Budgeting on Shifting Sand

Abstract

THE headlines are daunting. Plunging home values, skyrocketing fuel costs, declining state revenues, and a multitude of other budget worries add up to nightmares for state budget officials and school business directors. Even the most conservative observers will admit that budget cuts in most districts go beyond trimming fat and are cutting deep into the meat. According to Mike Griffith, senior school finance analyst for the Education Commission of the States, each economic slowdown affects different states in different ways. For example, the impact of the current slowdown is less severe in states that rely on mineral extraction taxes or in states with a large agricultural base. In addition, those states that did not experience the boom in the housing market are not being affected as much by the current bust. But states that rely on businesses other than mineral extraction or agriculture--especially those that rely on manufacturing--are already feeling the pinch of the economic downturn. Governors and state legislatures have used a variety of means to try to stave off the impact on districts of reductions in current and future revenues, but looking for efficiencies appears to be one of the more common approaches. Proactive policies can be implemented prior to bad economic times, and reactive policies can be used in response to a downturn. Purchasing cooperatives. A study conducted on behalf of the Leadership for Education Achievement in Delaware Committee found that, if school districts pooled their purchasing power, they could reduce their costs by between 8% and 14%. In 2006 the Rhode Island legislature passed P.L. 298. This legislation directed the Department of Elementary and Secondary Education, working with the Department of Administration, to establish a statewide purchasing system for products and services pertaining to public schools. These include telecommunications, wireless services, general insurance products and services, and school transportation for children with special needs. Shared services. While shared services might include purchasing, this type of collaboration can also include management and instruction. Iowa was one of the first states to offer incentives for districts to share services, and the legislature continues to tweak laws to encourage such collaboration. S.F. 447, passed one year ago, reinstated earlier incentives for reorganization and whole-grade sharing, created operational sharing incentives, and mandated a statewide study of efficiencies and sharing. S.F. 447 provides additional funding for districts that share one or more operational functions for at least 20% of the school year in such areas as management, business, human resources, transportation, or operation and maintenance. The additional funding is available to a district for a maximum of five years during the period covering the budget years 2008-09 through 2012-13. Also passed one year ago, Indiana S.B. 526 was an omnibus bill that included provisions related to shared services. Article 42.5 of this bill authorizes school corporations (districts) to take specific actions to reduce noninstructional expenditures and allocate the resulting savings to student instruction and learning. Authorized actions include creating insurance pools with other school corporations, aggregating purchases of natural gas, and consolidating specified purchases. Such shared services can even include arrangements to provide instructional services and management. Educational service centers are required to report annually on the results of their efforts during the preceding school year to help school corporations pool resources. Last September, the Michigan legislature enacted H.B. 4592. This bill requires each intermediate school district to conduct a study of opportunities for its constituent districts to share services with other districts or other units of local government. Among the services that might be shared are transportation, human resources, purchasing, technology support, professional development, accounting, and event management. …