Dear School Trustees,
Deficit. It’s a scary word. It implies that you’re spending more than you earn, that you’re losing money.
The amended 2016 Budget for the school district projects a total deficit of approximately $600,000 which is a significant number. But it’s important to realize that more than $300,000 of this deficit is a non-cash loss.
This part of the deficit comes from the amortization of tangible capital assets. It takes into account the depreciation of the value of assets such as vehicles, furniture, computers and buildings. You’re losing value, not cash.
While both the operating deficit and the amortization deficit are of concern, the operating deficit is the most important.
A school district must cover an operating deficit by using monetary savings in its accumulated operating surplus fund. It must have cash on hand.
With an amortization deficit, a school district can choose to spend money to purchase more tangible capital assets to off-set this non-cash loss or it can choose to incur the loss in its capital fund. Provided it has an accumulated surplus in its capital fund, a school district may ignore its amortization deficit.
And over the years, the school district has done just this. It has incurred losses in its capital fund in 2012 and 2014. Granted this approach isn’t fiscally prudent over the long term. Nevertheless, it is an option during financial difficulty.
So why focus on the total deficit? By focusing on the total deficit, the board office can direct attention away from the budgeted operational deficit of $280,000 — a number less imposing.
School District 53 is in new territory when it comes to operating deficits. It’s something the school board has not had to face for a while.
The school board has been rather fortunate. From 2010 to 2014, the school district has posted an average annual operating surplus of over $600,000. This is despite declining enrolment and despite reduced funding.
These operating surpluses have been incredibly beneficial. They’ve allowed the school district to build its accumulated operating fund surplus as well as to maintain its capital fund.
But operating surpluses can be a double-edged sword. While the school board has warned of declining enrolment and reduced funding for years, the public has not taken these concerns seriously. The perception is that if the district can post an operating surplus of over half a million dollars, it must be doing okay.
Then in 2015, the school district posted an operating deficit of $424,000. It was a wake-up call.
It would have been a perfect opportunity to set up a district-wide committee to look at possible savings. But no committee was formed and there was no real sense of urgency.
I was at first puzzled that there was no concerted effort to balance this year’s operating budget. The means to do so were there.
For example, the elimination of the assistant superintendent position should have resulted in $150,000 of savings. Instead, the board decided to create the Network Leaders Program at a budgeted cost of $235,000. (At the March 8 public consultation, Ms. Young stated a new administrative position would be required if the Network Leaders Program was eliminated. Why can’t current school-based administrators take on the portfolios that comprise this position at no extra cost to the district?)
Furthermore, the services and supplies budget for district administration is 1.9% of the operating expense budget. In other districts of comparable size, it averages at 1.1%. If SD53 followed the example of other districts, it would save more than $185,000.
This leads me to believe that the school board did not look to save on operating costs this year. It chose to approve a budget with an operating deficit. So I have to ask myself, why submit a budget with an operating deficit?
Just as it’s difficult to be taken seriously about declining enrolment when posting operating surpluses, it’s also difficult to justify closing a school. (Interestingly, when the school board decided not to close TEN in 2011, the district posted an operating surplus of nearly $740,000.)
It is my belief that the board office purposely constructed an operating deficit in order to validate its decision to close OSS. It needed to be able to show financial necessity. The fact that so many cost-savings proposals have been dismissed out of hand only deepens my belief.
Furthermore, the school board has not followed its own policy on school closure. It is required to ensure an open and meaningful public consultation by providing full disclosure of all facts and information.
However, much of the information the board office has provided is suspect. Little effort has gone to determine actual savings. No added costs have been considered. Many questions have not been answered directly or completely.
For example, I am still unclear as to what constitutes district administration services and supplies and why these costs have increased by over 90% since 2010. The reasons provided in the FAQ to explain these cost increases are insufficient. Furthermore, it is highly questionable that capital assets, such as a district vehicle, a photocopier and furniture, are being categorized as “supplies.”
To close, I do not believe the school board has entered into this consultation process sincerely. It is simply going through the motions.
Consultation cannot be meaningful or purposeful if the decision has already been made.