Budgetpalooza: Lots of words on next year’s school district budget

It’s budget time!  The School Board has started the process that should result in our adopting in June a preliminary budget for the 2011-2012 school year.

There is often a lot of confusion about budget issues.  I’ll try to describe the process and likely next steps as I understand them.

I.                Our Spending Limit:  The Governor’s Proposed 5.5% Reduction Actually Works Out to a 3.7% Reduction for Us. 

Our budget process is typically consumed with deliberations on potential cuts to our programs or other ways to limit expenditures.  The school district’s expenses go up every year, but our overall level of expenditures is capped on the basis of the state’s revenue limits.  (That’s the first source of confusion – what we call revenue limits are actually spending limits, and that’s the way I’ll refer to them in this post.)

Since they were first enacted in the early nineties, each district’s spending limit has increased a bit each year, but not enough to keep pace with rising costs.  A typical increase is $275 per student.  Since it is a per-student figure, the spending limit is relatively more binding for school districts with declining enrollments and relatively more relaxed for growing school districts.

Things are, to put it mildly, different this year.  The Governor’s budget bill does not include an increase but for the first time proposes a reduction in school districts’ spending limits – one of 5.5%.

For Madison, this works out to a reduction in our spending authority from $11,352.47 per student to $10,539 per student.  However,  primarily as the result of our starting a four-year-old kindergarten program next year, our student count for spending limit purposes will increase from 25,088 to 25,642.  This means that our total spending limit will decrease a bit less than $15 million, from just under $285 million to a little more than $270 million.

But our supportive community has provided us with some relief.  2011-2012 will be the final year for the three-year referendum that was passed in November, 2008.  As a result, we have authority to exceed our spending limit next year by $4 million.  That takes our spending limit up to a bit more than $274 million.

Good news these days frequently consists of bad news not being worse.  And so the good news here is that our actual spending limit will be cut by 3.7%, or about two-thirds of what the Governor proposes. 

II.             We Have to Find More than $20 Million in Reductions from What We Projected Our 2011-2012 Expenses Would Be Last Fall.   

We have a good idea of how much we can spend next year.  Next, we need to figure out how much it will cost to operate the school district during 2011-2012.

We try to get a handle on our projected costs of operations by developing a budget model.  Last fall, we put our model together on the basis of our best assumptions at the time about our 2011-2012 operations.

What the model told us is that for 2011-2012 the expected cost of our operations that are subject to the spending cap would be a little less than $295 million.  In other words, our spending limit of a little more than $274 million is about $20.5 million less than what we expected our costs to be when we estimated them last fall.  So we’ll have to find reductions equaling that amount.

It gets worse.  As part of the budgeting process the superintendent has identified almost $700,000 in proposed additional spending that wasn’t previously captured in last fall’s budget model (the cost of the four-year-old kindergarten was included.)  The additions:  increased cost of the teacher mentor program ($46,320), additional expenditures for Youth Options ($60,000), the incremental cost to the District of the Badger Rock charter school ($43,000 – see that, Madison Prep folks?), increased on-line classes through Madison Virtual Campus, ($20,000), additional use of the System 44 secondary reading intervention system ($160,000), and increased assessment costs for MAP, Explore, PLAN, and CogAT and AP tests ($311,000). This brings the required reductions up to $21.2 million.

That’s a big number.  But the superintendent has crafted a proposal  that identifies sufficient reductions from our initial budget model that we should be able to stay within our spending limit.  What’s no surprise, the bulk of the reductions come from concessions our teachers and other represented employees have agreed to in our recently-extended collective bargaining agreements.

III.            How to Find $21.2 Million In Reductions: First, Take Most of It Out of the Pockets of Your Teachers.  

The reductions that the superintendent has proposed fall into a handful of categories:



Lower-then-projected increases (health insurance and utilities)

$2.3 million

Employee contributions to Wisconsin Retirement System

$11.5 million

Wage freezes

$4.8 million

Other savings from changes in collective bargaining agreement

$ .7 million

Shifting money around

$1 million

Other stuff

$.9 million


$ 21.2 million

The first three categories are straightforward.  The latter three could benefit from a little explanation.

“Other savings from changes in collective bargaining agreement” consist of three items.  First, the right of teachers to take a day to visit another school was eliminated in our new collective bargaining agreement.  This saves the district about $125,000 in substitute teacher costs.

