District Finances Stable Despite State Funding Questions

The Mehlville School District is in a good financial frame of mind despite questions from funding at the state level, Chief Financial Officer Noel Knobloch said.

Knobloch presented an estimate for this fiscal year, plus the next three years’ budget projections at a workshop with the school board on Wednesday.

Revenues are about $1.7 million higher than planned because of additional state funding, Knobloch said. Expenses are also $800,000 less than budgeted because of reduced insurance costs and delays when purchasing supplies.

In 2012-2013, Knobloch wrote that the district is in a strong financial position as a result of cost-cutting measures and a conservative budget approach over the last four years.

Knobloch said he was conservative in his estimations for next year, but did not factor in free, full-day kindergarten in 2013-2014 because it was determined the move would be financially neutral.

The district is predicted to end the 2011-2012 school year with a 20 percent reserve fund, well above the 3 percent that the state requires before a district is put into a distressed category.

At a previous meeting, Superintendent Eric Knost said he would not like to see balances below 13 percent.

Knobloch estimated three years in the future, and at the end of the 2014-2015 fiscal year, balances would be at 17.8 percent.

Knobloch said if the district expanded on its laptop program, balances would be estimated at 15.75 percent in 2015 and 19.9 percent by the end of the current fiscal year.

If the district’s 1:1 technology pilot is deemed a success in the spring, Knost said he would like to give all freshman Communication Arts students a laptop. Continuing the project would require approximately $600,000 annually for technology out of district funds.

State Questions

While officials project the district’s financial stability, questions remain at the state funding level.

The state gives funding through a foundation formula, which Mehlville uses to receive about 13 percent of their revenue. 

The formula, started in 2006, has a 7-year phase in. But for the last two years, the state could not fully fund the formula due to the economy and lack of appropriations. Knobloch said it would take another $400 million to fully fund the formula in its current state.

Knobloch predicts the state will give $11.5 million to Mehlville by the end of 2011-2012.

In 2013, if the formula is pro-rated around what the districts should get if the formula was fully funded, the district can receive up to $13.2 million. This procedure has been used for the past two years. 

However, if the formula is calculated by the state adequacy target (SAT), the district will only receive $9.8 million, a $3.4 million drop. The SAT is the yearly average amount of dollars necessary to educate one student, according to the Department of Elementary and Secondary Education (DESE).

Knobloch said those two scenarios were the best and worst funding possibilities. Some districts, such as St. Louis City and Kansas City, could see a $17 to $20 million difference between the formula and SAT calculations.

“That’s the one big variable we don’t have a good feeling at this point and time with regard to the budget,” Knobloch said.

Two pieces of legislation could alter the foundation formula, but funding would still not dip below $9.8 million for Mehlville.

If no legislation is passed, DESE will decide between funding schools through the pro-rated formula or SAT.

Senate Bill 454 gives the district $13 million in 2013 and calls for increases in education appropriation from 2014 to 2017.

House Bill 1043 gives the district $12.9 million in 2013 and requires a recalculation every year using a three-year average of wage data. The bill also requires the General Assembly to appropriate an amount for school funding that equals or exceeds the funding for 2011.

Both bills have provisions if the formula is not fully funded.

Districts that do not use the formula, but receive state funding, such as Lindbergh, are known as hold harmless districts. Both bills have different calculations for hold harmless and formula schools.

Under 454, if appropriations are less than what is required to fund the formula, hold harmless districts will receive half of the decrease that formula schools see. Likewise, if the formula is overfunded, payments to hold harmless districts will be increased half as much as the rate to formula districts. 

Under 1043, hold harmless districts will be at a one-third rate to formula districts with negative or surplus funding.

“They (the bills) only attempt to ease the pain,” Knobloch said. “If you look at those two bills, you can see that everybody who is on the formula comes out better; everybody who is on hold harmless comes out worse, but not nearly to the extent if you take either of those two DESE approaches.”

Knost said he symbolically voted in support of House Bill 1043 in a superintendents’ meeting because it would be the least varying swing for most districts, but still give Mehlville a stable amount of funding.

“It’s hard to look at something that would be very good for our district and claim to be a passionate public educator and watch it decimate the budget of a neighboring school because of the heavy swing,” Knost said.

Also on Wednesday, the board unanimously passed a resolution to refund 2002 Certificates of Participation (COPs) with a savings of approximately $2.9 million.

The resolution, plus two other refunds in 2010 and Sept. 2011, will earn the district approximately $6.3 million, which will fund the new auditorium and repairs to the Witzel Learning Center.

L.J. Hart and Company served as the underwriters of the resolution.