The North Little Rock School Board on Monday approved a 2016-17 budget that is smaller than last year's budget and comes with the warning that millions of dollars in budget cuts will be necessary in coming years to offset the forthcoming loss of state desegregation aid.
The board unanimously adopted the 2016-17 budget at a meeting in which it also authorized the district's financial adviser -- First Security Beardsley -- to begin the process of refinancing nearly $22.7 million in bonds. The refinancing -- which must be approved by the state Board of Education -- is projected to generate as much as $2.4 million in interest-payment savings, which district leaders would like to apply to roof repairs at as many as three campuses.
The district is projected to receive $106.5 million in revenue this year, almost $1.3 million less than revenue last year. Projected expenses are $102.3 million, compared with $103.5 million last year. The budget preserves the district's $12.8 million in carry-forward balances. Those balances or reserves are necessary to carry the district through times of the year when there is relatively little income. District leaders anticipate transferring another $4.23 million from operating fund balances to the district's construction fund.
This year's budget -- which must be submitted to the Arkansas Department of Education by the end of the month -- includes revenue of $37 million in state foundation aid, which is the unrestricted state money that districts use for salaries, utilities and other operating expenses. Other revenue for the year includes local tax funds in excess of $34 million.
Superintendent Kelly Rodgers said Monday and at a School Board budget work session Saturday morning that the district must plan for ways to offset the anticipated loss of $7.6 million a year in state desegregation aid. That special funding will cease after the 2017-18 school year as the result of a 2014 settlement agreement among the Pulaski County school districts and the state in a long-running federal school desegregation lawsuit.
"We have a lot of work to do between now and next year," Rodgers said in an interview. "We are going to get there but there are going to be some tough decisions."
The end of the desegregation money comes on top of the North Little Rock district cutting $8.3 million in operating costs a few years ago to help finance a $265.5 million capital improvement program. The district reduced its number of campuses to 13, 12 of which were built anew or extensively remodeled. Almost all of that work has been completed with the exception of extensive renovation of the North Little Rock Middle School. The district has a debt service payment of more than $12 million a year as a result of the building program.
"Two years ago we put a savings plan together and we knew we were going to have to revisit that plan every year," Rodgers told the board at the work session. "The first year we saw some small reductions in our budget. It worked. The second year, which was last year, the plan ... moved backwards. There were a lot of construction-related costs," he said and cited higher-than-expected electricity costs as well as higher-than-expected student transportation costs for shuttles between campuses.
Still other expenses have been additional security officers for the high school campus, employee overtime pay, and the the hiring of temporary custodians.
"There have been some growing pains," he said.
The district's electrical costs have increased from $1.04 million a year in 2013 to $1.26 million in the 2015-16 school year. The cost is projected to be almost $2.15 million this school year.
Rodgers said there are problems with the electrical utility control systems in the new and renovated schools that go beyond just turning off the lights that will require conferring with architects to find fixes. At the urging of School Board members, Rodgers said he also plans to meet with city leaders to negotiate billing reductions.
Balancing the district's 2017-18 budget could be even more difficult if the district's percentage of students eligible this year for free- and reduced-price school meals drops below 70 percent. The state provides extra funding to school districts based on the percentages of students who were eligible for subsidized meals in the prior school year. That eligibility is based on family income.
The district, which is currently funded for a 70.4 percent eligibility rate and scheduled to receive more than $6 million, will be entitled to only $3 million next school year if the percentage of eligible students drops below 70 percent this year, Chief Financial Officer Denise Drennan told the board at the budget work session.
Board members and district leaders are in the early stages of identifying expenses to cut for next year. Possibilities suggested at the work session included reducing the teacher and administrative work year, hiring private companies for custodial and transportation services, increasing student-to-teacher ratios to the maximums set by state standards, reducing transportation employee numbers, relocating the district's alternative education center and paying off some outstanding bonds to produce interest savings.
The district has an enrollment of about 8,500.
Metro on 09/27/2016