Second, the number of substitute teachers who could enroll in the District’s health insurance plans, with the District paying a portion of the premium, was reduced from 100 to 60 ($198,000).

Finally, the new agreement provides the district with more flexibility with respect to occupational therapists.  Currently, OTs are required to work with Certified Occupational Therapy Assistants (COTAs).  The new agreement does not include this requirement.  The superintendent has proposed laying off our COTAs and replacing them with a smaller number of OTs.  This change is projected to result in savings of $373,000 next year.

Of the superintendent’s recommendations, the OT/COTA item is the only one that has been controversial so far.  No one wants to layoff staff and those affected maintain that the promised savings would not be realized.   The Board’s Operational Support Committee has already proposed to the full Board that this change be eliminated, with the projected savings made up for a year out of what we expect will be an increase in the District’s fund balance as a consequence of this year’s vacancies in administrative positions.

The “Shifting money around” category includes four items:  covering a portion of Ready, Set, Goal conferences with IDEA funds ($91,862); moving some technology expenses to what is known as Cy Pres funding that came from the settlement of a lawsuit against Microsoft ($200,000); shifting an additional portion of staffing costs to Federal Education Job Funds ($516,000); and reducing unallocated positions and hence staffing flexibility by four positions ($280,000).

None of these changes actually save us money and the use of Cy Pres and federal job funds money are one-time fixes that just kick the can down the road until next year.  On the other hand, this budget seems to include fewer of these sleight-of-hand accounting mechanisms than previous years.

The “Other stuff” catch-all category includes three items:  savings from some reorganization and reductions of administrative positions at Doyle ($336,000), freezing the district’s non-salary budgets at 2010-2011 levels ($484,000), and decreasing supply budgets by 2.5% ($75,000).

Bottom line, primarily thanks to the cuts in the take-home pay of our teachers and other staff, we should be able to get through the budget process reasonably unscathed (except, of course, for our staff’s paychecks).  While our new collective bargaining agreement authorizes us to require our teachers to pay an additional 5% of the cost of their health insurance next year –which would save the district about $1.7 million – we don’t plan to insist upon that for 2011-2012 because it appears that we don’t have to.

Thankfully, we won’t have to consider the kind of controversial and difficult cuts we’ve confronted in other years (other than the OT/COTA issue).  This year there are no administrative recommendations to eliminate 4th grade strings, close schools, lock the doors on the planetarium, eliminate the budget for the school forest, increase class sizes, or approve any of the other unpopular proposals that have kept our email inboxes filled and public hearings hopping in past years.

IV.           A Wildcard in the Process:  Our $10 Million Underlevy Authority

This year, the school district budgeted to spend less than the maximum permitted under state law.  Our “underlevy” is about $10 million.  Under current law, we’re able to carry that underlevy over to next year and hence have an additional $10 million in spending authority on top of what I describe above.

The Governor’s budget bill repeals the statutory authority for carrying underlevy authority over to a following year.  However, this repeal was apparently not intended.  A bill to correct some errors in the (still pending) budget bill was recently introduced and it does in fact remove the provision that repeals the underlevy carry-over authority.

While it is far from certain, it seems more likely than not that, when all is said and done, the law will not change and we will be able to use some or all of our $10 million in underlevy authority next year if we choose to do so.  This would provide us with a budgeting cushion and would also allow us to consider some additional expenditures.   Assuming we can carry underlevy authority over to our 2012-2013 budget year, it might also come in handy the following year, when we will have perhaps more budgetary challenges than next year.

V.             What About State Aid?

One helpful feature of the Governor’s budget bill is that it reduces the maximum amount of general state aid a school district can lose from one year to the next from the current 15% to 10%.   Our state aid has been cut the last two years and we’re certainly expecting that again.  We’re planning on the maximum 10% reduction and hence on receiving a bit more than $45 million in general state aid in 2011-2012.  This is far less than the state-wide average on a per-pupil basis.

It’s useful to bear in mind that the reduction in state aid is the only part of the Governor’s proposals that actually addresses the state’s budget deficit, whatever the size of that deficit might actually be.  The state-imposed reductions in school district spending authority and the drive to cut teachers’ take-home pay – which are of far greater consequence to our district than the decrease in state aid — have no impact on the fiscal health of the state.   

