to come close to that 3 percent salary figure.''

Board member Rita Diekemper later asked about the assumption for a 3 percent salary increase and what that would include.

"The 3 percent would include steps, plus I want to say maybe $75 to $100 on the base is about all it would take to generate a 3 percent salary increase,'' Charles said.

Ricker said, "And I think in theory you could do a combination of both, the decrease, not as much as an increase of salaries, and look at positions.''

Diekemper and board President Cindy Christopher noted the district is close to MSIP minimum standards for staffing.

Ricker said, "Again, using the same standard that we have for this year, there is a possibility of reducing staffing positions.''

Christopher said, "Not to this level, though ...''

Ricker said, "Not the full $2 million ...''

Chellis said, "Well, especially if you're talking about a continuing enrollment decline, partially because of our VICC (decision).''

Ricker said, "That's what rolls into it. That 15 percent decrease along with the trends that we've seen in declining enrollment ...''

The superintendent also noted the possibility of reducing "some transportation services at a level we're not accustomed to ...''

During the discussion, Chellis also asked at one point, "Have you guys discussed the possibility of putting activity fees back in the budget?''

Charles said, "We've had some very preliminary discussions about that in CO (Central Office) team. I don't believe I've heard that issue come up, for example, on the Finance Action Team, but, again that would be a revenue enhancement strategy that's worthy of consideration.''

In response to a question from Diekemper, Ricker said, "We believe that the budget that we put together would not have to increase fees in any way, shape or form ... The preliminary assumptions that we've included in this are not increasing fees nor are they eliminating any programs.''

Diekemper said, "... But if there's a $2 million deficit, you haven't really put together a budget really yet because it's not balanced.''

Charles and Ricker agreed, with Ricker noting, "Within those assumptions, we have not looked at program closings or program eliminations or increasing activity fees and those would be things that we could put back in. We were wanting to talk with the finance group to see if that would be an alternative that they would think would be appropriate — one of the many strategies that they're looking at.''

Charles said, "Again, the numbers that were put in front of you this evening were intended to give you a feel for the magnitude of the challenge and our hope is we get responses just like that ...''

The Board of Education in July 2002 voted 5-0 to eliminate fees charged to participate in elementary school, middle school and high school clubs and organizations and to charge a one-time, annual activity fee of $40 to participate in high school sports instead of the previous $50 charged for each sport during the 2001-2002 school year with the goal of eliminating the high school athletics fee by the 2005-2006 school year.

Christopher, Secretary Marea Kluth-Hoppe, Chellis and Diekemper served on that board. While Chellis and Diekemper were absent from the July 2002 board meeting, Christopher and Kluth-Hoppe voted in favor of the effort to rescind club activities and eventually phase out sports fees.

Under the proposal approved by the board nearly three years ago, the goal was to reduce the athletics fee to $30 in 2003-2004, to $20 in 2004-2005 and eliminate the fee completely in 2005-2006.

To compensate for the lost revenue, board members approved in 2002 increases for the use of district indoor facilities and an overall 10 percent increase for the use of outdoor facilities, then estimated to generate $61,000.

Administrators at that time predicted the district would "come close to offsetting the reduction in activity fees" because the reduced activity fees would have generated $53,600.

Board members again in July 2003 voted 6-1, with Chellis opposed, to reduce the high school athletics activity fee by $10 to $30 per year for the 2003-2004 school year. Current members Bill Schornheuser, Mike Heins, Kluth-Hoppe, Diekemper and Christopher supported it.

The amount of the fee has not been changed since the July 2003 vote.

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