School trustees in the Lakeland district recently approved a plan to borrow $1.5 million to keep the district afloat until it receives local property tax revenue.

The short-term revenue anticipation note will be used to pay employee salaries and for cash flow through the summer to help pay for maintenance work.

Like many school districts in Idaho, Lakeland has relied heavily on its general fund reserve, or fund balance, to compensate for deep cuts to state education funding made during the Great Recession. Over the years, the fund balance has been depleted to an unstable level.

“We are very close to zero,” said Dave McDowell, Lakeland School District’s director of business and operations. “We’re probably within a few thousand (dollars).”

Typically, a school district’s fund balance is used for emergencies or unexpected expenses. Fund balances are generally maintained at roughly 5 percent of a district’s general fund.

For its operations, the Lakeland School District relies on state funding and money from property taxes distributed by the county, but derived from local voter-approved levies.

“We’ve run into a problem with not having the fund balance there to support payroll while we wait for that check from the county for local property taxes,” said Lisa Sexton, Lakeland’s assistant superintendent.

Sexton said it was an issue last year also.

This year, the district decided to borrow additional funds to help until it gets the funding it’s been expecting.

Wells Fargo approved a $1.5 million loan to be given out in two parts because the loan would span two fiscal years. School districts’ fiscal years end June 30. The first loan was approved for $400,000 and the second loan was approved for $1.1 million.

Since the agreement was made in early June, the Lakeland School District realized it didn’t need the full $400,000, so Friday it borrowed just $10,000.

“When we started this process we anticipated that number to be higher, but in reality we didn’t need it,” McDowell said. “Even though our authority is the $1.5 million, we will be substantially under that. We are only going to borrow what we need to borrow.”

The district will take out its second loan in July. School officials don’t know exactly how much will be needed then, but they expect the amount will be well under the $1.1 million. The district plans to immediately pay back its loans when it receives additional funding from a regular source at the end of July.

“This is brand new,” Sexton said. “We just struggled last year in July, so now we have a policy in place that obligates us to put $250,000 a year in our fund balance until it is 5 percent of our overall operating budget.”

Brian Wallace, a member of the board of trustees for the Lakeland School District and the director of finance for the Coeur d’Alene School District, isn’t that worried about the Lakeland School District having to take out a loan in order to pay its employees.

“It’s a concern whenever your fund balance gets low,” he said. “But it’s not unique for school districts, not just in Idaho but in other states as well, to have to do this.”

Wallace used to work in Washington and can recall at least three school districts there that had to do something similar to maintain their fund balance.

“It’s only a month,” he said. “The district is going to be fine.”

Meanwhile, school officials and the local teachers union reached an agreement June 9 on salaries and benefits for the 2016-17 fiscal year.

The district will give teachers a 2.5 percent base salary increase, which will cost $306,383.21, and cover a 5.7 percent increase in health insurance rates, which will cost $98,000. The cost of additional benefits due to the salary increases will cost the district another $140,005.04.

The district will also unfreeze the last remaining frozen step for teacher pay and provide this year’s experience step. The unfreezing and this year’s step will cost the district $293,642, and benefit 151 teachers.

Another part of the agreed-upon contract is that for $100,000, the district will pay for education credits moving across the salary schedule.

The total settlement agreed upon comes out to be $938,030.25.

The Lakeland School District will be operating on a $28.2 million budget for the 2016-17 — about $3 million more than last year’s budget.

The general fund is mainly made up of state funds and a voter-approved supplemental levy that will provide $5.3 million in local property tax revenue.

“Because it all goes into the general fund, it's hard to identify what portion is being used for teacher salaries,” Sexton said.

She estimates the levy will go toward paying for about 20 percent of the teacher salary increase.

“Our major goal this year was to settle with the teachers because we haven’t the last two years,” Sexton said. “We felt really good with where we ended with them this year and we are ready to move forward in a positive way.”