Flagstaff Arts and Leadership Academy is working on a plan to smooth out some of the hills and valleys in its annual financial roller coaster.
The public charter school is facing the possibility of a shortfall of about $160,000 in cash at the end of June, said Larry Wallen, FALA’s new executive director.
“We’re not going anywhere. We’re not closing the school,” he said.
The school still has a reserve fund that it can draw from in order to get it through the current school year until it has to make the payments for its bonds, payroll and operating and maintenance costs in August.
Arizona schools get a monthly payment from the state based on their monthly enrollment figures except in June and July, he said. In June schools get two payments that are supposed to tide schools over the summer break. But this year a number of financial concerns that have been snowballing over the years have culminated in a shortfall of cash, he said.
The first fiscal concern deals with the $350,000 in bonds that FALA took out to build the school at its current location off Fort Valley Road, Wallen said. Those bonds were taken out in 2010 and cost the school about $31,000 a month, with a 7 percent interest rate.
The second and third concerns deal with two lawsuits FALA settled around 2015 and 2016, he said. The first lawsuit dealt with a parent who withdrew her child from FALA because the school could not meet the student’s special education requirements. That $130,000 settlement cost the school about $3,000 a month and was recently paid off.
The second lawsuit involved the contractor who built the school, Wallen said. That $505,000 lawsuit was settled in 2015 and costs the school about $6,000 a month plus 11 percent interest. The school is expecting to pay on that settlement until 2026.
The last layer to the snowball was a shortage of seventh graders signing up to attend FALA last fall. The school expected and budgeted to have a total enrollment of 320 students, but currently has 289. That shortfall equals a total decrease in state funding of about $159,000.
EVERYTHING ON TABLE
FALA Board President Laura Umphrey said the board and Wallen are looking at a number of possible solutions to fix the financial situation.
“Everything is on the table,” Umphrey said.
First on the list is reducing current expenses to stretch the money through the summer, Wallen said. One idea is negotiating with the bond company to refinance the bonds at a lower interest rate. This would reduce the monthly bond payment.
Wallen said the bond company also loans money to nonprofits like FALA and the school may qualify for a $150,000 loan. That would add revenue to the school's funds and help cover some of the summer shortfall.
The school is also negotiating with the holders of the promissory note for the construction lawsuit settlement.
The school also filled one full-time position with a part-time position. They hired a special education scheduler into a full-time teaching position and hired a part-time clerk to do the special education scheduling.
Wallen and the dean of FALA have also offered the option of cutting their work week by one day and not getting paid for that day off. Other options include cutting teacher pay by 5 percent across the board and/or not paying teachers for study halls. Wallen said the last two are options that no one wants to implement.
“The teachers here do extraordinary work and should be compensated for it,” he said.
ENDOWMENT AND FUNDRAISING
The board and Wallen have also come up with some ideas to increase revenue at the school. Wallen believes the school can fill the 50 seats in its first sixth-grade class in the 2018-19 school year at no additional cost.
The school can do this by cutting some classes that don’t have a high attendance and are not required by the state and using those teachers to teach some of the sixth grade classes. The new sixth-grade class will also bring in about $50,000 of new revenue to the school through state funding.
But the school doesn’t want to rely on just students in seats, Wallen said. Enrollment varies from year to year. So he’s looking at the possibility of setting up an endowment for the school that would act as a savings account for hard fiscal years.
Most charter schools have an endowment, said Wallen, who has served as FALA’s executive director for one year. He isn’t sure why one wasn’t set up when the school was first opened.
Wallen also wants to create a sponsorship program where local businesses or individuals can donate to the school and receive credit from the school in various ways.
The school is also looking at an education drive to notify parents of the Arizona school tax credit. The credit allows an individual to donate up to $200 in one year or a couple filing jointly up to $400 a year to a school. The couple or individual can then claim that donation as a credit on their state taxes. The donations can be made and claimed on Arizona taxes right up until April 15.
Donors don’t have to pay the $200 or $400 all at once, Wallen said. Donors can make monthly donations of whatever amount they wish and take a tax credit for the total amount at the end of the tax year.
Another suggestion by a new fundraising committee the school has set up is to hold a fundraising drive that would earmark money toward teacher salaries.
“Fundraising and volunteering for the community has always been a part of our curriculum at FALA,” he said. “But we also need to cultivate a culture of giving to FALA.”