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The 5 Million Dollar Deficit

Posted in: Blog, Financial by Tim Husnik on November 28, 2009

Let’s talk deficit folks. Information was presented in the last board meeting that I think everyone should be aware of. The districts meeting summary of the last board meeting skipped over the most important information: the district is facing a ~$5 million dollar deficit in the 2010/2011 school year. To put things into perspective, this amount is equivalent to half the revenue collected by the City of Arden Hills each year.

Let’s talk deficit folks. Information was presented in the last board meeting that I think everyone should be aware of. The districts meeting summary of the last board meeting skipped over the most important information: the district is facing a ~$5 million dollar deficit in the 2010/2011 school year. To put things into perspective, this amount is equivalent to half the revenue collected by the City of Arden Hills each year.

The board will begin to address how they will deal with this deficit in the meetings to come. Everyone should keep a watchful eye on how the board addresses this problem. There are basically 3 ways to deal with it.

1. Reduce the level of spending down to the level of revenue. This is commonly how government operates. A large budget gets cut down to meet the level of revenue.

2. Dip into any type of reserves available. The district has a large reserve of ~$16 million. They also have a policy to maintain at least a $1 million dollar reserve. They are well in compliance of the policy (the policy is a bit odd, I think the policy shouldn’t be a fixed amount, but rather a % of revenue).

3. Do some combination of reducing expenses and dipping into the reserve.

Unfortunately the district did not provide a file which shows their 19 budget assumptions for the 2010/2011 year because I certainly would like to look at it. A few were read off in the meeting. One assumption worth discussing is that funding received from the State of MN will remain flat to what they received last cycle ($5,124 per pupil).  The State of MN has a $7 BILLION dollar deficit in this same time frame. Education represents over 40% of the State budget. Logic dictates that funding for education will be reduced.  If State funding decreases this 5 million dollar deficit will instantly grow larger.  

A few board members did comment on reducing expense and the cabinet was requested to pull some scenarios together which would show how balancing the budget impacts class sizes.  I support this approach, it’s exactly how a family impacted by the recession would act.  You can not continue to spend more money than you make even if you have a nice sized savings account.

Let us keep an eye on this folks! Stay tuned for additional information as it become available.

~Tim Husnik

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