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Willmar Schools loses more of general fund reserve to rising costs, shrinking revenues

WILLMAR -- The general fund reserve continues to shrink in the Willmar School District.

A revised 2008-09 budget approved by the School Board on Monday indicates that the general fund will have an undesignated balance of $2.3 million at the end of the fiscal year, not the $2.8 million estimated last summer.

The change has to do with a number of factors that have pushed expenditures up and revenues down since the board first approved the budget in June 2008.

The state Department of Education requires school districts to have budgets in place when their fiscal year starts on July 1 each year.

However, those budgets always contain estimates of expenses, revenue and enrollment figures for the coming year.

Business and Finance Director Pam Harrington described the factors that have affected the budget during the school year.

Budgets are always developed using "the best information we have available at the time," she said.

However, the actual amount of aid received and actual expenses can vary greatly from those summer estimates.

The revised budget includes revenues of $41 million, about $140,000 less than anticipated. That can be attributed to receiving less tuition reimbursement from the state for special education students and less interest on investments.

Harrington said the budget had made allowances for lower interest rates, but they fell even more than anticipated.

Expenditures are expected to be $44.3 million, which is about $775,000 more than expected. The difference will come from the general fund reserve, which was $4.4 million at the beginning of the year.

The School Board had planned to spend down the reserve fund this year. However, more will be gone than expected.

Actual expenditures were a mixed bag when compared to the estimates in the budget, Harrington said. Utilities cost more, but gas and diesel fuel cost less. So far, no major maintenance expenses have occurred, and overtime levels are normal. Health insurance costs are increasing.

A big additional expense is the severance that will be owed to more than a dozen retiring teachers. Long-time teachers are eligible for retirement severance that can equal as much as 150 days of pay.

The district had budgeted for about $400,000 in severance costs this year after spending $350,000 a year ago. However, retirements are up this year, and severance will cost the district about $1 million, Harrington told the board.

Retirements are a difficult thing to plan for, because teachers are not required to notify the district until 90 days before they retire, she said.

Board members asked if some of the severance cost would be made up in lower future salaries. Harrington said younger teachers would probably be paid less.

Teachers hired more recently aren't eligible for the same severance package, and eventually the district will be done paying it, she said.

Board members asked if the estimates can be fine-tuned.

"We try to estimate as close as possible," she said. Budgeting a large amount for severance that may not be needed can take money away from educational programs, she added.

Many of the increased costs are beyond the district's control, she said. "This is an example of why it's important to keep a fund balance," she added.