Amended budget has local school district cutting costs

Expenses outpacing revenues by $517,000

The Gunnison RE1J school district’s administration is getting the chance to dip a toe into the world of budget cuts this year, before taking the plunge in 2011. Although the district could face funding reductions of around $1 million from the Colorado Department of Education (CDE) next year, there are smaller but more immediate budget cuts to contend with now.

District Business Manager Stephanie Juneau told the school board at a special session on Monday, January 25 that a decrease in student enrollment, combined with an onslaught of cuts and requirements from the Colorado Department of Education, has the district’s expenses for the 2009-10 fiscal year outpacing revenues by $517,000.
But to stave off disaster, the school district’s administration is working quickly to close the gap, and with the help of immediate cuts, some federal grants and better-than-expected county tax revenues, the budget gap is down to $127,000.
“The corresponding decrease in general fund balance [to cover the gap] has been carefully considered,” Juneau said.
District-wide cost-cutting measures have added a $250,000 cushion to the district’s fund balance. The amended budget proposes using half of that money to offset the loss in revenue this year, Juneau said, “so we can prepare for what is coming next year.”
Juneau had some more good news: the district collected $632,000 more in property taxes than it had originally budgeted for because of the greater assessed valuation of county properties in 2009. So despite pulling in $77,000 less than expected from specific ownership tax, the district is still more than $550,000 ahead in local sources of funding for the rest of this year.
But the district’s change of fortune didn’t go unnoticed by the CDE.
“As a result of the increased property tax and decrease in student enrollment, the state of Colorado has decreased its state equalization funding by $778,000 to support our total program funding of $12.2 million,” Juneau told the board. The state’s funding is calculated using the district’s enrollment of 1692.7 FTE (full-time equivalent), which is down 17 FTE from a year ago.
In all, the district’s funding from the state has fallen by more than $791,500. Fortunately for the district, the federal government stepped in to supplement the money from local and state sources.
“Federal sources of revenue have been fine-tuned as we now have better information regarding grants for fiscal year 09-10 than we did last May when we budgeted,” Juneau said. “As a result, federal funding has increased by $109,000.”
However, the increase in local and federal dollars wasn’t enough to offset the state’s funding cuts. The district is still stuck looking for ways to cover $127,000 from the budget that isn’t being funded.
“To accommodate the decrease in revenues, there have been [line items] across the district that have been negatively affected,” Juneau told the board. “Each site has been asked to reduce discretionary expenditures by 5.6 percent to accommodate the reductions to student enrollment.”
The district also shaved $52,000 from the budgeted expenditures in the capital reserve fund, by reducing funding to places like technology, maintenance and furniture replacement. The district’s technology department reduced its $200,000 budget by a full 10 percent.
Superintendent Jon Nelson reassured board member Bill Powell, who was concerned about the lack of funding for building maintenance, which he said was a priority to members of the community who supported the district’s $55 million bond sale early last year.
“That’s part of what AdCo [the administration] has been working on for the upcoming year,” Nelson said. “Stephanie [Juneau] and [Director of Maintenance Tom Taggart] have done a very nice job telling AdCo what those costs need to be and I think there’s a good understanding at the administrative level that that needs to happen.”
Juneau was able to save the district some additional money by telling the district’s insurance agent she didn’t think all of the district’s employees were classified properly and asked that the school’s workers’ compensation insurance get a closer look.
“By getting [the classifications] right, we saved $39,000,” Juneau said.
But in comparison to the level of loss the district faces with impending cuts to the state’s education budget, all of the savings the district could muster seemed inadequate. After discussing the budget as a stream of revenues and expenditures, Juneau brought up the state “rescission.”
“The originally anticipated $110 million rescission by the state will be done this year. That equates to $235,000 for our district,” Juneau said. “Furthermore, in all likelihood, there will be an additional $19.8 million rescission in this fiscal year and that is equivalent to $46,000 for our district.”
Juneau told the board the budget included a “district contingency reserve” that was enough to make up for the $46,000 rescission, which the state will just take back from the money it gave to the district last year. That money will probably be paid back to the CDE in June, she said.
“So in the last two weeks we had to dig up another $46,000 in the budget to reduce,” Juneau said, explaining that she was able come up with the money from maintenance accounts with the help of Taggart.
And the bad news didn’t stop there for the board. Juneau said the CDE might be trying to reach a little further into the district’s pockets, using the results of an audit conducted over the past year as leverage.
“We received a preliminary, not even a draft, audit from CDE,” she said. “Even from the preliminary look we may have to pay back about $46,000 to the state. The things they talked about in this audit were extremely picky and pointed.”
Juneau said when the state requested the information for the audit in March of last year, she was told that they hoped to have the results to the district by June 30, but they didn’t come until this month.
And the audit—which covered two years of information on the free and reduced lunch program, the pupil counts from 2007 and 2008, transportation, and three years of the English Language Proficiency Assessment—flagged some shortcomings on the district’s part that seemed suspect to several board members.
Board members Jim Perkins, Bill Powell and Lee Olesen agreed that the CDE had not done enough to keep the district’s audits current or provide any support for the audit’s claims in CDE policy.
“At our request they will audit us every other year, provided that they have the staff,” Nelson said.
Powell said he could not see any reason that the CDE should wait so long before auditing the school district and springing several years’ of bookkeeping errors and then require payment.
“We have to insist [on frequent audits],” Perkins added. “We can’t go five years and then all of a sudden hear about it, whether they have staff or not. Staffing is their thing to take care of, not ours.”
Powell said, “I just want to make sure this isn’t a fishing expedition and this is how the state tries to balance its budget, by finding things that are wrong with our process.”
Olesen agreed and the board breached the issue of an appeals process before Powell asked Nelson and Juneau to approach some of the organizations that represent the district about using their political influence to deal with the issue of infrequent CDE audits.
The CDE has yet to let the district know when they will be getting a draft of the audit, which will trigger a 30-day response period that could yield an adjustment in the amount the district owes the state.
 “I don’t think it is a mass negligence on the part of the staff,” Juneau said. “There are just a few tiny things that we need to work on.” To be on the safe side, she stashed enough money to cover the audit fees in the amended budget.