School budgets face big unknowns
ESCANABA — At the end of each school year, superintendents and their administration create a budget for the following school year and submit it to the state of Michigan. The House, Senate and Governor do not complete the state budget before the school year ends, creating a guessing game for administration — guessing how much funding the state will pay their district.
Local school districts budgeted conservatively, knowing there may be budget cuts due to the coronavirus pandemic.
“It is always tough creating a budget without knowing what the state budget will be,” said Big Bay de Noc Superintendent DeeDee Thill. “This year was especially difficult because school districts faced a few new challenges.”
A considerable amount of time is put into closing out the previous school year before creating a budget for the next school year. By closing out the previous year, it starts to create the most accurate budget for the following year.
When creating its budget, Escanaba looked closely at current and future rough revenue estimates provided by the state and the potential impact on the district. Using data collected, they created a conservative budget.
Included in creating a budget is knowing the number of students planned to enroll in the district.
“…we are not certain how anxiety and pre-existing conditions will combine with COVID-19 concerns to impact enrollment,” said Gladstone/Rapid River Superintendent Jay Kulbertis.
According to Manistique Superintendent Howard Parmentier, they created their conservative budget using predictions from the Michigan Association of School Administration, Michigan Association of School Boards, and the Michigan School Business Officials.
“Ideally, the state would establish school funding prior to the July 1 budgetary deadline so the school budgeting process can be completed with real and informed numbers,” said Thill. “Without this in place, districts must continue the process of making budget adjustments once the state-level budget is put in place.”
Typically a funding estimate is done by evaluating the states’ house, senate and governor’s budgets.
“There continues to be uncertainty in this current fiscal year …,” said Kulbertis. “Since the state fiscal year continues until Oct. 1, the governor’s office and leading legislators have reached a budget compromise and are planning to pass a supplemental budget in July to address the revenue shortfall caused by the economic shutdown.”
Until the budget bill is adopted the details are subject to change.
The fiscal year of the state doesn’t align with the school districts’, leading to cash flow borrowing and costs. The state begins to fund schools in October, but the school year starts in July, four months earlier. It causes most of the school districts to borrow money from the state for cash flow purposes as they go into a new school year. If the state paid the school districts throughout the entire year it could eliminate the cash flow issues, noted Escanaba Superintendent Coby Fletcher.
“While the interest rate is low, I could still hire a teacher solely on the amount we pay in interest for what we borrow,” he said. “The way the state budget tends to force districts into a guessing game … While I understand that this year’s challenges are unique, these are problems that could be easily fixed.”
The majority of school districts created their budgets reviewing different scenarios that took into account less funding from the state.
“This budget cycle was incredibly difficult because of the lack of information we received from Lansing,” said Bark River-Harris Superintendent Jason Lockwood. “…not knowing what our state revenues would be has created a very fluid budget.”
COVID-19 has created an economic crisis that has impacted state-wide revenue. It is expected there will be less state funding for schools.
“This is a serious concern as public schools are already underfunded. We are thankful that our state has allocated Corona Relief Funds to help fill the void for the 2019-2020 budget, but that doesn’t solve our 2020-2021 budgetary issues,” said Lockwood.
Local school districts are funded by local taxation, state funding and federal funding. The amount of funding is tied to the number of students in the district. School districts will probably face COVID-19 budget cuts while asked to spend more money to start up and run schools safely.