Fort Smith School Board, officials concerned 2017 legislative session may impose financial restrictions

Officials with the Fort Smith School District are watching the 2017 legislative session with uncertainty as rumblings from Little Rock have left some in fear of a minimum fund balance requirement for school districts.

Fort Smith Public Schools (FSPS) Finance Director Charles Warren urged the school board at Wednesday’s (Jan. 18) committee meeting to speak with area legislators to get across the point that a minimum fund balance requirement at the end of each school year would remove flexibility and efficiency in how the district operates financially.

Responding to board member Talicia Richardson’s request for talking points, Warren said, “We’re taught we need to treat the school as a business, so if we’re going to do that, then let’s apply business rules that we need operating capital at the beginning of every school year because our revenue sources are fluctuating.”

Warren said local school districts “know when money comes in and when it’s not there,” and argued that “we should have the right to determine what is prudent for Fort Smith as far as what is the cash balance we need at one point in time — the last day of the fiscal year. Because of that, we shouldn’t be earmarked with restrictions.”

Warren continued: “We should be allowed to say, ‘If we need to hold money for a specific purpose, then let’s do that.’ We need to be able to have the flexibility not to fritter away the money just to make some sort of minimum balance. We would not expect that of a private industry.”

After the meeting, Warren told Talk Business & Politics that many of his colleagues are apprehensive about what the legislature might do once it gets medical marijuana rules and tax cuts crossed off its agenda. Particularly, Warren said, officials in Little Rock with the Arkansas Association of Educational Administrators (AAEA) have said the murmurings are that minimum fund balances are being discussed, though no bills have been filed.

“The fear is that the restrictions might be too low where we may have to spend money that might have been used purposely for a program in the next school year. That’s the worst case scenario — where you’re in a situation that you don’t have any operating cash to start the school year off to pay for bills like utilities and payroll-related expenses,” Warren said, adding that even though teachers are off during the summer, “that’s when we try to do many of our renovations and repairs.”

The district also has year-round personnel.

“If you’re not getting enough revenue and your funds are restricted, then it may bleed into the start of the next school year,” Warren said.

A “best case scenario,” Warren concluded, would be allowing school districts to remain in control of their finances with the flexibility and judgment they currently have for the planning of projects and expenditure of funds while focusing on any “problem districts” case-by-case. “(The state) needs to trust that local school districts and school boards are monitoring closely and prudently what their money is and how they’re spending it.”

According to the 2016 financial audit of Fort Smith Schools by Przybysz & Associates — also delivered Wednesday night — the net position to revenue ratio is an indicator reflecting the overall strength of the district. Fort Smith is at 0.66:1. A ratio greater than 0.25:1 is a category “4,” the best available ranking. As of June 30, 2016, the district held a net position of $102.2 million, up slightly from June 2015’s $99.431 million. Governmental fund revenues rose to $155.148 million from $149.888 million during the same period of time. Total expenditures for the 2016 fiscal year were $152.379 million.

Also Wednesday, the Board approved a $1.376 million roof repair at Southside High School that will begin construction over the summer. The Board had previously budgeted $450,000 for the expense, but damages from the April 29, 2016 hailstorm made the district eligible for a $1.027 million insurance payout. With the total cost coming in at $1.376 million, the district will be out-of-pocket $100,000 less with more extensive repairs completed than initially anticipated.