ARMOREL -- On May 10, Armorel Superintendent Mike Hunter will recommend to the school board that the district be put on the state's "fiscal distress" list.
While this does not necessarily mean that the district has a negative budget balance, state law requires that a school district be put on fiscal distress if the district has had declining budget balances for three consecutive years.
"We received the notification from the state in February," said Hunter. "At that point we thought we might be able to avoid it. In fact the state told us that we might not have to do it, but after a further review of the situation, there was no other way to do it."
Hunter said that a combination of declining revenues and spending by the district, some of it encouraged by the state, helped bring the district to its present course of action.
"Three years ago, we had a budget balance of about $1.2 million," Hunter said. "I was at a superintendent's meeting in Little Rock and we were told that districts with balances as high as our need to pay down their balances or risk losing any extra money from the state. Basically, use it or loose it."
Hunter said at that time the district began a couple of new construction projects with the money.
"We made improvements to our gym and put in new bleachers." he said. "We built a concession stand outside next to the ball fields. We built a new maintenance facility and provided a bigger area for our welding class. We updated some of our maintenance equipment. We started a three-year plan to get our technology up-to-date. Everything we did was for the benefit of our children and was done with our own money. I take responsibility for the spending. While the board approves my recommendations, I'm the one who gives them the information that the money is there and the projects can be done."
Hunter said that in the 2008-09 year, revenues declined by $500,000, which is a significant number for a district that receives just under $4 million in total revenue each year.
"A lot of people wonder how a school district with one of the highest wealth indexes in the state could be in a situation like this. It's really a false reading," Hunter said.
The district received another blow in the spring of 2009 when it was determined that the assessed value of the district had dropped by $11 million, which equals $400,000 in lost revenue for the school district.
"Hindsight is always 20-20. No one could have seen just how bad the economy was going to get," Hunter said.
Hunter said the district is taking out a $750,000 loan to help get through the remainder of the 2010 school year.
While the district appears to have it's troubles at the moment, Hunter said that the district has already begun implementing a plan to get back on track.
"Part of the process of going through and getting out of fiscal distress is that you have to prove to the state that you have a plan to improve your situation and that you are capable of implementing the plan," Hunter said, noting that the district had already begun trying to solve its financial troubles almost a year ago. "Fortunately, our school board had the foresight to see where this was going and acted upon it before things got worse."
In the fall of 2009, district patrons approve a 3-mill increase. One of the mills was for new construction projects and the other two were for maintenance and operation. The money from the bond for maintenance and operation comes to $814,531 and will be available by November of this year.
"Had we waited until now to ask for the increase, we'd be waiting another year for the money and we'd have even more problems," said Hunter. "We couldn't have done this without such a supportive community."
One of the requirements the district is that they make significant budget cuts. The district has already put together a plan that will cut more than $500,000 out of its budget.
Two vacated teaching positions at the high school will be filled from within without new hiring, the preschool will be run by an aide instead of a certified teacher and kindergarten will return to two classes instead of three. This means that the district did have to cut two positions.
"We tried to retain everyone in the district but there was just no way around this, Hunter said. "We're losing two quality individuals."
Hunter says the adjustments to the staffing will bring a savings a $349,772.71. The school board also cut contributions to the district health insurance by 50 percent, bringing in a savings of $91,918.80, and cut the technology budget for 2010-11 from $135,000 to $35,000.
Another positive sign for the district is more than $900,000 of new revenue the district is set to receive next year. Along with the $814,531.00 from the bond, the district will receive $30,000 from the PILOT Fund from Pizo Company, and with the extra classrooms being built, the district will be able to take "school choice" students again. If the district receives at least 10 school choice students, they will receive an extra $60,000.
The building projects, which will provide a new cafeteria, more classrooms and a new high school library and were funded by a 2-mill increase in 2007, have provided an unexpected positive to the district's budget situation. When projects were originally budgeted, building materials were abnormally high. By the time the projects were actually bidded out, building materials had declined dramatically. The projects will actually have a surplus of almost $500,000. According to the ballot that was voted on, the surplus revenues produced each year by debt service millage may be used by the district for other school purposes. This brings the total additional revenue, including budgetary cuts, to $1,946,222.51.
"We'll be able to pay off our loan by December and be in good shape after that," said Hunter. "We are also looking to be in a position that we will be prepared so that we won't be in this situation again. Until then, it's going to be tight. I've been telling people that ever since our public meeting back in August."
Hunter, who steps down as superintendent at the end of June, said that if all goes well, the school could be out of fiscal distress within six months to a year.
"I feel awful that this is happening as I'm leaving, but I feel good that we've been able to put a plan together to get this school back to where it should be. " Hunter said. "I've seen schools that didn't have a plan and didn't try to solve the problem until they're already in fiscal distress. Then, sometimes, it's too late. We should be able to build up our accounts back to where we have a nice buffer. Thanks to our school board, we had the foresight to begin tackling this issue while it was still manageable. The rest of this year will be tight but we'll be back and stronger than ever. "
afitzpatrick@blythevillecourier.com