Revised budget projections show the Mehlville School District could end the next two fiscal years with significantly greater operating reserves than originally anticipated.
But those higher balances would come as a result of the district next year implementing, at least in part, a contingency plan that calls for such budget adjustments as cuts to busing, a salary freeze and a reduction of administrators and staff.
The Board of Education also is considering an early retirement incentive for eligible certified staff, which it may approve as early as this week.
The board discussed the contingency plan at length during a work session last week. It is scheduled to meet again at 7 p.m. today — Dec. 9 — at the Administration Building, 3120 Lemay Ferry Road.
Board members earlier this year asked district officials to craft a contingency plan after Chief Financial Officer Noel Knobloch predicted Mehlville would deplete its operating reserves by 2013.
The Missouri Department of Elementary and Secondary Education requires school districts maintain an operating fund balance that’s at least 3 percent of total operating fund expenditures, excluding activities, athletics and food service. Districts that don’t are placed on the state’s “distressed” schools list. Mehlville is projected to close fiscal 2011 in June with an operating balance of roughly $12.2 million, or about 14 percent of expenditures.
But subsequent budget shortfalls caused by a combination of stagnant local revenue, state funding cuts and increased operating expenses would drain the district’s cash to a negative operating reserve balance of more than $200,000 — or more than -2 percent of expenses — at the end of fiscal 2013, Knobloch’s original projection indicated.
However, Knobloch told the board last week that, through the contingency plan and other cost savings, Mehlville could keep its operating reserves at roughly $10 million, or from 11 to 12 percent of expenditures, through fiscal 2013.
Among the budget adjustments included in the revised projections:
Hiring and salaries would be frozen in 2011-2012 for a total savings of roughly $1.7 million, and again in 2012-2013 for a total savings of roughly $3.1 million. The salary freeze would include base salaries and step increases for classified and certified staff.
“The reason that 2013 is much higher is that you get the cumulative effect of saving both years in 2013,” Knobloch told the board, noting that even with a salary freeze, the cost of providing employee benefits is expected to increase the next two years.
The district’s contribution to the Public School and Education Employee Retirement Systems of Missouri, for example, is expected to increase next year to 14.5 percent from 14 percent, he said.
Reductions in staff and transportation totaling roughly $1.2 million a year would be implemented beginning next year.
They include the reduction of one Central Office administrator, $175,000; one .5 assistant principal position at each high school, $120,000; one middle school assistant principal position, $100,000; 3.6 middle school STRETCH gifted program teachers, $180,000; Parents as Teachers staff, $54,000 and stipends for 39 department chairs, $142,000.
As proposed, the district also would switch to a four-tier transportation system — meaning fewer buses and 12 fewer bus drivers — and eliminate bus service within 1.5 miles of schools, for a total savings of $470,000.
If the board decided to retain bus service within 1.5 miles of schools, the savings would be reduced to roughly $220,000.
The district could defer infrastructure repairs and replacements for the next two years for a projected cost savings of $380,000 next year and $390,000 in 2012-2013.
Officials have said Mehlville is projected to save roughly $250,000 annually over the next 10 years by refunding certificates of participation issued in 2001.
Unidentified adjustments also are listed, saving $389,000 in 2011-2012 and $554,000 in 2012-2013. Knobloch said those could include miscellaneous, lower-dollar items on the district’s contingency plan, such as textbook and supply budget reductions.
With the proposed adjustments, the district’s originally projected budget deficits of roughly $6.5 million in fiscal 2012 and roughly $7.8 million in fiscal 2013 would decrease to roughly $1.6 million and $838,000, respectively.
The district’s operating balance, as a result, would be roughly $10.5 million — 12.2 percent of expenditures — at the end of 2011-2012 and roughly $9.9 million — 11.5 percent — at the end of 2012-2013.
Board member Micheal Ocello asked how much the district could dip into its operating reserve to avoid making some of the proposed cuts.
“I know the state says 3 percent, and I think given the uncertainty of revenue, going to 3 percent is really dangerous,” he said. “But could we be reasonably comfortable in being able to handle a little bit of a crisis if we’re at 6 percent or 7 percent?”
Knobloch said, “Once the money is gone, you never get it back. So once you get down to 5 percent or 6 percent … you have no certain way of ever getting it back. You can cut, but you’re not adding anything back by cutting, you’re just staying status quo. So when you have no control over your revenue stream, it really is much more critical to keep it, I would say, in the 8 to 10 percent level in the bare minimum. Because 8 to 10 percent, that’s less than two months of operating cash …”
Board members requested more information from the administration regarding the proposed adjustments, such as how many students would be affected at each school by reducing bus service.
Not included in the revised budget projections is a proposed one-time retirement incentive for certified teaching staff.
As proposed by the district’s human resources department, eligible teachers would receive 25 percent of their base salary paid in equal installments over three years.
Retirees would be required to provide five days of “service,” such as substitute teaching, each year for the three years they are paid the incentive.
The incentive, as proposed, would be offered from Jan. 3 through Jan. 31 and would be available to employees under contract for the current school year.
Teachers must have 10 or more years of service with Mehlville and meet one of three criteria to qualify for the incentive:
They are younger than 55 with at least 25 but less than 30 years of PSRS credit.
Their total years of service plus their age equals 80.
They have 30 or more years of service.
Eighty-eight employees currently are eligible for the incentive, Assistant Superintendent-Human Resources Lisa Counts told the board. Counts said her department sent a brief survey about the proposal to those employees, 99 percent of whom responded.
Twenty percent of the employees said they already were considering retiring at the end of the current school year, while 74 percent said they would consider retirement if offered the incentive, Counts said.