I have appreciated having the opportunity to talk about our schools with you and value your insights, so I wanted to let you know where matters stand on the possibility of a school spending referendum on the November ballot.
As you probably know, Superintendent Dan Nerad submitted his recommendations to the Board at a School Board meeting Monday night (1MB PDF, 3 year financial forecast PDF). In summary, the structural deficit the school funding law imposes on districts as well as increased fixed costs result in a projected budget deficit of $8.1 million for the 2009-2010 school year, $4.4 million for the 2010-2011 school year, and $4.3 million for the 2011-2012 school year, calculated on a same-service basis.
To meet these gaps, the superintendent recommends that the Board approve a referendum asking the voters to authorize the district to exceed our spending limits by $5 million next year, and $4 million in each of the following two years. This would be a recurring referendum, meaning that the authorization for the increased spending in the specified amounts would continue indefinitely.
The amount of extra spending authority we would seek is less than the projected budget gaps. The idea is that this a shared-sacrifice sort of proposal – we would be asking the community to permit us to erase some of the gap through additional taxes while we pledge to address the remainder through seeking out savings and efficiencies that will not have a detrimental impact on classroom learning. As is probably apparent, the referendum is not designed to allow us to restore in a significant way any of the painful cuts we have made in previous years.
Budget information for the district has historically been confusing. We’re working on greater clarity and transparency in our budget information. I have some questions about our numbers that I’m in the process of trying to get clarified. Part of the confusion derives from the fact that the budget is arranged in a number of separate funds that are defined by DPI. The principal category of spending for our purposes is Fund 10. For the upcoming school year, we are projecting Fund 10 expenditures of about $306 million. For the following year, the one that shows the $8.1 million shortfall, we foresee expenditures of about $318 million, or a 3.78% increase.
With the Qualified Economic Offer, salaries and benefits for teachers are, as a practical matter, required to go up at least 3.8% per year. Our total projected increase for next year for salary and benefits is 3.88%. The rest of the Fund 10 budget, a little under $100 million, increases 3.55% from this year. (By comparison, the consumer price index has increased 5.6% since July of 2007.) This budget does not include any significant new initiatives.
Turning to the revenues side of the ledger, the category of interest here is the tax levy. This is what our community has to cough up to pay for our schools, and it represents the difference between our expenditures and our other sources of revenue, including state and federal aid and grant money. The portion of the tax levy that is attributable to Fund 10 expense is governed by the spending cap that state law imposes.
The total tax levy for the current year is about $226 million. Under the superintendent’s plan, if the referendum passes, the total levy for next year would be $237 million, an increase of 5.07%.
If total expenditures are increasing less than 4%, why is the tax levy projected to increase 5.07%? There are a couple of reasons. First, we are unable to project that increases in other sources of funding will keep pace with our increasing level of expenditures. Indeed, we do not project any increase in state or federal aid. Second, the tax levy increase was moderated this year by the one-time injection of about $4.1 million in TIF funds. Had these funds not been received, then the tax levy would have had to increase this year (presumably through a referendum) in order to support this year’s level of spending. The 5.07% increase in the tax levy for next year is thus partially the result of starting from an artificially low base.
A final consideration is the mill rate. This is the amount applied against the assessed value of a taxpayer’s property to arrive at the amount in taxes that is levied. As the total value of property in our community increases, the mill rate goes down, all things equal. Under the superintendent’s plan, the mill rate increases from this year’s $9.92 to next year’s $10.03 (an increase of about 1%) and then is projected to decrease the next two years, to $9.59 and $9.29. So if one owns a house with an assessed value of $300,000, and the assessment remains the same next year, the amount that taxpayer would pay for schools would rise from $2,976 this year to $3,009 next year, and would decrease in the following two years if one is willing to entertain the unlikely assumption that the assessed value of the house would remain the same over the relevant years.
This analysis assumes that the referendum passes. If the referendum fails, then we will be obligated once more to hack away at the budget and attempt to find cuts that do the least amount of damage to classroom learning.
There are many reasons to want to avoid this. As past experience has shown, it is a divisive and painful exercise for the community. It requires that the Board devote much time and attention to the budget-cutting process – time that could be better used by the Board to work on strategies for improving student learning. Some of the decisions that have resulted from this typically-rushed process have later appeared to be short-sighted or misguided. And, most importantly, the cuts diminish the quality of the education we are able to provide to our students. There are no easy cuts left. If we are compelled to continue to slash away year after year, we will soon be at a point where we will be unable to provide the quality of education that our community wants and expects.
If the referendum passes, we will have breathing room. We should have three years when the specter of budget cuts is not hanging over our heads. This will enable the Board and the new administration to put into place the process we currently contemplate for reviewing our strategic priorities, establishing strategies and benchmarks, and aligning our resources.
Superintendent Nerad has described a proposal that contemplates a broad-based strategic planning process that will kick off during the second semester of the upcoming school year. This process will be designed to identify the community’s priorities for our schools, priorities that I expect will reflect a concentrated focus on enhancing student achievement. Once we have identified our priorities and promising strategies for achieving them, we’ll likely turn to examining how well our organization is aligned toward pursuing our goals. This will likely be the point at which we take a long, hard look at our administrative structure and see if we can arrange our resources more efficiently.
It will take a while – certainly more than a year – for us to undertake this sweeping kind of review of our programs and spending in a careful, collaborative and deliberative way. If we do go to referendum, and the voters authorize the increased spending authority we seek, then the obligation will pass to the Board and administration to demonstrate that the community’s vote of confidence was well placed. There will be much for us to do and it will be fair to judge our performance on how well we take advantage of the opportunity the community will have given us.
These are my initial thoughts. As you can probably tell, I am sympathetic to the approach the superintendent proposes and I am inclined to support his recommendation. However, we did just receive the recommendations Monday night, and I may well be confused about a few of these points. But since we will vote on a referendum next Monday, I wanted to get this summary to you as soon as possible. If you have thoughts or questions, I’d appreciate it if you could share them with me.
2226 Lakeland Avenue
Madison WI 53704