Westonka district faces a new financial deficit

Less than a month after Westonka School District voters approved an $877,000-a-year, 10-year operating levy, an annual audit has revealed that the small west-metro district has a $1.1 million deficit and slid back into state-defined "statutory operating debt" at the end of last school year.

"When you hear this type of news there's anger and frustration, and I recognize that," said Superintendent Kevin Borg. "We have to make changes so that we can deliver."

Borg and Chuck Herdegen, the district's business manager, met with reporters Wednesday to preview a report prepared by the audit firm of Kern, DeWenter and Viere. It will be presented to school board members Monday along with a plan to return to a positive fund balance.

School officials said the audit revealed that "overly optimistic" revenue projections -- not exorbitant spending -- in special education, general fund aid and property tax revenues contributed to a $650,000 increase in the $450,000 deficit projected for the end of the 2006-07 school year.

The state Department of Education applies the term "statutory operating debt" when a district has deficits greater than 2.5 percent of its expenses. The $1.1 million figure represents about 5 percent of Westonka's expenses last school year.

The district serves about 2,200 students at its four elementary and secondary schools.

Westonka previously emerged from statutory operating debt in 2004 after dealing with negative fund balances of as much as $1.3 million during the mid-1990s. When former Superintendent Gene Zulk retired at the end of the 2005-06 school year, he said that stabilizing the district's finances had been one of his major goals. Borg, a former middle school principal, was selected as his replacement.

The district attempted to win voter approval of a $770,000-per-year operating levy in November 2006, but more than 61 percent of the voters opposed it.

Westonka administrators and school board members now are facing criticism from some residents who contend they should have said more about the district's financial problems before the Nov. 6 elections. Westonka asked voters to approve the extra levy money during the election to stave off more than $300,000 in projected budget cuts for the 2008-09 school year.

Borg said he did not have the information on the district's deficit until the week before the auditors visited the district during the week of Oct. 29, "and it had to be verified. I presented it at the earliest opportunity I could," at the Nov. 5 school board meeting.

Herdegen said the audit found that the district had overestimated special education funding by about $300,000, general education funds by $200,000 and property tax revenues by $122,000.

He said the shortfall in general-education revenue was the result of overestimated enrollment projections for the 2006-07 school year. But projections for the current school year were more conservative.

The superintendent said he will discuss steps the district can take to make better budget projections at Monday's meeting. By Jan. 30, he must submit a plan to the state for getting out of statutory operating debt.

Defending superintendent

David Botts, Westonka's board chairman, said he believed Borg was "very timely" in the way he notified the board about the auditors' preliminary figures.

"He was quite concerned about his personal credibility," Botts said. "I'll testify that there was no attempt to hide anything."

The veteran board member said "I wish we could've" mentioned it earlier, but the administration needed more information before making the numbers public.

However, Mound resident James McCanney said he voted against the levy because he had heard that the district was having financial problems.

"We knew there was something wrong," McCanney said, adding that he supported non-incumbents in the election, two of whom won, because "we needed people in there who would get the real details."