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Sounding the alarms

An unprecedented budget crunch is putting public school finance experts to the test.

When students return to schools in a month or less they will encounter bigger class sizes, fewer teachers and librarians, bus routes eliminated, and classrooms and corridors that aren’t quite as clean as they’ve been in the past.

School officials and staff, many of whom belong to the Arizona Association of School Business Officials (AASBO), are crunching numbers that will, among other things, result in reductions in their own pay and benefits — and that’s for the lucky ones who haven’t lost their jobs.

Schools are trying to cope with the elimination of funding for all-day kindergarten, and districts with declining enrollments are facing a double hit. Some officials think declining enrollment is tied to the state’s new immigration law, which is scheduled to take effect July 29.

The Legislature slashed public school spending for fiscal 2011, which began July 1, by approximately
$400 million. It would have been $400 million worse if voters had failed to approve a temporary one-cent increase in the state sales tax earlier this year.

But that’s not all. A worst-case scenario looms in November when voters will be asked to give the Legislature authority to sweep $450 million from two voter-approved programs:

• $325 million from First Things First, an early childhood services program that focuses on literacy problems and abuse prevention and is funded by a voter-approved tobacco tax.

• $125 million from Growing Smarter, a program funded by the Legislature to more effectively plan for land use and to acquire and preserve open space.

If voters don’t go along with those two ballot proposals, lawmakers will face an additional $450 million hole in the state budget, and education funding would be a likely target. On top of that, Congress has been reluctant to authorize additional funding for Medicaid, which Arizona lawmakers were banking on when they approved the state budget in April. That’s another $400 million dilemma.

“This is truly the worst condition we’ve ever been in,” says David Peterson, outgoing president of AASBO, a nonprofit that provides professional support for public school and charter school staff.
Peterson, a school administrator for 16 years, speaks from experience. He is assistant superintendent for business services at Scottsdale Unified School District, which is comprised of 31 schools, including five high schools, and has approximately 26,000 students. The district’s budget this year is $181 million, down $10 million from last year.

Because wages and benefits account for 80 percent to 90 percent of the operating budgets for most schools, that’s where most of the cuts are being made. Add the cost of everything from utilities to personnel expenses and the figure hits close to the mid-90-percent mark.

For example, the Scottsdale district laid off more than 70 teachers, eliminated three administrative positions, and is adding three students to every class. Teachers who help train beginning teachers will go back into the classroom. Full custodial cleaning is being reduced to three days a week from five, with only trash picked up on Tuesdays and Thursdays. Libraries will be staffed by one librarian instead of two. A utility saving of $280,000 resulted from shutting down school buildings from June 15 to July 15, except for one high school that offered summer classes. And all employees will lose five paid vacation days.

Special education services are under federal mandate and are not subject to any reductions, Peterson says.

“First and foremost, we made cuts as far away from the classroom as possible,” Peterson says. “That’s our guiding principle, to minimize the impact to students.”

As AASBO president, Peterson hears from districts around the state and how they’re coping. “They’re struggling,” he says. “Unfortunately, they’re having to lay off people. In some cases they’re actually reducing pay across the board. It’s a tough thing to do, but everyone realizes we’ve got to get through this.”

Potential pay cuts can be blamed in part on the sluggish economy. Voters approved a small increase in the state sales tax in 2000 establishing the classroom site fund, with most of the money designated primarily for teacher salaries and benefits. The amount awarded from the fund this year is $220 per student, down from $397 in 2008. AASBO officials blame reduced sales tax collections, which they say could result in pay cuts. It’s nothing the Legislature did or didn’t do — it’s the economy.

At Osborn Elementary School District in central Phoenix, declining enrollment is having an impact. The district, which runs roughly from the 51 freeway on the east to 19th Avenue on the west, and from Bethany Home Road to Thomas Road, is home to a relatively large transient population. Enrollment at the district’s six K-8 schools is 3,076, down about 15 percent from the 2006-07 school year.

When enrollment decreases, so does state aid. But just because there are, for example, 15 percent fewer students, that doesn’t necessarily translate into a 15 percent reduction in operating expenses, AASBO officials say.

Other districts with declining enrollments, due mainly to the economy, include the unified school districts of Dysart, Queen Creek, Florence and Mesa. Contractors couldn’t build houses fast enough during the early part of the decade, but then the bubble burst.

Pattie Johns, director of finance at Osborn, says many residents are in a lower socio-economic group. During construction of the light rail system on 19th Avenue, apartments were being converted to condos, forcing many residents to move. Now, some of those condos are reverting back to apartments, which could result in people returning to the district, she says.

