State demands reimbursement from ES schools

Tuesday, February 22, 2011 ~ Updated 11:04 AM

EUREKA SPRINGS -- The fate of the Eureka Springs School District's budget for this current school year appears grim, in light of the state's demand for reimbursement of what it says is excess millage revenue over and above the minimum foundation funding of $6,023 per student. Eureka generates $7,291 per student and is therefore considered a "wealthy" school district.

The Arkansas Department of Education (ADE) sent a certified letter last week threatening to cut off grants and aid if the district does not comply.

Superintendent Wayne Carr reported to the school board Thursday he had responded to a state Department of Education letter sent last month demanding the school district adjust its budget to reflect an expense of $803,000 it says the school district owes by June 15. The letter gave the district 30 days to respond, by Feb. 12.

"So I responded in an email and said we have received your letter, thank you, and we'll be in touch."

He explained to William J. Goff, Assistant Commissioner of Fiscal and Administrative Services, that he had asked the district's attorney to review the request and that a bill was being filed by State Rep. Bryan King "that would offer a solution to this issue." He said severe weather, with the schools closed for 11 days, had delayed efforts to respond.

The state "didn't like that so well," Carr said.

Goff sent a certified letter dated Feb. 15, replying that under state law, if the ADE finds a school district's budget "deficient," it notifies the district it has 30 days to respond "prior to suspension of grants and aids."

"You will have 30 days from receipt of this letter to correct the deficiency and provide a written response that explains how the budgeted revenue for 2010-2011 has been reduced by at least $803,005," Goff wrote.

Carr said Eureka and two of the three other school districts also under the demand, Fountain Lake and West Side Greers Ferry, discussed jointly filing a lawsuit. The remaining district, Armorel, is under fiscal distress and cannot afford to participate, he said.

Carr asked the board for approval to partner with the other districts in the suit.

"We will ask for a declaratory judgment and injunctive relief," he said.

Eureka's part of attorney fees would be $14,000 to $15,000 at the most -- if depositions are not taken. It will also cost more if there is an appeal.

The board approved signing a contract with Hatfield & Sayre of Little Rock to participate in the suit.

Thursday, Rep. Bryan King of Green Forest filed House Bill 1435, which would allow school districts to keep any excess millage revenue they generate above the state's mandated foundation funding of $6,023 per student.

King also sent a letter to Attorney General Dustin McDaniel, asking him to revisit his opinion issued last year that excess millage must be turned back to the state for distribution to districts that could not generate the foundation amount.

King said the opinion does not take into account the application of state code, which mandates that revenues return to the district that generates them.

In a letter dated Feb. 15, attorney Eugene Sayre wrote to Goff, "From my reading of these tax imposing statutes, it appears there are conflicting requirements ... that have to do with the appropriation of state funding for 'foundation funding aid,' and not the administration of any amount of money raised by the 25 mill minimum ad valorem school tax. ..."

Carr said King is also due to file a bill this week that forgives the first year of reimbursement the ADE claims is due.

In the meantime, Carr said, the board will meet with staff at the three schools this week to look at staffing, benefits and stipend cuts in an attempt to meet the budget reduction demand and will vote on a proposal to send to the Personnel Committee for its review.

"We're not cutting $800,000 from the budget -- we can't," he said. "We'd cut maybe $600,000 and take the rest from our bank account. But we'd have to look at it again next year and see where to make cuts."

The irony, noted one board member at the January meeting, is the state's budget reduction demands the district falsify its budget.

"We've already spent it," he said.

Another noted the "Catch-22" of taking almost a million dollars out of the budget this late in the year, "but also maintaining a sufficient balance."

In other business, the board:

* Approved a request, 6-1, Karen Gros voting nay, from Tom Tharp of Olden Days Carriage to lease a space next to the concrete maintenance building behind the high school gym and place a temporary storage shed on it to store a carriage when not in use.

* Approved the hire, after a short executive session, of Pam McGarrah as a part-time bookkeeper to intern with district treasurer Wanda Stanford as her replacement. Stanford will be retiring in 2012.

* Approved invoices for payment on the new high school.

* Approved the district's master plan update.

* Approved the EAST Lab's field trip to Tennessee to compete in the robotics challenge.

* Heard that plans for the new high school have been filed with the state.

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