The Norwich City School District took out a $3.5 million revenue anticipation note last month to ensure adequate cash flow throughout the year, according to interim superintendent Diana Bowers.
A RAN is not a loan, Bowers explained, “it’s just saying we anticipate that revenues are coming in.”
The district must demonstrate that it will accrue enough income within a year to pay back the RAN, Bowers said, noting that district officials expect to have it paid off by the end of the school year.
“It’s not an unusual practice for a school district, but it’s one that we just haven’t done before,” said Bowers, who was hired by the district in July.
A January 2019 report from the Office of the New York State Comptroller cited Norwich as one of six districts statewide exhibiting “significant fiscal stress.”
The district currently has no funds in its unappropriated fund balance, and the remaining reserves are “far below fiscally healthy levels,” according to Bowers.
Since 2015, the district’s annual budget has run on a deficit ranging from negative $2,722,000 during the 2017-2018 school year to negative $465,000 for 2018-2019, Bowers said. The district used its fund balance and applicable reserves to balance the budget, yielding a negative fund balance for the next several years.
Although cuts were made in the previous year’s budget, Bowers said additional cuts would not be necessary.
“We’re looking at taking what we have and doing it smarter,” she said. “We probably will be able to get ourselves back on track — if not this year, then next year — and then we can move forward in a productive way.”
A forensic audit over the summer revealed unspent funds in several areas of the budget that officials were able to absorb into the current year’s budget, Bowers said.
“It’s been helping us bring this year from the red to the black, and we’ve been very successful there,” Bowers said. “Now we’re looking at how we’re going to make that possible moving forward, because there’s only a certain number of places you can go to find money — once you’ve found it, it’s a one-shot deal.”
The district is reexamining its contracts and medical insurance plans, and the budget was frozen at the end of November to minimize spending and help the district recover funds, Bowers said.
“It’s going to take a couple of years before it looks like we’re out of the woods,” Bowers said. “We have the ability to make enough change here that we’re going to be able to fix any of the issues that caused this stress to occur.”
A two-year audit of the district by the comptroller found that district officials developed budgets that were not structurally balanced by appropriating fund balances — a finite resource — to fund recurring expenses year to year.
According to the November 2018 report, $1.5 million in appropriated funds were used to finance the 2018-2019 budget when only $283,749 was available, resulting in a $1.2 million unassigned fund balance deficit by the end of the 2017-2018 school year — a $3.3 million decrease from June 2015.
The report also found that district officials budgeted for more state aid than was reported on the governor’s state aid projections — which were available during budget development — by an average of more than $850,000 between 2015 and 2018.
The district also repeatedly over-budgeted for building contractual expenses, according to the report.
Between 2015 and 2018, expenditures averaged $587,188, compared to an average budgeted amount of $931,295, according to the report. District officials budgeted $767,369 for the 2018-2019 school year, $180,181 more than historical averages.
“Although these line item variances were unnoticeable when District officials analyzed total budget-to-actual variances, this budgeting practice is not transparent to taxpayers who approve the budget,” the report read.
“We’re doing this year is making concerted efforts to get information out, and so we’re happy to meet with people and happy to help them understand what we’re doing,” Bowers said.
The district will host budget meetings at 6 p.m. Feb. 5 and March 11 at the district office.
Sarah Eames, staff writer, can be reached at firstname.lastname@example.org or 607-441-7213. Follow her @DS_SarahE on Twitter.