THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Wednesday, November 22, 1995 TAG: 9511220499
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: BY TOM HOLDEN, STAFF WRITER
DATELINE: VIRGINIA BEACH LENGTH: Medium: 99 lines
The School Board learned in a report Tuesday that the district could be heading for a potential budget shortfall of up to $8.6 million this year because officials again overestimated state and federal revenues.
It is $2 million more than school officials calculated Oct. 17, when the board approved cost-cutting measures to reverse the trend.
The preliminary figure of $8.6 million, if it holds true when the budget year ends June 30, 1996, would be in addition to the $12.1 million deficit posted last year by city schools.
It is against state law for a governmental body to end the year with a deficit. The Circuit Court on Monday granted Commonwealth's Attorney Robert J. Humphreys' request to empanel a special grand jury to investigate the school deficit.
Although the district has seven months before the end of the fiscal year to make up the projected $8.6 million shortfall, Tuesday's report reveals that this year's budget problems are getting worse, not better.
Interim Superintendent James L. Pughsley was cautious about the projections, saying the administration would update the School Board in January when more information becomes available.
``It could change,'' he said. ``If the information we heard this evening stays where it is, then obviously it could have a negative impact. If it were going in the other direction, then our projection might improve.''
Donald A. Peccia, associate superintendent for administrative services, explained in the report that revenue the school district expected to receive from the state has fallen short in three main areas: sales tax ($345,048 less), aid for remedial summer school ($584,952 less), and money for adult education ($77,372).
In addition, revenue from the federal government to offset the impact of military dependents educated by the school district is expected to be $550,000 to $1 million less than forecast.
Those figures total $1.5 million to $2 million, depending on the final tally of federal impact aid. Peccia's report states that ``none of these additional reductions in revenue were factored into the Projected Deficit Reduction Plan,'' adopted Oct. 17 by the board.
Peccia's report also states that expenditures for the year to date are below those recorded during the same period last year.
An independent audit of the 1994-95 budget found that the school district overspent $6.4 million and overestimated its expenses by $5.7 million. The audit also reported that budget transfers of $43 million were made throughout the year.
Those transfers continued Tuesday when the board moved $75,000 from the operating fund into the legal services fund. The board had already added $75,000 in September.
Board member Tim Jackson seemed exasperated.
``How can this happen? How can we budget less this year than we spent all of last year?''
This year's budget included only $107,994 for legal services. But by October, the district already had spent $129,756 on legal services, forcing the board to take money from the operating budget to cover the expenses.
The large number of interbudget transfers in the 1994-95 budget was cited by auditors from KPMG Peat Marwick as rendering the original budget documents useless.
Two weeks ago, the School Board approved more than 100 pages of budget transfers totaling more than $5.5 million in the 1995-96 budget.
Despite the problems reported Tuesday, board Vice Chairman D. Linn Felt credited the administration with identifying the problem early and publicly, an advantage he said the board has not enjoyed with previous administrations.
``If we're not going to get the revenues, then we'll have to go to the city,'' Felt said. ``If you don't want to pay us, give us more, then we're going to have to cut more in the budget.
``The farther into the school year, the more severe those cuts will be,'' he added. ``The problem last year was that we were continually told we would get the revenues and then we didn't. If we had been told up front, like we're being told right now, then we could have taken measures, gone to the council. Whether they would have agreed to our request I don't know, but we certainly would be on better terms with them than we are now.''
The city, however, may have more trouble making up a deficit this year than it did last year, for precisely the same reason the school's shortfall is increasing.
Thanks to conservative budgeting, the city finished its 1994-95 fiscal year with a $14 million surplus, enabling it to loan the district money to compensate for the $12.1 million deficit.
But, because the city is also drawing less in sales tax revenue than it projected in this year's budget, its surplus is likely to be less this year, city officials said Tuesday.
The School Board has not asked the City Council to consider another bailout, but council members have said they are already concerned about that possibility.
The School Board and the City Council deferred action Tuesday on a proposed agreement that would set the terms for a city loan to pay off last year's deficit. The School Board scheduled a Dec. 13 workshop to discuss the city's plan to merge some financial operations. MEMO: Staff writer Karen Weintraub contributed to this report.
KEYWORDS: VIRGINIA BEACH SCHOOL BOARD by CNB