Herald Journal, Jan. 31, 2005
LP Schools facing $400,000 in cuts
By Ryan Gueningsman
In a presentation to the Lester Prairie School Board and about 15 members of the public last Monday, Lester Prairie Schools Superintendent Joe Miller said that about $400,000 is going to have to be cut for the 2005-06 school year.
In five of the last seven years, the school district has overspent in its general fund, Miller said.
In fiscal years 2000 and 2001, the district saw a jump in the funds it had due to the “Jesse shift,” from the levy to state funding, Miller said, noting the shift of funds that came to the schools when Jesse Ventura was governor.
“For our school, that worked out very well,” Miller said. “Because prior to that, we didn’t have a levy, and we got an additional bump up of $400, so in those years, you’re going to see positive balances.”
In 2000, expenses started to rise, and revenue was not kept consistent with those expenses. Factor in a declining student count which leaves the school in its current position.
At the school district’s peak in 1999, there were 596 students enrolled at the end of the school year. That number has been decreasing each year since that year.
“From 1999 to the present, we have seen an almost steady decline of the number of students in our building in k-12,” Miller said. “What’s interesting to me, is that the state demographer was out at that time and said, ‘You will see a 30 percent difference in loss of students in the next five to 10 years.’
“You go from almost 600 students to about 450 students that’s about a 30 percent decrease in the number of kids in our building.”
Each student generates about $4,601 in state aid, plus $500 from the referendum, Miller said. Comparing the number of students from April 2004 (482 students), and December 2004 (442 students), Miller noted that the constant decline is hurting the district.
“We’re 40 students less in December than we were last spring,” Miller said. “If you take those 40 students, times the state aid and referendum money, that’s about $200,000 less revenue that we’ll have this year than we really anticipated.”
Looking toward 2005-06, some adjustments will need to be made due to less revenue this year, he said. The district’s unreserved fund (used for books, salaries), has also been declining since the Jesse shift.
By 2000, it had dropped, then Miller again cited the Jesse shift putting more money in the district’s general fund.
“It made a big difference because that money was in the general fund,” Miller said. “But, if you look at what has happened since then when we’re overspending each year, that fund dropped by $340,000, by another $160,000, by another $150,000 . . . so at the end of 2004 fiscal year, our unreserved funds were at about $149,000.”
“Expenses are rising, revenue is leveling off, the school population is dropping, and our reserves dropped,” he said.
This means less money to put in the district’s reserve, and expenses higher than the revenues already.
“It’s not a very good picture,” Miller said.
Looking at the district’s total budget, in 2003-04, it overspent by $92,000. For its overall budget for 2004-05, the school board made a choice to use up more of its reserves, leaving $149,000 left in reserve at the end of 2004.
With the 40 fewer students adding up to about $200,000 in less revenue, plus a budget deficit of $211,116, that’s going to raise the amount the district is over budget to more than $400,000.
“There’s not money there is no money here to pay that,” Miller said.
“If we go and spend $400,000 more than we have coming in, even with the reserved funds, the district is going to be $250,000 in the hole.” Miller said the district will have to short-term borrow to pay out the rest of the school year.
“In May or June, we’ll be borrowing money to pay the bills,” he said.
This year, Miller is hoping to graduate 39 students, but anticipates only 30 students entering kindergarten.
“This will add to the problem next year,” he said. “We can anticipate another $45,000 drop in revenue due to nine less students.”
Right now the levy is maxed. “We’re at as much as we can get,” Miller said, noting that this is the first year funds from the levy could be obtained, which was figured into the budget.
Miller explained that there is a capital reserve fund, in which there is $300,000 (used to fix the roof, boilers, buy computers, etc.). The roof repairs that were done took approximately $100,000 of that.
“We’re going to try during the remainder of this year to code as many things as we can to use those reserve funds to buy some of the things that we need to purchase here, but it’s not going to be possible to spend all of that either,” he said.
Miller met with the administrative team and staff the first week in January.
“Each of us that are working here day-to-day need to look at ways to save money,” Miller said, as he has asked teachers and staff to monitor spending. He said a group of staff members have formed a “task force” to work toward helping the district save money.
What to do now?
