REGIONAL— After a brief period of improving finances, buoyed by higher tax levies, the St. Louis County School District is once again facing a rising tide of red ink.

On June 27, the school board approved a 2016-17 operating budget with a $1.57 million general fund deficit, after accounting for all expenditures and transfers. The budget, as approved, authorizes total general fund spending of $29.3 million.

While Business Manager Kim Johnson told the board the approved budget is based on conservative enrollment numbers, the gap is a significant one, fueled primarily by sharply rising employee costs.

According to Johnson, a 22-percent hike in health insurance premiums added $500,000 to the district’s spending. At the same time, a recently approved teacher’s contract added just over $400,000 in payroll costs, while the addition of 2.78 FTEs to the teaching staff added another $175,000. Those changes pushed the school district’s salary and benefits bill to an estimated $22.94 million in the new school year, up $1.19 million from the just-completed term.

The budget’s general fund revenue projection, of $27.73 million, is based on an estimated district-wide enrollment of 1,804 students, a loss of 45 students over the previous year. The current uncertainty over the future of the taconite industry prompted the conservative estimate, according to board member Troy Swanson.

The biggest projected enrollment losses are in the north half of the district. The Northeast Range student count is projected to fall from 264 to 247, while North Woods is expected to decline from 513 students to 496. Meanwhile, Tower-Soudan is expected to fall from 76 students to 70. South Ridge, in the southern half of the district, is also expected to lose about a dozen students, while district officials project a 19-student gain at Cherry.

While higher student numbers could reduce the anticipated deficit, barring a dramatic and unexpected increase in enrollment this fall, the district is likely facing a substantial deficit, that comes on top of what is expected to be a smaller deficit in the just-completed school year. According to Johnson, the district’s general fund balance declined by $614,000 this past school year. That dropped the district’s unaudited general fund reserves to $3.68 million, from $4.29 million the year before. If the numbers hold as approved, the district’s total general fund reserve will drop to $2.1 million by the end of the new school year. Yet only $1.39 million of that is considered unreserved, making it available for unexpected expenses or for cash flow purposes.