Assembly questions school budget number

MAT-SU -- The Mat-Su Borough Assembly took a stand last summer and, after several hours of public testimony and heated debate, agreed to fund the school district to the maximum allowed by law. Now, it seems, the assembly members may be having some misgivings.

What seemed a simple budget balance -- in the amount of more than $5.3 million -- was put on hold at the assembly's Tuesday meeting when questions were raised about a seemingly innocuous line in an information memo sent to Borough Finance Director Tammy Clayton from school district accounting and payroll supervisor Kathrine Vanover and Jack Sherman, district director of business and risk management.

In the Oct. 17 letter meant to bring the district's 2002 budget into balance with the borough, an adjustment in the amount of nearly $133,000 is titled "Beginning Budget Difference."

"There was supposed to be someone here tonight to report on this," Clayton told the council.

Assemblywoman Sara Jansen expressed frustration with what she saw as some financial discrepancies between what the assembly understood about how much money the district planned to bring in and exactly how much was actually brought in.

Jansen pointed out that the borough had lapsed more than $1.2 million in operating money not spent back to the borough after district representatives had, in the fall, told the assembly it was unlikely they would lapse any funds at all. Jansen also mentioned an estimated $2 million extra that was spent in Retirement Incentive Program (RIP) payments -- $2 million more than the district had budgeted.

Lastly, Jansen pointed out the nearly $133,000 of what seemed to be unexplained funds the district increased the assembly-approved budget by.

"That is incredibly troubling to

me," Jansen said.

Borough Manager John Duffy said he was not sure whether arbitrarily increasing the budget was possible.

"How can they increase their budget without assembly approval?" Duffy asked.

The assembly agreed to postpone any action on the budgetary adjustment until the Feb. 5 meeting, and requested that someone from the school district be present to explain the financial issues.

The district was not trying to skate around the borough's authority or hide money by listing the $132,916 as a beginning budget adjustment, school district public information specialist Kim Floyd said Wednesday

"Pending grants are our best estimate of what we're going to get," Floyd said. "When we go over that amount, we don't wait for the borough [to appropriate the additional grant funding], we accept it and later adjust the budget."

The practice of adjusting the budget in this manner, Floyd said, has been used for several years, as is evidenced by a similar letter written in December 2000 listing an overall increase of nearly $4.7 million. That information memorandum, like the Oct. 17 memo, simply notified the borough of funding differences. The December 2000 memo does not list a "Beginning Budget Difference."

The $132,916 in question, Floyd said, was not related to the operating budget the assembly approved. That money came in the form of grants and are special revenue funds that cannot be used as a part of the district's operating fund -- anything other than the designated use is not allowed.

"Using federal funds for something that should be paid out of operating funds [is illegal]," Floyd said.

As for the unexpected lapsed funding, Floyd said that money came from sources that were not easy to estimate.

"[It came from] unfilled positions and unanticipated long-term leaves of absence," Floyd said.

The district must have its budget to the borough by July 1, Floyd explained, and many of the positions that went unfilled were expected to be filled at that time. In addition, the borough school district seemed to go through its own little baby boom, which resulted in an abnormal number of long-term absences.

Floyd added that the district was taking this, too, under advisement and this year added a vacancy factor of 5 percent into the budgetary process, which is an estimate of unfilled positions and long-term leaves of absences. If for some reason the district underestimates the vacancy factor, then one method of recovering those costs is instituting a hiring freeze, Floyd said.

"If we have less than 5 percent [of positions] vacant," Floyd said, "then we'll have to find a way to recoup those costs. But, based on previous years' history, we think that we'll be in the ballpark."

Floyd also addressed the $2 million paid out in RIP payments. The RIP program was offered three years ago to teachers who were approaching retirement. The way the program worked, Floyd explained, is teachers who were near the end of their contract were offered an incentive to take early retirement. If the teachers agreed, a certain amount of bonus money was paid out to them, but in the meantime, the district could hire a younger person at a lesser salary and save money on the other end.

"We're not doing [the incentive program] anymore," Floyd said. "We had one payment [left] and we made the last payment early."

Some of the unexpected money that came in from unfilled positions and extended leaves of absence went to making the final advance payment on the RIP, Floyd said.

"We were able to identify resources from our operating fund," Floyd said, and explained that the district paid the RIPs off early so the payments would not effect future budget cycles.

"I think right now we are fully paid up," Floyd said.

The largest amount of money the borough was asked to approve came from grants obtained above what was expected. The district brought in more than $4.7 million in grant funding this year, compared with $1.9 million last year.

"[The teachers] worked very hard to find additional revenue sources," Floyd said, "and again, that's something they do aside from their everyday responsibilities. A lot of the support programs that are so critical to students' success are funded by grants, so it is a big coup for [the district]."