Missouri Ponders Steps To Avert Financial Crises in Districts

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Missouri education officials are considering taking steps to avert what they fear may be a potential financial crisis among school districts stretched by meager local tax bases, rising costs, and dwindling state aid.

After reviewing a financial report that depicts a statewide pattern of deficit spending among local districts and conducting a "fact-finding tour" of several school systems, Commissioner of Education Robert E. Bartman warned the state school board this month that "the vital signs are getting weaker in many school districts."

While none of the state's 543 school districts were in danger of imminent financial collapse, Mr. Bartman told the board, the possibility that a district may go bankrupt is real enough that the state should investigate methods of forestalling or ameliorating financial failures.

At his suggestion, the board directed the state education department to develop ways to help districts facing financial emergencies prevent financial collapse.

The department could, for example, promulgate new regulations that would tighten state oversight of local spending.

The board also indicated that it might seek legislation during the coming session to impose statutory penalties on districts that run deficits, possibly by closing them or forcing them to consolidate.

"We're not trying to say that 'the sky is falling,' but we think it's prudent to do what we can," said James L. Morris, a spokesman for the department.

The report, presented to the board by department officials late last year, indicates that 16 districts are violating state law by spending more money on operational expenses than they raise in revenues.

The districts have accumulated deficits in their incidental accounts, which cover day-to-day operating expenses, ranging $563 to $2.7 million, according to the report. Statewide, the total shortfall was found to be $3.6 million.

The department also estimated that as many as 40 districts could post deficits next year if no remedies are found.

A more serious finding, state officials argue, is that more than 300 districts are avoiding deficit spending only by tapping emergency "reserve funds."

Mr. Bartman likened that wide8spread strategy to a family dipping into its savings account.

"There is often a good reason to do this, but you can't do it indefinitely," he said. "It's a sign of trouble."

Although deficit spending is not a new phenomenon, the report also indicates that conditions are worsening rapidly, Mr. Morris said.

Four years ago, he noted, 10 districts posted a cumulative deficit ofless than $500,000.

The problem also is more widespread than in years past, Mr. Morris said, and affects all types of districts.

"It's a general malaise," he said.

At the same time, however, Mr. Morris noted that, "In some cases, the problems are fairly modest."

But local superintendents, even those whose books are balanced, say they are not as optimistic that the trend can be reversed, particularly if the state continues to fall short of its previously stated commitment to education funding.

"I think it's very, very likely that a number of smaller school districts will have to close their doors because they don't have enough money to operate," said Eugene Oakley, superintendent of the Greenville R-II School District.

Mr. Oakley, a former state legislator, is the spokesman for a coalition of small districts that has filed suit against the state, hoping to force legislators to fully fund its Foundation Formula for school aid.

Critics argue that the formula has never received more than 50 percent of the funds it should have under state law.

The crisis also comes at a time when state spending is essentially flat and Gov. John Ashcroft and key legislators are calling for fiscal austerity.

But many local superintendents argue that the shortfall cannot be made up through local contributions alone.

"Basically, we're just sitting here and starving to death," said Donald L. Collins, superintendent of the Dora R-III School District in rural Ozark County.

Mr. Collins said that while his district and many others are not running deficits, they are surviving on very tenuous margins.

He noted that his district, which operates on a $1.1-million annual budget, ended the fiscal year with a reserve fund of only about $5,800.

Under such conditions, a large expenditure could have pushed the district into insolvency.

"All that needed to happen was for the pump to go bad on our well," he said.

With a deficit of $2.7 million, or 10 percent of its operating budget, the Normandy School District on the northern fringe of St. Louis County has the largest single shortfall noted in the state report.

Bruce Smith, the district's superintendent, said that local levies and bond issues are at best an unreliable solution to his district's problems.

Mr. Smith noted that the district has not increased its operational levy since 1969 and is in an area with an extremely low tax base. Only a quarter of the district's revenues currently come from the state, he added.

The district hopes to eliminate its deficit over a three-year period through austerity and deferred maintenance, Mr. Smith explained.

But other school officials are proposing more drastic action.

Jerry Deardorff, superintendent of the 255-student Marquand R-VI district, said he is considering teacher layoffs and plans to ignore state mandates, such as a legislative proposal requiring all districts to teach driver's education, unless they are adequately funded.

"I'm to the point where I'll tell them, 'We'll do it when you spend the money for it,"' he said.

Vol. 10, Issue 19

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