The Little Rock School District is submitting to the state a 2016-17 budget of $344.6 million in revenue and $355.9 million in expenses -- including $34 million, mostly for a new middle school but also for other capital improvements.
"This budget proposal adequately funds the educational priorities of the LRSD," Superintendent Mike Poore said in an introductory budget letter to Arkansas Education Commissioner Johnny Key, whose role includes serving in the place of an elected school board for the state-controlled Little Rock system.
"This budget financially reinforces the strategies that will enable our District to continue making gains in student academic achievement while staying financially solvent," Poore also said in the letter.
The 25,000-student district will draw from its balances, or carry-over reserves, to help offset the capital improvement expenses, Kelsey Bailey, the district's chief financial officer, said Tuesday.
The district is having to rely on its reserves even though it eliminated the equivalent of 249 full-time employee positions since last school year, the savings from which are incorporated into the budget.
At the beginning of the school year, the district had a total fund balance of $44 million. That amount is expected to drop to $32.8 million by the end of the current school year, according to the budget documents.
Bailey said the draw on the district's reserves for planned construction costs should not be considered by the Arkansas Department of Education to be an early indicator of a district that is verging on fiscal distress.
"I don't think it will be identified as fiscal distress because it is planned upfront," he said. "You save up for building projects. It creates a fund balance so you eventually have to transfer it out of your operating fund to a building fund. This is a legitimate transfer to a building fund. It is planned. It is not a surprise."
The state Education Department monitors school districts that repeatedly draw on reserves to meet expenses. Declining reserves in each of three successive years puts a district in jeopardy of being state-labeled as fiscally distressed and subject to state approval of each district expenditure while also carrying out a financial improvement plan.
Fiscally distressed districts that fail to show sufficient progress in correcting their financial issues can be taken over by the state.
The Little Rock district is not labeled as fiscally distressed, but it has been operating under state control since January 2015 for academic distress. That was brought on when six of the district's 48 schools were labeled as academically distressed for low student achievement on state tests over three years. Since then one school -- Baseline Elementary Academy -- has been cleared of the label.
The 2016-17 budget for the state's largest district comes in advance of Poore's plan to release in October a list of possible budget cuts for the next school year, 2017-18.
Poore has said he will present to the state Board of Education and the district's Community Advisory Board on Oct. 13 a list of possible cuts totaling $15 million or more that can be whittled down to about $10 million in actual cuts. The anticipated reductions in expenses will be necessary because the district will no longer receive $37.3 million a year in state desegregation aid after the 2017-18 school year.
That special desegregation aid will cease as the result of a 2014 settlement agreement among the Pulaski County school districts, the state and the group of black students known as the Joshua intervenors in a 33-year-old federal school desegregation lawsuit.
The district's budget includes revenue of $154.5 million from local sources and $134.9 million from the state, including $67.7 million in state foundation aid and $17 million in extra aid based on the percentage of students eligible for subsidized school meals because of low family income.
Total state aid to the district is about $5 million less than the district received in 2015-16 because some early childhood education funds are re-classified as federal funding, Bailey said.
Federal grants to the district are anticipated to be $32.3 million, up from the $24 million the district received last school year.
In regard to expenses, the district is anticipating $314.3 million in total operating expenses, including $156.8 million for salaries. That salary figure is down from $164.3 million spent last year and the $167.3 million budgeted for last year. A total of $46.2 million is budgeted this year for employee benefits.
The budget this year includes no across-the-board raises for employees, but it does include "step" increases -- an average of 3 percent -- for eligible employees for their additional years of experience. The district's longest-serving employees, who have reached the top of their salary schedules, are ineligible for the step increases.
In addition to reflecting the reduction of some 249 positions -- including central office administrators, school security officers and unfilled vacancies -- the budget includes a reduction in the district's contribution to employee monthly health insurance costs, Bailey said. The $300 monthly contribution will go to $275 this year, he said.
Bailey said Tuesday that he hopes that the draw on reserves during the year won't be as great as currently projected -- more than $11 million.
"But we knew it was going to shrink because we knew we were going to have to put it into the schools," he said about the reserves. "We didn't build it up just to keep it up there. Last year we spent a big portion -- $11.7 million -- on the purchase of the Leisure Arts building, but we were still able to increase the fund balance by $6.5 million."
The former Leisure Arts office building and warehouse on Ranch Drive were purchased to become the new Pinnacle View Middle School. Sixth-graders are housed this year in what was the office building. The warehouse is being converted into a two-story school for grades six through eight. The district is transferring $34 million to its capital expenditures to accomplish the construction.
"We'll continue to take a fine look at every aspect of our budget," Bailey said, "not only to reduce costs of things but looking for ways to grow student enrollment, as well."
A Section on 09/28/2016