June 11, 2014 - As projections continue the district's trend of negative cash flow and a planned spend-down of reserves, the Mehlville Board of Education is set to consider some major financial decisions tonight — June 12 — including next year's budget, an employment contract with teachers and salary increases for other employees.
A preliminary budget the board could consider projects a $109 million budget with a deficit of $3.8 million for the upcoming fiscal year, including $2.5 million in salary increases, up from this year's $105 million budget.
The board will discuss the budget at a meeting at 7 p.m. at the Administration Building, 3120 Lemay Ferry Road.
Although the administration first previewed its recommended budget last month, the Mehlville National Education Association, or MNEA, was slated to vote on a new memorandum of understanding, or MOU, this week — after the Call went to press. Late actions by the Missouri Legislature on tax breaks that could cut into the district's sales-tax revenue by a projected $1 million have also put more pressure on the district financially.
Another question facing board members is whether to roll up the voluntary two-cent tax rollback that returned $330,000 to taxpayers last year.
"I've budgeted that to be reversed, but it doesn't mean it will be reversed," Chief Financial Officer Marshall Crutcher told the board when he previewed the recommended budget May 8. "It's a $300,000 'yes' or 'no,' and it's certainly at the board's discretion on what they want to do on that ... As you can see, there's a lot of unknowns."
Overall, the district's preliminary budget is less conservative than budgets of the past, with a lower possibility of a positive windfall at the end of the year, Crutcher noted.
The projected deficit is offset by predictions of higher foundation formula funding, which would bring $700,000 more to the district in state funding next year. Board President Ron Fedorchak told the Call that he believes the recommended budget is too optimistic on formula funding, with Crutcher originally projecting next year's funding at 97 percent of the formula and now ramping it down to 95 percent. Current funding is at 92 percent.
Next year's projected $3.8 million deficit includes $2.5 million in increased salaries and benefits, a carryover $1.36 million deficit from the current school year, $306,000 from increased debt expenses, $205,000 for energy increases, $165,000 for new exhaust hoods for school kitchens, $80,000 for increased expenses for science-oriented Project Lead the Way classes, $62,000 for increased property and liability insurance and $50,000 for new buses.
Last year, assessments that came in $575,000 lower than expectations fueled an unexpectedly high deficit of $1.36 million, despite an unexpected influx of more than $1 million of transfer-student tuition from the Riverview Gardens School District.
The current deficit also stems from $500,000 spent on the district's 1:1 laptop program and $440,000 for the five-year facility plan.
With the district receiving $1 million less in sales taxes, Fedorchak said the result will be even more deficit spending.
"(The sales tax is) going to be one of the big things — that's going to accelerate our draw-down on our reserves a little faster," he said.
Faced with a large reserve fund, the board has operated the district by deficit spending for the past few years, which has allowed funding of new facilities and technology plans.
Deficit spending can only go on so long, however, and Crutcher emphasized that the five-year trend for the district, no matter the variables involved, is heading downward.
Toward the end of Crutcher's five-year forecast, the district's reserves fall to nothing. Under state law, a school district is required to maintain a 3-percent balance in its operating funds or it is considered a "distressed" district.
To shore up the reserves and get back to the minimum in five years, the district would need to add $21 million.
To address that shortfall and add $5.5 million in ongoing revenue to keep funding the district's technology and rolling facilities plans and provide money for salary increases and other expenses, Superintendent Eric Knost proposes a $50 million, 19-cent bond issue that would pay off $18 million in bond-like certificates early to free up funds in the district's operating budget for those expenses.
Knost's plan also includes $24.5 million for "Forward Motion" facilities projects. He also recommends a second ballot question for an additional 10-cent tax-rate hike that would add roughly $1.5 million in extra annual revenue, which would go to top up the reserve fund.
Knost is leaving June 30 to take over as superintendent in the Rockwood School District. Current Springfield Public Schools Superintendent Norm Ridder will take over as interim superintendent for Mehlville on July 1.
The board is delaying action on Knost's Forward Motion bond issue until Ridder arrives and can make his own recommendations on the plan.