Weather Forecast


ISD 363 faces some difficult decisions

If you have had watched the news, listened to the radio, or read a newspaper in the last month, you likely have been inundated with talk regarding Minnesota's budget issues and the significant challenges the legislature faces in trying to balance the budget in the upcoming legislative session.

The purpose of this article is to inform the public about school district finances as the Board of Education faces some difficult decisions. The following information was presented to all district employees Jan. 5.

School district accounting is broken into six separate funds: The general fund, food service, community service, the building fund, debt service and trust and agency. The general fund is by far the largest fund as it pays for pretty much everything in the district related to payroll, supplies, utilities and transportation.

The food service fund is pretty self explanatory, but it should be noted that the revenue from the food service fund does not cover the expenses so there is a transfer from the general fund each year to bridge the gap.

Community service includes community education and funds for early childhood education. The building fund is where the proceeds from the one day bond are held and pays for large expenses related to building and facilities needs including technology. The debt service fund is a reserved fund that is used strictly for paying for long-term district building debt. Finally, trust and agency is basically the scholarship fund.

Healthy fund balance

The school district expenditure budget is about $6.8 million dollars per year. The district is fortunate to have a pretty good fund balance. At the end of fiscal year 2009, the balance in the general fund was about $5.4 million.

The end of fiscal year 2010, the balance was $5.1 million and based on the budget for the current fiscal year 2011, it will be about $4.8 million. Please keep in mind that there are dedicated funds included within these balances that must be utilized for specific purposes.

While the fund balance is still quite healthy, you can see the recent trend has been a reduction in the fund balance.

If the expenditures have remained fairly steady at about $6.8 million, why is the fund balance going down. The answer to that is mostly changes in local revenue.

Local revenue sources

The district receives money from logging stumpage and there has been a reduction in that revenue of about $113,000 annually since fiscal year 2008.

The district receives interest on funds on hand and that revenue has decreased from $252,000 in FY08 to $74,000 in FY10 with another expected reduction to about $36,000 in the current year.

The reduction is due primarily to historically low interest rates. Another factor as we look forward is the ending of the one day bond process next year. By the end of FY12, the building fund will have about $770,000 in it, but after that, there will be no new revenue for that fund.

State budget concerns and budget shifts

Complicating matters further is the current state of affairs in regards to the budget for the state of Minnesota. The biennial FY10-11 State general fund budget is about $30.3 billion and E-12 education makes up about 37 percent of that amount.

As the state heads into the next biennium, there is a $6.2 billion deficit that needs to be overcome. Unlike the federal government, the states are required to operate under a balanced budget. Over that last biennium, the state used a variety of accounting "tricks" to balance the budget.

The most significant for school districts has been funding shifts. In a normal year schools receive 90 percent of their funding during the current fiscal year and 10 percent the following year.

Last year the state shifted that amount to 73 percent and 27 percent respectively. The current year has a shift of 70 percent and 30 percent. Also in the current year, the state has imposed a state aid payment delay until May 30. This results in a delayed payment of about $2.3 million.

Categorical aid

In addition to the basic funding school districts receive, there is also categorical aid. Included under categorical aid are compensatory aid, alternative attendance adjustment and sparsity aid.

The categorical aids are not received by all schools, but are a significant source of revenue for South Koochiching/Rainy River ISD 363 and there is concern the legislature may be looking at these aids.

There is a great deal of uncertainty as the current legislature begins the process of creating a budget for next year. The November elections saw a complete flip in the makeup of the legislature as the Republicans captured both the House and Senate, while there is now a Democrat in the governor's chair.

Nobody really has any idea what things are going to look like at the end of May when the legislature is supposed to be done, but one thing that is certain, is there will not be any new money for schools.

Ways to reduce expenditures examined

Given the fact that the district fund balances have been shrinking, the board of education and administration will be looking for ways to reduce expenditures since the prospect of increasing revenues seems unlikely.

Areas that need to be examined include staffing reductions, supply expenditures, extracurricular activities, academic clubs and transportation amongst others.

It is going to be interesting to see what happens as the future unfolds, but regardless, it is the goal of the school board, administration and staff to provide the best possible educational opportunities for students.