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February 9, 2010

 

Expert: Schools face tough financial choices

Rising costs, falling revenue will require layoffs, salary freezes and benefit caps

By SCOTT CONROE
Staff Reporter
sconroe@cortlandstandard.net

DRYDEN — Public school districts need to freeze salaries, reduce or cap benefits, lay off staff and raise taxes, or they will fall into heavy debt in five years.
“We have all been in a comfort zone,” Rick Timbs, a schools financial consultant from the Rochester area, told the Dryden Board of Education at its Monday meeting. “Name the person who doesn’t think they’re doing enough. Everybody’s world will be rocked. We have a financial Haiti.”
Timbs, a former school and BOCES superintendent in the Rochester area, is executive director of the Statewide Schools Finance Consortium, which has 150 member districts, including Dryden.
Timbs reviewed the district’s overall financial picture for two hours for the board, staff and about 40 members of the public at the middle school’s C-13 instruction room. Only board members had copies of his report.
Timbs said costs are rising, revenue is falling, state aid is decreasing, and wealthy downstate districts that have more academic programs are receiving more aid than they should be.
He said that with Gov. David Paterson trying to cut the district’s state aid by $1.8 million for 2010-11, and announcing last week that the state’s estimated $7.4 billion budget gap is actually $8.2 billion, the board needs to think about the next three years.
Timbs praised the district’s financial practices of recent years, saying the board had been wise to keep taxes down and the tax levy flat, trim spending and avoid using revenue anticipation notes to bolster cash flow.
“You guys have been tighter than the bark on the tree,” he said.
Timbs said the board was wise to decide last year to pay for buses at a faster pace, gaining more money for them when selling them and increasing transportation aid. He said transportation costs are a problem, with fuel prices increasing and buses adding new features — mirrors, lights, stop signs, seat belts. He said bus costs go up 5 to 10 percent each year.
“That’s a problem in a rural district like yours,” he said.
But the district’s decline in enrollment, from around 1,900 students in 2005 to 1,811 this year, means the cost per student has increased and the aid will change when the state Education Department updates its aid formula. He said aid has been based on enrollments two years ago, when Dryden had 1,890 students.
Health costs for districts have been growing, as schools “become the social agency for kids’ health.” Special education costs continue to rise, including costs from legal challenges by parents who demand services from schools.
Layoffs by area employers have caused the people laid off, who have spouses working for schools, to use the spouses’ insurance — putting pressure on insurance costs. Plus, insurers have begun to ask people if they have other insurance, then forcing them sometimes to use that to pay for health costs.
Dryden’s retirement costs rose from $900,000 in 2005 to $1.1 million in 2009, and its health insurance costs rose from $2.6 million in 2005 to $3.3 million in 2009.
“The only way to decrease employee benefits is to decrease people, and that’s a problem since schools are in the people business,” Timbs said.
School districts have had their aid frozen in the past year — except for building aid, which has kept coming — and cut. They were bailed out last year by federal stimulus funds, but now the governor wants to keep funds that were intended for next year’s school budgets, which is $353,000 in Dryden’s case.
Districts are caught by conflicting state laws and opinions from the state Comptroller’s Office about how they can structure their reserve funds.
And if districts continue to use reserves to offset aid cuts, as Paterson has said, the reserves will be depleted in five years.
Dryden would need to use $500,000 from its reserves in 2011, then as much as $2.5 million in 2012.
By 2015, even with a tax increase, the district would be $600,000 in debt.
“The governor says we’re $750 million further in the red than he thought, and by the end of this month he might find more,” Timbs said.
Even contingency budgets, adopted if district voters defeat a budget twice, are a challenge. Cutting one part could drive up the costs of another part, making the budget illegal.
Board member Lawrence Lyon asked what state legislators could do to help. Timbs said aid needs to be more equitable between downstate and upstate.
Locally, he said employee benefits need to stay where they are, unions need to keep health costs down, districts need to continue to share services and sports leagues need to be restructured to be closer geographically, to cut down fuel costs.

 

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