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You are Viewing an Archived IssuePosted: 03/05/14
RCS's worst case budget
wipes out fund equity
by CHRIS GRAYRomeo Community Schools would only have $8,626 in its fund balance if no cuts are made to handle a $2.7 million shortfall in a $48.4 million budget.
Observer Staff Writer
Executive Director of Business Affairs David Massoglia painted the picture for the Board of Education at its March 3 meeting using information from Gov. Rick Snyder's 2014-15 budget. Massoglia said with a projected loss of 100 students and revenue remaining flat, the district would use up the majority of its fund equity to keep next year's budget balanced unless reductions are made.
"The economy is improving, but the money is not coming back to the schools," he said.
Snyder's budget provides a $104 per-pupil increase to the foundation grant. However, $64 per pupil will be used to lower unfunded pension liabilities by 1.2 percent, so the district will receive about $50 per pupil. Additionally, the district's retirement rate will be 24.58 percent, but the state will contribute 8.62 percent for a total of 33.2 percent.
"What that basically is stating is a lot of the money that the state is giving us is going right back to fund the retirement rate," he said.
Massoglia said Best Practices and performance revenues will likely remain the same. Last year's performance revenue was $70 per pupil. Money is given to districts that complete eight practices, such as providing dashboard reports to the community or offering students a chance to earn postsecondary credits.
If approved, the governor's budget provides a 40 percent increase in the Great Start Readiness Program grant that includes a $100 per pupil increase. This would fund pre-school programming.
The current budget year's projections show a $1.6 million gap in expenditures over revenue. If not cuts are made, this would reduce the $4.4 million fund equity to $2.8 million. When using Snyder's budget figures, Massoglia said the district could have a $2.8 million gap in 2014-15, which includes an estimated loss of 100 students totaling $770,000. Without budget reductions, the district would have to spend 99 percent of its fund balance.
A more optimistic estimate shows the district with a $1.1 million gap and a loss of no students for a total of $1.7 million in expenditures over revenue. This would leave the district with $1.5 million in its fund balance for 2014-15 if no cuts are made.
"We'll probably be somewhere in the middle, hopefully we're on the better side of that," he said, adding that the technology bond and an improving economy could reduce the number of students lost.
To deal with the shortfalls, Massoglia said the district could either absorb the gaps with the fund equity, eliminate it through reductions and revenue enhancement or a combination of both.
"Difficult choices are likely as the district has already had $14.9 million in reductions over the last 11 years," he said.
Romeo Community Schools isn't the only district facing tough times. In Macomb County, five out of 21 public districts have expenditures over revenue, and four out of 28 in Oakland County are in deficit. Overall, 50 out of 545 Michigan public school districts are in a deficit.
Massoglia said Synder's budget has yet to become law, but expects state legislators to approve of a budget by June. The district's budget must be approved by June 30.