LYLE — The Lyle school board heard some big news at its special session workshop Tuesday: If the district loses more students, it could shut down.

The district’s overall student population declined from 264 students in the 2003-2004 school year to about 228 last year.

“You need to get that number up,” Interim Superintendent Joe Guanella told board members. “If the trend continues downward, you will not exist in five years.”

Though Lyle’s finances are set for next year — an update revised budget for fiscal year 2012 shows the district probably won’t need to borrow money — school expenses always rise due to inflation, and educators are betting on more state aid from the Minnesota Legislature.

Lyle faces a tough future, as the town’s population declined slightly from 566 residents in 2000 to 551 residents in 2010. On top of that, Guanella showed board members Minnesota Department of Education reports stating Lyle has lost about 60 resident students, or potential students who live within district boundaries, during that time.

“You’ve got to get a plan and process here,” Guanella said.

He advised the board to start reaching out to community members and creating a program or panel that would concentrate on getting young families and students into Lyle.

“We’ve got a lot to brag about,” said board chairman Jerry Sampson. “We just need to do that and I know we’ll be fiscally strong.”

Promoting Lyle was one of several points Guanella had to make about raising expectations in the district. He scoffed at the district’s former nickname of “Last Chance Lyle” and said though substantial improvements had been made, board members needed to keep those standards high, since the superintendents and principals they’ll soon need to hire may be in Lyle for a short time.

“You’re the ones that need to do this,” Guanella said.

Board members also reviewed the district’s budget, community relations efforts and strategic planning initiatives during the four-hour meeting. The district’s overall unreserved balance in its general fund improved substantially thanks to business manager Dan Schroeder, who rechecked the budget along with Guanella. The district will no longer lose about $271,000; the general fund’s unreserved balance will lose about $20,000 instead.

Schroeder previously told the board he found funding in odd places, though there wasn’t anything to be concerned about. He reiterated that to board members Tuesday.

“It’s just coding errors,” Schroeder said. “Everything is in a different bucket than what it’s supposed to be in.”