School districts look to dip into reserves
Friday, May 23, 2014
The Jefferson City School District will have to dip into its reserve fund in order to sustain the spending cuts to education that Missouri Gov. Jay Nixon announced Tuesday.
Citing concerns about declining state revenues from lottery sales and casino taxes, Nixon withheld an additional $35 million in spending — on top of the $22 million he restricted on April 10 — to the state's public schools and universities.
Jefferson City’s share of that funding is about $240,000, or $90,000 for the April 10 spending cut and $150,000 for Tuesday’s restriction, said JCPS Chief Financial Officer Jason Hoffman.
Earlier this month at the Jefferson City Board of Education’s meeting, Hoffman spoke confidently that the district was in a better position regarding deficit spending. However, Tuesday’s news — that the state was exacting another spending cut — caused that optimism to evaporate.
Fiscal analysts had been raising concerns for the past two years that the General Assembly’s gaming revenue estimates were overly optimistic.
Ron Lankford, deputy commissioner for Finance and Administrative Services at the Department of Elementary and Secondary Education (DESE), said he’s charted declines for four years in the funding stream from gaming to the state’s Classroom Trust Fund and has noted those declines in monthly memos to the school districts.
“I’ve been very concerned all year that the appropriation level for the Classroom Trust Fund could not be achieved,” Lankford said.
Because of that, the department held back on distributing funds to Missouri’s school districts, out of the concern that the department might be forced to recapture those funds from the districts if funds fell short — a difficult prospect. If analysts proved to be wrong, the department could remedy the situation with larger payments in June.
“We were very cautious about where we started distributing money to the school districts,” he said.
Instead, Lankford said DESE made an effort to mitigate state funding shortfalls by disbursing funds in a way that would hold monthly payments roughly equal throughout the fiscal year — rather than allowing the schools districts to experience large declines in June.
However, many of the districts — including Jefferson City — wrote budgets based on what the Legislature approved in May 2013.
This year’s state budget needed nearly $343 million from casino revenues and almost $312 million from lottery proceeds to meet its education appropriations. That would have amounted to a 4.2 percent growth for casino revenues and a 7.9 percent growth in lottery proceeds compared with the previous year.
But the state is now expecting to receive $309 million from casino revenues and $275 million in lottery proceeds, according to projections released Tuesday by Nixon’s budget director, Linda Luebbering. That would equal a 6 percent decline in casino revenues and a 4.9 percent reduction in lottery revenues compared with the previous year.
Hoffman said the state is currently underfunding the public schools in two ways. Students would receive $6,700 annually if state officials agreed to fully fund the foundation formula; however, the state’s adequacy target is currently set at $6,131.
“And we don’t even have enough money to fund the $6,131,” Hoffman said.
He said he’s not only worried about gaming revenues, he’s also concerned that the state’s general revenue collections may underperform.
Hoffman said the spending cuts “make me very nervous.”
Lawmakers ended the session touting the $115 million they added to the K-12 budget for next fiscal year.
“I have really big concerns about (lawmakers) being able to meet next year’s promise,” he said. “And I have no idea how to write a budget for next year.”
Hoffman said it’s conceivable — although not likely — that statewide general revenues will rebound in the months of May and June and meet revenue forecasts.
“We’re 2 percent below the revenues they expected to have for this year,” he said. “Next year, they are saying we’re going to grow by 4.1 percent over what we expected for this year.”
“We have to grow by 6.1 percent over what we actually have this year? That is not realistic even in a robust economy.”
Blair Oaks Superintendent Jim Jones said Wednesday afternoon he had not yet heard from DESE how the spending cut would affect the Blair Oaks School District.
“I’ve yet to see how the cuts will trickle down to the district level in exact numbers,” he said.
But with two days left in the school year, nearly all of the expenditures have been incurred, so any funding cuts will almost certainly dig into the school’s fund balances.
The district tries to maintain an unrestricted fund balance between 12 to 20 percent.
“When your school district is primarily locally funded, you need those balances to maintain cash-flow,” he said.
The district ended the last fiscal year with a balance of about 19 percent; this year, the district is likely to have 20 percent on hand — well within a safe zone for unexpected revenue losses or unanticipated expenses.
But he doesn’t like to see the state withhold funds from the public schools.
“Because we’ve got to look forward from here,” Jones said, “we’ve got to start talking about what these projected revenue reductions are going to mean for fiscal year 2015.”
The Associated Press contributed to this report.
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