Arlington district eyes change in fiscal calendar for one-time boon

ARLINGTON -- Strapped with budget deficits, the Arlington school district is considering an accounting switch that could save it about $22 million in fiscal 2011-12.

Several school board members said they want to discuss changing to a fiscal calendar that starts two months earlier, allowing the district to collect 12 months of property taxes and state funding to pay for 10 months of operating expenses. It's a one-time benefit: The fiscal year would return to 12 months, running July 1 to June 30 each year thereafter.

The discussion is tentatively set for the Sept. 16 board meeting.

The idea isn't new. Since the state approved the earlier alternative to the traditional Sept. 1-Aug. 31 fiscal year in 2001, 141 of the 1,235 school districts have switched. Fort Worth, Birdville, Northwest, Burleson, Denton and Dallas are among them.

Besides the funding boost, officials say, the earlier start allows districts to complete their budgets and make funding available to schools well before the hectic start of each school year.

On the other hand, state-level decisions on funding that drag into the summer may cause greater heartburn among local budget makers facing a June 30 deadline. Budgets might have to be amended more often.

"Ultimately I'm asking the question, 'What's the long-term benefit to the district?'" said Arlington district Trustee Wayne Ogle. "I would hate to get a one-time adjustment, then get saddled with a system that doesn't best serve the district."

Deficits remain

Also, the financial windfall doesn't fix budget shortfalls, said Cindy Powell, the district's associate superintendent for finance. The one-time savings acts as a bonus, having no effect on revenue and expenses -- and any gap between them -- in the years to come.

"You go right back to having a deficit if you don't make any other changes to your budget," she said, reiterating a point she made to the school board recently.

Still, socking away an extra $22 million in reserves could allow the district to cover additional years of shortfalls while weathering a weak economy and uncertain state funding, she said.

The $443.3 million budget the board adopted last week includes a projected $13.4 million deficit, the district's fourth consecutive shortfall. It will take the budget reserve, or fund balance, down to $57.5 million. Even so, the reserve will still exceed the optimum level of $39.1 million the state recommends for Arlington, based on roughly two months of operating expenses.

The district will need that cushion, said Powell, who projects several more years of shortfalls.

The district has to notify the state by June 30 if it plans to implement the new fiscal calendar a year later, on July 1, 2012. The district's shortened 2011-12 fiscal year, then, would run Sept. 1 to June 30.

Difficult choices

The Fort Worth district implemented its early fiscal calendar in the 2009-10 school year, saving $33.5 million that was mostly applied to the year's projected $40 million budget deficit, said Cheryl Kennon, the district's executive director of management and budget.

The savings prevented a big hit to the district's $102 million reserve fund for 2009-10, but revenue is expected to continue to fall short despite budget adjustments. The recently adopted 2010-11 budget of $606 million includes a projected year-end deficit of $31 million, Kennon said.

"It did defer some painful decisions that are going to have to be made," Kennon said. "We have to continue to evaluate some programs. Basically it bought us another year."

But she and other school officials believe that the bigger benefit may be how the new fiscal calendar aligns with the academic schedule. With budgets wrapping up by June 30, teachers and other staff members can be more certain about salary and program changes before signing contracts.

Also, schools don't have to wait as long for funding to finish buying supplies and preparing for the next school year.

"At the end of the year, you're trying to get ready for school, trying to get things done, and the state says you have to have the budget in place by Aug. 31 -- it puts pressure on," Arlington board President Gloria Peña said.

With the earlier fiscal year, she said, "I think everything would fall into place better."