Cloquet debates budget cuts vs. spending fund balanceThe old saying goes that there’s more than one way to skin a cat. There’s also more than one way to handle a budget deficit.
By: Jeff Papas, Pine Journal
The old saying goes that there’s more than one way to skin a cat.
There’s also more than one way to handle a budget deficit. In the case of the Cloquet School District, there may be as many as three.
With an anticipated shortfall of $1.2 million for the 2012-13 school year, administration is acting on a school board resolution to cut up to $600,000 from next year’s budget.
Debate on the subject was passionate at the March 12 school board meeting, and it may well be again when the board meets for a work session Thursday evening and again on Monday, March 26.
No one wants cuts. However, there are those who feel steeper cuts aren’t the best option.
Carolyn Kedrowski is a fifth-grade teacher at Washington Elementary, and Jason Godnai is a third-grade teacher at the same school. They are of the opinion that the district’s fund balance, which they say has grown each year since 2004, should absorb as much of the shortfall brunt as possible.
“It’s very drastic and very sudden,” Kedrowski said of the proposed cuts. “The problem is that the people think the sky is falling because that’s what they are being told.”
“And then it’s not,” Godnai added. “It’s hard to believe we [the district] will deficit-spend.”
Figures provided by the teachers appear to bear out that statement.
The teachers’ figures show a general fund balance that grew from a low of $1.061 million in 2000-01 to $5.529 million in 2010-11, with general fund growth shown every year since 2004-05.
They also show the district’s total budget turning out better than projected in nine of the last 11 years, with variances of $900,000 or more in four of them.
“I do think they pad the budget,” Kedrowski said. “Look, I understand budgeting is hard. But I don’t think we need to panic.”
While not officially representing the teachers’ union, in the interests of disclosure it should be noted that both Kedrowski and Godnai are union negotiators. Their figures were presented to the union’s executive committee before they were interviewed for this story.
Be that as it may, both teachers believe spending down the fund balance is a perfectly acceptable short-term solution.
Godnai added that if the district showed citizens it is spending down its fund budget, referenda similar to the one which failed last November might stand a better chance of passing.
In any event, the teachers are firm on one specific point regarding the proposed cuts.
“I’d like to see the 10 (student contact) days lost reinstated,” Godnai said. “I don’t think there’s anyone here who wants to see those days lost.”
With reference to the fund balance, Kedrowski made a simple observation.
“We’re not First National Bank,” she said. “The fund is supposed to be used to provide education for students.”
Superintendent Ken Scarbrough, however, has his own thoughts on the “banking” issue.
“The State of Minnesota is using us as a bank, by borrowing money from us,” he said. “We are loaning the state money this year and we did last year, too.”
Scarbrough noted that the fund balance has been rising and also noted that funding the anticipated 2012-13 deficit from that fund balance is one potential course of action should the school board choose to go in that direction.
However, he also added that some of the increases in district revenue that make such a plan possible were one-time events. The district received money from the Federal stimulus, particularly in 2009, and other factors also increased the balances.
A packet released by the district noted that special education reimbursements were higher than expected in recent years, as was the overall student population, which increased the district’s per-pupil allotment.
The result has been a series of better-than-projected budget years and, Scarbrough agreed, an understandable belief that Chicken Little might reside in or around Cloquet.
“I can understand that,” he said. “We have had more revenues and less expenses in the budget so a lot of people would think that.”
However, Scarbrough notes the budgeting process is an inexact science.
“We set the budget in June,” he said. “One year we had well over 100 new students [register] in July and August and that was our revenue generator. We get more (state) aid that way.”
This week, the district released figures to brief the board and public on what would likely happen to the general fund if sharper cuts were delayed.
According to district projections, with no cuts made in the next two years, cuts of $1 million in 2015 and $2.5 million in 2016 would be needed to keep the fund balance above zero. The figures assume flats revenues and a 3 percent inflation rate (for more, see the chart linked to this story at www.pinejournal.com).
According to the district’s figures, a $600,000 budget reduction this year with no reductions in the next two years would deplete the fund balance by 2016. Reductions of $600,000 in each of the next three years would hold the balance at just over $2 million in 2016.
“We would hope by then that the state would have figured out its budget situation,” Scarbrough added.
While advocating for steeper short-term cuts, Scarbrough was quick to note that other options are open.
“We have a fund balance, but deficits are increasing,” he said. “We don’t want to be in a situation where we have a zero fund balance and we have to reduce the budget by $2.5 million.”
“I really understand where [the teachers] are coming from,” Scarbrough added. “We have to try to consider everything and we want do to the best we can. There are a lot of legitimate concerns out there.
“I didn’t take this job to take things away from students,” Scarbrough added.
He noted that, when presented with positive cash flow situations, the school board has opted to add programs such as all-day kindergarten, and is considering adding a vocational education program as well.
And for their part, the teachers are quick to note they aren’t trying to be boat-rockers.
“I don’t think there is bad feeling,” Godnai said. “The discussion is always respectful.”
That discussion, of course, also leaves a potential third option. The board is also within its rights to strike a balance between planned cuts and funding deficits from the fund balance – varying from its $600,000 goal.
Board member Jim Crowley said at the March12 meeting that he would not support some of the cuts listed in the district’s initial proposal and board chair Gary Huard said he wanted to see more sacrifice from administration.
A 5 p.m. board work session was set for Thursday, March 22, so the board can review the proposed list, prioritize or even change some of the suggestions. It’s all part of the public process.
However, Scarbrough notes the district does face added challenges over the next year.
“We’re going to lose $260,000 in interest income next year, and if we have to borrow to meet short-term cash flow needs we’ll pay 2 to 3 percent interest on that too,” he said. “It adds up.”
But, speaking of addition, the frustration of committed educators on all sides – staff, administration and school board – is clear.
“Cloquet values its schools and its teachers,” Kedrowski said. “People have been supportive. But we’re hired to teach. We want to work with kids.”