CAPE SCHOOL BALANCE NOSE-DIVES; OPERATING FUND AT 7.5% OF EXPENDITURES

Cape Girardeau School District finances are stressed to the point that significant changes in spending will be required, the Board of Education was told Tuesday.

Schools superintendent Dr. Dan Tallent and business manager Dr. Steve Del Vecchio informed the board of extremely low fund balances during a special meeting to finalize work on the current budget. The budget is expected to be approved at a meeting Monday.

They said the district is solvent and operational, but available funds are significantly low and spending will need to be corrected as soon as possible.

"We are currently under 10 percent of our cash balance, which puts us on the state's list as financially stressed," said Tallent. "We're going to have to make some tough decisions in order to get our finances back in a positive situation."

Missouri law requires school districts to maintain balances of 10 percent or more of budgeted expenditures to sustain adequate cash flow. If deficit spending occurs, the Department of Elementary and Secondary Education designates the district financially stressed.

The designation means the school board could waive its Proposition C rollback without a vote of the people but would be required to freeze salaries and administrative costs until the district could build a 3 percent reserve fund in the incidental and teachers funds. If the situation didn't improve within a designated period, the district could be declared insolvent, and students would be distributed to neighboring districts.

Although not in the red, the district's operating fund balances fell some $500,000 to $1.8 million over the last year. This balance amounts to roughly 7.5 percent of expenditures from last year's $24 million budget, several percentage points below the 10 percent mandated by state law.

In July another area school was actually threatened with insolvency. The Marquand-Zion School District, which serves 245 students in southeast Madison County, was one of only two districts in the state to be identified as financially stressed last year. The district, which ended two fiscal years in the red, passed a 30-cent tax levy in August after three previous attempts to increase local revenue and prevent the district from being dissolved.

Tallent and Del Vecchio said the district was not significantly over budget in any area last year. In fact, they said, the low coffers could be largely attributed to the district's "hold-harmless" status and declining state aid for required programs.

"Districts like ours who are hold-harmless, their only source of income is that local money, and they've capped us on that also," said Del Vecchio. "We're also not seeing any increases in state aid although our categorical expenditures are on the rise. We've had to make up the difference from our operating balances."

Tallent said planned deficits acquired when staff salaries were sizably increased several years ago have also attributed to the district's current problems. The district once had 20 percent balances and decided to spend it in salaries, he said. That's a recurring deficit that over the years has made dents in the operating balances, he said.

"Over the last couple of years we've tried to give the staff modest increases to move out of it in increments, but with all of the other things going on that's not happened," he said. "Any time you begin to talk about solving the problem -- and 74 percent of expenditures are salaries -- you have to see where one of your solutions falls."

Although the district's available cash is low, Tallent said he doesn't want people to think "the sky is falling." The board will have to take positive action to reverse the low balances, but the actions will need to ensure that the quality of student instruction isn't reduced.

He said he will work with other administrators to develop a list of solutions to be presented to the board in January.

"We're going to have to plan on taking care of ourselves," he said. "The next budget has to turn around and show an increase, but we can't lose the confidence of our voters. They can't see us using money they approved for building projects to correct our financial problems, because that wouldn't be responsible.

"The one thing above all others we'll have to be concerned about is not diluting the quality of the programs our kids are getting."