Lindbergh using $2 million in reserves to balance '04-'05 operating budget
An operating budget for the 2004-2005 school year that is balanced with $2 million from district reserves recently was adopted by the Lindbergh Board of Education.
The Board of Education voted unanimously last week to adopt the operating budget, which projects expenditures of $43,118,643 with anticipated revenue of $41,118,643 — a shortfall of $2 million. However, the district will not go into the red, but will dip into its reserves to make up the $2 million shortfall. With a projected operating fund balance of $21,014,657 on June 30, the district anticipates an operating fund balance of $19,014,657 on June 30, 2005.
"Right now, as the budget stands, we're planning on using $2 million in reserves ...,'' Pat Lanane, assistant superintendent for finance and the district's chief financial officer, told the Call. "Now do I think it will be that bad? No, because this year we also were authorized to use $2 million and we only used about $800,000. So we did end the year much better. But, again, the figures that are in the budget book are worst case. I figured the revenue a little conservatively, hoping we'll get a little more and we never spend 100 percent of our expenditure budget. So you know going in, it will be a little better than what you have on paper, but it's only fair to give people the worst-case scenario, I believe. I know districts that don't do that. They really do try to figure it to the penny of what they think it will be so it doesn't look quite so bad, but I'd rather be just a little bit conservative and then be able to tell the public it actually turned out better than we thought. It happened this year, so that was good news.''
At the June 8 Board of Education meeting, Lanane noted that board members had discussed the 2004-2005 budget at two workshop sessions — Feb. 24 and May 18.
"Just a very few brief comments, we've probably spent already somewhere between eight or nine hours in direct conservation with the Board of Education on the budget so I do not want to belabor that tonight,'' he said.
"The operational revenues for 2004-2005 are projected to be $41,118,643 and the operational expenditures are projected to be $43,118,643,'' Lanane said. "I would comment that the revenue projection is anticipated to be less than (a) 1 percent increase over the current year. The expenditure projection is anticipated to be just about 1 percent over the current year. So, again, it's a very modest budget in terms of both revenues and expenditures ...''
During the May 18 workshop, board members heard a budget presentation from Lanane and reviewed budget reduction proposals totaling $655,711. The board accepted $626,274 of those reductions for final consideration.
Among the budget reductions school board members accepted were changing the textbook replacement cycle to six years from five years, reducing the technology budget by $44,000 and cutting the activities budget by $20,000.
Before final consideration of the budget last week, administrators developed a revised budget proposal that included about $100,000 in additional reductions. For the past school year, the board approved $1.9 million in budget reductions.
During an interview with the Call, Lanane discussed the approved 2004-2005 budget.
"Where's the money going? It's kind of interesting when you look at this,'' he said. "If you look at the pre-approvals, things that were in our contracts, almost all of those items were personnel items and the cost for personnel next year will be about $1.4 million more than this year. But to offset that, we made about a million dollars in reductions. We had to go pay for this somewhere and it wasn't exact one to one, but we got pretty close in terms of balancing. In fact, by the end of the day, it was almost exactly because we did come up with a few more items after the (May 18) budget workshop ... So those were the big things in terms of what did you buy with your money? Well, that's basically what we bought.
"We did have to have another $90,000 increase for some staffing issues at the elementary (level). We had some increases there that are going to cause us to have to hire a couple of teachers,'' Lanane said said. "So what else did you buy? Well, we bought that.''
In addition, during the May 18 workshop, board members expressed concerns about the level of pay for substitute teachers as compared to other area school districts.
"... We did increase the rate of substitute pay. That cost us about a little over $40,000 for next year,'' Lanane said.
Nearly two years ago, district voters approved Proposition 4, a $14.1 million bond issue designed to address safety issues at all of the district's schools. During that time, much discussion occurred about the need to provide more money for routine maintenance and the board last year established a budget for maintenance of district facilities.
"... We established a budget of $335,000 for (Director of Facilities) Karl (Guyer). Well, he got busy even before the budget this year, and got bids on the items that come out of that $335,000,'' Lanane said. "Well when it came in, this is one of those really nice things, it came in $60,000 less than what he budgeted. So that remaining $60,000, we took it out of the budget. So that was a budget cut.''
In addition, personnel changes saved the district $30,000.
"So when you add the $2 million to the reductions we made, we were at zero — a balanced budget — but balanced because of the use of reserves. That's kind of something we want to be careful (with) ... It's balanced from reserves and we think there's a message in that,'' he said.
On top of using $2 million in reserves to balance the operating budget, a 17-cent voluntary rollback will be eliminated and the district projects an operating tax rate of $2.75 per $100 of assessed valuation.
During the May 18 workshop, Lanane made two recommendations that were accepted by the board — that the district maintain a minimum reserve balance of 25 percent of projected expenditures and that a committee comprised of a cross section of the community be established to review the district's finances.
While the 25 percent minimum reserve is an important number, Lanane said, "The other figure that's actually more important is this gap between revenues and expenditures. That represents the amount of tax increase you have to have just to get even and with any tax increase, you don't want to have to go back to the voters for at least three years. I just can't imagine a situation where I would recommend we'd go for something that wouldn't last at least three years and I really might think five, but we'll see. So it has to be more on top of that to do that.''
Right now the difference between projected expenditures and anticipated revenues is nearly 21 cents, Lanane said, noting at some point the board will have to make a decision on whether to ask voters for a tax-rate increase.
Of the quality of education Lindbergh offers, he said, "... We think it's a great educational bargain and I'm not a bit ashamed. In fact, I look forward to going to the community, telling our story. I think we have a great story. I think they have a great educational bargain here and I think most of the people will recognize that. And if they don't. If they tell us no, then we will have a balanced budget and that will be very painful, but if that's what they tell us, we're prepared to do that as well. In fact, my plan right now as we move toward the budget next year is to plan as though there will not be a tax increase ... We're simply going to go on the basis: 'No, we don't have this in our pocket at all and this is what we'll need to do' and that's what we'll do. I've seen districts that I thought did scare tactics or threats. This isn't going to be a scare tactic or a threat.''
Noting the district stretched its last operating tax-rate increase more than 10 years, Lanane said, "We have a history of being able to stretch these things much longer than (three to five years), but at least promise some minimum amount of time, so, again, voters get the big picture: 'Oh, we see what you're doing. We see where you're going. Yes I can support that or no I can't.' But let them know. Here is the budget for next year. We're not counting on it. Could someone interpret that as a threat? I guess. But to me to not do it that way is dishonest ... And there'll be nothing on that list if it says it's coming off won't be done. That's when it's a threat. I've seen districts say well, we're going to cut this, we're going to cut that. It didn't pass and then they don't do it. Boy, you lose all credibility.''