VI.           What About Property Taxes?   

If no underlevy amount is used, our property tax levy is projected to go down about $2 million, from a total of about $245 million this year to a total of about $243 million next year.

As a practical matter, this figure is driven almost entirely by our spending limit.  Once we know how much we can spend, we subtract the amount of state aid we expect to receive and the result (after a few other adjustments) is the property tax levy.  So, the $2 million projected reduction in property taxes is more a function of our spending limit and our state aid than it is our deliberate choice.

We could decide to cut taxes even more by spending below our limit next year, as we are doing this year.  Not likely.  Also, if our underlevy authority survives, we could choose to increase the tax levy above the current projected figure by some or all of the $10 million.  More likely.  Finally, we could also authorize an increase in spending that is included in our Fund 80, which funds MSCR programs and operates outside of our state-imposed spending limit.  Also not very likely. 

VII.         Next Steps: More Streamlined than Last Year

We now know the dimensions of our budget challenge and have the benefit of the superintendent’s recommendations for bridging the gap.  The next steps for the Board are to consider the recommendations, come up with budget amendments of our own, hold public hearings, and vote on a preliminary budget by June.

Last year in particular this was a complex and time-consuming exercise.  The Board essentially put other issues aside and focused exclusively on the budget for a couple of months in the spring.  I don’t think the process should be nearly as time-consuming this year, for three primary reasons.

First, we need to adopt a preliminary budget so that we can get any necessary layoff notices issued before our deadline.  This requires us to resolve the OT/COTA issue, since the superintendent has recommended issuing layoff notices to our COTAs.  But no other layoff notices are in the works for the Board to consider.  (There could be some layoffs attributable to shifting enrollment levels among our schools, but the Board tends not to get involved in these.)  This lessens the urgency and reduces the scope of our budget deliberations.

Second, it seems likely that we will spend less time on individual Board member’s proposed budget amendments this year.  In the past, Board members have generally had two primary motives for offering amendments.  The first was to find alternatives for unappealing budget recommendations.  We don’t have a slew of unappealing recommendations this year.  The second motive has been to reduce what a Board member considered to be an unacceptably large increase in our property tax levy.  That shouldn’t be an issue this year.

Individual Board members may come up with some sound and beneficial budget recommendations this year, of course.  At this point, I don’t expect to offer much in the way of amendments myself, since I’m aware of no low-hanging fruit and I’m not much in favor of trying to effect policy changes through the budget amendment process.

Third, our budget deliberations (and our recent extension of our collective bargaining agreements) have been shaped primarily in response to the Governor’s budget recommendations.  The budget bill is unlikely to pass before the end of June.  Our budget choices are affected by the final form the budget bill takes.  What happens with our underlevy authority is the most obvious example.

Under the circumstances, if we pass a preliminary budget before final action on the budget bill, our budget will be really, really preliminary.  A lot of the heavy lifting budget-wise – like what to do with our underlevy authority, if it survives – can’t take place until after June.

There are some other reasons as well why it makes sense to defer substantive budget deliberations to later in the year.  For example, it would be helpful to know how our fund balance will look at the end of the fiscal year on June 30 and how it’s changed from last year.  We’d also be in a better position to make smart choices for next year if we have a clearer idea of how our 2012-2013 budget is looking and the more time passes, the clearer those numbers will come into focus.

VIII.            Looking Further Ahead: Paying the Price for a Different Kind of Deficit Spending

That’s a brief walking tour through the current landscape of our 2011-2012 budget deliberations.  Relatively speaking, we’re better off than many school districts in the state, because our community supported our 2008 referendum and because we were able to work out two-year extensions to our collective bargaining agreements that include significant financial concessions.  (We did agree to preserve important collective bargaining rights in the agreements, perhaps more so than any other district that has been willing to extend agreements for two years after the budget repair bill deliberations began.)

While the process should be relatively straightforward for us this year, the budget solutions the state has compelled us to pursue will have unfortunate long-term consequences.  Our teachers, who are not overpaid, are our most important resource.  Maintaining the quality of our school district will depend critically on our continuing ability to attract and keep the best teachers around.

Much as the Governor might disagree, we’ll eventually have to pay our teachers what they’re worth.   When we do, our expenses will jump and our property tax levy will follow suit.  Talk about your deficit spending – in effect, the state is financing the next two years of rising school costs by borrowing from our teachers.  At some point, that debt will become due.

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