Fayetteville School Board May Dip Into Reserve

FAYETTEVILLE — The School Board this month may have to move $1.3 million from one of its two reserve funds to balance the district budget.

The board approved in July a $1.1 million dip from its $2.5 million in unrestricted carry forward, a type of reserve account, to balance the budget to start the fiscal year.

Meeting Information

Fayetteville School Board

Date: Feb. 20

Time: 5 p.m.

Location: Ray Adams Leadership Center, 1000 W. Bulldog Blvd.

The district may have to use about $1.3 million in property tax reserve to keep the budget balanced for the rest of the fiscal year, said Lisa Morstad, chief financial officer.

The district created the tax reserve several years ago to cover any drop in property taxes paid to the district. The taxes have remained stable and the $3 million fund hasn’t been used for its intended purpose.

The board will receive a mid-year budget report and annual audit report at its February meeting.

Shortages started last year with federal budget cuts. Hiring personnel, buying textbooks and increasing general operation expenses contribute to the financial situation, according to administrators.

Morstad is reluctant to say the situation is serious until she completes the mid-year budget review, something that occurs every February. The fiscal year runs from July 1 to June 30.

“I don’t think we’ll be in fiscal distress,” she said.

Correspondence since Nov. 1 between Morstad, Superintendent Vicki Thomas and the School Board showed concern about budget issues, ranging from hiring employees without knowing if there was enough money to pay for them and buying textbooks when there was no money allocated for the purchase.

Morstad said the district will receive additional state growth money, probably near $900,000. Growth money is based on the number of new students from one year to the next. Fayetteville enrollment increased this year by 279 students.

Thomas, who is leaving the district June 30, says there are financial challenges as with any large business with more than 1,000 employees and an annual budget in excess of $110 million. District officials are constantly looking for financial efficiencies, she said.

“I’m not aware if it’s serious,” Thomas said. “We left out some textbook money but it’s doable.”

The district lost about $200,000 in federal money and expenses increased because of higher contributions to employee health insurance, Morstad said.

The district has recouped $324,000 through attrition by not filling mostly support personnel, Greg Mones, human resources director, said. He said other hiring practices helped recoup $328,000.

Jim Halsell, a board member, said he doesn’t know the full extent of any budget problems.

“We do have to get out in front of it, and be made aware of it,” he said. “The board has to have information.”

Textbooks

School districts in Arkansas are required to upgrade textbooks in all subjects every six years. This is the year for new math books. The math books and other textbook purchases total $585,432.

A line item for textbooks was eliminated three years ago, Morstad said. Textbook purchases are rolled into the Curriculum and Instruction Department budget. The purchase was somehow overlooked in the budget preparation last spring but neither Morstad or Thomas said how that happened.

Thomas said the line item for textbooks would be restored in the 2014-15 budget. Even in a year when there’s no textbook adoption, there should be money put in that line for the years when a major adoption is required, she said.

“I gave the board an amount of $390,000 for the math adoption. It didn’t make it into the budget when it was approved,” Thomas said. “It got left out. This is not a blame thing.”

The rest of money amounted to about $190,000 for book replacements and texts for a new course in sports medicine at the high school, Thomas said.

Personnel Costs

The budget included money for about seven new teachers, calculated as full-time equivalents. However, with 279 more students than last year, additional positions were added without checking to see if there was money for them, Morstad said.

Mones, said the added positions were a part-time teacher, five classroom aides and two custodians. The custodial positions were added because of the expanded Fayetteville High School and the Professional Learning Center, formerly the old Happy Hollow School.

Morstad expressed concern about the cost of substitutes. The district outsourced substitute staffing to SubTeach USA in June and expects to see some savings from that strategy.

Mones said the district averages 57 substitutes a day. During the first five months of the contract with SubTeach, the district paid $402,153 for wages and a 35 percent service fee, according to records in the business office, he said.

Morstad added it’s too soon to know if the district will realize savings from the outsourcing. Thomas said the cost for substitutes is reflected in the lump sum of all personnel costs in the budget and isn’t a separate line item.

Morstad said the business office isn’t in the loop for hiring new personnel. That’s between the superintendent, principal and human resources, she said. There’s no check to see if money is available.

Personnel is the largest expense for the district. For this year, $79 million is budgeted for salaries and benefits out of the $111.8 million budget.

The revised budget will likely show personnel costs of $80 million in a $113.3 million budget, according to figures Morstad has compiled so far.

The district is in the midst of an early retirement program that will result in savings in personnel costs as more experienced teachers and others take the buyout and are replaced with less experienced personnel. Employees are just now applying to participate so there’s no way to know the extent of savings yet, Morstad said.

New Budget Process

The district is developing a new budget process, called student centered budgeting. Morstad hopes to have the process in place by the start of the 2014-15 school year.

The process requires evaluating spending by asking if programs are making a difference in the education of a child. If not, that program needs to fall by the wayside and the money reallocated, Morstad said.

“The budget process is really important,” Morstad said. “It impacts how you staff, where expenditures occur and allocating money based on priorities.”

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