July 3, 2008

Budget Surplus Allows SCR-I to Approve Deficit Budget For 2008-09 School Year

Having too much money in the bank is not a problem most people will complain about. However the Scotland County R-I Board of Education is making an effort to spend down its positive financial balance to bring its reserve fund closer to a targeted 17-percent surplus.

I believe our board members feel like we are not in the business of taxing people so that we can put more money in the bank, said SCR-I Superintendent David Shalley.

At the June 26th meeting of the board of education, the district approved a deficit budget of just under $430,000 for the 2008-09 fiscal year.

Last year the district had budgeted for a $264,000 deficit. However the close of the year actually found the district in the black, prompting the board to approve expenditures for the ongoing parking lot upgrade in the closing fiscal year. The $264,000 project put SCR-I in the red for the first time in nearly a decade by $110,000.

Since the 2003-2004 school year, the districts balance has risen from 20.8% to 40.2% following the 2006-07 school year.

The board has adopted a targeted balance rate of 17% as the state legislature also encouraged districts not to maintain excessive balances. With a $6 million annual budget, the 17% target rate equates to roughly $1.2 million. The district currently is maintaining a balance of approximately $2.6 million.

We have been fortunate with sound financial decisions over the past decade to expand the reserve fund from $100,000, or less than 5% of the annual budget, Shalley stated. This has allowed the district to pursue some one-time expenditures such as the building upgrades and the parking lot.

The district remains below the state established performance levy rate of $3.43 per $100 assessed valuation. Taxpayers in Scotland County pay just $3.36 per $100 of the nearly $44.5 million assessed valuation in the district.

The new funding formula began to be installed across the state last year and will continue incrementally over the next six years. Senate Bill 287 also mandates established salary levels for teachers with a masters degree and 10 years of experience.

In May the district approved a 5% pay increase for all staff members that will bring the school into compliance with these regulations.

With a declining enrollment, the districts revenues are not expected to increase in the future, while projected expenses will likely continue to increase, allowing the districts budget surplus to be gradually drawn down over time.

Shalley indicated the district will reconvene its long-range planning committee in the near future to review possible capital improvement projects. The committee, made up of staff and community members, work to prioritize capital improvement projects at the school. Its work has led to the current building upgrades as well as the parking lot project.

Shalley noted that the abnormally wet spring has revealed some roof issues at the districts buildings, likely putting that atop any list of future repairs and upgrades.

Even without any major capital improvements projects currently in the budget, the district is anticipating going into the red by $430,000 this budget year.

This process is obviously not an exact science, Shalley stated. The revenues are based on estimated state revenue, which in turn effects other revenue sources that are based on state aid. When building the budget I try to be conservative in my revenue estimates, while looking at worst case cost scenarios on most expenditures, so hopefully we wont have any surprises.

One factor that will impact the bottom line for the district is the uncertainty of fuel costs and related energy expenses. However the district has not been forced to increase its energy budget thanks in large part to the facility upgrades last year that targeted improved energy efficiency. Shalley also noted that the district was approved for a 0% loan to help fund the facility upgrade project, allowing the district to save approximately $20,000 in interest over the life of funding the $260,000 project.

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