Miller estimates having to trim about $400,000 for the 2005-06 school year.
“Out of the total budget, that’s about 10 percent,” he said. “But, 85 percent of our budget is personnel, so a good chunk of that $400,000 is going to have to be taken in personnel.”
Miller said that while he has had the chance to meet with some school board members individually, this is the first time others have heard this information.
The board passed a resolution that will allow Miller to reduce expenditures, and in doing so, come up with a plan that may involve cutting staff or curtailing of programs.
“At our February meeting, I will present them with some options,” he said. “They don’t know what those options are yet, and neither do I. To be honest with you, I haven’t sat down and said ‘Ok, this is the process I’m going to go through to do it.’”
Miller suspects that after he presents this information to the board at its February meeting, board members might have a meeting at some point before their March meeting, or call a special meeting for public input.
“We face a very big challenge here,” Miller said. “In my 30 years here, we’ve never had to cut $400,000. I think in the worst year, we talked about maybe $60-70,000, but $400,000 is a lot of money.”
Miller also presented information on what he considers to be the “optimal-sized school,” and urged the board to take into consideration what size school it can afford.
“If we have $4 million in expenditures for the 2005-06 school year, we will be $600,000 in debt at the end of that year and you can’t do that there’s no way, he said.
“At the end of this year, and I don’t see any reason to say our spending patterns will change, our expenditures are going to be around that $4 million mark, and our revenue is going to be about $3.5 million.”
Board Member Chester Hoernemann asked Miller to explain deficit spending and statutory operating debt.
“Statutory operating is when the State of Minnesota says you need to develop a plan to get out of statutory operating debt, and if you don’t do that within so many years, the state of Minnesota can, although they never have, come in and get the district out of debt.
“We said there is $250,000 (of expenses) this year that there is no money for,” Miller said. “If we short-term borrow that, the first money we get in July, we have to pay that back, so we’ll start off 2005-06 with $250,000 less money.
“If we don’t make any change, by the end of the year, we have to go out and borrow to pay the bills,” he said, noting that the district will probably be in statutory operating debt by the end of the year.
“My responsibility is to not let us do that,” Miller said. “We can’t do it in our homes, we can’t say ‘Well, we’re going to spend 10 to 15 percent more than we’re going to take in and just not worry about it.’”
Board Member Bob Carlson brought up the fact that the City of Lester Prairie had more than 60 building permits issued last year, and asked if it is true that most of the people building homes do not have children that are school-aged.
“We looked at numbers, anywhere from one kid per household to half a kid per household, and as those households fill, you would hope that that would impact your school population,” Miller said. “But, if we even used a half a kid per household 60 households that would be 30 kids, and we dropped 40, so if every one of those houses was filled with half a kid per house, it’s still a net loss of 10.”
Miller also said that some people just aren’t having children, and other districts are counting .3 children per new household in new developments.
Hecksel asked about the response that was received to the postcards and personal contacts that were sent out to families who live in the district but open enroll elsewhere and attend private schools. Miller noted that very few students open enroll out of the district for reasons other than religious.
He said that some people choose to attend Lester Prairie Schools because they can participate in things, and that there is never any cutting from teams or events.
Miller said no response has been received from those cards or contacts. It was noted that 61 students open enrolled out of the district, and 71 come into the district.
“I would say that for every reason you have someone leaving, you have someone coming here for the exact same reason,” Miller said.
Assistant Principal Ron Erpenbach noted that “parent convenience” is another big reason that children attend school where they do.
“I would guess that 55 of the 70 kids we get that are open enrolled are from Winsted,” he said, citing parent convenience, and that the parents can pick up their sons or daughters on their way home from work.
It comes down to staffing issues
A staff was built to handle a certain number of students, Miller said. That staff, as long as the student population stayed where it needed to be, would be fine, but as student numbers decreased, staff number didn’t.
“You got less kids, but the same staff,” Miller said. The flat funding from the state is also putting the school in a tight spot, like many other schools across the state. He noted that the school has lost about 9 percent of its funds by the flat rate.
“None of them are going to be enjoyable. None of them are going to be easy,” Miller said about cuts, but said they are necessary in order to “get our house financially in order.”