Five-year forecast is a planning tool, but right now in flux

Each year, school districts are required to file a new five-year forecast by the end of October. Last night, the board approved this year’s “official” forecast – but, more than usual, this is a document that will be changing regularly as both revenues and expenses change in response to new laws and requirements, as well as our continuing efforts to reduce expenses.

However, this forecast is also a great example of how it can be used as a planning tool. Last year, the school board updated the forecast generally once a year. It was seen as a legal requirement and not a living, breathing document the board could use to plan. Last October, following a large financial decision we made without first ensuring the forecast was up-to-date, I requested we be sure to update the forecast whenever major changes were hitting our budget (read article).

A good definition of a forecast (from the Business Dictionary) is “A planning tool that helps management in its attempts to cope with the uncertainty of the future, relying mainly on data from the past and present and analysis of trends.” Using it like this, the results are obvious. In May, we looked at an interim forecast that showed continually declining revenues. At that point, we would have needed a 7-mill levy in 2012 to cover operations. The board and administration did not feel that was acceptable, and additional reductions were made. Several more administrative positions were reduced, and our certified/classified staff agreed to freeze salaries and steps in FY 2014. We also are continuing to search out efficiencies and reductions in general spending.

By responding up front, before the forecast was due to the state, we are now able to file a document that requires only 4.9 mills starting in FY 2013 to balance the budget. The October forecast will be posted on the district website soon. [PLEASE NOTE: we are required to submit a forecast that shows a balanced budget, which is why a levy amount is entered. The board HAS NOT made any decisions, or even held any discussion, about a levy or its level.]

Yet, as stated earlier, this current document is more changeable than usual. The budget bill, which just went into effect, will bring changes beginning with FY 2014 that we cannot yet predict; depending on the outcome of Issue 2 on November 8, more changes will be coming; House Bill 136, legislation on statewide vouchers, could cost the district millions (read article); the changes in graduation figures will require even more work on the district’s part to track down students who have moved to other districts. These are just a few of the new “unfunded mandates” we are facing right now (read article on unfunded mandates; read article on Milford’s fight against unfunded mandates).

The Finance Committee will continue to update the forecast as we understand changes to revenues and expenses. This will allow us to respond more quickly to changes and plan more effectively.

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