School Comments by Dr. Robert Mayer The school board expected to have a revenue shortfall of $893,000 for the 2001-02 school year. This projection was based upon information available in July 2001. The shortfall would be covered from the district's reserve account (fund balance). When the books were closed on June 30, 2002, the shortfall was actually $708,000 or $185,000 less than projected a year earlier. The shortfall was less than expected for two reasons.
The first reason is that revenues received were more than budgeted by $76,000. The district receives general fund reserves from 30 different sources. Monies received in some of those categories had less money than anticipated such as interest income. When the 30 categories were added at the end of the year, the amount exceeded projections by $76,000. The total revenues received were within 1.2 percent of the amount projected.
The second reason for a shortfall less than expected was under-spending the budget by $108,000. The total general fund budget of expenditures was approximately $6,900,000. This amount was divided over 564 different categories. When final tallies were made at the end of the fiscal year, June 30, 2002, the district had spent $108,000 less than budgeted. That amount was within 1.5 percent of the total budgeted.
In addition the school received money from an unexpected source. About 10 years ago the roofs at the high school and middle school were replaced. There have been no problems with the product used on the roofs. However, that product has been proven to be defective in some cases. As a result there was a class action lawsuit filed against the manufacturers, Johns Mansville Corporation. The school was contacted by a law firm to determine if we wanted to participate in the lawsuit. Our legal counsel evaluated the situation and determined that there was no risk to the school. We were never informed as to how much money we could receive or when we would receive it. On July 8, two checks were received totaling $143,610. The school board receipted this money into the general fund.
When all factors were considered, the district's year end balance was $327,610 more than expected. Therefore, it did not become necessary for the board to opt out for 2003-04. The budget cuts and revenue shifts already made, coupled with a more favorable reserve, created a situation that did not make an opt out absolutely necessary.
The question in the minds of most people is whether an opt out will occur in the near future. The school district financial situation is adequate to fund the 2002-03 and 2003-04 school years. It is expected that there will be more cuts for the 2003-04 year. The cuts to be made will be determined by the school board in the coming months.
The revenue shortfall for 2003-04 is projected to be $700,000-$750,000. The district can fund this shortfall; however, the reserve account will be almost eliminated. Therefore, the state Legislature must provide sizeable increases in school funding or an opt out will be very likely for Vermillion for 2004-05.