Superintendent Graden Lays Out Plan to Fill $6 Million Budget Gap

The Saline Area Schools district hopes to stave off state emergency financial managers with a three-pronged plan to fill a projected $5.9 million hole in the budget.

The district, which closed and sold Union School and shuttered Houghton School last year while cutting $2.5 million from its budget, is expecting another $1.6 million cut from the state government plus on top of more than $1.1 million in state mandated payments for the retiree salaries and benefits.

Superintendent Scot Graden said the district plans to cut about $2 million in programming, hopes to negotiate $2 million in concessions, and dip into the $2.9 million fund balance for another $2 million. He said a balanced approach using the three “3 Cs”—cuts, concessions and cash—is the best way meet budget demands while minimizing the impact on the district.

“We look at it as three legs of the stool. If you don’t have anyone of the ‘3 Cs,’ things tend to get off balance,” Graden said. “You’re not going to be able to make $6 million in cuts. The district couldn’t sustain that right now. We’re not going to get $6 million in concessions. And making all $6 million in cuts without using the fund balance would be ludicrous."

While the district keeps an eye on Lansing, it has begun talking with the Saline Education Association about concessions. The district and union have a contract in place until 2012. Graden described the talks as productive.

But, he said, concessions aren’t the silver bullet.

“People sometimes say, if we could just get the teachers to pay for more of their health benefits, that we’d be okay. That’s not true anymore. The numbers are too big,” Graden said.

Graden said the district would also talk to support staff, which has given back in three straight contracts, about potential concessions. He said there are no plans to privatize support services at this point.

“They’ve made concessions for three contracts and as a result, costs are down significantly. The savings associated with privatization aren’t as great as they were. A few years ago we may have had a million in savings (if the district privatized services). Maybe it’s a half a million now,” Graden said. “At this point, you start to weigh the level of service against the return of savings.”

Graden said additional savings could be achieved with summer shutdowns and furlough days.

The district is also looking at $2 million in spending cuts. That means cutting the equivalent of 20 full-time teaching jobs. Graden said the district would likely send out 40 to 60 layoff notices by its May 10 school board meeting. Many teachers would likely be called back by early June as the district finalizes staffing levels for 2011-12.

As a result of the staffing cuts, larger class sizes will be unavoidable, Graden said.

Graden said building closures are unlikely.

“We closed two buildings last year. Structurally, I don’t think we can do much else in that regard,” he said.

He said the district is working with schedules at the middle school and high school to achieve more efficiencies.

The district is also exploring ways to raise revenue. The district has expanded the school of choice program in hopes of bringing in more students from other districts. The goal is to offset the revenue drop the district will experience as larger class sizes graduate and are replaced by smaller incoming kindergarten classes. Potential revenue streams, such as advertising and building naming, have been investigated. Families will pay more to have their children participate in sports and other activities. The big revenue boost will come from the fund balance. The district plans to dip into the $2.9 million fund for approximately $2 million, which will leave the district with a paltry $900,000 in its “rainy day” fund.

If the district can do all this, it should be able to avoid falling into a deficit situation during the 2011-12 school year. But there isn’t much left in the bank to get through another tough year of cuts.

“When this is all said and done, we’re going to have an overtaxed school system, labor groups that all gave concessions, and we’ll basically be down to pocket change in our bank account for next year,” Graden said. “We want to be rational and balanced in our management of the district, but the idea that we’re somehow going to be able to avoid some really catastrophic things, if this type of budget continues, is not realistic.”

Graden said the district is working to balance the budget and avoid being one of the “deficit districts” that becomes a ward of the state.

“To borrow from (Chelsea Superintendent) David Killips, we’re all going over the cliff. You don’t want to be the first one. The more who go over before you, the softer the landing,” Graden said. “Clearly, we want to avoid going over the cliff. We don’t want to be the poster child for the emergency financial manager program.”

But, Graden said, even if the district can avoid this year, there’s not much left to fall back on next year.

Once the district has learned the concessions the union is willing to make, it will flesh out the plan and present it to the community at forums planned for late April and early May.

The district must adopt a new budget by July 1.