I read an article the other day about a number of school districts in Iowa that are making pretty significant budget cuts. Before delving into a discussion on this topic, I want to make very clear this is not a Hudson phenomenon right now. There are very specific reasons it isn't, and hopefully this article will articulate those reasons for you (if you aren't interested in the suspense, just read the title of this post again). Even so, it is wise to pay attention to what is going on around the state and to be mindful of our own trendlines. Our financial metrics are quite good right now. The reason they are good is because enrollment is growing. A combination of open enrollment and residential enrollment [growth] makes up for woefully inadequate supplemental state aid. It hasn't always been that way for us. For those of you that haven't been around as long as I have, we were in a bad spot in 2011. That year, we had to implement some pretty significant budget cuts, somewhere in the vicinity of 10%. It was awful! Perhaps that is one of the reasons why I feel the growth that comes with open enrollment is such a big deal for our district. Even though as I shared recently, maintaining this balance between resident/open enrollment can be tricky.
So let's get to it. What is going on around the state? A 2 minute story on the evening news simply doesn't peel back all the layers of the onion. On one hand, it is enrollment loss due to the voucher program introduced last year. But, it is also because the per pupil growth rate set by the legislature is/has been inadequate for more than a decade. Sure, it is a very valid point for legislators, and even community members to suggest the remedy is to simply to reduce staff as enrollment decreases. The common refrain is that, 'Yes, you have to cut the budget. But you have fewer students, so what's the problem?' Well, it's much more nuanced than that.
Again, it is hard to argue with a concept that as enrollment either increases or decreases, staffing should adjust accordingly. I call it 'right-sizing' the district. The challenge though, is that as enrollment decreases those pupil losses aren't concentrated in just one class or grade level. If they were, it would be easy; right? The reality is that when you lose a few students here, a few students there; you can all of a sudden be down 20-30 students and not have any great options when it comes to adjusting your staff downward to meet the reality of the budget. Losing 2 students from 4th grade doesn't necessitate eliminating one 4th grade position. Losing 2 students from each grade however, does. But the question becomes, which one? There is no easy answer. So, in many cases superintendents will deficit spend their operating budgets. This means they are able to maintain (at least in the short term) staffing levels without class sizes getting out of control. Keep in mind it is wholly appropriate to make such a decision, so long as it isn't considered a long term strategy. But it comes with a cost. The consequence of this action is a deterioration of the unspent balance. Now, if you have a healthy unspent balance, deficit spending every once in a while is probably not going to cause too much of a headache. In fact, that is precisely the point of the unspent balance. To deal with unexpected or short term budget issues. It may recover, or it may be high enough to not be of huge consequence. Perhaps there is an assumption that enrollment may recover or that supplemental state aid will make up the difference. (Making those assumptions is unwise.)
The trouble is, that in many of these districts they just weren't deficit spending one or two years. In other words, they are treating a long term problem with a short term fix. Simply treating the symptoms won't cure you of a cold or flu. What happens in this case is that the unspent balance trend begins to turn, drop, and then accelerate. Why? Because of deficit spending year over year it then compounds. When coupled with supplemental state aid that is already inadequate, on top of stagnant or decreasing enrollment, the consequences can be profound. A tipping point is reached where the unspent balance is exhausted and there is no choice but to implement severe budget cuts. That is what is happening right now in many school districts; and I am not talking about small school districts. Des Moines: $14 million; Iowa City: $5.5 million; Linn-Mar: $2.5 million.
The reality is that as long as supplemental state aid remains inadequate there really is only one solution: enrollment growth. Unfortunately, deploying that as a solution depends on a lot of factors, many of which are completely out of the control of the local school district. It has become an even taller order with the introduction of vouchers whereas the schools that benefit from the voucher aren't playing by the same rules as their public school counterparts.
To remind you, supplemental state aid is the percentage by which the state cost per pupil grows annually. It is not adequate to meet the rising cost of education and hasn't been for quite some time. In the last decade, the per pupil growth rate has averaged 2.04%. In the decade before that, it averaged 3% (which also includes a year where the rate was 0%). Set aside wage growth for one moment, we'll come back to that. The cost of electricity, heating, and supplies alone surpasses those percentages. The reason Hudson isn't experiencing or considering austere budget measures is simply because our enrollment growth makes up for inadequate supplemental state aid. Think about it like this. The legislature this year passed an SSA rate (supplemental state aid) of 2.5%. Because of our enrollment growth, it actually netted us 4.03%. By the way, that only considers the residential side of the equation!
House File 2612 did provide additional resources for schools. The bulk of course being the money needed to meet the new salary floors for teacher employees: $47,500 for beginning and $60,000 for teachers at 12 years of experience. While welcomed for sure, it has caused a bit of consternation for some. Some districts don't have enough due to faulty data in their BEDS report and a somewhat clunky rollout. Plus, it is hard square a circle where on one hand you are cutting $5 million from your budget, while on the other you are increasing teacher salaries by huge numbers. (Remember, prior to this law, the minimum salary in Iowa was $33,500. Increasing that floor to $47,500 is a 42% increase.)
One could argue, quite successfully, that if the supplemental state aid rate had been adequate over the last decade and a half, the salary gulf wouldn't be nearly as wide as it is now. Likewise, if guys like me wouldn't deficit spend year over year (making those staffing adjustments downward when enrollment dictates such), we might be in a much better position. Of course my colleagues would rightly point out that doing so is easier said than done. Remember that mention of 2011 and the budget cuts we implemented? That fall we opened with 2 sections of kindergarten. One of them had 29 students; the other had 28. How do think the parents liked that? Teachers? I suppose the upside now is that, yes, teachers are going to make more-- but they also may have ten more students in their class!
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