Wednesday, February 8, 2017

Supplemental State Aid: The Die Has Been Cast

The good news is that we won't spend the next several months trying to figure out what supplemental state aid is going to be for the fiscal year that begins on July 1, 2017 (FY 2018). The bad news is that we know what it is, and it is woefully inadequate. To remind everyone, supplemental state aid (SSA) is not the dollar amount that we can expect school budgets to grow in the coming fiscal year. It is instead the amount that the state cost per pupil is expected to rise. Basic school funding is determined by multiplying the number of students that attend a school by the state (or in our case district) cost per pupil. Therefore if a school district is experiencing a decrease in enrollment, it takes a greater amount of supplemental state aid to avoid a funding cliff.

Supplemental state aid for the new fiscal year has been proposed (and will be approved) at 1.11% which means the state cost per pupil will increase by $73. That means the state cost per pupil will grow from $6,591 to $6,664. The total cost of this increase statewide is around $40 Million. To put that in perspective, the number that is being used as a benchmark for statewide budgetary growth is $178 Million. This is noteworthy in and of itself because remember, our legislators have consistently stated that education is a priority and always receives the lion's share of budget growth. At 22%, this hardly seems to suggest a state where public education is a priority.

At the local level, this means the district cost per pupil will also grow by $73: from $6,776 to $6,839. The trouble is, as I stated above districts [that have a decrease in enrollment] don't see as much budget growth. And in Hudson our enrollment decreased for the fiscal year budget we are currently developing. That means our supplemental state aid will be in the vicinity of $45,955. To put that number in its proper frame of reference, our entire general fund budget expenditures for the current fiscal year are anticipated at $7,963,287. When you increase that by .57% you are somewhere in the neighborhood of $45,390.73. So as you can see, this isn't anywhere near 1.11%. Here is another interesting point: based on current estimates, our budget will increase $69,620.85 just by turning our calendar from June 30, 2017 to July 1, 2017. That is before we do anything else.

Trouble is, we need to do some other things. For starters we will have an additional 30+ students in our high school next year. That means we are going to need more electives for these youngsters, particularly in our Business program. While we have had lower than normal enrollment in the high school the last several years, we have been able to make this work; but adding this many students makes the current staffing configuration a pretty steep hill to climb. On top of that we currently have two sections of sixth grade. I suppose that would be okay for next year too....that is of course if we are willing to have these two sections with more than 30 students in them. Then there are two special education rosters [at] or exceeding recommended caseloads, so that needs to be addressed as well. Then, if you have been paying attention lately, you are aware that we are in the process of trying to start a public preschool program in Hudson.

Now, if this was an anomaly that was due to a bad economy or a recession, one might expect a year or even two where the growth in state aid is low. However, this isn't an anomaly, but rather a pattern. According to "Parents for Great Iowa Schools", this isn't just another year of low school aid, but the third lowest rate of supplemental state aid since the adoption of the school foundation formula in 1973! And worse yet, the other two low points have occurred since 2012!

Fortunately we have a school board that has exercised fiscal restraint over the last several years and have ample reserves on hand to weather this storm. Plus we are poised to begin seeing enrollment rise with our smallest class graduating from high school this year. The challenge is, if you examine the chart that is included above, it is evident this is part of a trend that doesn't appear to be headed anywhere but down. 

In spite of the fact that we have ample reserves on hand the board will have to be very careful and deliberate when making decisions about how to allocate resources. Because as we all know, once the reserves are gone, they are gone for good. Based on the trajectories above; any hope at refilling them could take a very, very long time. Hudson and other schools like us who are in good financial condition will be forced to dip into reserves to make their budgets work. Perhaps that is why reserves exist. Yet interestingly enough, the legislature refuses to dip into the state reserves, which are completely full and what many would argue are precisely designed to be tapped in situations like this.

One final point: Remember three paragraphs above where I stated this might be expected if we were in a recession or bad economy? Iowa's economy is currently growing by 4.2%, and for the fiscal year that begins on July 1, 2017 revenue is expected to grow by 4.8%.

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