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School board warned of budget shortfall

More than $600,000 in unplanned spending

By Robert Cloud

The Waupaca School District’s fund balance dropped by $683,000 during the 2017-18 academic year.

Carl Hayek, the district’s business manager, said the 2017-18 budget shortfall was due to expenditures the school board approved after it passed the budget.

“This year, at almost each board meeting, you were asked to approve additional expenses,” Hayek said at the July 10 meeting.

Among the expenses not included in the 2017-18 budget were $30,000 for the charter school, $50,000 for landscaping at the high school, $95,000 for storage bleachers, $40,000 for sixth-grade Chrome Books, $38,000 for remodeling at the high school, nearly $30,000 for transportation, nearly $47,000 for curriculum, $10,000 for textbooks, $16,000 for legal services, $10,600 for community relations, $4,500 for a human resources consultant and 20 other items.

Some of the items were unexpected but necessary, such as $10,000 for road salt due to the harsh winter.

Hayek said another cause for the budget shortfall was due to a misunderstanding about donations for Comet Field.

Waupaca Foundry committed $100,000 to the project. The administration anticipated a lump sum payment to offset project costs, but the foundry has been making monthly payments of $2,750.

Without the unbudgeted expenditures, there would have been a $15,500 budget deficit for 2017-18.

From 2010-11 to 2016-17, the district’s fund balance grew from $7.27 million to $9.55 million.
The fund balance dropped to $8.86 million in 2017-18.

“It took 31 years to build the district’s solid fund balance,” Hayek said. “In three years it could be depleted.”

If the board continues approving more than $600,000 a year in unbudgeted expenses, the fund balance will fall to $6.4 million by 2019-20.

At that point, the district will need to borrow $3 million on a short-term loan to cover its cash flow, Hayek said.

He estimated the district would pay about $90,000 in interest, which would come from the instruction budget.

By 2021-22, the district’s fund balance would be down to $600,000 and the district would need short-term borrowing of $9 million.

The following school year, the district would have a negative fund balance and need a referendum to exceed its revenue cap.

The fund balance, Hayek said, “is the most important component to a district’s financial health and one should try to increase it each year.”

Hayek asked the school board to consider its wants vs. its needs before approving further expenditures, whether they are in the budget or proposed after the budget is passed in October.

He presented a list of proposed expenditures and categorized them as wants versus needs.

For example, he questioned the necessity of spending more than $500,000 on landscaping at the Chain, WLC and the middle school.

Noting that some have argued that landscaping may draw out-of-district students to Waupaca, Hayek said, “They’re probably not going to drive from Appleton to get here because we have a bush in our front yard.”

He also suggested that $120,000 to hire a human resources attorney and $60,000 for a human resources assistant may not be needed.

Other proposed expenditures that Hayek questioned included $96,000 for high school fitness equipment, nearly $123,000 for sound systems at the middle school and high school, and $182,000 for a video board in the high school gym.

Quoting Warren Buffet, Hayek said, “Do not save what is left after spending, but spend what is left after saving.”

Board member Sandy Robinson said most of the unbudgeted items that the board approved were one-time expenditures.

She proposed more detailed financial reports so board members could compare actual spending to what was in the budget.

Robinson also wants to see financial reports that compare the current year’s spending to the prior year.

Board president Steve Johnson said Waupaca is one of the few school districts to consistently spend below the revenue cap.

Johnson recommended that Robinson meet with Hayek to discuss the additional financial reports.

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