Balancing the Budget – Part 1 (2012-13)
Unless you have been vacationing on the dusty shores along the banks of the Sea of Tranquility for the last 14 months, you know that schools across Texas are experiencing drastic cuts (around $5.4 Billion) in school funding from the State.
Nearly every district in the State either took steps to completely balance their budgets last year, or they are taking those steps now.
Since the implementation of Target Revenue, low to mid-wealth districts (like WISD) across Texas have had very few options at their disposal to increase revenue. About the only way to substantially increase revenue is to pass a Tax Roll-Back Election (TRE). Luckily, Whitesboro ISD passed a TRE several years ago. Local voters approved to maximize the M&O Tax Rate at a $1.17. Unfortunately, schools can’t (except for extenuating circumstances) raise their tax rates above the $1.17 cap. Therefore, we are locked in at our current Target Revenue per WADA.
Since our revenue is primarily based on WADA, taking steps to increase our WADA is very important. As you know, WADA is tied very closely to enrollment. As enrollment increases, WADA and revenue increases. A problem for our District is that our enrollment has dropped slightly over 9% during the past 5 years (this 9% drop in enrollment equates to a similar drop in revenue). And, there are no signs that this trend will reverse itself over the next 7 months. So, the District must look for other ways to increase our WADA. Outside of an influx of new students, about the only ways to increase WADA is to increase participation in CTE classes at the high school, and increase enrollment in some of our special area programs throughout the District.
Other districts have taken additional measures to increase revenue. Some districts… charge a participation fee for activities, increase charges for facility use, increase ticket prices, and increase fund raising activities. Unfortunately, these options are somewhat limited.
So, districts are left with the daunting task of cutting expenditures to balance their budget. There are two basic costs found within a district’s budget: Personnel and Non-Personnel costs.
On average, non-personnel costs make up about 20% of most school budgets. And, these non-personnel costs fall into two distinct categories: discretionary and non-discretionary. Non-discretionary expenditures are part of our fixed costs (like utilities). Discretionary costs deal with things like travel, uniforms, instruments, equipment, professional development, instructional supplies, building maintenance, computers, technology… and the list goes on…
This year we cut 10% out of our non-personnel budget. The non-discretionary parts of these expenditures were not touched, since they were non-discretionary. So, we actually reduced our discretionary non-personnel expenditures by close to 20%. During budget preparations for next year, more dollars will be trimmed from this very small portion of the budget.
Personnel costs account for about 80% of a district’s budget. For most districts across the State, the only way to effectively balance their budgets will be to reduce personnel costs. There are many ways to do this. And, since each district across the state is unique, there is no “one best way” for districts to reduce their personnel costs.
The Texas Association of School Boards (TASB) has published a document titled “Reducing Personnel Costs.” The options listed below are ways that TASB has identified as legitimate options to reduce personnel costs:
- Freezing Pay – Pay the same as the previous year.
- Reducing Pay – Pay employees less than the previous year, reduce stipends, and/or reduce the contract length of employees that are on a contract that is longer than a 10-month contract.
- Furloughs – Reduce the work schedule of employees and reduce their compensation by a corresponding amount.
- Hiring Freeze – Reduce staff by attrition, non-renew probationary Chapter 21 contracts and/or non-Chapter 21 contracts.
- Reassign Staff – Consolidate job duties and fill gaps left by exiting employees.
- Reduction of At-Will Positions – Eliminate selected at-will positions.
- Reduction in Force (RIF) – Eliminate specified certified positions according to State Law and Local Policy.
- RIF of Term Contract Positions (end of contract and/or mid-year contract) – According to State Law and Local Policy.
- Offer Early Resignation Incentives.
Currently we are estimating a $430,000 budget deficit for next year. This amount does not include a step raise. A step raise for all employees will cost the District an additional $170,000. So, to balance our budget and give a step raise, we will need to trim $600,000 off of next year’s budget.
According to several high-ranking sources, it appears that Texas schools will face more cuts during the next legislative session. They are predicting that conditions won’t improve until the 2015, or even the 2017 legislative session.
There is nothing pleasant about this process… Districts, employees, students and programs across the State will continue to struggle to adapt to this “New Normal” way of doing business…
