CAPE SCHOOLS IN A CRUNCH; DISTRICT'S CASH RESERVES SO LOW, SCHOOLS HAVE TO BORROW MONEY TO MEAT PAYROLL

The Cape Girardeau School District is experiencing its busiest period in recent memory. A $14 million bond issue was successfully passed earlier in the year to finance upgrading, construction and expansion of district facilities. Conceptual drawings are being sketched, principals have been chosen and in some cases, dirt is being moved and foundations are being laid.

And in the midst of it all, the district has had to seek credit to meet its financial obligations for the next two months.

Business manager Dr. Steve DelVecchio sought and received approval Wednesday to obtain a tax anticipation note worth up to $1.2 million from NationsBank. DelVecchio said the note was necessary because balances were down to about $962,000, which won't cover the nearly $1.2 million worth of payroll checks staff will receive next week.

A tax anticipation note acts as a line of credit to help cover district expenses. This credit will guarantee that all checks written by the district between mid-November and mid-January are honored. The district should receive about $4 million in local tax funds at the beginning of the year.

Board members said it's the first time they can remember having to use a tax anticipation note, but school superintendent Dr. Dan Tallent said it's not an unusual occurrence.

"That's not unusual for a school district to do that when its balances are low," he said. "This will basically help us to make payroll and cover vouchers for goods and services that we purchase."

To cover this fiscal year's $24 million budget, cash balances will drop some $500,000 to about $1.8 million. The district has been spending over budget since 1995.

Funds received from the bond issue approved in April cannot be applied for any purpose other than that approved by voters: in this case, to finance capital projects. Districts are prohibited by law from using interest earned from the bonds for operational costs.

Tallent said the district is in a financial crunch largely because of its hold-harmless status, which was created as part of Senate Bill 380. This designation means the district receives no less amount per pupil than it received when the legislation was implemented in 1993.

Tallent said the district relies on local tax dollars for 52 percent of its budget. Most of this money is received in one lump sum, which means there is very little money coming in from the state each month to help offset expenses.

Cape Girardeau schools receive about $740 per pupil from the state because of the hold harmless designation. This amount is much less than many other districts, including smaller hold harmless districts Nell Holcomb and New Madrid County Central, which both receive about $1,300 per pupil. Superintendents at both schools said they sympathized with Cape Girardeau's situation and understood how hard it is for a hold harmless school to make ends meet when they rely so heavily on local funding.

"The state and the federal regulations are requiring more and more individualized instruction and other things that require the expenditure of money," said New Madrid superintendent Dr. Mike Barnes. "We're just like Cape Girardeau. We've had to live with all the requirements but we haven't gotten another dollar in state money to help defray ongoing costs."

Former board member Kathy Swan, who served from 1992-1995, said the district at one time had as much as 20 percent cash reserves, some $4 million, on hand. The board lived within its means and gave modest salary increases to keep the budget in line.

Swan said deficit spending in the form of salary increases was implemented after several board members -- including herself -- left the board in 1995.

Salaries for all staff account for 74 percent of the district's budget each year. Board president Ferrell Ervin said he believes the school board approved the significant salary increases to make teachers' salaries compatible with other area districts, which depleted some of the district's reserves.

That dent in the reserves has continued, he said, because of the lack of new state funding, and the result has been a drop in cash balances to the current low of about 7.5 percent cash reserves, which falls short of the 10 percent mandated by law.

"What has happened basically is there have not been any new operating dollars that have gone into the district in the past three years, and it's just continued to eat into the reserve year after year," he said. "The thing that the public needs to know is there's no evidence of mismanagement anywhere in the budget picture. The board thought they were acting in the best interests of the district and its patrons when they approved that raise."

Tallent said one way the district could have avoided its financial problems in the past two years is by freezing salaries or by cutting costs elsewhere. That would have psychologically hurt the district, because "it's not good to give a significant raise increase one year and then the next year turn around and not give staff anything."

Tallent said he wouldn't speculate on what budget changes would be made except to say something would have to be done soon. He plans to work with board members and other administrators to devise a balanced budget that doesn't "dilute or reduce the programs" currently in place.

Ervin said the board will probably do what other school boards have had to do in the district over the past decade. They'll review the budget item by item and try to make decisions that will allow programs to survive and thrive after funding cuts are made.

"I think what's going to have to happen is we know there's not going to be any new revenue from the state, so we'll have to find the money ourselves from within."

HOLD HRMLESS DISTRICTS IN MISSOURI

SOURCE: Department of Elementary and Secondary Education

Following is the latest list of other hold harmless school districts in the state. The list is updated by the Department of Elementary and Secondary Education each month.

Shell Knob 78

South Callaway R-2

Camdenton R-3

Climax Springs

*Cape Girardeau

*Nell Holcomb

Luray 33

Washington

Davis R-12

South Iron Co. R-1

Iron Co. C-4

Center 58

Joplin R-8

Jefferson Co. R-7

Crystal City 47

School of the Osage

Moniteau Co. R-5

Holiday C-2

New Madrid Co. R-1

Couch R-1

Cooter R-4

Pettis Co. R-12

Boncl R-10

Westran R-1

Centerville R-1

Southern Reynolds Co. R-1

Bunker R-3

Lesterville R-4

St. Charles R-6

St. Charles R-5

Roscoe C-1

Pattonville R-3

Rockwood R-6

Kirkwood R-7

Lindbergh R-8

Mehlville R-9

Parkway C-2

Affton 101

Bayless

Brentwood

Clayton

Ladue School District

Maplewood Richmond Height

University City

Valley Park

Webster Grove

*Scott County Central Schools

Bell City R-2

Milan C-1

Newton-Harris R-3

Branson R-4

Schell City R-2