desks school stock classroom

Advocate file photo of school desks.

The East Baton Rouge Parish school district may face budget cuts after it spent through roughly half of its financial reserves last year.

“The overall financial position of the district has deteriorated," an annual audit from the firm Postlethwaite & Netterville says. "However, measures are being taken to improve the district’s overall position."

The general operating budget, called the general fund, spent far more than came in during the 2018-19 fiscal year, which ends June 30. Consequently, the money available for emergencies shrank from $53.3 million to $25.9 million.

That’s $2 million more in the bank than first estimated, but it's not even half the leftover money that the state's second largest school system had in July 2018.

The routine audit says the district needs to maintain reserve funds to pay for "increased retirement costs, health care premiums, and other unforeseen emergencies."

In July, the School Board approved its first balanced budget in several years to ensure it did not fall further behind financially. It did so primarily by shedding almost 300 positions from its payroll, a third of them from the classroom.

School Board President Mike Gaudet said he expects more belt-tightening as the school system fashions a 2020-21 budget but said it won’t be clear how much until spring.

While there are some changes in the works in operations, particularly in transportation, Gaudet said more extensive changes will wait for a new superintendent to replace Warren Drake, who retires June 30.

“We’re not going to slash and burn and let the new guy pick up the pieces,” he said.

For years, despite annual predictions of financial distress, the school system has managed to avoid dire financial straits and close its books in the black. That was largely due to a mix of underestimating revenue and overestimating expenses.

But that has not happened in the past two fiscal years.

The 2018-19 overspending was a combination of shrinking state revenue, increased expenses on charter schools and the continued cost of building repairs stemming from the August 2016 floods.

The flood also explains much of the state revenue decline. The number of students eligible for Supplemental Nutrition Assistance Program spiked after the flood, temporarily boosting state education funding. But when SNAP numbers returned to normal, so did state funding.

Local sales and property taxes grew by 2.6% compared with 2017-18, but that was not near enough to make up for a 6.2% decline in state funding.

Enrollment is up so far in the current school year compared with the past, but that’s almost all due to a handful of new charter schools launched in 2018 that continued to add students. Many traditional schools still continue to lose students.

Student enrollment declines at traditional schools are expected to continue with the opening of new, previously approved charter schools. Those new schools could add as much as $20 million to overall district spending during the 2020-21 fiscal year, though not all are expected to open by then.

To help blunt the impact of budget cuts and possibly fund teacher pay raises, teachers unions and employee organizations have lobbied the School Board over the past two years to end, or at least curb, the practice of granting industrial tax exemptions. The school system estimates these exemptions cost it $14.9 million in property tax revenue in 2018-19.

That’s less than the previous year when those exemptions were estimated to be $16.9 million in lost revenue.

Spending from all funds, including the general fund, clocked in at $647.6 million in 2018-19, a 1.4% increase over the previous fiscal year.

Auditors with Postlethwaite & Netterville briefly presented their findings to the board at its Dec. 5 meeting, saying the school system's basic financial statements are sound.

Kelly Davis, the school system’s chief financial officer, said it’s been a good process.

“We did very well this year,” she said. “We had a very good audit.”

The auditors had a couple of concerns. They questioned the failure of the school system’s magnet office to properly document and justify five instances of choosing one vendor for services rather than seeking other bids or proposals. School officials promised better documentation in the future.

Also, looking at the roll books for 10 classes, auditors found problems with two of them.

In one case, seven students were incorrectly listed as taking a class in the fall when they really took it in the spring. In the other case, a student dropped the course in early August 2018, but that was not recorded in the system until late October.

To prevent future problems, school officials plan to hold more periodic record audits and, to serve as an independent data point, that all teachers have to have at least one graded assignment in the roll book by Oct. 1.

Email Charles Lussier at clussier@theadvocate.com and follow him on Twitter, @Charles_Lussier.