Hard to grasp, but COVID pandemic has had ‘positive’ impact on Pelican school budget— at least for now
And just like that … the coronavirus pandemic of 2020 reversed the financial future of the Pelican Rapids School District.
The Pelican district was facing the prospect of continued negative cash flow, and reserve funds dipping below $100,000. That’s barely enough to run the school for a few days.
Now, the school is forecast to build fund balance reserves to about $1.1 million.
School finance experts recommend a fund balance equivalent to 10 to 13 percent of operating expenses. With the Pelican district forecasts, the schools should be at about 12.2 percent of the school’s approximate $10 million annual expenses.
For guys that wield calculators and gaze with fascination at spreadsheets, this is incredibly good news.
The Pelican school board should be standing up and cheering, suggested Pelican school finance director Rudy Martinez, at the Sept. 14 school board meeting.
The mask-wearing board members; viewing the financial report on a screen and the finance guy “Zooming” into the meeting through modern technology; weren’t quite that animated in their reaction.
But the forecast of more than $1 million in reserves was some of the best financial news in several years.
“You should go home and sleep well, knowing you’re doing a darn good job,” said Martinez to the board and administration.
Pandemic has resulted in some cost trimming
The COVID-19 pandemic itself is, of course, nothing to cheer about.
But for school districts, the outbreak more-or-less “automatically” trimmed expenses such as transportation, activities, travel costs to sports and events, food service, waste collection, janitorial supplies, etc.
These reductions, combined with several internal measures, have returned the Pelican schools to a positive cash flow.
• With the untimely death of Superintendent Ed Richardson in April, the board restructured and effectively “downsized’” the administration team to save about $100,000.
• By offering early retirement incentives to several high-compensated veteran teachers, the board saved another $100,000 or more.
• Painful budget cuts more than a year ago, totalling about $1 million, have started to show up on the bottom line—as the school’s reserves start to re-build.
COVID relief also assisting schools
Also indirectly aiding schools and other local governments are the various federal CARES Act and state relief programs, which are funneling dollars down to the local level.
For the Pelican schools, COVID pandemic-related funds have totalled more than $500,000. Among other expenses, this enabled the hiring of substitute teachers. Typically, substitute teachers are retired professionals—precisely at an age that is most vulnerable to the coronavirus. This has forced schools to broaden the search for qualified subs.
Federal relief will also enable schools to offer free lunches for all—regardless of family income.
Local reserves are buffer against state aid delays
Despite the positive financial trend, it isn’t exactly “Miller Time” for the Pelican Rapids school board and administration.
“The state is not in the best financial shape,” said Martinez.
The pandemic has completely reversed Minnesota’s financial profile—from a billion dollar surplus, to deficits with no bottom in sight.
Pelican’s reserve funds will help the school board weather delayed or deferred state education funds, which schools faced during the last recession of 2009-10.