When expenditures outpace revenues, school districts often turn to their fund balance to level things out.

But what happens when the fund balance runs dry?

That is the predicament Lehighton Area School District found itself in this year, leading to Monday’s majority board vote to, at least temporarily, cut student transportation to and from school each day, leading to a $992,810 savings from the 2020-21 budget.

How did it happen?

The district used 94% of its fund balance from 2014-15 through 2018-19, leaving it with $874,438 for the fiscal year ending June 30, 2019. That money is expected to have been exhausted in the fiscal year ending June 30, 2020.

From 2014-15 to 2018-19, Lehighton overspent its budget by $68,975, $5.35 million, $2.19 million, $1.90 million and $3.2 million respectively.

Some of that was intentional.

In a June 2018 board meeting, Lehighton’s business administrator at the time, Brian Feick, said the district’s fund balance was at around 17 percent of the budget when he came on board in May 2014.

“Over the last four or five years, we have worked to get that down to 7 or 8 percent, where the state says it should be,” Feick said in 2018.

Over $6 million was used from the fund balance to pay for the addition of artificial turf and opening of a multipurpose athletic stadium.

Even though the district was trying to reduce its fund balance level, did it go too far?

“This district is in the position it’s in because it spent more than the revenues it took in,” current business administrator Patricia Denicola, who replaced Feick in March 2019, said in a meeting earlier this year. “Since 2016-17 through the 2020-21 preliminary budget, expenditures have increased, on average, 7%, while revenue rose less than 1 percent.”

The 2018-19 overspend left maybe the most questions surrounding it.

When that budget was approved, projections were that the district would only require just over $200,000 from its fund balance to level out revenues and expenditures. It ended up needing $1.77 million. Denicola said the number could have been even worse had it not been for two one-time revenue sources totaling over $1 million; proceeds from the sale of former elementary school buildings and PlanCon reimbursement that, she added, should have been coming in during the previous two fiscal years.

Lehighton budgeted for $40.69 million in expenditures for 2018-19, but actually spent $43.9 million. In 2017-18, it budgeted $40.99 million and spent $42.39 million. In 2016-17, it budgeted $39.17 million and spent $41.37 million. In 2015-16, it budgeted $38.65 million and spent $44.01 million.

“In those years, we were never alerted we were running in a deficit,” board President Larry Stern said in a meeting earlier this year. “This budget number uses actuals versus the fictitious $40 million budgets presented in past. We can sit here and lie to each other and make things up. We all understand we have an issue and need to try to work together to find a solution to the issues.”

In June, Denicola said throughout the 2018-19 fiscal year, benefit payments were made to insurance carrier, but not indicated in the expense reports of the district and not shown on budget summaries.

She also cited historical budget overruns in areas such as special education and maintenance.

“Consistent overspending is how we are where we are at today,” Denicola said. “I don’t know how those budgets were tied in to realistic expenditures. Beginning in 2019-20, we budgeted more closely to our actual expenditures.”

Could transportation be saved?

Lehighton has not closed the door on developing some kind of transportation plan for 2020-21.

“We are still in talks with our contractor to determine if there is some level of regular transportation we can provide that would meet the guidelines related to COVID-19,” business administrator Patricia Denicola said. “Our work does not stop because the budget is adopted. We are also actively looking at any potential revenue sources to support a transportation program of some sort.”

School board Director David Bradley said Monday night he drafted a budget that has a tax decrease and does not eliminate transportation or any other programs.

“All we have to do is put the employee benefits commensurate to the marketplace,” he said.

Administration and other board members said the plan isn’t feasible because salaries and benefits are tied to contracts. The teachers’ contract is up at the end of August, while the support staff contract expires next year.

One of the options that could help restore funding for buses may be a debt restructuring that would save $1.3 million over each of the next two years.

“If we put all the right pieces together over the next few years, the refinancing plan could help us get through some lean years,” Denicola said last week.

District administrators have also cited COVID-19 as a significant challenge to transporting students this year. Superintendent Jonathan Cleaver said meeting a recommendation of no more than 12 students on a school bus would mean around 100 bus runs to get half of the student population to school.

Transportation remains one of the big unknowns in districts across the state as return to school plans are still actively in the works. Each district has to have a plan, approved by its school board, before the fall campaign begins.

“Transportation,” Cleaver said, “is going to be a big discussion item as everyone looks to possibly reopen school in the fall.”