Schools' Finance Director Paints Bleak Picture

Finance Director Janice Warner delivered grim news about the budget at Tuesday’s Board of Education meeting.

The structural deficit — the annual amount of money being spent minus the amount of money coming in, is expected to grow from $1.6 million this year to $2.9 million next year and nearly $4.7 million in 2013-14.

According to Warner’s projections, the district’s fund balance, which should be at $1.2 million at the end of this fiscal year, will fall into negative territory, to -$1.1 million, even after a cash infusion of $570,000 from a land sale, by the end of the 2012-13 fiscal year. The fund balance is projected to fall to -$5.8 million by June 30, 2014.

Much of the blame can be pinned on falling enrollment and the increasing cost of employee retirement benefits.

Enrollment is expected to decline by 71 students next year, which will cost the district $450,000 in state funding. The district will also see a decline in Act 18 funding, federal Edujobs funding and the loss of revenue from extended day option kindergarten tuition as the district is shifts to all-day kindergarten. At the same time, unless there is reform, the district expects to pay more into the state’s retirement system, higher utilities costs, and additional costs for all-day kindergarten.

For this year, the district expects to reduce costs by $160,000. The bulk of the saving will come from the new hard cap on health care costs and replacement of retiring staff with more inexpensive employees. Thos savings are expected to offset an 11.9 percent increase in what the district pays into the state retirement system, extra expenses related to all-day kindergarten, and higher utility costs after a mild winter.

For 2013-14, the district faces the possibility of rising costs and declining revenues.

The district expects enrollment to fall by another 114 students, which will cost the district about $736,000 in state aid. At the same time, the retirement rate paid by the district is expected to rise from 27.37 percent to 31.21 percent of payroll. That projects to $1,063,941 in additional costs.

Warner said there were many unknown factors which could change the budget projections.

The state could impact the projection with reform to personal property tax and school employee retirement. The school aid budget could also change.

Locally, the district’s contracts with teachers, support staff and administrators expire at the end of June. Staffing levels could also change due to decreased enrollment and other factors. Other factors which can change are supply costs, which Warner noted have increased 23 percent this year. Warner also noted that the expense outlook could change if the district is forced to start purchasing busses, technology and other big-ticket items that have been put off during the recent financial crunch. Warner said that the recent sale of the Ford plant to Faurecia, and the downsizing of the plant 1,000 workers, could also impact enrollment.