Financial Update I want to begin the District’s update by addressing some concerns that have come to my attention about the District’s financial status. As everyone well knows, the State is in a financial crisis. I also want to acknowledge the fact that school districts are not being affected by the proposed cuts as negatively as the cities, counties and health and human services. While the Governor has tried to spare Education as much as possible, there are a few areas that will be affected by his proposals. As the details about the proposed cuts are being examined, we are finding that programs outside of the school day, like community education, adult basic education and the early childhood family education programs will be greatly affected by the cuts. In addition, funding for special education will remain flat as costs increase for the District. Other cuts will be phased in over the next four years which include; compensatory funds, sparsity funds, transportation sparsity funds, training and experience funds, and equity funds. To compound the proposed budget woes, the District has, over the past four years, spent down its undesignated/unreserved fund balance. The undesignated/unreserved fund balance is like a savings account and auditors recommend that districts keep about 8-12% of its annual expenditures in reserve for one-time expenses. As the District begins its budget cycle, a budget advisory committee has been formed to make recommendations to the Board of Trustees. The advisory committee is made up of the following individuals; Mrs. Alice Robinson – Community Rep-resentative, Mr. John Gohmann – Parent and Business Rep-resentative, Mr. Gerald Gillman – Board Representative, Mrs. Dorothy Kersten – Board Representaive, Mr. Howard Bahn – Teacher Representative, Ms. Mary Bernardy – Teacher Rep-resentative, Mr. Jon Clark – Elementary Principal, Ms. Karen Imholte – High School Principal, Ms. Joan Schmidt – Business Manager and myself. As administration brings forward recommendations for elimination of programs and/or staff for reductions, the budget committee will offer the perspective of their representative groups. The District is anticipating reductions to compensate for declining enrollment and deficit spending for the past four years. The committee will help in the decision making process to cut approximately $367,000 in recurring expenditures and approximately $150,000 in non-recurring expenditures to build up the undesignated unreserved fund balance. Budget Overview I want to give a brief overview of the District’s funds and how they are monitored. The school funding formula is set by the state and is very intense and complicated. I am going to attempt to simplify the ways in which the funds have to be held by the District. Just as everyone that has a checking account knows, you have a monthly or semi-monthly deposit into your account and you have to set aside an amount to make your car payment, house payment, electricity bill, etc. You also have to set aside some for your savings account. The same is true for the District. The District receives monies throughout the year, some from the state and some from the local taxpayers. Each time the District receives a disbursement from the county or the state, the funds are earmarked for specific areas. The funds are broken down into the following categories: Fund 01 (General Fund) Fund 01 includes funds that were formerly separate like fund 03 (transportation) and fund 05 (operating capital). The general funds are used to pay transportation costs, repair buildings, purchase textbooks, pay employee salaries and purchase instructional supplies. The general fund accounts for the majority of the District’s expenditures. Currently, the District has a dedicated reserve balance of approximately $180,000 for bus purchases, $57,000 for re-employment insurance, $23,000 for severance pay, $35,000 for severance pay-insurance premiums, $60,000 for disabled accessibility and a deficit of approximately $340,000 for health and safety in this fund. (The health and safety funds are reimbursed to the District through levies and state aid after they are incurred.) Fund 02 (Food Service Fund) Fund 02 is dedicated to pay for food services. The District contracts food services out to TAHER. The District has been using TAHER for over twenty years. Currently, the food service fund has a reserve of approximately $80,000. Funds in this account can only be used for food services and not any other fund. Fund 04 (Community Services) Fund 04 is made up of many components. It includes; community education, adult basic education, after school enrichment programs, the latchkey program, early childhood family education programs, youth development programs, preschool screenings and a portion of summer recreation programs. Currently, Community Services does not have a reserve fund balance. Fund 06 (Construction) Fund 06 is dedicated for construction or building funds. This fund holds the construction bonds for the District. As bills are paid for construction, the funds are taken from this account. The public has inquired about the possibility of missing monies in the construction fund. I want to assure everyone that there are no monies missing from the construction fund. State mandates and coding concerns about indoor air quality, fire suppression and asbestos abatement arose during the renovation of the high school. Those issues were not included in the building plans and required additional funding. In the state of Minnesota, when health and safety concerns are to be addressed the districts are required to pay for the concerns before they are reimbursed by the State. The District incurred approximately $966,000 worth of health and safety improvements during the construction phase and approximately $620,000 of the improvements were funded through the building funds (fund 06). The District levied for $500,000 in December of 2001 and will receive approximately $120,000 in aid from the State for those improvements. The District levied for approximately $300,000 of the remaining costs of the mandates in December 2002 which will be paid to the District in the fiscal year 2004. To summarize, the District used funds from the construction fund to pay mandated improvements to the building and by the end of this fiscal year 2003, the fund will be reimbursed the $620,000 it borrowed from the fund. Fund 07 (Debt Service) Fund 07 is used to pay off the bonds that were issued to build the elementary school and to renovate the high school. The state provides aid to the District and the remaining balance comes from the local taxpayers. Within this fund, the state requires a five percent excess in the account. Over time the excess builds up and then the state makes an adjustment. In the fiscal year 2003, this year, the state made an adjustment of $707,000. That meant that the levy on taxpayers did not include this excess. In the District’s Audit Report from Kern, DeWenter and Viere, it was realized that the state’s adjustment was significantly more than was necessary. An appeal was filed by the District and the state will adjust the Debt Service Fund and give the District back approximately $229,000. Cash Flow Cash flow is the amount of money that a District receives throughout the year. Monies are received from the Counties and the state. It is important to understand the state’s funding formula because it impacts the District’s cash flow. This year, the state changed the way it disbursed monies to the school districts. In the past, school districts received 90 percent of the state allocation in the current year and 10 percent in the following year. The state changed that this year to 83 percent for the current year and 17 percent for the following year. The District received 7 percent less of the allocation this year which drastically impacted its cash flow. In addition, the state over estimated the excess in the Debt Service fund which left the fund short by approximately $230,000. All of these factors led to a cash flow shortage and as you will see in the School Board Minutes dated Feb. 20, 2003, the D
istrict approved the issuance of an Aid Anticipation Certificate. The certificate enables the District to meet obligations while the reimbursement to the Debt Service and the seven percent for the General Fund are made up. The aforementioned funds and information hopefully will provide an overview of the District’s financial status. If anyone has additional questions, please do not hesitate to contact me at 398-5585 extension 330. Congratulations I want to congratulate five Kimball Area High School wrestlers in their advancement to the State Wrestling Tournament. Gary Salmela, Blaine Lemke, Jeremy Dahnke, Tom Libbesmeier and Kyle Winter all advanced to the State Tournament. Blaine was sixth in the State in the 135 pound category, Kyle was second in the State in the 215 pound category and Tom is the State Champion in the 171 pound category. Tom is the first Kimball Area High School wrestler to be a state champion. It was a great tournament and all of our wrestlers represented Kimball very well. Congratulations wrestlers and coaches! I also want to congratulate the Girls Basketball team as they advance through the sectional playoffs. By the time this article is printed, I am hoping that our girls have defeated Hancock and will be poised to play in the sectional finals on Friday in Minnewaska. Good luck girls and continued success! In addition, the Boys’ Basketball team will begin their run in the sectional playoffs this week. I want to wish them good luck and know they will do well in the playoffs!
