Duluth schools’ backup fund dwindlesThe Duluth school district’s $14.7 million fund balance was spent down by about half last school year.
By: Jana Hollingsworth, Associated Press
The Duluth school district’s $14.7 million fund balance was spent down by about half last school year.
The unofficial audit of the district for its last fiscal year, which ended June 30, was presented to the School Board Monday by auditor Eikill and Schilling of Duluth. The fund balance, which acts as a financial buffer for the district, now sits at about $6.8 million.
By board policy the reserve should be almost $9 million.
“It’s distressing,” said board clerk Tim Grover, because it means borrowing more and paying more in interest. “It has served the district so well for cash flow purposes … it’s really important that we re-establish that fund.”
The fund balance decreased for three reasons:
“If we had sold the properties per the original schedule, we wouldn’t be having this conversation,” said Bill Hanson, business service director for the district.
About $4.5 million is annually transferred out of the general fund into the debt service fund for the long-range facilities plan, with the expectation that it’s replenished when properties are sold. That
didn’t happen last year.
“When it does, (the fund) will go up,” Hanson said.
While Woodland and Kenwood schools and a facilities building have been sold, the sales haven’t all closed. The Rockridge and Central properties, along with some other school property, still need to be sold. The district needs to sell about $4 million in property for this fiscal year, so only the sale of Central and the Secondary Technical Center will make up last year’s deficit. Those properties together could add up to $13 million in revenue for the district, Hanson said. The district also still must finish paying off about $2 million in debt for the Secondary Technical Center.
“Central and STC are critical sales for the district,” Hanson said.
The city is gathering feedback on how the property should be zoned, because it’s now zoned for institutional use.
The fund has dropped below levels required by a School Board policy. The policy says it shouldn’t fall below 10 percent of unrestricted expenditures. There are no sanctions for failing to meet the target, Superintendent I.V. Foster said. It does mean the board needs to be notified and steps need to be taken to fix the problem, he said. Foster was pleased with the audit results because “there were no negative findings,” he said.
“That’s unusual for a district this size,” he said. “It reinforces the fact that we’ve been prudent.”
The fact that the fund is half of the size it was in 2010 isn’t yet cause for panic, Foster said.
“For as much as our fund balance has dropped below expected levels, it really is an imposed financial safeguard,” he said. “A lot of school districts don’t have (a similar policy). They don’t maintain those funds. We’re a lot better off than many.”
The Duluth district has maintained its reserve balance target for about 15 years.
Without the sale of Central, Grover said, there is a lot of pressure on the district to replace fund balance money.
He encouraged the board to be a “player in the process” of the city’s efforts to decide its future use.
“The ramifications for the district’s finances, for taxpayers, are significant,” he said.