Janesville School District officials debating fate of $3 million leftover from 2010-11
JANESVILLE Janesville School District officials expect to close the books on the 2010-11 fiscal year in better shape than budgeted, about $3 million better.
That's not to say the district's coffers are not brimming with cash, but this gives the school board another tool—potentially—to address its financial problems this year and next.
The current year's budget needs $2.1 million to come into balance. Board members are debating the best way to solve that problem while casting a wary eye toward 2012-13, which has a projected deficit of $9 million.
Board members on Monday suggested they might be forced to lay off 120 or more workers to balance next year's budget, on the heels of eliminating 100 full-time-equivalent positions this year.
The school board last fall designated $2.2 million from its reserves to moderate the property tax increase. Turns out, that money didn't have to be spent to balance the year-end books, and another $975,000 also went unspent.
District Chief Financial Officer Keith Pennington listed several over-estimates on the spending side and unexpected revenue increases that added up to the positive budget news.
Pennington said he estimated expenses conservatively, and he'd rather err on that side of the equation than to come up short.
All this is according to preliminary estimates. Audited figures won't be available until November.
About $648,000 of the good news came when the city of Janesville unexpectedly closed a tax increment financing district. The board already has applied that amount to its 2011-12 budget deficit, but the remaining money could easily take care of the rest of the $2.1 million deficit.
If only it were that simple.
The money resides in a place often called the Fund 10 balance. Using this fund balance creates a problem for the next year's budget. That's because it's one-time money. It covers expenditures for one year, leaving no money to continue covering the same expense in succeeding years.
The school board already has designated about $4 million from the Fund 10 balance for the 2011-12 budget, and that amount is part of the 2012-13 deficit. The rest of next year's budget deficit, about $5 million, is a projected increase in salary and benefits, Pennington told the school board Monday.
Board member Kevin Murray is interested in using the unspent money to balance this year's budget.
Murray understands that using the Fund 10 balance now just postpones the problem to next year, "but punting down the field sometimes is a good offense," Murray said. "I just want to get this school year off and running."
Murray proposes balancing the budget with a combination of higher taxes and Fund 10 balance, but he is open to hearing about possible budget cuts to close the budget gap.
So far, however, no one has made any specific proposals, Murray noted.
Dave Parr, president of the Janesville Education Association, said he'd prefer higher taxes now, saving the fund balance to soften the blow of possible layoffs in 2012-13.
Parr said options for future school boards will be limited if this board doesn't raise taxes because the district loses some of its taxing ability when it doesn't tax as high as allowed under the tax levy cap.
Board President Bill Sodemann said he's willing to use more fund balance, but he's also interested in softening the blow two years from now. That's when the teachers' contract runs out and the board no longer has to punt. That's because Wisconsin Act 10 will take effect, giving the board the authority to fix its budget problems by imposing changes on employees, such as making them pay more for their benefits.
Sodemann said the district should work to make sure those changes aren't too drastic.
"It won't be pleasant," Sodemann said. "I'm not trying to be threatening or alarmist, but the numbers are what they are."
FUND 10 AND ITS BALANCE
Some basics about the so-called Fund 10 balance, according to district officials:
-- Fund 10 and Fund 27 are the district's operational funds. "The fund balance of Fund 10," as it is properly called, refers to the amount of money available in those funds at any given time. The balance fluctuates through the fiscal year as revenue is received and bills are paid.
-- The balance is not a savings account with a stable amount. It's more like a checking account, with income added and expenses deducted throughout the year. In recent years it has dipped as low as $3 million and reached as high as $28 million.
-- The balance covers unexpected expenses, and it helps the district avoid short-term borrowing to maintain cash flow, something many local governments do. The district hasn't had to do this since 2001.
-- A healthy balance keeps the district's bond rating high, which saves large amounts in interest payments when the district sells bonds to pay for large expenditures.
-- The Fund 10 balance is audited once a year. The audit yields an amount for the last day of the fiscal year, June 30. This year's audit is still going on, but the district estimates a June 30, 2011, fund balance of $28.1 million.
-- Parts of the Fund 10 balance are reserved by board policy. One reserve amounts to a sum of 19 percent to 23 percent of the annual operating budget. (This year's budget will be around $100 million.) Another reserve is in the amount of 20 percent to 25 percent of the district's projected annual health-care claims, for use if the district's self-funded health insurance plan experiences an unanticipated expense.
-- The board can designate parts of the fund balance for a specific purpose. This year, for example, about $4 million was designated to help fill a budget deficit. The board in recent years has used the fund balance to moderate its property tax increases.