Today I will start to discuss a topic that is important for the school district and the community. That topic is the state of the school district’s finances. The folowing comments are my reflections on what has happened and does not reflect any official position. First of all, Ridgway Area School District is positioned very well for the financial storm that Pennsylvania school districts will face in the coming years. RASD will have no debt service after the next budget year. In personal finance terms, the school district will have no outstanding loans. This is obviously a good thing. The school district also has a healthy fund balance. State law prevents school districts from putting too much money in the fund balance; however, the school district has designated parts of the fund balance for projects and budgetary items that will increase over the next few years. With all of that being said, as I stated in an earlier blog, there are signs of stress in the budget. Namely, the school district has had to use money from the fund balance to balance the budget. You can equate this to using your savings account at home to pay your monthly bills; eventually the money will not be available. While I am proud about the state of our local financial situation, I have concerns about the state and national financial situation. Today I will focus my comments on how Pennsylvania used federal stimulus funds to balance the state educational budget.
When the financial crisis hit in the Fall of 2008 all areas of the economy were impacted. Almost immediately, state revenues began to drop sharply. The result was the states were not going to be able to balance a budget for the 2009-2010 budget year. In response, the federal government enacted what is commonly referred to as the “stimulus plan”. Although the stimulus money went to various entities, I will limit my comments to how the state used the money in the education budget. As a historical note, in the past, Pennsylvania usually increased educational spending between 2%-3% a year. This would translate into a 2-3% increase (generally speaking) in the money that school districts would receive in basic educational funding (BEF). Because of the economy, Pennsylvania could not continue that level of funding for education without using the stimulus money. In the 2009-2010 budget year, Pennsylvania increased educational spending by 300 million dollars, but decreased the state’s share of the budget by 300 million dollars. In other words, Pennsylvania used 600 million dollars of stimulus finds. This was an admirable thing to do for education. However, it created a “cliff” where Pennsylvania would have to double their contribution to educational funding in the next budget year ($600 million)) just to stay “level”. The Governor’s proposed budget for 2010-2011 for education includes a state increase of 300 million while still using $600 million of stimulus money. What this means is that in the following budget year (2011-2012) the state would still have to come up with $600 million “new” dollars to “level fund” the educational budget. I am skeptical about the possibilities of that occurring.
What do these numbers mean for RASD? If the state does not include a level funding formula in the 2001-2012 budget, RASD will have $600,000 less in our basic educational funding. This is a significant decrease in funding for the school district. While the school district contemplates this loss of revenue, there will also be a financial burden caused by the employee pension crisis. I will explain this crisis in tomorrow’s blog, but the school district may realize an additional $500,000 in expenditures in three years as a result of the pension crisis. If you add the $165,000 that we used from the fund balance to use in our budget, you will see that the district may have to find over a million dollars in program cuts and different sources of revenue. This will be a challenge, but a challenge that the district will be able to endure. There will be tough decisions to make concerning the budget but I firmly believe that the school district will be able to increase the capacity to help students in the future.
No comments:
Post a Comment