February 2009
Administrators talk about staying fiscally fit in an ailing economy
By Raven L. Hill

When Miami-Dade County Public Schools Superintendent Alberto Carvalho urged the U.S. Congress last fall to consider bailing out the nation’s public schools, the sentiment resonated with district leaders across the country. The following week, a suburban Ohio school district requested $100 million from the Treasury Department.

With lawmakers focused on the automotive and financial industries, a federal financial bailout of public schools doesn’t look likely. Now more than ever, our nation’s school districts are relying on state leaders for funding and support as the nation moves further into a recession.

Texas is no exception.

Initially, Texas was doing better than most states, thanks to oil and gas revenues and a healthy construction market. Some economists predicted the Lone Star State would emerge relatively unscathed from the nation’s financial crisis. However, most experts see it differently.

“It’s been 25 years since we’ve had this sort of national economic crisis,” says Harvey Kronberg, editor and publisher of the Quorum Report, an online newsletter about Texas politics. “We’re living in this presumption that Texas will escape the worst of it, and we just won’t know that to be true until we get closer to the end of the [Texas Legislature’s 81st] session.”

Mike Griffith, a policy analyst with the Education Commission of the States, a Denver, Colo.-based think tank, is equally cautious when it comes to the funding of Texas’ public schools.

“The watch word for Texas is that things aren’t looking great,” Griffith says. “School districts will want to assume there will be a reduction in state aid, and it’s going to be fairly large.”

He says the absence of a state income tax has helped shield Texas from the revenue shortfalls that most other states are experiencing. However, Griffith warns that lower oil prices could adversely affect Texas.

“Texas has had larger employment growth than anywhere else; the question is whether those growth numbers can hold with decreases in oil prices,” he says.

The fact that Texas’ sales tax revenue is down doesn’t help matters, Kronberg adds.

“It’s going to kill us,” Kronberg predicts. “The best jobs in Texas, broadly speaking, are oil and gas related. If oil recovers in the next year, we might dodge the bullet, but who knows?”

With Democrats picking up more seats in the Legislature, Kronberg admits there’s more support for public schools, but the financial constraints remain unchanged.

“While the will may be there, the means may not be,” he says.

Meanwhile, school administrators statewide are hoping to absorb any losses without bankrupting their reserves.

Says Art Martin, president of the Texas Association of School Business Officials: “[Districts’] fund balances across the state have been dropping. School officials are using those dollars to keep their districts afloat.”

Martin, who serves as the assistant superintendent of services in Lubbock ISD, says he expects to see more tax rollback elections, more dollars drawn from reserves to maintain programs and, eventually, program cuts.

“You’ve got to balance the budget somehow,” he says.

School leaders across the United States are trying to make cuts where they can. According to a recent study by the American Association of School Administrators (AASA), superintendents are taking the following steps:

But cost-cutting carries its own burdens. According to the AASA report: “When schools curtail their spending through measures such as reducing payroll, conserving energy use, reducing fuel consumption,  deferring maintenance and delaying purchases, the local community feels the effect. For many small communities … cuts to school spending mean cuts to community revenue.”

According to a list compiled by TexasISD.com, Texas school districts working on their 2009-2010 budgets are considering putting these items on the chopping block:

A real sticking point when it comes to school finance in Texas, some say, is the state’s target revenue funding formula, which has not changed in almost four years. The calculation uses expenditures and weighted average daily attendance figures from 2005-06. Under this system, any increase in local revenue, such as additional property taxes, means the district receives less state funding.

This formula is contributing to “growing inequality” among districts, according to the San Antonio-based Intercultural Development Research Association. However, state lawmakers favor waiting two years until the next legislative session to reform the system.

Many school business officers say they cannot overstate the need for more state aid.

“If the state does nothing, then a number of school districts could be bankrupt in three to five years,” says Deborah Ottmers, assistant superintendent of business and finance in Fredericksburg ISD.

With 2,800 students, the small Central Texas district is the largest school district for miles. It’s considered under the state’s funding system to be property rich. However, Ottmers calls the district “income poor”; Fredericksburg’s median household income is lower than the state average. Consequently, the district is unable to shift certain costs for extracurricular activities or athletics onto students. Furthering the problem is that fuel costs in the district tend to be high; students typically must go outside Fredericksburg for extracurricular activities, Ottmers says.