The other hit to enrollment may be linked to the state’s new anti-illegal immigration law. Hispanics comprise at least 50 percent of the district’s population.

Osborn scaled back on music, band, physical education and art. Those classes will still be offered, but for fewer hours a week. Johns says the district, which had 15 teachers for those classes, is budgeted for 11½ positions, which includes a part-time band instructor.

In the libraries, only one of six certified librarians remains as a supervisor to oversee clerks. It’s the same with the nursing staff; one registered nurse survived the cuts, and five assistants have been hired.

The district has closed a classroom in each of the six schools for students with behavior problems. “They’re gone,” Johns says of the classrooms. “We’re giving staff some classroom behavioral management training, but if a kid is misbehaving, we can’t pull them out of class.”

In addition, the district cut two bus routes and reduced annual leave for all employees by six days. “In order to not lose productivity, we’re taking six holidays without pay,” Johns says.

One of the biggest challenges school officials are facing is how and whether to continue all-day kindergarten after the Legislature cut $218 million from the program.

Tim Carter, Yavapai County superintendent of schools, says rural schools are facing many of the challenges that affect urban schools, especially what to do about all-day kindergarten. Yavapai County has 26 school districts on 98 campuses, including 25 charter schools. Enrollment, not counting the charters, is 24,744.

“All-day K is having an impact on all of our districts,” Carter says. “They’re going to have to determine whether or not to offer all-day K. Most say it’s a priority. Some are going to charge tuition for the other half of the day. Others say they’ll add it into the budget without a tuition and cut somewhere else. And some might just do away with it.”

Chuck Essigs, AASBO director of government relations, says schools have to deal with a reduction of $162 million in what is considered soft-capital funding — money for such things as furniture, equipment, computers and books. In fiscal 2010, soft capital funding was cut $144 million.

The Legislature allowed school districts to spread out the fiscal 2011 loss over two years, which lessens the need to reduce teacher salaries and benefits, says Essigs, who serves as AASBO’s lobbyist.
Because salaries and benefits account for most of the school spending, that’s where budget-cutters look. “When they’re only minor cuts, maybe you can cut supplies a little bit,” Essigs says. “But the kinds of cuts schools are facing have to impact people. That’s where the money is. You can’t save enough in non-salary and benefit items.”

Each district has to consider its options. A good example is bus drivers. “You still have to get kids to schools safely,” Essigs says. “You need crossing guards. There are a number of things that relate directly to safety that schools may not be able to cut, but they may have to cut. They have to be very careful they don’t compromise student safety.”

All support functions, such as custodial, could face cuts. “How far can you cut back and still keep your schools clean?” Essigs asks. “Some say just contract out, but that still costs. There is a significant cost for contracting out for bus and custodial services. That may or may not save some money. You have to maintain a certain level of cleanliness just to have a healthy environment. Then there are the mechanics who fix buses, the crossing guards and some security people.”

There are only so many cutbacks to be made regarding clerical staff. State and IRS forms still have to be filled out, and payroll has to be met.

Districts are trying to get the word out that passage of Proposition 100, the sales tax hike, didn’t prevent all the cuts that schools are implementing. “It just minimized them,” Essigs says.

Carter, the Yavapai County superintendent in his 38th year in education — 30 as a teacher, coach and administrator — says if voters reject the two ballot measures calling for fund sweeps, the Legislature will go back to the alternate budget they approved just in case the sales tax hike was rejected.

“That is probably a convenient hit list,” Carter says, “and it hits K-12 very hard. I have not seen anything like this. There are always ups and downs, but this appears to be substantially worse than anything we’ve seen.”

Carter blames the state’s structural deficit as much as the economic downturn. “We are simply spending more dollars than we are taking in,” he says.

One of the reasons is because of voter-initiated programs that cost more each year, even in a bad economy, Carter says.

Peterson of AASBO says there are no easy cuts yet to be made. “Over the last several years districts have been whittling down their budgets and consolidating jobs,” he says. “Scottsdale consolidated two schools last year. From here on out anything you cut is like taking a limb.”

Schools are working diligently with banks for lines of credit to tide them over until state funds arrive. The state implemented a four-month rollover covering April through July.

“Even though the state delays our aid, we still have to keep educating children,” Peterson says. “We’ve got to pay our bills, so finally when the state gives us the money they should be giving us, we can pay back the money we had to borrow to keep operating. It’s a major problem.”

His advice to AASBO members? “We have to analyze every decision more carefully than we’ve ever done in the past. Any opportunity where we can save dollars, we need to take advantage of that.”

— Full disclosure: Don Harris, copy editor for the Arizona Capitol Times, also does freelance writing for the Capitol Times and the Arizona Association of School Business Officials.

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