Running district schools could cost as much as $7.6 million more next year, education officials told the Kenai Peninsula Borough Assembly last week, and deciding where to spend and where to cut is going to be no picnic.
“There will be some tough prioritizing,” said assembly President Ron Long of Seward.
A preliminary schools’ budget presented to the assembly during a work session Feb. 21 estimated it would take $96.6 million in district general fund spending to operate the schools, well above the $89 million being spent in the current 2005-06 school year.
Unfortunately, general fund revenues currently are projected to fall short by about $3.6 million.
The total estimated budget includes special revenue funds pass-through appropriations to specific programs from the state and federal governments.
Those will increase overall revenues to $112.3 million, but the expenditure side of the ledger also jumps to $116.4 million, leaving the borough $4.1 million short of what is needed to break even.
“This matter will need to be resolved with either additional revenue, reduced expenditures, an allocation of fund balance or a combination of these solutions,” Melody Douglas, chief financial officer for the district, told the assembly in a memo in early January.
The proposed budget anticipates enrolling 9,244 students next year, about 2 percent fewer than attending today.
The revenue side of the preliminary budget was based on a $428 increase in the per-student state allocation proposed by Gov. Frank Murkowski, which would push the current allocation from $4,919 per student to $5,347.
This “Foundation Formula” is a complex calculation including factors beyond just raw enrollment and the per-student allocation, Douglas said. Under the proposed budget, the Foundation Formula would be expected to generate $54.8 million in state funds, about $5 million more than the current year, she said.
The projected budget presumes the borough will fund schools “to the cap,” that is, contribute from local revenues as much as is permitted by state and federal law. The borough uses proceeds from its sales tax to fund education.
Assembly members have stated their intention to fund to the cap if at all possible, which would mean committing $29.3 million to the district, some $1.78 million more than the current year, as well as another $7.4 million of in-kind services, an amount equal to that of the current year.
School district officials, however, have noted that “cap” funding is in jeopardy. Facing its own budget deficit, the borough is considering funding schools at the current budget level, and not “at the cap” of the new budget. Should that happen, the borough would see an increase in the district’s anticipated general fund deficit from $3.6 million to $5.4 million that could only be addressed with further budget cutting.
“The district has no way to go out and generate more funds,” Douglas said in an interview Monday.
The preliminary schools’ budget includes no appropriation to the Community Schools program, which the current budget funds to the tune of $263,000. It also anticipates no Legislative Equipment Fund, a $460,000 item in the current budget.
At the end of the current fiscal year (June 30), the district expects to have roughly $2 million in undedicated funds left in its fund balance. The proposed new budget could wipe that out. Douglas said that at least some members of the Kenai Peninsula Borough Board of Education want to retain a portion of the undedicated money for unexpected expenses, a position she supports.
But that, too, would mean more budget cuts, she said.
How the district will ultimately use those undesignated funds will be the subject of discussions in the coming weeks.
In developing the fiscal year 2007 preliminary budget, the district made other changes.
For instance, the current transportation contract with Laidlaw terminates this year. Under the new contract, the district will purchase fuel directly, removing that element from the contractor’s profit calculations. That should help contain costs.
Student nutrition services will be adjusted in the new budget as determined by the results of a comprehensive review of the program now under way, while spending on equipment will be lower than in the current budget.
During the work session, the administration proposed leaving local contribution funding at the FY 2006 level rather than boost it to the new budget’s “cap” level. The assembly is mulling that over.
“I wouldn’t say we are of a unified voice about what level of funding should be,” Long said. “There will be more discussion before we take action. But I have heard from a lot of constituents that it is important to fund to the cap.”
Whether reality will allow that to happen “will be a tough question” to answer, he added. “If we do, what do we take (funding) away from to make that up? Obviously, we won’ be able to do everything we have done in the past for everybody.”
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