At the school board workshop on April 19th, board members and Heather Martin, Executive Director of Business Services discussed solutions for eliminating or “reinstating” the third furlough day for all staff. This discussion led to a dilemma on what to do with excess funds intended to be used for reinstating the furlough day.
Martin explained that at the last informal board meeting on April 5th, she mentioned the possibility of transferring extra money within the categorical funds to the general fund if all textbook purchases had been made. She stated that this is allowable under statute and is common practice in other districts. Martin said that the option of using extra money in the categorical funds has not been an option in the past because there has not been any excess monies.
This year there is $489,000 in left in the categorical funds after textbook purchases were made. Martin asked the board if they’d be willing to adopt a resolution to transfer the $489,000 to the general fund and then use that money to reinstate the third furlough day for all of the district’s employees.
Board member Gus Guadagnino asked what would happen if they did not transfer the funds to the general fund. Martin explained that it would roll forward to the next year and it would be added to the revenues for that year which is projected to be about $1.6 million. These revenues would be used to purchase textbooks. Martin explained that there is only a social studies adoption next year, so the $1.6 million will cover that plus replacement textbooks.
Mr. Guadagnino said he would be in favor of a resolution to transfer the funds.
Martin additionally explained that there is another funding source that would go toward eliminating the furlough day. Individual schools and departments gave up a total of $192,000 from their discretionary budgets to reinstate the furlough day.
Using both the categorical funds and the discretionary funds in order to reinstate the furlough day, there will be approximately $140,000 left over. She explained that it is possible to leave it in the general fund or could return it to the schools since they gave the money for “a specific earmarked purpose.”
Martin discussed how discretionary funds work. She stated that discretionary funds are general fund money that the district gives to the schools. At the beginning of the year, schools receive 70% of their discretionary money. “That covers everything the schools use,” stated Martin. She explained that the 70% figure is adjusted based on student enrollment. The additional 30% follows after student enrollment stabilizes. “Unless it’s been a bad budget year and they have retained that 30% on rare occasion to help with the general fund,” stated Martin. This year, Martin clarified, that schools received the 70% upfront. They gave 10% back in February and retained another 20%. The 20% is the $192,000.
School board member Beth Naverud stated that she would prefer to go ahead and reinstate the furlough day and then return the balance to the schools, rather than keeping it in the general fund.
Mr. Guadagnino stated, “I feel we need to give that money back… We took it for a purpose, we’re not going to use it for that purpose. Let’s give it back.”
School board member Mark Johnson worries about the state requirement for a 3% reserve. If they stay above the current 2.08% reserve level, he would feel comfortable giving the $140,000 back to the schools.
“When we drop below 2 we run into a very serious problem, where the state comes in and takes over… It’d just be more costly. It would be another layer of bureaucracy. I think it would impact our students negatively,” stated Johnson.
Mr. Guadagnino felt that they should be able to find the funds to prevent that from happening.
“If our accounting department could assure us we wouldn’t drop below the 2% I wouldn’t have an issue with that,” stated Johnson.
Ms. Martin stated that she does not foresee them dipping below the 2% mark and they will have a balanced budget for next year at 3% since they are required to do that. “We are confident we are not going to fall below the 2%,” stated Martin.
“To them [principals] it’s a lot of money back to the school,” Martin said.
Board Chairman Matt Foreman viewed the 2.08% reserve figure in a harsher light. “We’re talking about the wrong number, it’s not 2% it’s 5%. And if not 5, 3. When you say I don’t think we’ll dip below 2%… That means to me, we’re skating pretty close to a crisis,” stated Foreman.
“That 2% is our drop dead mark…. We have some additional revenue sources, but the primary one goes to capital,” he continued.
“The initial reaction for each of us is to return that discretionary money to the schools… but when you are less than .1 from disaster, I like to build in enough cushion as I possibly can,” reasoned Foreman.
“We flirted with that 2% line in the past and the things that come with sitting near that line are not fun. My preference is to try and get our fund balance up.”
All board members agreed to a resolution for presentation at the school board meeting on May 3rd to transfer the $489,000 to the general fund.
Ms. Martin clarified that the $489,000 will be earmarked towards academic instruction which frees up money in the general fund to be able to reinstate the furlough day for all employees. The resolution will not state that it is for the furlough specifically. The resolution was passed on the consent agenda at the regular school board meeting May 3rd.
At the workshop on May 3rd, school board members decided to let the schools receive the rest of their discretionary funds- an amount $192,000 instead of keeping it in the general fund. This would bring the schools up to the 100% mark in discretionary funding. However the schools must spend that money by the end of the school year, or it goes back to the general fund. Some schools may put the money towards supplementing their sub-budgets, if they are running short. Martin explained that the schools can use the money for anything that the school needs to function with the exception of capital expenditures.