Lindbergh Schools will be very close to borrowing money next fall to meet operational expenses, including payroll, Chief Financial Officer Pat Lanane told the Board of Education last week.
The Board of Education voted unanimously Dec. 14 to adopt a revised budget for the current school year that projects an operational fund balance of $13,443,550 on June 30, 2011.
Though Lindbergh voters last month approved Proposition L, a 65-cent tax-rate increase, the district will not begin to collect revenue generated by Prop L until late 2011 and early 2012.
Of the $13.4 million projected operating balance, Lanane told the board, “It’s going to push us very, very close to the borrowing point. As we said in the election: We are there. It’s that close and I can’t tell you today whether I’m 100 percent sure whether we will or we won’t. It is that close. And so we have some options within our funds to be able to try to weather through this without (borrowing). But I cannot sit here and promise that we won’t be a hundred thousand short or whatever for one month. So we’ll be looking at what we need to do. We’ll have a ‘Plan B’ in place.
“Right now, I don’t think we will have to (borrow). But it is going to be so close that nobody who has any knowledge of this would try to predict it within such a narrow range. So we really weren’t kidding when we were — that was one of the arguments and one of the facts that was brought out in the (Prop L) campaign. That’s certainly a reality.”
The revised 2010-2011 operating budget projects revenues of $53,219,013 with anticipated expenditures of $57,254,963 — a deficit of $4,035,950.
The original operating budget, adopted in June, projected revenues of $53,892,275 with anticipated expenditures of $57,828,411 — a deficit of $3,936,136.
The nearly $4 million deficit was reached after the board voted to give final approval to more than $4.7 million in reductions. The board’s action eliminated 60 positions, including 45 teaching positions.
Cognizant of the financial difficulty residents and businesses are experiencing as a result of the recession, Lindbergh officials pledged in late 2008 not to seek a tax-rate increase for at least 24 months.
The district’s long-range financial plan called for a spend down of its reserves with a deficit-spending cap of $3 million per year. In June 2009, the school board adopted a 2009-2010 operating budget that projected a deficit of $3 million. That $3 million deficit was reached by making more than $2 million in reductions.
But a further decline in the assessed value of commercial real estate — including successful appeals by commercial property owners to the county Board of Equalization — coupled with cuts in state funding left Lindbergh with a projected budget deficit for the 2009-2010 school year of roughly $6 million, though that amount later decreased to about $4.8 million.
The decline in Lindbergh’s assessed valuation since the 2007-2008 school year has resulted in a cumulative loss of $14 million in tax revenue to the district.
“… We came up with a three-year plan, a $3 million spend down (per year) and a two-year moratorium of going to the taxpayers,” Superintendent Jim Simpson told the Call, noting the plan called for the district to use its balances to weather the financial storm. “… In that three-year, marching-order plan, which we marched and hit every single milestone — I mean in other words, we walked the walk in Lindbergh fashion. It wasn’t a plan that we came up with and then forgot about and did something different …”
Part of the plan included “painful” cuts, he said, citing the $6.7 million that was cut over the last two years.
“We weren’t going to get to where we are today with the staff that we had in ’07. We couldn’t afford to have as many people as we had in ’07,” Simpson said, citing the elimination of the 60 positions. “(We) cut everything that could possibly be cut — 191 cuts went into play. So we had a $3 million a year spend down of our reserves, which took many years to build. So there’s discipline there. Our rainy day fund saved us and was there when it rained heavily — poured.”
Of the three-year plan, he said, “It ended as it was always slated to end with going to our community and having a discussion about the future of Lindbergh and that resulted in Prop L.
“So we are just where we thought we would be. We knew at the end of that plan that we would be close to (borrowing). Even with the passage of Prop L, we had one year before any of that money came and we knew that would be the year we would be in limbo about are going to borrow a little bit? When we talk about borrowing, we don’t have to borrow a great deal. I mean we’re on the edge. So is it borrowing a few hundred thousand or is it not?
“So we’re right where we thought we were going to be and it’s a scary place. We don’t like to borrow. I’ve never borrowed in my whole career to make payroll. It’s always a red flag that you are financially not where you need to be,” Simpson said. “Now many districts do that because they don’t want to be there, but you’re there and when you’re there you do what you have to do. But I sleep a lot better at night knowing that we have the balances to carry payroll without ever going to a bank. I don’t know what it feels like to go to a bank and ask for money as a school person …
“Lindbergh has everything in place to get out of the maybe-we’re-going-to-borrow situation as soon as Prop L comes on board, which is a year from now. A year from now, this will be a moot conversation,” he said.
If Lindbergh has to borrow money, that will occur in the last three months of 2011, the superintendent said, noting the biggest unknown with regard to borrowing “is what is our tax base going to do this time? Is it at the bottom and stays level, which is actually a good thing or do we have another dip?
“Now if we have another dip, that’s going to enhance the possibility of borrowing. If we’re down another 1, 2, 3 percent in our tax base, that means we’re going to be down revenue that we expected because we budgeted for a flat tax base. We’ve had three years of a declining tax base …
“If you’d told us five years ago that you’re going to have three consecutive years of a declining tax base, we would have thought you would have lost your mind. That’s never happened before, but I guess it could happen … Now are we going to have four (years)? That’s a key question.”
The importance of the passage of Prop L cannot be over-emphasized, he said.
“If Prop L had not passed, you and I would be talking right now about 80 teachers not being here next year — 80. Our class sizes would have gone from the mid-20s to the mid-30s,” Simpson said. “Our parents would have been bitterly unhappy, as they should be. Our students would have been significantly impacted and Lindbergh as the top-performing school district in the state of Missouri, our ship would have been in peril. Sometimes I stop and think: If you’re so fortunate and have everything in place and it is many, many factors but all of them hitting home runs to be the top because that’s the only way you get to be that — it would be almost unbelievable to wound and destroy that. It would be unbelievable.
“It would be so bad for our community, so bad for the home values in this community. There’d be morale problems, there’d be parents so upset they’d say: Well, I’m not going to stay in Lindbergh anymore. Lindbergh, as we like to say, would not be Lindbergh any longer.
“So Prop L was a knight on a white horse that saved us from that apocalyptic vision right there because we would certainly would be talking about that right now,” he said.
Simpson also emphasized that Prop L is not a “windfall” for the district.
“It’s basically a life preserver. It keeps us afloat until this recession plays out. But we’re very thankful for that rather than the alternative … I would say that I have to pinch myself a little bit and say: I can’t thank Lindbergh people enough,” he said. “We’re one of the few districts in the state that didn’t get their hat handed to them. Just about everybody that went out for a tax increase in this climate got their hat handed to them …”
