If the Brainerd School District continues to maintain its unreserved fund balance at its 5-7 percent target, then $4 million would need to be cut from the budget during the next two years, school board Finance Committee members learned Thursday in a lengthy meeting.
What would $4 million in budget cuts look like in the Brainerd School District?
Superintendent Steve Razidlo told the committee this would be the equivalent of cutting about 80 teachers over the next two years, a move that would significantly affect students.
Razidlo and Steve Lund, director of business services, were asked by school board members to create a list of programs and services, along with detailed costs, for the board to see what $1 to $2 million in budget cuts would look like during each of the 2011-12 and 2012-13 school years. This information will be provided to board members at a committee meeting yet to be scheduled later in April or early May.
A similar process took place in 2007 when the district’s bond referendum failed to pass, requiring the district to cut $5.5 million from the budget for the 2008-09 school year.
Lund’s budget forecast model for the next two years includes the assumption there will be no increases in state funding; the anticipated loss of federal stimulus funds; flat enrollment; and that the district’s existing $199 per pupil operating levy expires and is not renewed in 2012.
The district will end the current fiscal year in June with a $1.718 million operating deficit, or $70.28 million in revenues and $72 million in expenditures and an unreserved fund balance of $8.2 million, or 11.43 percent.
The FY2011 budget is projected to end with an operating deficit of $3 million, dropping the unreserved fund balance to $5.3 million, or 7.3 percent. The FY13 operating budget deficit would grow to $7.6 million, reducing the unreserved fund balance to about $2.3 million, or a negative 3 percent. The district would then be considered to be in Statutory Operating Debt, or SOD, by June 30, 2013.
Lund said the board should not lose sight of correcting the deficit spending instead of focusing solely on the unreserved fund balance.
“If we cut $4 million, you’ve got another $3 million to cut the next year,” Lund said. “We have a structural imbalance. If you’re going to simply target reductions to get to a target reduction without correcting the structural imbalance, you’re kicking a can. You’re kicking a can down the road.”
The district’s existing $199 per pupil operating levy provides about $2 million in funding for the district each year. While board members briefly discussed the expiring levy, they agreed they first needed to see what types of cuts the district is facing first.
“With all due respect to the children we serve, we have to talk about the revenue question,” Razidlo told board members, alluding to the expiring levy. “What is it that our community would be willing to support?”
Board member Tom Haglin agreed that the district needs to address changes in revenue.
Razidlo said the district will have 12 certified staff retirements at the end of this school year and administrators have been looking at not replacing all of these positions as a cost-saving measure. He said this could save about $400,000 to $500,000 through a combination of not filling some positions and bringing in less expensive replacements for others.
Razidlo said staff have been comparing educational assistants’ hours with other districts and found the district is “heavy” in comparison. He said it’s possible the district could potentially cut about $250,000 in educational assistant hours.
Razidlo also said staff have been discussing eliminating custodial positions, some may be cut due to attrition. These cuts could be about $100,000.
“We have other target areas but we need your endorsement to find out how big a target we need to set,” Razidlo told board members.
The committee recommended board approval to revise the current budget for $70.28 million in revenues and $72 millions in expenditures with a general fund operating deficit of $1.7 million. Adjustments included several items, from additional revenue for special education reimbursements and federal stimulus funding to expense increases for electricity, water and sewer and expense reductions in severance packages, snow removal and heating.
The committee rejected an administrative recommendation for a 15 percent increase in health insurance premiums in order to boost the self-insured reserve pool. The health insurance fund has had an operating deficit since 2009 and will be reduced to a 3.3 month reserve by June 3. The industry target for a fund reserve balance is 3 months. Health insurance costs are projected to increase by 9 percent in claims and costs.
The district’s contribution to the premium increase would be about $1.02 million, with about $400,000 paid for by employees.
While board members generally agreed that the increase is necessary, they asked administrators to bring back different proposals, such as a high deductible alternative plan or employee incentives, to attempt to drive down escalating health care costs. Administrators will come back with more information at the next finance committee meeting yet to be scheduled.
JODIE TWEED may be reached at firstname.lastname@example.org or 855-5858.