Budget reductions presented; forecast revised to reflect changes

There is a good reason the state requires a five-year forecast.  By projecting revenue and expenses outward for a period of time, we can see trends and understand what might be coming our way financially, based on what we know today.  The forecast is an excellent planning tool, although until recently, it has not really been used as such by most districts.

In October, the school board had a work session to review the five-year forecast.  At that time, the projected end-of-year balance for FY2015 (school year 2014-15) was a deficit of -$34 million.  This was due not only to continually increasing costs, but to over $5 million in revenue declines from state reductions, Duke Energy’s request to reduce property tax, elimination of the personal property tax for businesses, and others.

At this time, the board and administration made the conscious decision to use the forecast as intended:  as a planning tool, so we do not get “stuck” in a few years with an untenable amount of debt.

As is happening everywhere, we had to find ways to “do more with less.”  Last year, we reduced expenditures 3%.  For this year, the board asked the administration again to reduce another 3%, or $1.8 million.  This reduced the forecasted deficit appr. $9 million over the five years.  The administration then committed to reducing expenses further every year, starting next year with reductions of $1.5 million in ongoing reductions, adding more reductions each year. Total additional savings over the five years would be $10 million, resulting in a forecasted deficit in FY2015 of -$14 million.

Last night, Tim Ackermann, Director of Human Resources, presented recommendations for reductions that would begin next school year.  The administrative worked hard with the entire staff to identify reductions that would make the district more efficient while affecting education as little as possible.  The result is $2 million in reductions, which were identified to feel like a “pinch” instead of a “slash” in what our children and community receive.

It’s important to note the administration was able to identify an additional $500,000 in reductions early, which actually makes these reductions much less painful.  Because they will accrue every year, we will achieve the $10 million savings goal from just these changes, versus having to continue to reduce large amounts every year.  This is a huge accomplishment that greatly benefits our students.

Class sizes will be only slightly higher (appr. 2 students on average) at the elementaries, and a new approach to the Junior High schedule (6 periods instead of 7) not only reduces the need for future staff, but will provide a better education for our students.  Some B-teams will be reduced, but we hope to add more players to remaining teams and possibly add club sports to increase participation opportunities.

Reductions were made in line with the percent of the budget each area represented.  For instance, 66% of the reductions came from the Instruction area, which represents 59% of the overall budget, while 21% came from Administration, which represents 19% of the budget.  Curriculum & Support accounted for 11% of reductions versus 10% of the budget.  Extracurriculars were reduced 5%, which is more than their 2% of the budget; however, a third of the extracurricular reductions came from reducing transportation associated with several B-teams – transportation is expensive and adds up quickly.

While our future financial picture is far from rosy – and we may be facing additional large cuts in state funding starting this school year – we are doing everything we can to identify efficiencies and find the least painful ways to reduce expenditures.  This process is not stopping now – it has become a culture, a “way of doing business.”  We will hold an open forum on February 16 (details to come) for the community to discuss the reductions and provide any ideas for additional reductions.

The powerpoint Mr. Ackermann gave last night is available on the website if you would like more information, or feel free to post your questions or email me directly.  And if you do see any areas where we can become more efficient, please get in touch – sometimes it’s only from the outside that we can see what’s happening.

NOTE:  A state bill (House bill 30) is currently looking at changing forecast requirements to a three-year timeperiod versus a five.  If this happens, I will still push our administration to look five years out.  With school budgets, three years is not enough – if we had only looked at three years, we would not have seen the magnitude of the deficit we’d be facing if we kept previous spending patterns.  Hopefully this will not happen – I will keep you informed.

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10 Responses to “Budget reductions presented; forecast revised to reflect changes”

  1. Herta Pfeiffer Says:

    Thank you for this thorough and clearly articulated report. We are optimistic that our district can weather the financial difficulties most of the country finds itself in. We hope that ALL employees of the school district realize the need to make financial sacrifices, as everyone else has to.

  2. Larry Deel Says:

    Andrea,

    Can you tell me how salaries and benefit costs are plugged into the formula for a 5-year forecast? Is there an annual percentage figured in beyond what contracts call for?

    Thanks,
    Larry Deel

  3. andreabrady Says:

    Thanks, Herta – the big question is still what happens at the state level. If they cut significantly more, we’re not sure what will happen. We should know by June.

    Larry, Randy includes any approved increase, the mandatory step raises for each year, plus an increase of 5% for benefits. No additional forecasts of increases are included. The 5% benefits increase is optimistic, but so far we have been able to stay on that track.

    Any additional personnel or personnel reductions are also included. These are figured by the appropriate department (for the most part by Tim Ackermann) and plugged in at an “average” amount. This is probably high because it is average and, for the most part, new teachers at least are hired at starting levels. This hopefully gives us room and brings us in under budget, if possible, instead of estimating low and being unpleasantly surprised.

