CROSBY – At the Monday Board of Trustee’s meeting of Crosby ISD as promised Dr. Scott Davis, new superintendent of the district presented his findings in a report.
About 60 community members who were in attendance. The report included information on recently discovered financial issues and he stated, “The district has been spending beyond its means.”
Later during the meeting the board concerned with the safety of the children held a discussion on school safety and security measures, specifically, the hiring of three additional school resource officers. At $98,000 to $99,000 each per school year.
This reporter checked with law enforcement from throughout the area and learned that about $40,000 of that is for a deputy’s yearly salary.
Sherman Eagleton at his fundraiser on Thursday stated to this reporter that he did not know what decisions the schools were going to have to make because funds are tight but “I am going to see after the well-being of these kids, that is a priority.”
According to the school district’s officials, “Dr. Davis and new Chief Financial Officer, Lesa Jones, discovered a cash flow issue that appears to date back to the Spring of 2017. This cash flow problem resulted in the district partaking in a short-term loan and internal fund borrowing from the district’s Debt Service and Construction Funds to cover operational needs and the district’s payroll obligations. Prior to Davis’ arrival, $5.65 million had been borrowed from the Construction Fund to cover the district’s payroll obligations. When Davis arrived in late June, he had to borrow an additional $1.99 million from the Construction Fund to cover expenses for the July 15th payroll. To date, the total amount borrowed from the Construction Fund stands at $7.64 million. Davis stated that the plan is to repay the $1.99 million he had to borrow by the end of November 2018. He and Jones worked closely with the district’s bond counsel to determine if there were any qualifying expenditures made in 2017-2018 that could be subtracted from the total amount due to the Construction Fund. Approximately $2.25 million of capital expenditures have been identified as potential qualifying expenses leaving $3.4 million outstanding that the District intends to repay by December 2018.
Recovery from the financial issues is expected to take 3-5 years. While additional short-term loans, also known as Tax Revenue Anticipation Notes (TRAN), will be required to subsidize the cash flow shortage, the plan will be to create a diminishing dependence on these loans over the next several years by implementing cost-saving measures including a 10-20% budget cut, absorbing staff positions through attrition and potentially a reduction in force, if necessary.
Fund Balance
Fund Balance is essentially a school district’s savings account. The Texas Education Agency recommends a district keep 2-3 months of operating expenditures in Fund Balance, which would total approximately $14.4 million for Crosby ISD. As of August 31, 2016, the District had an audited $10.6 million in Fund Balance. It was at that time that the district approved changing the end of the fiscal year from August 31st to June 30th, creating a 10-month fiscal year for 2016-2017. During that 10-month fiscal year, the District had a net decrease in Fund Balance of $5.2 million, leaving only $5.4 million in the District’s Fund Balance account to start the 2017-2018 school year. Recently, district staff discovered that payroll was not accrued at the end of the 2016-2017 fiscal year in the amount of $3.8 million for the General Fund. This discovery will require a Prior Period Adjustment (PPA) to be made, which will decrease the June 30, 2017, Fund Balance amount to $1.5 million instead of the original audited amount of $5.4 million. However, due to a required restricted General Fund Balance for Debt Service of $1.7 million, other Fund Balance categories will be negative. Replenishing the Fund Balance to a healthy state will require spending less than the District earns.
2018-2019 Budget
The next order of business for the District is to closely examine the 2018-2019 budget that was approved this past June in order to ensure that it will allow the district the opportunity to begin repairing the aforementioned issues. Staff has already been instructed to cut their 2018-2019 budgets by 10% and to judiciously examine every expenditure made. Approximately 20 positions have already been absorbed by the district through attrition.”
“We are going to actually have to be as gritty as we preach to our own kids,” said Davis, “We will do so as a team and figure out a way to get through it.”
And to this reporter in the audience, “Lewis, don’t let 10% of the reality write 100% of the story because that’s not fair to Crosby ISD. This is a great place.”
It’s also broke from overspending but their is reform in the works, the Community Pep Rally will be replaced by an encouraged Family Night this year. Dr. Davis intends to present a 2018-2019 budget amendment in the near future for approval by the Board of Trustees to ensure that an accurate, right-sized budget is realized.
The board also engaged in discussion regarding the three previously proposed School Resource Officers. Discussion regarding implementation of a Guardian Plan or Marshall Plan was ultimately refused as an alternative to the hiring of School Resource Officers. Crosby ISD currently employs 5 full-time School Resource Officers. In light of the financial situation, however, the Board voted to approve the hiring of one additional School Resource Officer for this school year and potentially adding one officer per year for the next 2 years.