The Warren County R-III School Board voted 5-1 to adopt pay increases for salary schedule and non-salary schedule faculty during its June 30 board meeting. A step average of 2 percent, a total of about $268,000, was granted to teachers on the salary schedule. A 1 percent increase was given to non-salary staff. The fiscal year 2011-12 budget was approved during the meeting as well. The raises come a year after an average 2 percent salary step for teachers and staff was approved. Board member David Housewright left last week's meeting and did not vote on the item. The salary increase will see the district begin the current fiscal year with an approximate $500,000 operating fund deficit - as opposed to an approximate $200,000 deficit - had the salary increases not been approved. The deficit could force the district to borrow money from a bank to pay for the salary increases in the future, but Chief Financial Officer Pam Frazier said the district will be financially stable for the new fiscal year that began July 1. "The budget is in a deficit because we're budgeting to spend more than we are budgeting bringing in," she said. "The fund balances have grown and we're going to dip into that." Operational fund balances will come in at an estimated 19.94 percent for 2011-2012, compared to an estimated 21.99 percent in 2010-2012. Board member Jan Sutherland cast the lone opposition vote, fearful such a large deficit could force the district to make unwanted job cuts next year. "Everyone wants a raise, but these people might lose their jobs after a year," she said. "I'd rather see people keep their jobs. We're going to have to cut, but how deep?" Board member Lisa Wilmes gave a differing opinion from Sutherland's. "It's important to pay our employees," she said. "These are some good people and I don't want to see them go (to another district)." Board Treasurer Bill Hawley acknowledged both Sutherland's and Wilmes' opinions as possibilities. "We're between a rock and a hard place," he said, prior to the salary increases being passed. Board President Teresa Scott said she felt the gap between salary and non-salary employees needed to be bridged. "I would like to see additional money go into the salary schedule to beef it up to catch up to (non-salary schedule faculty) as opposed to a 1 percent increase," she said. "I think people on the salary schedule would be getting less of an increase." Board member Scott Costello said salary increases are feasible, but acknolwedged the district needs to limit its expenditures in the future. "The cost to borrow money for salaries isn't unmanageable, but then next year will be difficult because we'll be in a deficit spending situation and we need to look at other areas to cut," he said. "If we're giving a step and a raise, going into the future, we have to look hard at areas where we don't need expenditures." He acknowledged tuition reimbursement as an expenditure the district could potentially cut. "We put $50,000 toward this," Costello said. "I'm comfortable stating we need to put other things on the table (to cut) if the fund balances start moving the other direction." He also said district patrons' opinions could be sought. "We may need to ask the community how much they value the things we offer," he said. "We need to look at the expense side to find other ways of taking money out of the expense side." Sutherland said she has always tried to avoid deficit spending. "The teachers deserve raises, but these are volatile economic times and I think we should be very conservative," she told The Record. "I would like to see the economy turn around before we increase our expenditures." Costello felt not giving a salary increase would have negatively impacted faculty members' lives. "Employees are dependent on the (district's) health plan, which will increase," he said. "If we leave the salaries exactly as they are, we're putting (employees) in the district in a position where they would not be able to do everything they used to do. I'd like to see (the district) keep pace, rather than fall behind." Health insurance expenses for district staff will increase 3.7 percent, while dental insurance also is expected to go up by 3.7 percent The district's estimated revenue for the newly approved 2011-2012 budget is $28.32 million, down from last year's revenues of $37.82 million. The new budget forecasts an estimated $28.30 million in expenditures, compared to $37.93 million actual expenditures in 2010-2011. The board also approved the district's lone capital improvement project as it voted 6-0 to award a $22,370 contract to Karrenbrock Construction for work on the drainage system in front of the high school stadium bleachers. Other bids were received from from Ed Laubinger ($26,500 and $25,500) and Mick Mehler and Sons ($27,500).