Administration, Board currently scrutinizing how to reach 2018-19 budget goal
By Brett Nachtigall / Publisher
HOT SPRINGS – Just prior to leaving for Christmas break last month, faculty and staff of the Hot Springs School District were given more details in their school’s financial situation – and it wasn’t good news.
In a series of separate meetings with elementary, middle school and high school personnel on Dec. 12-14, Superintendent Kevin Coles and Business Manager Deb Ollerich presented a target number of $422,670 which will need to be eliminated from the 2018-19 General Fund Budget, citing the key factors in that decision due to declining revenue and declining enrollments.
In addition to those two key factors, Supt. Coles also acknowledged in an interview with the Fall River County Herald this past weekend, that the current financial situation is also an accumulation of many other factors which occurred over the past several years as well, including the addition of a number of new programs and associated staff members to run those programs.
In a separate interview with Ollerich on Monday, Jan. 8, following this week’s regular school board meeting, she said for at least past two years, the school had needed to pull approximately $350,000 from their Impact Aid Reserve Fund to balance its expense budget. Those backup reserve funds are now depleted, she said.
Ollerich, who is currently in her first year as the school’s business manager, added that the target number of $422,670 was identified by taking into account the estimated $350,000 that would be needed again, along with the anticipated revenue shortfalls due to lower enrollment numbers this year, and projected enrollment decreases in the years to come.
But, just as Coles addressed with his staff in the meetings last month, the school’s focus moving forward is not to point blame on what occurred in the past, but instead to learn from those past actions and address the budget accordingly and move forward.
Coles, who is in his third year as Superintendent of the Hot Springs School District, said the dire situation of the school’s finances were brought front and center to the administration and school board during his first year at the school during the audit process.
At that time in 2016, Deidre Budahl, a CPA for the Rapid City-based Casey Peterson & Associates, conducted her annual audit of the school’s financials and said that while Hot Springs could continue as-is in the short-term, the district was on a financially precarious path and would likely need to make drastic changes in the near future, especially if enrollment numbers should decline.
Budahl was back, in February of 2017, with similar news after an audit of the 2016 financials, and cited specific areas in her report, which stated, “Several funds of the district are reporting negative fund balances ... The District should be monitoring the budget and adjusting spending where appropriate if revenues are not being received as anticipated. In addition, the District should consider reducing expenditures in order to recover the deficit in some funds.”
When asked during that February 2017 meeting what the future impact would be if enrollment would decrease in the district, Budahl responded, “You’re in big trouble.”
The Hot Springs School District had been on stable ground in terms of enrollment from the 2012-13 school year through the 2016-17 school year, where every year they were over 800 students when totaling the elementary, middle school and high school – peaking with 811 in 2015-16. This year, for the 2017-18 school year, enrollment dropped down to 786 students (a decrease of 18 from the previous year).
When projecting out enrollment numbers for the next few years – using unscientific data, but simply taking into account the number of outgoing seniors compared to the anticipated average number of incoming kindergartners – the Hot Springs School District will likely continue to decline in enrollment, meaning less revenue coming into the district from the state.
For this year’s 2017-18 school year, Coles said the District was able to reduce its general fund budget by about $269,000 through attrition/resignations by not filling a number of positions.
Despite those reductions this year, the District is now needing to make “more painful” cuts to their 2018-19 general fund budget, totaling $422,670, he said.
Ollerich said the targeted expense reductions represent an approximate 7.5 percent cut in district general fund costs. She shared that without the cuts, the district has a General Fund Expense Budget of approximately $5.6 million. With the cuts, the budget would total about $5.2 million in expenses, which is more in line with the projected revenues for 2017-18.
Coles said in many ways, the process they are going through now is no different than they do every year, as they analyze revenue and expenses while setting the budget for the coming year. This year however is also very different in many ways due to the very high target number, which will require the administration and school board to be much more critical and prudent in their decision-making. He added that many other similar-sized area schools are experiencing declining numbers and will be forced to make similar decisions as well.
He pointed out that personnel makes up about 80-85 percent of the school’s general budget, and in order have the needed budget impact, personnel will likely be the hardest hit when the reductions are announced later this year. Because of how schools are allowed to utilize their different budget accounts, any reductions to the school’s Capital Outlay Budget, for example, would have not effect on the needed cuts to the General Fund.
When asked about how the recent increase in teacher pay, made possible by the state’s half-cent sales tax increase, impacted the school’s financial decision, Coles replied, “Teacher pay increase is always a good thing. But where the state fell short with this, is that you have to be able to sustain it.”
Coles cited how some schools are now having the burden the weight of those pay increases without the help of the state, due to not meeting certain criteria associated with those original pay increases.
Coles said that he made it known to the staff in the meetings last month that if anyone is planning to retire and/or apply for a job outside of the district, it would be best to inform the administration and board of those things as soon as possible, as it would help in their decision-making now. Coles met on Thursday, Jan. 4, with each of the three building principals to discuss some potential reductions, and would be meeting with the school board in executive session on Monday, Jan. 8, to discuss those ideas in more detail.
He said the administration and board has asked all staff for their ideas and input on how to address the reductions. While nothing has been formally announced, he does recognize that there is a lot of speculation as to how the reductions will be made and that they hope to announce them by next month, so that those affected by the changes will have time to make changes in their personal life prior to the start of next year.
Several members of the district’s faculty were present at the regular board meeting held this past Monday night, Jan. 8. While the meeting itself lasted only an hour, an extended executive session to discuss the personnel to be effected by the budget reductions was held following the meeting and lasted well into the night.