District in good financial place in spite of recession, however, no new programs, budget efficiencies made

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By Kellie Petersen 2008
The economic recession and the threats posed by it have sadly become a fixture of the present American culture.

Factory closings, mass job lay-offs, the foreclosure crisis, stimulus packages, bailouts and dismal days of stock trading have seeped into every facet of media, from the headlines and covers of news magazines to television shows ranging from AC 360° to Oprah.

With the present environment, it is not surprising that the effects of the recession have filtered down to the educational system. The Cedar Falls School District, however relatively unscathed, is still no exception.

“We have been impacted to some degree,” superintendent David Stoakes said.

Stoakes accounted most of the impact to the 1.5 percent cut to the state government budget made in December, which includes public school districts. The cut was made after the state Revenue Estimating Committee indicated there would not be enough funds to cover the budget as it currently existed.

Stoakes said that this cut cost the Cedar Falls School District $290,000.

The legislature determines the educational budget according to a formula called the School Foundation Aid Program, which accounts for the amount of students as well as specific criteria such as students with special needs or of low socioeconomic status. Each year the legislature determines how much more money will go into the general education fund according to this formula.

However, the budget is generally set for two years, except when subject to change according to conditions such as the current recession.

In addition to the state-determined budget, the majority of money for education is derived from tax levies.

These levies, such as the Instructional Support and Physical Plant and Equipment Levy, are voted on by the public and, unlike the budget determined by the legislators, are not subject to change according to the state of the economy.

These two levies are part of the general education fund, but another important tax levy is the Local Option Sales Tax that many districts have in varying amounts. In Cedar Falls,

there is a seven percent sales tax, and a small part of this money is used only for school buildings in Black Hawk County.
Stoakes said that about 85 percent of the budget for school districts is composed of these statewide budget components, whereas the individual districts decide upon the remaining

15 percent prior to the beginning of the next school year.

One of the specific areas where school districts, including the Cedar Falls School District, are most impacted by the effects of the economic recession is staff.

“When 80 percent of our budget is for salaries, it is hard to look elsewhere,” Director of Secondary Education Dan Conrad said.

Another complication is that once individual districts have accounted for salary cost in their budgets at the beginning of each school year, the amount cannot be changed according to outside factors such as the state of the economy. However, districts try to compensate.

“We can’t cut back on our salaries during the middle of the year, so we try to create efficiencies,” Stoakes said.

Stoakes said that cutting back on energy costs and field trips are examples of how the district might compensate for the money lost due to budget cuts. Also, he mentioned how the low fuel prices had created an unexpected estimated $60,000 in savings.

“This was really out of our control, but when the price of gas started to drop, it really helped us a lot,” Stoakes said.

Cedar Falls School District Business Manager Doug Nefzger also commented on the unexpected energy savings.

“The price of fuel is quite a bit less than what we budgeted for, so we’re very fortunate for that,” Nefzger said.

In spite of the savings posed by lower fuel prices, the energy costs of a school district provide an important opportunity to create budget efficiencies. Stoakes said that within the Cedar Falls School District, Cedar Falls Utilities would be asked to survey the district in order to determine efficiency and make recommendations for improvement.

He also said that money from the Physical Plant and Equipment Levy is used during the summer to make energy efficient improvements to areas such as windows and lighting in buildings throughout the district.

Another potential area for efficiencies mentioned by Stoakes was staff. He said that the district might reassign staff to fill any vacancies. Also, staff members may be moved within subject areas at the secondary level according to changing demands.

Also concerning staff is the necessity of open positions, as unnecessary positions may not be filled in order to conserve money. Nefzger said that when a resignation occurs, the position will be evaluated to determine whether it is still necessary, but that this practice is one that occurs regardless of the state of the budget.

Another way Cedar Falls, and other school districts as well, are compensating is through the usage of cash reserves, which include money that is not a direct part of the spending plan.

“That in essence is our savings account, the cash reserve,” Nefzger said.

Nefzger said that the money in the cash reserve would be used to offset the money lost due to the state budget reductions. Nefzger further described the cash reserve as “money we had on hand at the end of the year” that is composed of unspent state aid money and property taxes the school district has levied as well as unspent budget authority.

The budget authority is the amount of money a district can possibly spend, according to how many students there are in the district, how much money is received for each student and how much money the district did not spend from the previous year.

“One of the things Iowa schools can do is levy property taxes specifically for cash flow purposes,” Nefzger said.

The cash reserve also provides the school district with funds during the summer months when no revenue is earned, in addition to supplementing the budget during times of reductions such as these.

Nefzger said that the amount of money from the cash reserve used to compensate for budget funds depends on many factors, which may include but are not limited to the amount of budget shortfall, estimated current year revenue and expenditures, state aid allowable growth for future years and anticipated future student enrollment and expenses.

However, the cash reserves cannot continually be used.

“We can do that fairly easily for one year. That’s why we have cash reserves,” Stoakes said.

Stoakes said that cash reserves might only be used as a one-time fund without replenishing, so therefore it cannot be used to pay for ongoing expenses.

Nevertheless, utilizing money from the cash reserve is an appropriate means of compensating for budget reductions. Nefzger said that when the state cuts the budget for all public schools, individual school districts are required to decide how to make up the “difference” that is created. School districts such as Cedar Falls choose to offset some of this difference by using the cash reserve.

