RICHMOND — Budgetary concerns continue to be a hot topic for Madison County school administrators and board members. State funding issues along with the rising cost of employee fringe benefits are expected to put a dent in the district’s budget, Superintendent Tommy Floyd told the board Tuesday.

The $4.8 million in state capital outlay funds the district has accumulated over the past five years may be transferred to the schools’ general fund under recent legislation, Debbie Frazier, chief financial officer said.

“We’ve set [the money] aside knowing these times were coming — it gives us flexibility,” Frazier said. “If we are forced to use it for operating to get through this financial situation, it’s there.”

However, using the capital outlay for general fund purposes is “not something we want to plan on a recurring basis,” she added.

Frazier guided the board members through the annual financial report to show how the district arrived at a $5.6 million unobligated balance on June 30. However, some members said they still found accounting process confusing.

“I trust you completely,” said board member John Lackey, “but I just don’t understand it. I have to trust you.”

“I concur with Mr. Lackey,” said Chris Hager, who joined the board in April. “Better financial education for the board is in order. We can have several sessions to become better educated about our finances, which will make it easier when the hard cuts come about.”

Although the district began the new fiscal year with a $5.6 million general fund balance and $4.8 million in capital outlay savings, both board members and administrators agreed the financial future is still uncertain.

“With the shortfall from state funding and the cost of opening a new school (Farristown Middle), we’re in a very good place,” Frazier said. “We needed to end in a very good place because the next couple years are going to be difficult.”

Hager asked how other districts are fairing and how Madison County compares.

“Other districts are struggling too,” said Frazier. “In other districts you would probably see a lot of employees being let go.”

Because of the number of retirements last year, Madison County did not have problems with cutbacks, she said.

However, “the 2013-14 [school year] is going to be an even greater concern because [the cost of] retirement (contributions) just keeps going up,” she said.

In Kentucky, teachers’ retirement used to be 100 percent state funded, but districts are now asked to foot part of the bill.

For the next fiscal year, the district’s projected teacher retirement cost (based on current staff and salaries) is $400,000. By the 2015-2016 school year, costs are projected to exceed $1 million.

Retirement costs for non-teaching staff also have increased, jumping from $1.5 million in 2010-11 to almost $1.8 million this past year.

On top of those increased costs, state SEEK (Support Education Excellence in Kentucky) fell $800,000. And, the mild winter reduced utility tax revenue.

Lackey asked where substantial cuts could be made in district expense.

“I’m satisfied that we’re probably going to have to continue to raise taxes,” Lackey said. “We didn’t this year, and that’s great. But maybe next year we may have to do it.”

Floyd said the board will have to be prudent when cutting “big chunks” of spending.

“We’re to the point where those big chunks are going to affect students and their opportunities in the classroom,” Floyd said.

The superintendent said state “education funding is inadequate” and Kentucky is at an educational crossroads.

“Districts all across the commonwealth are living on fewer resources,” he said. “We have worked very hard to reduce from our bottom line without directly affecting students, but if Kentucky doesn’t do something to restructure the funding mechanism for public education, that’s going to be impossible.”

Lackey said there are still places where the district could cut spending.

“I think there are savings that we can make in athletics, technology — you’ve done pretty well on some of the administration expenses that I had doubts about when I came on board. I give you kudos for that, but I think we can make some more. Those three areas, we need to continue to look at. We spend too much on athletics.”

Athletic funding comes primarily from school activity funds that are approved by the board, Frazier replied, and “the cost is almost all (for) people — coaching staff.”

“I realize that,” said Lackey, “but I think there are places we’re going to have to cut back on. The drama areas are the areas we need to cut, not the classroom. The fun kinds of things and the recreational activities.”

Board member Mona Isaacs asked what percentage of the budget goes to pay teachers and staff.

“Seventy-six percent of the general fund is people,” Frazier said.

However, that could rise to 79 percent when the Edujobs federal stimulus funds run out soon, she said.

“That only leaves us around 20 percent we could cut from operations,” Isaacs said.

“Well, we may have to cut people,” Lackey said.

Floyd acknowledged dealing with the financial squeeze will be a challenge.

“We pledge to give this board all the information we can. Itemize as you see fit, so that you know some of the [cuts] we’re looking at,” the superintendent said. “It won’t be painless. It won’t be easy. The challenges aren’t going to stop coming.”

The board passed a measure tabled at the last meeting, the contract with Verbal Behavior Consulting, which specializes in treatment of children with autism and other developmental disabilities.

Board members last month requested more details about costs and service provided.

In the past three years, the district paid about $49,000 to VBC, according to details that community education director Erin Stewart provided after the June 28 meeting.

If the district were to employ a full-time board-certified behavior analyst, the salary would cost about $58,000 annually, she said.

Payments to VBC in 2009-10 totaled almost $9,000, nearly $18,000 in 2010-11 and almost $22,000 in 2011-12.

Currently, the district has 15 students who will need these services in 2012-13, she said.

The contract is set up on an “as-needed” basis, said Frazier, and does not obligate the district to purchase a certain amount of services.

If prices continue to rise for services, someone with the proper expertise should be hired to “give a Madison County citizen a job,” Hager suggested Tuesday.

Director of Special Education Debbie King told the board that VBC’s services are the “last resort” for some students.

If a teacher is struggling with a student’s behavior, they contact one of the district’s special education consultants who provide strategies to correct the student’s behavior, she said.

If the teacher continues to struggle, they use a no-cost “co-op consultant,” she said. And if those two avenues do not work, they consult with VBC.

“I also wanted to point out that this is a new Medicare reimbursement area, so we’ll be able to recover some of the funds,” King said.

The board approved the $52,500 purchase of Dreambox Learning, a web-based math program for elementary students.

All 10 elementary schools use the program, said Instructional Supervisor Mendy Mills, and the district will save $1,800 per school through a collective purchase.

“It’s fun, very interactive and engaging for kids,” Mills said.

Lackey expressed hesitation about investing in another computer program, but two elementary school principals spoke up during the meeting to vouch for its usefulness.

“Parents come up to me and thank me for this program,” said Kirksville principal Dustin Brumbaugh.

Teachers and parents can monitor time spent using Dreambox, and “kids are logging crazy hours,” Brumbaugh said.

“Congrats on trying to find ways to save money,” Isaacs said to Mills.

Other business:

The swearing in of new school board member Beth Brock was first on the agenda at Tuesday’s meeting.

A chuckle erupted from those in attendance when Brock pledged “nor have I sent or accepted a challenge to fight a duel with a deadly weapon,” which is part of the oath of office for all Kentucky officials.

The board approved out-of-state trips for the Caudill and Foley middle school archery teams to compete in the World Archery Tournament in Orlando, Fla. Oct. 2-7.

The district will begin an accreditation review with AdvancEd, which will evaluate organizational effectiveness. A federal GEAR-UP (Gaining Early Awareness and Readiness for Undergraduate Programs) grant will cover the cost.

Isaacs proposed that citizen comments about agenda items be heard at the beginning rather than the end of board meetings.

“If there is something on the agenda that you want to make sure we understand before we vote on it, we can all hear what you have to say,” she said.

The board approved a request from Madison County Emergency Management Agency to place a warning siren on Farristown Middle School campus.

Architect Tony Thomas reported that all construction projects are on schedule despite delays caused by recent storms. Thomas expects Madison Central’s football stadium to be ready for the team’s first home game. Work at Foley Middle should be completed by next week, and work at Farristown Middle is “in the home-stretch,” he said.

Crystal Wylie can be reached at cwylie@richmondregister.com or 623-1669, ext. 6696