Wrenshall school board preps for 'cushion' loan

The Wrenshall school board will vote later this month on another loan to support cash flow during a period of time in the new year when district funds will be at their lowest.

Speaking at Tuesday’s work session of the board, superintendent Jeff Pesta compared the $300,000 loan to last year, when the board approved a $500,000 loan.

“This is truly our safety net,” Pesta said, later telling the Pine Knot, “in my recommendation to the board, I’m reasoning that the cost of borrowing $300,000 is worth it to eliminate the small risk of coming up short for payroll, lease payments, etc.”

Board members noted the expected loan as progress, following last year’s budget cuts due to declining enrollment.

“At least the amount went down,” board member Misty Bergman said.

“We just need to make sure we’ve got the cushion,” board member Mary Carlson added.

The board will vote on the loan during its 6:30 p.m. Dec. 18 meeting, following the annual 6 p.m. Truth in Taxation hearing.

Steve Pumper, vice president of the Twin Cities office of PMA Securities, presented details of the loan, or “aid anticipation certificates,” which borrow against future state aid.

The money, to be borrowed in January, must be paid back by Sept. 30, and will come at a time when the district’s on-hand cash amount is expected to drop to a $24,000 deficit. Coffers will refill as large chunks of state aid is made available.

Pumper said he expected the board will get a better interest rate than its self-imposed ceiling of 6.5 percent.

“The market has been very much in your favor the last three weeks,” Pumper said, describing how cash that isn’t used will be making money in the securities market, more or less offsetting the estimated interest of $11,230 at 5.5 percent.

The district made $312,000 in budget cuts entering the 2023-24 school year, in an effort to make its way back to financial stability. With fewer students than recent history — 335 students K-12 this school year — the district will likely vote on a reduced levy in December. The levy will be negligibly down, Pesta told the board, because levies tend to drop as enrollments do.

The board approved the maximum proposed levy in September, and final adjustments will be made leading up to Dec. 18. The proposed levy which the board cannot exceed will be $1,516,803. Last year’s final approved levy was $1,517,669.

Meanwhile, the borrowing of $300,000 is not directly related to the district’s general fund balance, Pesta explained; rather, it’s the cash made available to meet obligations and expenses on any given day during the fiscal year, which ends in June.

End-of-fiscal-year fund balances have varied in recent years, with $166,000 in 2022, followed by a negative $59,000 deficit last year due to having fewer students (and less state aid) in the second half of last year.

Projections for 2024 “reveal the start of an acceptable general fund balance,” Pesta said, of at least $40,000.

In theory, the district could have avoided the loan by strategically timing its bill payments. But the district is undergoing a transition in its business office and the board and superintendent agreed that now wasn’t the time to be left without a cushion.

In November, the board approved a 1.5-year individual contract with Elizabeth Peterson to become its assistant business manager in January. Peterson is currently the district office clerk/payroll and benefits manager for the district. Peterson is being groomed to serve as the business manager in the future. Currently, the district purchases limited business manager services from the McGregor district through June. Their business manager, Shauna Dalchow, is mentoring Peterson, who is also attending training to take over the role. Progress on that pathway will be evaluated in June and again in December 2024.

“The board can’t promise anybody a future position,” Pesta said. “However, there is a committed effort to support Beth in developing her skills.”