September 18, 2014 Board Meeting

As always, these are my opinions only and not the opinions of the Pendleton County School Board or any other individual board members.

 

This meeting included the annual report from outside financial auditor, Ms. Denise Keene.  That report was followed by our district Finance Director’s (Ms. Jan Johnston) presentation of our Fiscal Year (FY15) 2015 “working” budget.  The school district’s fiscal year starts in July and ends June of the next calendar year.  While these reports are prepared by different groups and presented separately, they obviously need to be viewed together.  This is because the audit shows “where we were” last year financially, and the working budget shows “where we think we’ll be” financially this school year.  While I voted “yes” to accept both reports, this vote comes with additional concerns that you need to be aware of.  The outside audit was a 71 page document.  The working budget was a 41 page document called the “MUNIS” report that is a standardized budget spreadsheet that most or all Kentucky public school systems use.  The administration, in concert with our Board chair, currently posts the meeting agenda about 48 hours prior to the School Board meeting (whether you agree with this lead time is another issue!).  I would argue that reading both documents, being briefed by their authors, and drawing conclusions from them requires a little more time.  I become smarter on our district budget priorities every month that I serve as your Board member.  While I voted to accept this working budget, I disagree with some of its spending priorities.  Any opportunity for changes in compensation or workforce size occurs before contracts are signed with our district employees, and not in September.  After just a few days with these documents here are a couple of things I noted:

 

(1)    One item on the auditor’s report is called the “Ending Net Position”, which is a snapshot of the district’s fund balances on the last day of the fiscal year.  One of Ms. Keene’s reports calculates this position without consideration for property (school buildings, land, vehicles, etc.) and debt (bonds payable).  The net position rises and falls daily as bills are paid and revenue comes in, but if taken at the same point year over year it is one indicator of our district’s financial health trend over the long term.  Our net position at the end of the 2010 school year was $8.751 million.  Over the last year (or portion) of Superintendent Yost’s service in FY11 it fell dramatically (by $2.689 million).  This drop was reversed in the first year of Mr. Strong’s tenure, and our position increased $.030 million (or $30,000).  The downward slide continued the following year (fiscal ’13), as it fell by another $.645 million. Ms. Keene’s report this year showed that our “Ending Net Position” fell again, by another $1.511 million.  This left a value of $3.936 million at the end of June 2014.  You don’t need a degree in accounting to realize that this is not sustainable.  Federal funding cuts (sequestration), and flat local revenue (property values and no significant school tax increase) are not helping matters.  These two sources of revenue, however, would only fix about 1/3 of our dilemma.  The Board and administration have to address the spending side of the equation in order to operate within the funding that our county, state, and nation can provide.  The good news is that one of our long term bond debts was refinanced.  After this transaction was complete (and the “normal” annual bond payments made), our long term debt on bonds fell by $2.073 million (to $29.634 million).

 

Pendleton County School District “Ending Net Position”

 

June 30th of Fiscal Year	Change in Ending Net Position	Ending Net Position
2010		8.751 million
2011	↓ 2.689 million	6.062 million
2012	↑.030 million	6.092 million
2013	↓.645 million	5.447 million
2014	↓1.511 million	3.936 million

 

 

(2)    Administrative costs have risen faster than other district spending.  The current administration has addressed spending concerns in many areas of our district budget over the last 36 months.  Instruction, debt servicing, student transportation, building maintenance, and food service costs have been held to modest rises (or even reductions).  The largest of these expenses is instruction.  Three years ago teacher payroll ($7.01 million) was just over 39% of our general fund income.  For the school year we just started, the budgeted commitment is to be about the same portion of our spending ($7.42 million or 40%).  This 3 year trend is not the case for school administration and support.  The MUNIS accounting software names these employee groups: student support, staff support, district admin, school admin, and business support. Three years ago these 5 groups total payroll was $1,838,000.  This was just over 10% of our district’s general fund budget.  By June 2015 this annual total is projected to be $2,841,000.  This comprises 15% of our general fund for this school year (fiscal 2015).  That 5% shift in priorities means a million more dollars per year (compared to 2011)!  This salary total doesn’t include benefits, and the benefits are quite robust in one of these groups.  Whether or not that extra admin and support spending is the best “bang for your buck” in producing better prepared graduates will be in my thoughts as the working budget becomes the final spending report over the next 9 months.