    For things like mandated special education needs, we estimate to the best of our ability, but if more students enter the district, we are required to provide the mandated number of instructors per.

  4. Larry Deel Says:

    Thank you for the clarification. I looked into that a couple of years ago. I just couldn’t remember what I discovered.

  5. Brett Bumgarner Says:

    Andrea…Thanks much for continuing to provide these summaries. They are very helpful & much appreciated. In my opinion, The Board is doing a great job under difficult conditions. I believe the first priority must be the quality of the education provided, followed by the second priority of fiscal responsibility. Please continue your efforts to balance both – prioritizing & protecting the excellence of the Milford Schools’ experience, while surrounding that with financial efficiency. Thanks again!

  6. andreabrady Says:

    Thanks for the nice comment, Brett – it’s good to know people are finding the information helpful.

    I believe it’s possible to provide an excellent level of education in a cost-efficient way. One of our biggest challenges is unfunded mandates. I’m pushing on this topic right now because there is a chink at the state level – with budget pressure from every direction, our law makers are beginning to see something has to be done.

    If we could get relief from at least some of these mandates, we would have the freedom to put more dollars where we feel they will be most effective.

    Of course, we do not know what other budget cuts are in store … unfortunately the state is facing an $8-10 billion deficit, and education will likely no longer be protected. That’s just another reason we need to join together to fight unfunded mandates – if our budget is even tighter, we need to be able to focus it as much as possible.

    Thanks again for your support – we need people to be involved and committed to helping us in these trying times.

  7. Brenda Ely Says:

    I was interested to hear about the savings that our administrators have put into place for this year and are recommending for next year. The total, almost 4 million that will continue to impact the bottom line for years to come, will be a valuable contribution to our district in the uncertain future.

    I am troubled by the ease at which these cuts can be made now, when such cuts were so bitterly battled in the past, by some of the same board members and administrators who support them today. They are billed as almost invisible to the students or public, and virtually painless to the education process or the classroom.

    I think this is a great thing, but I only wish it could have been done earlier, since any of the cuts described could have been pulled off a year ago, two years ago, before the last tax levy, etc. It seems that we could have been saving those millions all along.

    My thanks to the administrators that put this together, but let’s not forget that a lot of these cuts were suggested several years ago by members of the public and not so kindly received at that time. Suddenly they have become palatable. Now may be an excellent time to dig deeper!

  8. Betsy Anderson Says:

    I know we have to make cuts, but to say they are painless is wrong. My son has classes where they don’t have enough books to go around, so they photocopy pages to study. Quite a mess when you go back to study for exams. And the elementary schools – adding two more kids per class – how far does that put us above the recommended max student to teacher ratio? Junior high cuts a period out, our kids get two fewer classes to prepare for high school. Did that also increase class size there? Learning is impaired when you don’t have the teachers and/or supplies.

  9. andreabrady Says:

    Thanks for the comments. Brenda, I know what you’re saying – but I also do feel, especially after seeing the internal workings of the district, that too much change at once would not be good – any more than it would be for an individual. Most of the changes have been in process for a while, and they’ve been gradually inching toward them. It is frustrating to know we could have made most of these savings years ago, but remember where we came from and how long we were there … we needed a leveling-out period before making some of these.

    And yes, we are continuing to dig deeper. In finance, George Lucas & I have asked the administration to come up with what some people call a programs-based budget, some call requirements-based – whatever it is, it will break out what we must provide, what that costs, and build from there. That will allow us to look at all areas more closely and see where our spending patterns are, which should give us the chance to challenge assumptions. This will take some time, but we know we have to do it.

    Betsy, I’m going on what Dr. Farrell and the other administrators, in whom I have great faith and who have proven themselves over the past few years, when I say these changes are going to feel like pinches instead of slashes. I don’t know the situation with the books in your sons class – what grade? What class? Perhaps it’s a class that is being re-done so they don’t want to invest in new books for a year? Perhaps the books are online? I don’t know, I can see how that would be frustrating.

    As far as adding an average of 2 students/class at the elementaries, these are in the upper grades and should not hurt. Studies show if you don’t have really low class sizes (like a dozen to 15/18), there is no benefit versus having 23 or 25. We’re not talking 30 students across the board. Some classes will have 30 – but they will not be the norm, and we already have that some places. That’s a weakness of the neighborhood schools concept, which is hopefully balanced out by the benefits.

    Re: the JH, going to 6 periods instead of 7 should actually help students prepare for high school. They will get more core instruction, more in depth. This was a change that would have been made, budget reductions or no budget reductions.

  10. Brenda Ely Says:

    Thanks for the reply. The programs-based budget was discussed a few years ago. It sounds like a great idea! I am excited to see how that goes. We need to understand what we are spending on things, which things we need and which things we just want to have. Any further cuts, can then be base on good, solid understanding of what each things really costs, our must haves and our want to haves.

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