"We did not meet our enrollment projection," said Melody Douglas, the district's chief financial officer. "We fell short by about 100 students."
That drop in enrollment changes the funding formula for the school district. It means the district will lose $228,279 in state formula funding, $66,303 in borough funding and $486 in state Learning Opportunity Grants.
It also means the district will have to revise its general operating budget to account for the shortage -- and likely dip into reserve funds.
Douglas will present a memo and proposed budget revision to the school board tonight.
She said the revision is not unexpected, because the original district budget did not include the Montessori Charter School. The state Department of Education and Early Development approved the charter in late June, after the district budget had been approved by the school board and borough assembly, she said.
"The budget was already set, so the board knew we needed to do this," Douglas said.
The low enrollment was a bit of a surprise, though. The original district budget was based on a projected enrollment of 9,725 students. The Montessori Charter School increased the projection to 9,767 students. But as of Oct. 17, only 9,667 students were enrolled in KPBSD schools.
The state funds the district on a per-student formula, and the state contribution directly influences how much the borough is allowed to contribute to the district budget.
The budget revision will designate $211,483 for the Montessori Charter School. In addition, the budget for Connections, the district's distance-learning program, will be cut $101,287.
"They didn't meet their projection," Douglas said. "Assuming the kids don't show up, they won't need those funds."
In addition, Douglas will recommend the district appropriate $464,778 from the fund balance.
In layman's terms, the fund balance is a sort of savings account, Douglas said. Any revenue money not spent becomes part of the fund, and it cumulates from year to year. Some of the fund balance already is designated for specific projects or expenses, but at present, about $1,300,992 is available for various district needs.
Douglas said the district needs to be careful about using these funds, however, because they are not renewable. Most district expenses, such as employee salaries and benefits, are recurring costs, while the fund balance does not renew itself each year.
"Once it disappears, it disappears," Douglas said. "We don't want to use it as an ongoing revenue source."
She added, however, it is sometimes necessary to dip into those savings, and that the enrollment shortage is a valid use of the fund.
The remaining money in the undesignated fund balance will be available for other necessary budget revisions in the future.
"We're not making any recommendations for that money at this point in time, particularly in light of the ongoing negotiation process," Douglas said.
Under the current budget, about $58 million -- a little more than 75 percent of the district's general operating budget -- is set aside for employee salaries and benefits. Teachers and support staff employees are still negotiating terms of new contracts to replace the ones that expired June 30 and will take their case before a federal mediator later this month. The employees are seeking significant increases in salaries and benefits.
Douglas said, if necessary, the remaining undesignated fund balance -- about $836,214 -- could go toward employee compensation, but would not be nearly enough to meet the demands of the contract. It also would be gone after the first year.
The money also may be needed after the first of the year when utility prices are expected to rise.
She said while the budget is tightly balanced, it is too early to tell just what will need to change as the year progresses. In fact, the revision under consideration Monday night will not be the last one the district makes.
This revision is based on the district's enrollment data as of Oct. 17, but the Department of Education and Early Development finalizes state funding appropriation in December, after analyzing averaged 20-day period enrollment reports from schools. The 20-day period ended Oct. 25, so the numbers shouldn't be too much different, Douglas said.
It was necessary to make a budget revision now rather than waiting until December, because the district already is starting preliminary work on its fiscal year 2004 budget, which is based on this year's budget.
Douglas said Thursday that she had not spoken to members of the board about the revision, but didn't expect there to be much objection to the proposal.
The school board will consider the revision at its twice-monthly meeting at 7:30 tonight at Seward High School. Board meetings are usually held at the borough assembly chambers in Soldotna; however, the board meets in both Seward and Homer twice each year.
Also on the board agenda for tonight:
n District administration will present 2002-03 enrollment reports and pupil-teacher ratio comparisons, as well as enrollment projections for 2003-04.
n The board will consider the administration's proposed state and federal legislative priorities for 2003.
State priorities include assuring quality education for all Alaska children by: increasing the base student allocation -- the amount of money district's receive per student; inflation-proofing the education funding formula; placing Learning Opportunity Grants within the education funding formula; fully funding mandates; and reevaluating the education funding formula. A second priority is adopting legislation that awards an additional 5 percent of foundation aid to districts that meet a number of criteria.
Federal priorities include allowing Alaska flexibility in applying for the Leave No Child Behind program; fully funding the Individuals with Disabilities Education Act; and paving East End Road from Homer to Razdolna, Voznesenka and Kachemak Selo schools.
n The board will consider three new teacher assignments.
n The board will present a first reading of a number of policy revisions. The revisions, as well as all agenda and packet information for the meeting, are available online at www.kpbsd.k12.ak.us/schboard-/Default.htm under "Meeting Agenda and Packet Information." Docu-ments also will be available at the meeting.