Audit says school money in order, but finances still tight

Posted: Thursday, November 20, 2003

The Kenai Peninsula Borough School District's financial statements are in order, an independent auditor announced this week.

But just because the district is doing everything right doesn't mean it's not struggling for cash.

Bill Coghill, who runs the Kenai branch of Mikunda, Cotrell and Co., visited a school board work session Monday to report that the district's annual audit is complete.

"We have a primary purpose to express our opinion as to if the district presents its finances fairly," Coghill said of his firm, which has performed audits for the school district and borough for the past several years.

"We have a clean opinion," he said. "We do believe these statements fairly present the finances of the school district."

The audit reviewed the district's accounting practices and finances as reported in the recently released Comprehensive Annual Financial Report (CAFR), which reports on fiscal year 2003, which ended June 30.

In addition, the firm provided feedback on the district's internal control structure. Its only suggestion was that the district establish an accounts receivable policy to better track incoming money.

Finally, the firm audited the district's state compliance with federal and state programs, including such things as the Title I program, and found no problems.

"We have no compliance findings," Coghill told the board. "It's a clean report."

But just because the district's finance department is doing its job well -- Coghill complimented chief financial officer Melody Douglas and her team for their work -- the district still is looking ahead to some monetary trouble.

District administrators and the school board have begun preliminary work for the fiscal year 2005 budget cycle and, at present, expect to enter the budget process with a $5 million deficit.

That's not much different than the situation the district was in last year at this time. However, to balance last year's budget, the district made some severe -- and unpopular -- cuts.

In April 2002, Superintendent Donna Peterson issued a report on future budget considerations listing the "big three" areas in which cuts were likely in coming years.

"All choices facing the district are detrimental to student programs," she wrote in the report. "It must be clearly understood that all three of the following choices will likely be implemented in the next one to three years unless the district realizes a large influx of students and-or a substantial increase in funding."

Those three suggestions were eliminating cocurricular activities, increasing the pupil-teacher ratio and closing schools.

All three areas already have been touched to some extent.

The cocurricular travel budget was eliminated for the 2003-04 school year.

The board voted last year to increase the pupil-teacher ratio in all grades except kindergarten through third, cutting 42 teaching positions for a savings of $3.3 million.

And, after months of heated consolidation discussions, the district decided to close Nikiski Elemen-tary School at the end of this school year.

Those decisions helped somewhat last year, and the closure of Nikiski Elementary will help next year (though those savings were counted before estimating the $5 million deficit). But because the "big three" already have been cut, there aren't a lot of options left.

The school board on Monday approved a resolution to ask the borough assembly to fund cocurricular activities with $1.4 million in the 2004-05 school year and to put an initiative on the ballot asking voters to continue the appropriation through a property tax.

Approval of that resolution from the borough assembly and the voters would eliminate cocurricular activities from the district's budget without eliminating the program itself, meaning a savings of about $1.4 million.

But that still means a shortfall of about $3.6 million.

School board members have been adamant about not making another increase to pupil-teacher ratios, and on Monday approved status quo staffing formulas, meaning the remaining $3.6 million will not come from employee salaries and benefits -- an expense that makes up more than 70 percent of the budget.

That leaves consolidation of schools.

Monday afternoon, the school board had an informal discussion about future consolidation plans during a work session, though members were far from reaching consensus in the matter.

A handful of board members said they would rather see schools realigned and boundaries readjusted to make the best use of resources rather than seeing schools closed.

Sunni Hilts of Seldovia, for example, said she believes in many cases consolidation of schools means the closure of a school and thus the elimination of a community.

Debbie Holle of Kasilof agreed.

"Let's have boundary discussions instead of closing schools," she said. "Have we exhausted all our options?"

Dr. Nels Anderson of Soldotna, said as far as money is concerned, the district has indeed exhausted its options.

"When we look at the 'big three,' it says 'close schools,'" he said. "That does not mean realign or readjust. It means close.

"I don't happen to like any of these things. When we close a school, it does adversely affect a community. There's no way around that."

Sammy Crawford of the Kalifor-nsky district agreed.

"The board made it very clear we wouldn't raise PTR," she said. "We've got the idea about cocurricular activities. This is all we can do."

Still, what that means for the district is unclear.

Marty Anderson of Sterling said he needs to see hard numbers before he can make any decisions.

"We need to identify which schools have the potential to be consolidated," he said.

Margaret Gilman of Kenai agreed.

"I almost feel like we're all tiptoeing around the dinosaur in the middle of the table," she said. "Let's cut to the chase."

Peterson said the initial set of ideas for closures has been revised over the past few months. For example, Hope School actually had an increase in student enrollment this year, saving it from the chopping block.

District officials also have decided that isolated school simply cannot be closed for logistical reasons.

Marty Anderson asked if there is any sort of state statute regulating how far children can be bused to school, and Peterson said there isn't. However, she said, the district tries to keep one-way bus rides limited to one hour.

Ultimately, that means closures are more likely in the more "metro" areas of the peninsula than in rural areas. But a preliminary glance at enrollment and capacity numbers for district schools doesn't show any obvious consolidation possibilities.

Despite rumors that the district wants to consolidate Skyview and Soldotna high schools, the numbers show that it wouldn't be possible without serious reconfigurations until sometime after 2010.

Likewise, a rumored consolidation of Kenai Central and Nikiski high schools also would require significant organizational changes, as the two schools have combined enrollment projections exceeding building capacity through at least 2010.

Upon the board's request, Peterson said she could bring back some potential scenarios for consolidation.

But in the meantime, a handful of board members said they also want to explore other possibilities.

Holle said she wants the board to look into the legality and feasibility of having the borough take over building maintenance, though longtime board members said the idea has been explored several times over the past years.

Holle also broached the subject of a four-day school week, which some districts in the Lower 48 are testing. Board members said they would be interested in hearing about the potential cost savings and impact on student achievement of such a move.

Dr. Anderson said while experimental and "little" cuts are worth investigating, the board needs to stay focused on bigger ticket items.

For example, he said, the four-day school week is an interesting idea but "it would only save a little."

"We're dancing around the issue of where we're going to get the money," he said. "We can all find places to take a little here and a little there. We will. We will. But we need to look for the big things, too."

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