Managing the budget in a growing school district in tough times
As you consider your own household budget, imagine the following set of circumstances applies to you: your income will be fixed, or have minimal growth, for at least two years; and during those two years you know that the cost of health insurance will increase, as will the cost of living, goods and services. To complicate things, you're worried because this is coming at a time when you have a new family member on the way. Further, you have had to move to a larger home and take on a larger mortgage to have room for your growing family. You're concerned that you have had to spend some savings to get by, and that this is not a sound long-term strategy. What would you do? For many families, these are challenging but not insurmountable conditions. With some sound fiscal decision-making and conservative budgeting, the family will weather this period. Though not a perfect analogy, West Fargo Public Schools is in a similar scenario.
Consider the conditions the district faces this summer as we plan for the coming two years' budgets following the recent legislative assembly:
• The district is funded in large part based on enrollment—for the 2016-17 school year, foundation aid was at $9,646 per student. It will be the same next year and the following year. The legislature was able to hold this amount steady for the next two school years. That's the good news, in a climate where it could have been worse. Higher education and other state agencies are absorbing significant cuts.
• The bad news is that the district is growing about 400 students per year, and the current funding model pays districts based on their previous year's enrollment. We must buy books and materials and hire teachers to teach those 400 students THIS year; we cannot wait until the following year when we're paid for the new enrollees. The good news is that the legislature continued a rapid enrollment grant program, which pays about half of the foundation aid amount for new students this fall, but only for those that exceed 2% growth. With 10,000 students, the first 200 new students next year are excluded from any funding.
• Century Code requires that the board negotiate with professional staff to determine a contract, including compensation amounts. Over 80% of the district's budget is dedicated to staff compensation (salary, retirement, social security, health insurance). It is a labor-intensive business. These are people with families, much like the one described above, and they ask for and expect fair wages for the work that they do. Negotiating for their compensation is a tough job for a board in a growing district under the current financial conditions.
• The district is growing and has had to borrow money to add schools, build or remodel infrastructure facilities and activity amenities. Luckily, we have been able to do this with support through elections from the community, without increasing the mill levy. In fact, the sinking and interest levy has not just held steady, it has gone down, which is good news for taxpayers. The analogy we have used is that we asked the voters to extend a loan at the same interest rate and payment, rather than pay it off and receive a tax cut.
• Paying for new facilities is NOT the problem. The budget problem is in the general fund, or operational budget. We cannot substitute or move dollars raised through taxes for new facilities from the sinking and interest fund to the general fund.
You may be curious how the district has planned for next year's budget and how we intend to weather these conditions. The following strategies have been employed to balance the budget:
• We have made adjustments to staffing in order to accommodate the essential staff that are necessary to serve the increases in enrollment and the operation of new facilities. It is important to note that, with very few exceptions, we eliminated positions, but not persons. For example, a reading specialist's position might have been eliminated, but that person still has a job as a classroom teacher. The net result is that the district will add relatively few staff to address growth and operation of new facilities.
• We have made cuts in the "discretionary" or non-compensation portions of the budget—supplies, equipment, and travel are a few examples.
• We have planned not to have to dip into our savings, or fund balance, in order to operate the district.
• We have still planned to give modest compensation increases to offset some of the increase in the cost of living.
We are grateful to our staff for understanding our financial condition, to our community for their support of a growing district, and to our school board for their wise and prudent management.