Pandemic creates budget uncertainty for school districts
May 6, 2020
By RICHARD JENKINS
Ironwood — With students learning from home for the rest of the year, the effect of the coronavirus has already been felt by schools across Michigan. However, it remains unclear what the future impact of the pandemic will be on the state’s school districts — including the potential budgetary consequences of declining state tax revenue.
Several local superintendents have warned their school boards that, while the numbers haven’t been determined yet, the economic consequences of the pandemic could lead to steep cuts in the amount of funding the state provides for each student.
Ironwood Superintendent Travis Powell recently told the Daily Globe he hasn’t heard specifics and without concrete numbers, he will likely be following State Superintendent Michael Rice’s advice to create budgets for a variety of scenarios.
“We’re still working from Superintendent Dr. Rice’s recommendation to create a tiered budget plan that involves one tier that’s our best case scenario, and then has, ‘What if we have a per-pupil reduction of $100? What if it’s $200, $400, $600,” Powell said. “And of course, in each tier of ... reduction of student aid, then the more profound the cuts or reductions (to district spending) would be.”
The Detroit Free Press reported in April that early estimates from the state Treasury Department show revenue could drop by $1 billion-3 billion for the 2020 fiscal year, with another potential $1 billion-$4 billion decline next year, as the state’s closure of non-essential businesses and other measures taken to fight the pandemic have led to sharp cuts in consumer spending and a surge in the number of people not working.
Although the funding formula for Michigan school districts is relatively complex and Ironwood’s budget is made up of a variety of funding sources, Powell said the per-pupil revenue from the state was vital to the district’s finances.
The number of pupils is largely calculated using a rolling average of the district’s average student population over the past three years. Ironwood’s is currently listed at 755 students. The district currently receives $8,111 per pupil.
Although the state hasn’t provided information on what the per-pupil amount will be next year, Powell said his concern is that cuts could be as steep as $600 or more per student — which he said was his worst-case scenario.
Powell said the state had a $465-per-pupil reduction in 2011 as it sought to deal with the effects of the Great Recession — and the current economic situation could be worse.
“If $465-per-kid was the result of the final death throes of the Great Recession and its impact on schools, what’s going to happen now?” Powell asked.
Even a decrease of $100 per student would translate to over $72,000 less in revenue for next year in a district which, according to Powell, has 87% of its roughly $8 million budget tied up in salaries and benefits for staff.
He said a deeper decline in revenue — a $600-per-pupil reduction is closer to half a million dollars less for the district when using an enrollment of 755 students — means additional cuts to the district’s budget would be needed and would likely include layoffs.
“When you’ve got 13% of the budget for transportation costs, electricity, repairs, supplies — non people things — there’s not a lot of wiggle room,” Powell said. “For (roughly) $500,000 out of an $8 million budget, you’re not going to make up for it by buying fewer pencils … it’s going to end up being people.”
Powell said that a budget is often a spending target that is adapted to changing circumstances over a school year in the best of circumstances, and so the flexibility of multiple options will help the district be prepared when it gets the needed information from the state.
To help prepare for the various scenarios, Powell said he envisions gathering an advisory group of the various stakeholders in the district.
“What I would rather do is spend time working on stuff I don’t want to have happen, instead of not do that and then have this terrible scenario come up and be (unprepared),” Powell said, explaining if the district waits for solid numbers, it’s more likely to make hasty decisions as it rushes to complete the document.
As of now, the budget remains due at the end of June — even though Powell doesn’t expect the state will provide information on how much money Ironwood will receive by that deadline.
“(The budget) is typically approved at the June board meeting, and ... we still need to follow that timeline as far as I know — we haven’t been told anything changed,” Powell said.
Unless the district hears otherwise, Powell said he will likely present Ironwood’s board with the budget option that maintains the status quo and hold the other plans in reserve unless they are needed.