Make Cuts or Dip into Rainy Day Fund? School Board Debates 2012-13 Budget

The Birmingham Board of Education has some difficult choices coming up as it works to finalize the 2012-13 budget for .

Facing a budget deficit of $5.9 million for the 2012-13 school year, school board trustees have to decide: Should we dip into our rainy day fund or cut funding to the district's building and capital equipment fund? Or, should we do something else entirely?

According to a presentation to the school board at its regular meeting Tuesday night, the district is projected to spend $106,630,950 during the 2012-13 school year, while only bringing in $100,684,348 in revenue.

That leaves the district with a looming deficit of $5,946,602 — up significantly from the 2011-12 deficit of $2,062,336.

Debbie Piesz, assistant superintendent for business services, presented two options to the school board Tuesday night:

• Make up the decificit by cutting transfers to the district's building and capital equipment fund by $3.6 million in addition to spending $2.7 million of the district's fund equity.
• Or, spend the maximum amount of fund equity allowed by board policy — $2.89 million — and then break with that policy and spend an additional $3.4 million of fund equity to make up the difference.

Choosing the second option would involve setting aside School Board Policy 6215, which states that only a certain percentage of fund equity may be transferred to the general fund each year: either 3 percent of total expenditures or 20 percent of the total fund equity, whichever is lesser.

Birmingham Public Schools has around $16 million in fund equity — a rainy day fund it draws upon during tough times.

Board members torn between fiscal responsibility, building improvements

The 2012-13 budget does not need to be approved until mid-June. A public hearing was set by the school board for 7 p.m. June 5, during which the board will solicit feedback before approving the final budget.

However, school board trustees were mixed when it came to deciding between the two choices, torn between fiscal responsibility and making sure money is there for important repairs and purchases.

Trustee Michael Fenburg announced his support early for the first option, which includes eliminating $3.6 million in transfers from the general fund to the building and capital equipment fund. That fund is used to repair school facilities as well as make major purchases, such as .

Spending around $6 million of the district's fund equity would bring that account down to around $10 million, Fenburg pointed out, a move the district may not be able to recover from.

"We need to make cuts," he said. "To take $6 million out of fund equity in one year is too severe."

Trustee Rob Lawrence said he was more in favor of the second option, noting that building improvements and equipment purchases should be one of the district's priorities.

"We're pretty much at the end of the hard decisions," he said. "We have to talk about our priorities."

Superintendent David Larson noted that the building and capital equipment fund has no revenue stream, and any money in that fund has to be transferred from the general fund.

Several trustees, however, said they would like to see a third option — one in which money is held back from the building and capital equipment fund until the state releases its budget later in the summer. Tied up the state budget, they pointed out, are any potential changes to state school aid or retirement rates — should the district see more money than they expect, that money would go straight back to the building and capital equipment fund.

It's happened before. In January, after seeing better-than-expected revenues during the first six months of the fiscal year, as well as more money from the state.

Piesz and her department continue to develop the 2012-13 budget and will continue to update the board throughout the spring. In May, the district will finalize the budget process, followed by public hearings in June.