Preliminary budget $1.6 million in the red
CLOQUET SCHOOL BOARD
At their Monday meeting, Cloquet School Board members approved a preliminary 2017-18 fiscal year budget that spends $1.6 million more in the general fund than the school district expects in revenues.
Community member Richard Colsen was concerned by the deficit spending and asked about it in the open forum, but district officials played down the red ink.
Business manager Candace Nelis said the district has to adopt its budget now, but numbers are still fluid and they will know better the actual difference between revenue and expenditures in December or early January. The district is very conservative in its enrollment estimates each year, she explained, so the deficit is really a "worst-case scenario" for the budget.
Nelis explained that the district has to adopt a preliminary budget by June 30, then the school levies in July for the next calendar year's taxes for the following year's revenue.
"We levy in July of 2017 for calendar year 2018 for our fiscal year 2018-19 revenues," Nelis clarified. "We get the preliminary levy in September to certify and then we must certify the final levy in December. We revise the budget in early January or February which is still early as we are only halfway through the year and our student counts could fluctuate."
You bet it's confusing.
Recent history shows the school district predicted a $225,000 surplus in 2014-15 and ended up with a $330,000 surplus. A 2015-16 projected $505,000 surplus turned into $630,000.
Last budget year (2016-17) the district projected a $500,000 deficit, and Nelis said they won't know the actual final numbers until the final audit is done in November or December.
This year's projected deficit is triple last year's.
"We have had a pretty healthy fund balance over the last few years and so a couple of years of projected deficit spending is workable (but not ideal)," Nelis said. "We are already talking about how we can reduce the deficit for the 2018-19 school year."
During Monday's meeting, Nelis told board members the district has money designated for other purposes that could be used to help make up the general fund deficit. A fund designated for severance payments that hasn't been touched in years contains $1.7 million, and OPEB retirement funds could help with some of the retirement benefits that the district has been paying out of its general fund. The district will have a better idea of enrollment numbers by August, she noted, so revenue numbers will likely change then too.
The general message to the board from staff was "don't panic."
"I really don't think there is any need to [uncommit severance funds] right now," Superintendent Ken Scarbrough advised the board before its vote. "We're in good shape."
Nelis suggested the board would discuss numbers and possible cuts in December or January, when the numbers are more concrete. The district should be seeing money reimbursed for last year's special education transportation costs too, she said.
Levy dollars from local property taxes make up approximately 17 percent of the school district's total revenue, with almost 68 percent coming from state sources, 5 percent coming from federal sources and another 10 percent coming from other local sources.
Nelis said property owners can expect to see another bump in the long-term facilities maintenance taxes similar to last year's, a tax that the state authorized because school district's weren't getting enough money from the state and local taxpayers to cover costs and long-term facilities maintenance.
In other matters Monday, Cloquet School Board members:
• Approved long-term facilities maintenance revenue projections and expenditures, a move that audience member Richard Colsen said he appreciated;
• Hired Matthew Wade to fill the full-time choir teaching position at Cloquet High School and Cloquet Middle School; and
• Approved several positions for the new Northern Lights Academy including two special education teachers, a head secretary and a social worker.
Northern Lights Academy is a joint powers special education district created earlier this year that allows member school district to combine resources for Setting IV special education students, defined as those students who cannot spend any time during the school day in a regular school setting. Participating districts include all Carlton County districts as well as Proctor, Hermantown, Willow River, McGregor and the Lake Superior School District in Lake County. There are financial benefits for the participating districts as well because state legislators recently capped the increase of special education revenues for a district to no more than 4.6 percent than revenues received in the previous school year. Once that cap is reached, any funding required for a district's special education services has to come from the district's general education revenues. The special district helps avoid those drains on the general fund dollars and allows school districts to share existing resources.