In spite of needing to use money from the cash reserve, the district’s cash balances are still in a positive state.

“The district’s cash balances have improved nicely over the last four years,” Nefzger said.

Also, the Cedar Falls School District is anticipating receiving some federal stimulus money, which will be used in the special education and Title I (for students of low socioeconomic status) areas. However, the amount to be received and when is still unknown.

“We’re not going to spend it until we’ve got it,” Stoakes said.

Energy costs and staff are not the only areas affected by the economic recession.

Extracurricular activities, mainly at the secondary level, are affected as well, though not drastically.

Conrad said that although some extracurricular activities are supported through general fund money, the effects would not be as extreme as reducing coaches or games or entire activities.

“We’ve been pretty fortunate that a lot of our extracurricular activities have been self-supporting. So there’s not a huge drain on our educational fund due to extracurricular activities,” Conrad said.

Conrad said that only unnecessary expenses such as field trips would likely be cut.

However, certain aspects such as supplies, equipment and travel may be affected.

“What we have done is, in working with Mr. Conrad and Ms. McDonald, our two directors of education, we instituted some budget reductions to offset part of the loss of cash,” Nefzger said.

Nefzger said that building principals would have to be more “judicious” in how they utilized supply, equipment and travel items. However, he emphasized that travel referred to employee travel for professional development days and conferences and not to student travel for transportation.

“It’s teacher travel, not student travel,” Nefzger said.

Nevertheless, these areas are still of interest to conserving money.

“And we’ll be taking a very hard look at equipment and supplies and travel and all of the things associated with that,” Nefzger said.

Although certain areas such as energy costs, staff and extracurricular activities may be subtly affected, Stoakes said that the most obvious effect would be no addition of new programs. However, this also means that existing programs are not likely to be eliminated.

“We won’t see any drastic changes in terms of things we think we need to cut because the budget is not in very good shape, but by the same token we won’t see any new programs because we just don’t have the money to offer that to our students,” Stoakes said.

Stoakes specifically mentioned some proposed new programs such as an elementary language program or offering Chinese as a language option at the secondary level.
“If we’re going to start those programs, for example, we would have to cut something else,” Stoakes said.

Although the addition of new programs may not currently be an option, it allows for the continued existence of current programs.

“Given my choice between adding new programs or keeping what we have and not having to cut, I’ll take the second choice because it’s not really easy when you have to cut your budget,” Stoakes said.

Although the Cedar Falls School District is affected in some ways by the recession, the overall effect is not severe. This is mostly due to increasing enrollment, which as the state determines the money school districts receive based on the amount of students they have, increasing enrollment ensures money.

“In Iowa, basically every student that walks in the building is worth so many dollars,” Nefzger said.

Thus, increasing enrollment creates a good financial position for school districts.

“We’re in a very good position. Beyond that, we’re probably in an enviable position compared to a lot of other school districts in Iowa,” Stoakes said.

Stoakes mentioned that about 70 percent of school districts in Iowa are experiencing declining enrollment.

“So, if you have declining enrollment, it’s not going to be easy on your budget,” Stoakes said.

Another assurance is that, according to Stoakes and Conrad, the school district will be able to meet its two primary budget goals of keeping the local property tax at the same level and not cutting any staff positions.

“It’s still early, but as of now it looks like we will be able to meet those goals,” Stoakes said.

“The superintendent’s goal has been to number one not raise the property tax rate and number two not reduce staff, and we think we will be able to meet both of those goals,” Conrad said.

Although the Cedar Falls School District may be in a relatively stable position concerning the effects of the economic recession, the administration continues to be mindful with regards to finances.

“We always try to be as fiscally responsible as we can. We always want to spend money conservatively. We always want to be as efficient as we can,” Stoakes said.

Wise financial practices such as these may become even more beneficial as the state may make further cuts to the state government budget.

Nefzger said that other state agencies have been notified of funding reductions, but that it is his understanding that the governor is planning on using federal stimulus funds to offset any further state budget cuts for public education

Although not another cut, the budget does not completely fund the four percent allowable growth the state originally determined. Rather, it completely funds half of that amount. Nefzger compared this to having a $1,000 credit card with a $900 limit.

“That’s in essence what the state is doing to every school district in Iowa for next year,” Nefzger said.

Undeniably, finance and budgets are an important part of the educational system.

“The bottom line is that in order to provide the educational resources for our kids that we want to, it takes dollars,” Conrad said.

The economic recession has caused the Cedar Falls School District, and countless others, to create spending efficiencies — especially with regard to budgeting (energy costs, supplies, equipment and employee travel), detering the addition of any new programs and utilizing cash reserves.

Nefzger said that Cedar Falls had seen the effects of the economic recession through the budget cut made in December as well as with the possibility of another. However, he also said that he believed Cedar Falls was in a relatively good financial situation in spite of the times.

“Well, I think overall, Cedar Falls and the Cedar Valley has been, in my view, somewhat isolated from the economic situation we hear or read about across the nation. I do think Cedar Falls is weathering that a little better than our friends on the East and West Coasts,” Nefzger said.

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