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August 15, 2010

More proration could spell ‘doom and gloom’ for county schools

Additional cuts could send system into the red

If proration is declared next year, the Cullman County Board of Education could be out of money and relying on bank loans to pay the bills by mid-2011.

With the current fiscal year drawing to a close next month, what happens in 2011 could potentially make or break the Cullman County Board of Education’s budget.

Though the system should survive until the 2009-2010 fiscal year ends on September 30, any potential cuts to next year’s education funding could send the budget into the red.

“We’ve made preparations to get us through this fiscal year, but then on October 1 it starts all over again with a new set of challenges,” Superintendent Hank Allen said.

Current projections anticipate an ending balance of approximately $430,000 at the end of the next fiscal year on September 30, 2011, but any potential state cuts could make that reserve disappear.

“If things work out like we hope, we may have enough to cover that shortfall and not end the fiscal year with a deficit, so that’s a good thing,” county schools CFO Randy Dunlap said at a recent preliminary budget hearing.

In an effort to stay above water in the coming year, school officials plan to shift more than $1 million from other budgets, such as school bus renewal and construction funds. But, flexing money can create other problems.

“Right now, we have over 50 schools buses that are more than 10 years old,” Dunlap said. “We haven’t been able to replace some buses that need to be replaced.”

Though a plan is in place, the entire situation could change quickly if the state education budget is prorated again, as cuts the past two years have already cost the system more than $10 million.

If proration is declared again, the small reserve will almost certainly be depleted, and the school officials would have no other option but to open a line of credit.

“What looms out there could be worse,” Dunlap said. “Proration could occur, which would be devastating for us.”

Twenty-five school systems in Alabama anticipate having to borrow money within the next few months to remain in operation, according to the state department of education. Two school systems, Coosa County and Sumter County, have already been taken over by the state because they’ve essentially reached their lending limit.

“Even though we’ve established a line of credit in the past for short-term lending, we have not and do not anticipate having to do that this fiscal year, which is good,” Dunlap said. “But, without knowing more, we can’t say with certainty that we won’t have to do it next year.”

But, if additional proration occurs, Dunlap said loans would be about the only viable option to cover the shortfall.

“If [proration occurs] we would almost have to do it,” he said.

Judging by current economic indicators, Allen said proration is a definite possibility in 2010-2011.

“Some unfortunate rumors coming out of Montgomery is there could be around one or two percent proration, which would really be doom and gloom if that came to pass,” Allen said. “What’s so discouraging are the unknown variables, which will always be prevalent in an education budget, because we have no way of controlling profit and loss like a business would. We’re just really hoping something will happen so the governor doesn’t have to declare it.”

Though a date has yet to be set, the school board plans to hold a public budget hearing soon to further discuss the financial situation.

* Trent Moore can be reached by e-mail at trentm@cullmantimes.com, or by telephone at 734-2131, ext. 220.

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