New figures show the Volusia County School Board is facing down a $4.49 million budget deficit for the next fiscal year, and district staff isn’t clear yet on what to do about it.
Board members were quiet at a Tuesday budget workshop when presented with the most recent figure, in part because with only 12 days to go before they vote on a preliminary budget, they don’t have answers to some key questions.
And between now and that June 26 vote, they’re hoping for the government budget equivalent of finding loose change in the couch cushions.
“There are a lot of things up in the air,” School Board Chairwoman Linda Cuthbert said in a telephone interview Wednesday. “And we do have time to investigate, and I want to ask more questions.”
Some of those things still up in the air include ongoing negotiations with the teachers union; pending requests to Volusia County and its cities for help paying for school security; and finding out how much money is left over from the current budget when the fiscal year ends June 30.
“What I’m thinking of right now in June can change in over six weeks to two months because we don’t know what our end-of-year surplus will be,” Cuthbert said.
But district officials can’t wait until the end of the month to craft a working budget.
The problem
The $4.49 deficit discussed at Tuesday’s workshop is up from the $4.2 million deficit board members were told about in April. It takes into account projected state funding, expected expenditures and rising costs for the next year.
The district expects to get an extra $12.77 million from the state this year, as compared with 2017-2018. With that money, the district must cover increased costs of things like teacher raises, security spending and new positions, which add up to more than the money available.
Now, the district must find a new revenue source, find areas to cut or decide if it wants to dip into reserves to balance the budget — or a combination of these options.
“Where do we go from here? That’s the question I need to ask of you,” Chief Financial Officer Deb Muller said Tuesday. “What are your thoughts about this?”
The School Board didn’t give an answer at the workshop — the last before it will vote to advertise a tentative budget on June 26. It will adopt a final budget in September.
Muller said district staff would meet with board members one-on-one before the June 26 meeting to get direction.
The solutions
Board member Carl Persis expects the district will have to dip back into its reserves, or “unassigned fund balance,” to cover the deficit. It’s an approach the district took last year to cover a $1.65 million shortfall.
However, if that fund balance dips to 3 percent of its overall budget, the district would need to notify the state. In 2017, the unassigned fund balance made up 6.2 percent of the general fund. After 2018, it’s projected to be at 3.5 percent, which would decrease further if more funds are removed to balance the budget. The board’s goal is to have a fund balance at 5 percent.
“I certainly would not recommend that,” Muller said of using the reserves. “I know you’ve worked hard to do that, to build that fund balance up.”
Cuthbert said she typically agrees but would rather see the district dip into its reserves than cut classroom resources.
“It would be nice, but not at the expense of the classroom,” she said about rebuilding the district's reserves. “The last thing I want to see is to cut the classroom.”
Board member Melody Johnson remembers higher deficits in previous years. For example, a 2015 deficit led to cuts in department budgets and salaries. She feels better about this year’s shortfall, but isn’t eager to use fund balance.
“We do have it in our reserve funding, but do I want to spend money that way? I do not,” she said.
But Persis thinks it would make the most sense to use reserves this year to balance the budget and make cuts next year.
“I don’t think we benefit our students or our teachers by having a larger than required fund balance,” he said. “I don’t see where we’re going to be able to make those kind of cuts this fiscal year.”
The unknowns
Complicating the budget process are a number of unknowns.
Teacher contract negotiations are lingering, and it’s unclear if an agreement will be reached before the start of the school year.
The $4.49 million deficit was calculated on the assumption that teachers would be getting an 1 percent raise, which equals about $3.3 million — but the Volusia County teachers union’s last ask was for 2 percent.
Further, the district is hoping the county and cities agree to chip in funding to help cover the cost of a new state mandate to provide armed security at every school.
Persis is optimistic that the right way to deal with the deficit will become clear in the coming weeks.
“Planning for the unexpected is always challenging, but I think we’re gonna come through this year fine, and it’s just a matter of getting through these next 45 days,” he said. “I think it’ll become a lot clearer for us.”