Kronberg predicts there won’t be any court-compelled action to amend the state’s system until 2011.

“By then, if what the school districts tell us is accurate, it will be obvious how badly broken things are,” he says.

Larry Throm, Dallas ISD’s new chief financial officer, agrees that school districts are “handicapped” by the state funding formula. He says many districts are operating with the same amount of state money with no adjustments for inflation, which makes it difficult for schools to fund new programs and resources.

In Austin ISD, where Throm formerly served as chief financial officer, school officials need to find about $4 million to fund the district’s full-day kindergarten program next year. He says Austin ISD also would like to implement a program to boost high school completion rates, but it doesn’t have the money to cover $7 million in start-up costs.

According to Throm, even though voters in 116 school districts last fall in tax rollback elections agreed to a tax increase to fund daily school operations, districts may not be able to count on that support in the future.

“It will be very difficult in this economic recessionary period to say, ‘We’re going to raise your taxes,’” Throm says.

So, what’s a district to do?

For starters, keep dollars in the local marketplace by hiring service providers in your community, says Andrews ISD business manager Joe Merrell. Also, consider using investment income for supplemental funding on the instruction side, he says.

“Bake sales and car washes will not fund our schools,” Merrell says.

Ottmers suggests keeping an eye on staffing and course offerings, as payroll accounts for the bulk of most district budgets.

“If you’re overstaffed, that’s going to take up 85 percent of your budget,” she says.

Above all, level with stakeholders — especially school board trustees and district staff, says Becky Garcia, business manager for Lackland ISD in San Antonio. Good communication with the public can help drive support for rollback elections.

In Andrews ISD, school board members were able to explain to voters how increases in fuel, utilities, employee health insurance and overall cost-of-living expenses resulted in a nearly $800,000 shortfall. The tax increase passed by 89 percent in the West Texas district.

“When we take time to communicate our fiscal funding challenges and opportunities with our stakeholders, we all can be successful in remaining fiscally fit due to oversight, transparency and shared responsibility,” Garcia says.

And the survey says…

In October 2008, the American Association of School Administrators surveyed superintendents across the country to gauge their thoughts and reactions to the nation’s recessionary economy. Here are some key fi ndings from the “Study of the Impact of the Economic Downturn on Schools.”

When superintendents were asked to identify what actions their districts have already implemented as a result of the economic downturn, the top responses were:

• Altering thermostats (62 percent)
• Eliminating non-essential travel (57 percent)
• Reducing staff-level hiring (48 percent)
• Reducing consumable supplies (48 percent)
• Increasing class size (36 percent)
• Deferring maintenance (36 percent)
• Reducing instructional material (35 percent)
  

The top actions superintendents have considered, but not yet implemented as a result of the economic downturn are:

• Freezing outside professional service contacts (30 percent)
• Laying off personnel (30 percent)
• Eliminating outside staff development consultants (30 percent)
• Eliminating fi eld trips (35 percent)
• Cutting non-academic programs, such as after-school and Saturday enrichment programs (26 percent)
  

When superintendents were asked about the economic-related problems of the families of students in their districts:

• Ninety-five percent said unemployment has worsened somewhat or a great deal.
• Ninety-four percent said lack of health insurance has worsened somewhat or a great deal.
• Ninety-one percent said student mobility has increased somewhat or a great deal.
• Eighty-eight percent said mortgage foreclosures have worsened somewhat or a great deal.
• Seventy percent said homelessness has worsened somewhat or a great deal.
  

The study also found that superintendents are proactively engaging the community as they make decisions in response to funding shortfalls. The five most common methods superintendents are using to engage others in the decisionmaking process are:

• Discussions with the superintendent’s cabinet (81 percent)
• Discussions at open school board meetings (70 percent)
• Discussions in school board committees (56 percent)
• Established a school-level advisory group (27 percent)
• Consulted with legislators or other elected officials (27 percent)

Source: American Association of School Administrators’ “Study of the Impact of the Economic Downturn on Schools”