School Board members gave the go-ahead Thursday for Klamath River Early College of the Redwoods to recruit students for the next school year despite having a budget deficit.

The charter school is expected to end the fiscal year with a fund balance deficit of $253,000, said Brandon Paige, client manager for EdTec, which has been providing bookkeeping services to KRECR since February.

KRECR staff and board members asked the School Board on Thursday not to defer its decision regarding the school's future, saying that would hinder their ability to recruit students. Parents said that after attending other local schools, their students are excited to come to KRECR and have excelled because of its education model.

"We're afraid that if we close our doors early, students will be left hanging," said Susan Masten, Yurok Tribe vice chair and a KRECR founder. "We're geared up to bring students in for next year, and I have set a personal goal (to raise) $300,000 so donations for scholarships don't need to be an issue. Our model is unique. Academically, we are strong."

Board members agreed to allow KRECR to continue recruiting students for the 2013-14 school year. Trustee Jennifer England was absent.

The Board directed Superintendent Don Olson to draft a memorandum of understanding between the County Office of Education and KRECR stating that the school must recruit at least 119 students or raise $100,000 by Aug. 30 or it wouldn't be able to open.

Olson said he would bring the MOU before the Board on July 11.

KRECR's funding, like all public schools, is tied to its enrollment, but since the school's financial woes have come to light KRECR's enrollment has decreased, said Director Bernadette Johnson. KRECR's enrollment peaked this year at 123 students and fell to 97 by the time classes ended, she said.

Next year's budget, which projects an ending fund balance at $37,000 for 2013-14, is based on 125 students, Johnson said.

"It's difficult," she said. "We're fighting ongoing concern about the sustainability of our school. Some parents have decided to make a change before a change was made to them."

Paige said if the school's enrollment was 119 students, it could break even with no funds set aside for reserves. At 119 students, Paige said budget cuts likely wouldn't come into play. But if enrollment dipped below that, EdTec representatives would encourage KRECR to make extensive cuts, including layoffs, he said.

Next year's budget calls for five teachers with 25 students to one instructor in a classroom, Johnson said. If personnel cuts were necessary, she said, KRECR officials would limit those cuts to instructional aides and office workers. The school currently has three instructional aides and one office worker budgeted, Johnson said.

"Because of the cuts this year, two volunteers functioned as full-time (staff)," she said.

KRECR's original deficit of $168,000 was created because the school mistakenly used restricted scholarship funds to close a deficit in its unrestricted fund balance. The school has also been battling cash flow issues due to receiving state funds based on old enrollment numbers rather than this year's higher numbers, Johnson said in December.

But Paige said KRECR's cash flow balance for May was positive. June's cash flow is also projected to be positive, Paige said. Scholarship checks have been mailed to students and the school will be able to meet its payroll obligations, he said.

School representatives have also spoken with KRECR's creditors, notifying them that the school was experiencing cash flow trouble but that payment would come in the new fiscal year, Paige said. KRECR's outstanding bills total $60,000, some of which stem from early November, he said. The school plans to pay those bills by borrowing from Charter School Capital, an Oregon-based firm, against the funding KRECR expects from the state in 2013-14, Paige said. The firm is awaiting confirmation that KRECR will be operating next year, he said.

"Because of the letter of possible revocation (recently sent by the district), the entity has not extended the cash to Klamath River," Paige said. "If you provide feedback that the school will be operating, the entity will provide the capital."

Even though they acknowledged KRECR's successes, Board members said they couldn't ignore the school's financial struggles. Trustee Lori Cowan said she felt the KRECR model, which focuses on performance-based education and allows students to work at their own pace, was strong. But she said she was concerned about what had happened at the school that led to the budget deficit.

"It's good that the (Board) has now seen what's going on and is having a plan to recover," she said. "If it's reality and you can make it work, good. I don't want $250,000 to turn into $500,000."

Judie Cordts, the newest trustee on the County Board, pointed out that if the Office of Education revokes KRECR's charter, there would be no hope for recovery, and the school's debts would remain unpaid.

"Their plan is sound," she said. "People will be hurt by taking away this opportunity."

Board member Frances Costello said that while she admires KRECR's academic successes and the enthusiasm of teachers, KRECR Board members, parents and students, she is worried about the school being $250,000 in the hole. KRECR didn't get to that point overnight, she said.

"It's hard for a school and the community that whenever you get bad publicity people jump ship, but we need to hold our ground," Costello said, referring to the Board. "But as a board member, my responsibility is to the children at the school, to make sure the decision is the right thing for the kids."

Since December, KRECR has closed its Klamath campus, laid off staff members and cut its employees' salary by 5 percent. The KRECR Board also voted in February to discontinue health care benefits for its employees for the rest of the 2012-13 school year.

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