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Show supplement to the National Enterprise WESTERN AMERICANA Schools Could Cost $1 Billion by 1985 must All school programs be carefully evaluated on a costbenefit basis if Utah is to control educational costs and finance public school operating expenditures from present Decision Utah professionals opin ions vary only slightly regarding the recent U.S. Supreme Court decision reducing liability of auditing firms, and seem to agree it was a positive step for the business community. The decision, rendered March 29 by the U.S. Supreme Court, involved one of the reading the law literally Johnson, a Salt Lake securities The Justices lawyer, said. are interpreting the statute just as it reads. It is a change from before, when decisions seems to be an inference of the justices points of view, he added. Johnson said the decision is significant because it stops inhibiting profesion-als- . ht Liability law-firm-, According to the Foundation, much of the expected increase over the next ten years will be the result of enrollment growth and rising prices which are not controllable by state and local officials. A large part of the projected increase, however, is based on trends and there- fore is subject to future discretionary decisions. It is this portion of the projected increase that Foundation analysts say should be subject to It-i- who rely on financial statements will still try to sue accountants, he predicted. Salt Lake attorney NormanS. Johnson believes new ruling will allow accountants to exercise greater freedom of jusgement. and the trend had spread to affect lawyers and underwrit- ers. Johnson termed the liability of accountants before the re- - cent decision, an impossible burden. I hope this means we are returning to a literal read- ingof the law, he concluded, Lenders Tapped for High Risk Loans Salt Lake City officials have signed a contract with the Urban Reinvestment Task Force, a division of the Housing and Urban Development Department. The contract funnels $125,000 into a local neighborhood revitalizing program called Neighborhood Housing Service. Ruben Ramirez, Western Regional Representative of the Urban Reinvestment Task Force, will be in Salt Lake City to introduce the program to the citys lending institutions. Although one or two financial experts are vaguely aware of the program, most know nothing about it, and none have been actively preparing for it. The first phase of the program will be an educational one. Ramirez will introduce the program to about 45 city lenders, residents and government officials. Through workshops and retreats, these people will learn how this program can solve the problems of neighborhoods. Within eight months, a group of chosen participants will fly to another city where the program has already been successfully adopted. Lenders will meet with lenders, resi operating Enrollment Growth i Within the next week Salt Lake City lenders will be asked to help restore vitality to a deteriorating neighborhood. The job will not be one of simply sitting on a board or offering advice. It will be a job of actively administering a high risk loan fund and making conventional loans for rehabilitating houses in a specific neighborhood. school school lunch. need to feel comfortable to exercise judgement, Johnson said. Bradley, chairman of the professional ethics committee of the Utah Association of Certified Public Accountants, was not so sure the decision would send strong reverberations throughout the justice s a step in the system. right direction. But' we will need more court cases before we know how this one decision will affect future cases, he said. Victims of stock fraud Lewis, partner with Coopers and Lybrand, said he thinks the decision will make at- - 0s expenditures, added amounts will be needed for capital outlay, debt service, and o preme Court narrowed the circumstances under which an auditing firm can be held responsible when a client violates securities laws; The court said victims of stock fraud could not collect civil damages sitnply because an accountant was negligent They held plaintiffs would have to prove the firms accountant intended to deceive, manipulate, or defraud. Norman Johnson of the Johnson and Spackman, said the decision was extreJ. Will mely significant. Lewis, an accountant with Elmer Fox, Westheimer and Co., called it a landmark decision. Louie M. Bradley, accountant with Coopers and Lybrand labeled it a step in the right direction. The decision will benefit professionals because it means the Supreme Court is mid-198- higher nations biggest accounting It isnt good for profesfirms, Ernst and Ernst. In a Susionals to feel inhibited. They decision, the six-to-tw- tax sources in the decade ahead. Ihis warning was sounded by Utah Foundation, a private research organization, in its latest analysis of school expenditure trends in Utah. The report indicates that school operating costs in Utah will approach $1 billion a year by if present the trends continue. In addition to this outlook for substantially dents with residents, to discuss pros and cons of the Service. Upon returning to Salt Lake City, the group will reevaluate the program and determine whether or not they want to proceed with it. If they decide to proceed, the group will incorporate, select, a neighborhood to rehabilitate and elect about twelve people to sit on the board of the corporation. The board would probably consist of seven residents of the chosen neighborhood and six lenders. If all has gone according to plan, the corporation should have about $100,000 in its purse. Their money is available as a revolving high-ris- k loan fund. Lenders would be asked, through chairtable contributions, to administrate the non-prof- it fund. William Whiteside, director of the Urban Reinvestment Task Force, said the program has been effective in 22 cities already, and explained the $100,000 fund subsidizes only those residents who are elderly widows or have marginal incomes and cannot afford conventional loans. He added the interest rate to be paid by the borrower of the fund is usually determined on a basis. In Cincinnati, 15 out of 20 residents in the neighborhood did their own rehabilitation work. Four residents were referred to financial institutions for conventional loans. Only one out of 20 residents loan fund, used the high-ris- k Whiteside said. continued on page 2b case-by-ca- se closer legislative and administrative scrutiny. During the past ten years, school operating expensitures in Utah rose by $167 million. Approximately $77 million, or 46 percent of the increase was accounted for by inflation (i.e. the reduced purchasing power of the dollar) and $9.7 million, or 6 percent of the increase, was the result . of increased school enrollment. The Foundation study shows that $80.8 million, or 48 percent of the school expenditure rise between 1964-6- 5 and 1974-7is attributable to a variety of factors, such as 1. 5, increased retirement and fringe benefits for school employees, 2. reductions in the average class size, 3 increased employment on nonteaching instructional personnel, 4. introduction of new programs, and 5 salary increases in excess of changes. If spending for these other factors should increase in the next decade at the same rate as it has during the past ten years, another $300 million would be added to school operating costs in Utah by the cost-of-livi- 1985-8- 6 A ng school year. large part of the financing problem for Utah schools in the next decade will be caused by an expected rise in school enrollments, according to the Foundation. Between the 1964 to 1965 and the 1974-7- 5 school years, average daily membership in the Utah schools rose continued on page 2b |