By Jamie Taylor
Second in a Series
Just how interconnected all the components of the complex web that makes up the Merrill Area Public Schools’ finances was demonstrated to the committee of community members who have volunteered to help find nearly $1 million in budget reductions in their last two meetings Oct. 18 and Nov. 1. Also brought into focus was how declining enrollment and the resulting reduced state aid and the structural deficit are compounding the problem district administrators and the Board of Education face in making these reductions.
The Fiscal Advisory Council saw all this by way of a computer model run by Scott Gralla, senior financial advisor with PMA Financial Network on Oct. 18. This model, the Financial Planning Program (FPP) has been used by PMA for six years to help districts across the state forecast how changes to components of a budget affect each other and the fiscal bottom line of their budgets. MAPS has used the program for a couple years now, most significantly last year when Gralla made the same presentation to the FAC and the School Board.
They then tried to brainstorm short-term budget reduction ideas as well as formulate long range shifts in district operations that would both reduce expenses and possibly generate additional revenue.
The FPP uses a complex set of formulas representing each factor in the budget. While some of these factors are based on assumptions, these assumptions have proven to be quite accurate in forecasting both the overall budget picture, as well as the many components making it up. Because of this, it can look at trends district-wide as well as “drill down” into specific areas of a department’s budget.
“We are quite comfortable with our assumptions for five years out,” Gralla said.
Because of the declining enrollment the district will face in the next five years, specifically a loss of 92 students from this school year to the 2011-12 school year, it can also project how many teachers are needed at each grade level to maintain a certain teacher to student ratio, expressed as a Full Time Equivalent (FTE). This is important for Washington and Kate Goodrich schools who receive SAGE grants to keep these ratios low in grades K-3.
“If we are losing 92 students, are we losing 5.52 teachers? It is reasonable to make this assumption?” Gralla said.
The FPP also takes into consideration projected teacher retirements into its budget forecast as well as teachers progressing along the salary scale due to gaining experience or achieving higher degree certifications.
MAPS Superintendent Dr. Lisa Snyder also told the FAC members that its teacher salary structure is different from those of many surrounding districts.
“Our salary structure in Merrill is unique,” she said. “About 15 years ago we changed to one that provides for uniform salary raises across the board. That has driven up our comparables to other districts in the area.”
Overall, salaries and benefits, which are set by contract with the various unions through the 2010-11 school year, makes up roughly 80% of the MAPS budget. Negotiations for the next round of contracts won’t start until this spring, and Snyder said projecting the results of those talks and how they would affect the 2011-12 budget is impossible. This percentage is a huge factor in the structural deficit, but not the only one. A decline in property valuations, state aid and other factors also play a role in this deficit.
However, if the board only addresses making six FTE position cuts to offset declining enrollment, the savings would not be enough to equal the $1 million in cuts needed to have a balanced budget. Gralla said the projections show MAPS will be insolvent in five years if it only makes cuts in positions to keep up with declining enrollment.
“The one thing I would like to stress is that we are looking at all employee positions, not just teachers,” he said.
Snyder told the group that there will be one administrative retirement at the end of this school year and that position will not be refilled. That will mean some savings in salary and benefits.
Finance Director Louise Fischer said declining property valuation in the district is an area that directly affects the mill rate and the School Board can only react to this decline. As state aid declines as a result of the decreased values, taxes have to rise to compensate. She said this is why a lot of local taxpayers were upset at the board last year over tax increases when the blame should have been laid on state lawmakers who further reduced state aid in the biannual budget.
“The economy is affecting our aid, it isn’t affecting our revenue,” Fischer said.
Gralla then used the FPP to show how several suggested budget reductions made by the FAC members would affect the budget’s bottom line. In doing so, he showed that the suggestions affected one or more of the factors that make up the budget.
The members kept coming back to the issue of teacher compensation, and Snyder told them that while they can offer suggestions on possible negotiated cuts, they could not be bargained for in time to have an impact on the 2011-12 budget reductions. Suggestions for long range changes to teacher salaries and benefits greatly outnumbered other suggestions.
After Gralla’s presentation on Oct. 18, members of the FAC realized how tough a job that they, administrators and the School Board members have in finding the $1 million in reductions.
“You’ve already cut the easy stuff,” councilmember Gene Bebel said.
“They are never easy,” replied School Board President Jeff Verdoorn, who was one of several board members observing the committee’s work.