Tracing $500,000

By Rachel Margolis

Amid the discussion of how to tackle the $500,000 “deficit” the Dresden School District faces, it isn’t always explicitly clear where it came from. In an interview, Superintendent Wayne Gersen said that the term “deficit” was “substituted as a shorthand,” because “a $500,000 loss in revenue has the same effect as a deficit.” In the end, the budget for the 2011-12 school year will be half a million dollars farther from being balanced if the district doesn’t cut costs, increase revenue, or both. But before attempting to solve a problem, it is important to trace it to its source.

In 2004, the Dresden School District undertook a “$44 million construction and renovation project” involving the construction of the middle school, renovation of the high school, and other improvements. To assist this effort, Dartmouth College agreed to contribute $1.9 million annually for a period of five years, and the school district received building aid from both Vermont (a lump sum) and New Hampshire (an annual sum).
When it became evident that additional money would be needed to complete the project, Dresden sold $5.5 million in bonds. Naturally, these would be accompanied by substantial debt: annual debt service expenditures in Dresden jumped from $100,000 to more than $2.9 million in 2004, and the yearly sum has remained relatively constant at $3.5 million since the 2007-08 school year. Some of the money from Dartmouth went toward paying this debt service by reducing the Dresden assessment, the “bill” the district sends to Hanover and Norwich taxpayers. But the school board knew that the annual debt would continue long after the five years of help from Dartmouth were over—for another fifteen years, to be exact.
“[The School Board] thought, ‘That Dartmouth money’s going to go away; we need to plan for it,’” Dr. Gersen recalled. “We kept referring to it as a ‘cliff.’”
Understandably, if the school district was headed for a cliff, the board hoped to make the fall as painless as possible. When it sold the bonds, the board had “effectively put more money in the bank account than [it] needed to draw against,” creating a “surplus” of $1.3 million; the board members now decided to establish a “soft landing” by incorporating $800,000 of the surplus into the budget for the 2009-10 year and the remaining $500,000 into the 2010-11 budget. The rest of the funds needed to repay the debt, they figured, would come from taxes.
Then, in 2008, financial disaster struck.
“Interest rates dropped precipitously, almost to zero, which is great if you want to refinance your house, but terrible if you have money in the bank,” Dr. Gersen said. Property values did not increase as expected, dealing a major blow to the school district’s revenue.
The result? Dresden’s projected revenue for 2010-11 is expected to fall short of its expenditures by over $200,000, and this figure will be even larger next year as the last $500,000 from the surplus is spent.
This dilemma is largely due to the fact that the school district had not planned for an imminent economic recession.
“If things weren’t as bad as they are in the local community, we probably wouldn’t be having this conversation,” Dr. Gersen surmised. “We get affected by the economy, and things locally aren’t as good as they were even a year ago, and certainly not two years ago. We didn’t get hammered as much as other parts of the country, but we have some serious challenges.”
Deficit is not new to the Dresden School District. In fact, revenues have come up short for eight of the past ten years. The difference is that this time, the shortfall is bigger, and it’s going to accumulate. Needless to say, unless it makes some cuts in the budget or finds significant new sources of revenue, the school district will have to charge taxpayers more and more to pay its expenses.
“Have we hit the limit?” Dr. Gersen wonders. “Are the taxpayers going to say, ‘Sorry, we love our schools dearly, but we’re going to have to make some sacrifices’?” He believes that providing “the same level of service at the same cost” is “an impossibility.” This statement agrees with the old Dresden Cost Reduction Committee dictum, “Business as usual is not sustainable.” But will the Dresden community accept this?
SomPublish Poste community members may find it difficult to adjust, but many are helping to brainstorm new ideas. DCRC chair Carey Callaghan has stated that September’s public forum generated “about 130 ideas, a number of which were duplicative, but over twenty of them were good ideas that the committee is going to include in its master list of ideas, so it was very helpful.”
 “This is the third recession I’ve been through as an administrator,” said Superintendent Gersen. “When everyone is struggling, they have a tendency to blame the school for problems. The question is, do we want to economize on our schools, and, if so, to what extent? What’s the last dollar that you want to save?”

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