SIMPLE LESSON: DON'T OUTSPEND INCOME; CAPE GIRARDEAU SCHOOLS' FINANCIAL PLIGHT EXPLAINED

Hey, fifth-graders, grab your pencils, paper and calculators. I'm going to explain to you why the Cape Girardeau School District needs to cut $1 million out of its budget next year, and I want you to help your parents to understand.

The bottom line is this: You can't spend more than you take in. Now, here's the fancy way to say that: A school district cannot pay out more in expenditures than it gets in revenue.

Are you with me?

Good.

The Cape Girardeau School District's problem is it has disobeyed this basic rule of thumb since fiscal year 1995. A fiscal year is the amount of time a district designates to maintain a budget. Just remember that a fiscal year in this school district runs from July 1 to June 30. So the 1995 fiscal year ran from July 1, 1994, through June 30, 1995.

Now, when a person or school district spends more than it takes in, the extra amount has to be covered in some way. The easiest way to do this is to deduct from the fund balance. A fund balance is a technical term which refers to the amount of money that has been left over from past years.

Easy enough, right? Sure it is, but in this case we're talking about money that is provided by the public. That means the state government is watching the balance to make sure a school district keeps enough cash on hand for emergencies like broken boilers, backed up sewers, frozen pipes or cafeteria refrigerators.

The state recommends that the school district save an operating fund balance (that is the cash on hand from all of the district's accounts) that is equal to 10 percent of what it spent during a fiscal year. Cape Girardeau School District probably will have $1,812,098 left at the end of the 1998 fiscal year that ends June 30. But it is supposed to have $2,469,413 left.

The district isn't breaking any laws, because the 10 percent mark is just a recommendation. State officials usually won't hit the panic button unless a district drops below 3 percent. The Cape Girardeau district, at 7.3 percent, isn't that low.

Now, get those calculators ready, because this is what I want you to explain to your parents. Everything else was background information.

We're going to look at the school district's general fund balance, because that is the account it uses to pay most of the district's bills. The operating fund balance includes building funds, which are used to pay for such things as new buildings and equipment. The government has really strict spending rules on building funds.

Remember, the school district has been spending more than it has been taking in. On July 1, 1997, the general fund balance was $1,471,385. Administrators estimate that on June 30, 1998 (about three months from now), the general fund balance will have only $428,315. That means the district will have spent about $1 million more than it took in, and all of the extra money came out of the fund balance.

That isn't a lot of cash on hand for a school district the size of Cape Girardeau's. If next fiscal year the district doesn't spend any more than it is this fiscal year, and it gets the same amount of money, the district will still be about $1 million short.

That's bad.

The school's administrators said they want to freeze spending (not spend any more money) next year so the district's budget can break even. That means the district will have to spend no more than it brings in, and the $1 million it overspent this year has to be cut out of the next budget.

Administrators expect revenue (that is the incoming money) to increase by $500,000 next year. You do the math: $1 million in overspending minus $500,000 in additional money equals $500,000. That is the amount that still needs to be cut from somewhere in the budget.

Those cuts mean something or someone in the district is going to get less money next year. Salaries and benefits of teachers, administrators and others who work for the schools equal three-fourths of the total budget. Administrators said that is the natural place to start trying to reduce the budget.

But they also are looking at other places, and have encouraged the public to write down their ideas and take them to the Cape Girardeau Board of Education office at 61 N. Clark.

I know we've been through a lot of terms and a lot of numbers, but basically, just remember that if nothing changes next year, the district will have a fund balance that is about $500,000 in the hole after it gets more money.

The school board will meet April 2 to review all of these numbers and to try to find some ways to get rid of the other $500,000 in overspending.

The bottom line is this: You can't spend more than you take in.