March 19, 2002

Superintendent Bruce Harter disclosed that, without some stringent cost-cutting, the Brandywine School District could literally run out of local operating money before the end of the fiscal year on June 30. His administration has initiated some counter measures and is considering others, he said.

Its president, Nancy Doorey, assured a special meeting of the school board on Mar. 18 that those steps "will not harm our instructional program" nor result in any layoffs of district employees.

The board took no specific action at what was described as an informational meeting. The relatively few attendees -- mostly district administrators and people who have been involved as volunteers with committees dealing with district finances and activities -- seemed agreed that Harter can be relied upon to handle the situation. Both he and Doorey were applauded after speakers hailed their leadership.

Harter outlined some accounting steps -- mostly reallocation of expenditures to accounts other than local operations -- that are being taken. Other internal measures he proposed  include deferring non-essential purchases, conserving supplies and materials in schools and administrative offices, delaying travel and conference participation, conserving electricity and delaying the use of air conditioning, eliminating overtime to the extent possible and asking employees to defer taking personal leave to reduce spending for substitutes. The district will defer hiring an authorized assistant superintendent and will 'turn back' for state credits four unfilled central-office administrative positions, he said. Longer range, he said, such things as having parents carpool athletes to sports events, seeking donations for some activities and reducing the amount of contractual services will be evaluated.

Board member David Adkins questioned whether the general public might perceive the situation as part of the strategy to obtain a favorable result when the district goes to referendum on Apr. 23 to obtain an increase in the ceiling on its local operating tax rate.

"I know that in the past some districts have created crises [for that purpose]. That is not the case here. This has nothing to do with the referendum," Harter replied. "We are coming down to the last of the dollars from the 1994 referendum and they are not going to stretch far enough." Brandywine has not gone to voters for an operating-tax increase since then.

For more than a year, district officials have referred to a dwindling reserve from which part of the local budget has been financed. When the present budget was adopted it was projected to be down to about $1.3 million at the end of this fiscal year. Harter referred to that -- about 1% of a $114 million total budget -- as being a "razor-thin margin."  By the end of December, he said, the projection was down to $840,000. A significant proposed component of first-year spending if voters approve higher taxes is to rebuild the reserve to about $3 million, which is described as a more prudent level.

Harter told the board that he became aware that the district's financial situation was even more perilous than thought after  Mar. 5 when chief financial officer Michael Shockley, who has diabetes,  left the staff on long-term medical disability. Since coming to the district two years ago, he has been credited with tightly managing finances and making more efficient use of fiscal resources.

With Shockley's departure, Harter said he asked the business office to review Brandywine's financial situation, with a view to determining its position to weather the remainder of the academic and fiscal year. He described that as a precautionary step.

"By Friday, Mar. 8, the budget staff generated a report that indicated that the negative trend for the ending balance had accelerated and that, without some spending reductions, the district would end the year with a negative balance in the local expense account," Harter said in a summary report presented at the board meeting.

He also told the board that a straight-line projection of spending in the last four months of the fiscal year indicated that the district would overspend its local-funds budget by nearly 7%.

School districts are financed from several sources. In Delaware, the largest portion comes from the state. Local revenue accounts for about 35% of Brandywine's income. State law does not permit deficit spending by school districts.

Harter said Mark Dufendach, director of financial management for the state Department of Education, Jerry Gallagher, head of DelDOE's general funds division, and David Blowman, executive assistant to the secretary of education, came to Brandywine to review the situation. They provided detailed reports and offered suggestions and advice, Harter said. He also received advice from the chief financial officer of another school district, at whose request he declined to identify.

Based on that, Harter requested the special board meeting to provide a public airing of the situation. "I felt it important that we be out front and inform the public," he said.

He said that he did not want the situation to be construed as a crisis but added, "I am certainly going to err on the side of caution" in dealing with it.

During discussion at the meeting, there were suggestions that, in retrospect, it might have been better to have sought the operating tax increase last year. The district did receive voter authorization then to sell bonds to finance a major building renovation program. Doorey explained, however, that "it would not have been a good-faith effort to go forward [with a tax referendum] without a credible plan [for the future of the district]." The coming referendum is based, in large part, on a strategic plan adopted late in 2001.

Starting with an anticipated limited amount of fiscal breathing room, the district has been confronted with additional unexpected expenses. An overestimation of enrollment has required it to pay teachers in excess of the state allotment from local funds; there was a sharp increase in insurance costs following the September attacks on the World Trade Center and Pentagon; and the state implemented a new pay arrangement which impacted cash flow.

Kent Rigel, a retired business executive who co-chaired Brandywine's financial review taskforce last year, said Brandywine and other districts also are constrained by having to operate within what he described as "the arcane state system [for] managing public funds."

2002. All rights reserved.

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