A nearly $64 million spending plan for the Washington School District was approved Wednesday morning.
The 2013-14 budget was unanimously adopted by the school board. Two members, Kevin Blackburn and Trish Mitchell, were absent.
Public school districts in Missouri are required to have their budgets approved by July 1.
The new budget reflects total revenue projections of $49,225,438, while operating expenditures total $63,956,723.
District CFO Shelley Kinder noted that the expense total is much higher this year due to bond issue monies received, but not yet spent. In April, district patrons approved a $9 million no-tax increase bond issue.
Kinder said the district will dip into its reserves or deficit spend by approximately $3.8 million, but will still maintain “healthy” reserves of 27 percent.
On the revenue side, Kinder said the district has been hit with an unexpected 6 percent, or about $33 million, drop in assessed valuation in Franklin County. That equates to a loss of about $1.2 million to the district.
“We met with the county assessor in February who told us to expect flat assessment,” she told the board. “So imagine our surprise when we received a letter last week that reflected the 6 percent drop within a week of our budget meeting.”
Kinder told The Missourian all school districts in Franklin County were caught off guard by the drop, especially since this is a year of reassessment.
Several board members expressed frustration that the assessor had not provided any other feedback about the downward trend he was seeing between February and now.
“This is kind of a kick in the gut,” said Brian Sumner, board member. “We would have done things differently had we known that.”
Kinder said the district expected a $11 million hit in assessed value due to the Mercy/Patient First merger that occurred last year. Mercy is tax-exempt, while Patients First was not. But no one anticipated a 6 percent drop.
“I was told we have not seen the worst yet with assessed valuations,” she added.
Kinder said the loss results from limited economic development and a failing housing market, especially in the St. Albans area.
Board President Scott Byrne said the district was very prudent in making the major budget cuts it did about four or five years ago when the economy dropped.
“We’re still in pretty darn good shape compared to a lot of other school districts which didn’t do that and don’t have the reserves we do,” he said.
Kinder said local revenue still makes up much of the district’s budget. “And that’s why we need higher reserves than other districts which are largely state funding,” she noted.
Sequestration of federal funding also plays a role in declining revenue for the school district.
“We have budgeted for a 5.2 percent cut of our federal funding level,” Kinder said.
The district also expects a decline in state aid due to a lack of funding at the state level.
A breakdown of revenue by fund is as follows:
Local — $35 million.
County — $1.7 million.
State — $8.1 million.
Federal — $3 million.
Other — $1.3 million.
While revenues have declined, the district has seen an increase in expenses, due in a large part to pay raises for staff, which averages about 2.4 percent.
The district also will be hit with an 11 percent increase in health insurance for next year.
“When we started reviewing insurance rates, we were seeing rate increases as high as 25 percent,” she said. “But through negotiations and restructuring, we were able to get it down to 11 percent.”
Salary and health insurance increases also mean a hike in retirement that is calculated, Kinder pointed out.
Salaries and benefits make up 73 percent of the operating budget (teacher and incidental funds) which totals $46.7 million, she noted.
“Although we have a healthy reserve, when people are your major expense of the budget and we continue to increase in health insurance, it does not take long for that balance to drop.”
The budget also reflects a 10 percent increase in utilities.
Kinder said the district will continue to monitor financial issues with the assessor and state and federal funding levels.
A breakdown of expenditures by all funds is as follows:
Salaries — $26.2 million,
Benefits — $7.7 million.
Purchased Services — $6.4 million.
Supplies — $6.1 million.
Capital Outlay — 13.3 million.
Other — $4.1 million.
In a written budget message, Superintendent Dr. Lori VanLeer said the future carries a number of question marks, especially in the area of assessed valuation.
VanLeer was out of town last week and not in attendance at Wednesday’s meeting.
“The district relies heavily on the local tax effort,” she wrote, which makes news of the 6 percent drop in assessed valuation especially “hard to swallow at this late date.”
However, the superintendent said the district has budgeted wisely, maintaining high reserve balances to survive the unknown which will afford the district the time to plan for reductions and evaluate the tax levy.
The board will set the tax levy at its August meeting.
VanLeer said difficult decisions lie ahead for the district and should the trends continue, the next two budgets could require “aggressive” changes.
“We believe this current budget is in sound condition and we should be very thankful for our financial health . . . our ability to reposition the district may allow us to ride out the storms and that accomplishment is a direct reflection of the fine work that has been done to date.”