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'Financial train wreck': School prepares for another round of cuts

With no levy increase and no increases in state aid likely, the Perham School Board is again evaluating the budget and looking for cuts.

Based on present funding, enrollment and expense information, the school is expected to fall into "statutory operating debt," with a projected $625,000 deficit by the 2011-12 school year. By 2012-13, the deficit could become a staggering $2.1 million.

"Financial train wreck," is how Superintendent Tamara Uselman described the situation three years from now.

Like so many times before over the past several years, the board and administration will be bringing the numbers to the public over the next two months-looking for input as to what should be cut, and what should be saved.

The process was scheduled to start Dec. 2, with a work session by the board.

Public meetings will be scheduled, including possible sessions in outlying communities of the school district, in Dent and Ottertail.

Input will also be sought at the regular monthly board meetings between now and February.

Final cuts will be acted on at the March 15 school board meeting.

The good news is that enrollment is higher than projected, at least for this school year-which is running about 60 students more than expected.

Still, with the failure of the levy, the school is in for "harsh reductions," said Uselman.

Board member Mike Hamann said that the school should not even consider statutory operating debt, which essentially means the state comes in and takes control of the school's budget.

One key to the school board's budget-cutting decisions is how much money should be in the unreserved fund balance-which is essentially the school's reserve fund.

The state and auditors recommend 10 to 20 percent of the school's annual expenses, which in Perham's case will be $13.3 million in 2011-12. At best, the reserve funds will be about $350,000 next year-compared to a recommended reserve of at least $1 million.

Board Chairman Jim Rieber asked board members what their "comfort level" is with regard to reserve funds. "At one time, it dropped below $100,000," noted Rieber.

A reserve balance of $200,000 was as low as board member Ron Berns wanted to see it.

Meanwhile, board member Arnie Thompson said that the balance should be "low enough to maintain educational programs."

"If we don't keep up our facility and what we offer now, people will drive 15 to 20 miles to take their kids to one of the districts that have passed referendums," said Thompson. "That will make our situation even worse, and then we may never be able to come back."