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Duluth News Tribune Sept 1, 2002 RESERVE BY MARTIGA LOHN The Duluth School Board has budget problems, but it controls a rainy-day fund of $14.2 million. So with board members considering a plan to close up to two elementary schools next fall and asking the administration to study the cost of closing a high school, is it raining yet? "Sure, it's pouring," School Board Chairman Mike Akervik said. "But there's kind of an unwritten pledge never to touch it or use it." The district's total budget reserves, more than half of which are state-mandated, total $36.8 million. The board approved a policy in the mid-1990s, back when the public schools were $5 million in the red, to reserve 10 percent of its budget in a discretionary fund. Although the district has had budget deficits since, the board has cut spending to keep its budgets balanced. District officials and several board members oppose spending the discretionary reserve to prevent school closures or other budget cuts. "You can only spend it once," Business Services Director Greg Hein said. "That's the only thing that keeps us healthy," School Board member Harry Welty said. "If you're spending more money than you're taking 9n revenue, there's only one direction to go, and that's spiraling down into statutory operating debt." The budget reserves raise about $1 million a year in in money that pays for operating schools. Reserve funds are available interest-free when the district temporarily runs short of cash for payroll or other expenses. Districts without a reserve spend money on interest for short-term borrowing and have a lower credit rating, which increases the cost of borrowing. Duluth Federation of Teachers President Frank Wanner suggested last week the district could tap into its reserves to pay teachers more money. "Is this a school district or a bank?" Wanner said. "That's an incredible amount of money." The district has other plans for the money. Hein said it will be needed to pay for teacher severance packages and retiree health care. Four hundred of about 900 Duluth teachers are between 45 and 55 years old and expected to retire in the next decade. That will cost the district more than $20 million. Superintendent Julio Almanza added that the district may have to draw down $3.5 million in discretionary reserve funds to cover operating costs this year and next, because state lawmakers didn't include inflation in their school funding equation.
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