By Jenny Neyman
The Kenai Peninsula Borough School District’s fiscal year 2015 budget is a math problem without an easy solution, and with a timer ticking down to when it needs to be solved. And for the borough’s biggest employer, with 8,000-plus students to educate, there’s a lot more at stake than just a good report card or smiley face on a test paper.
As it stands at this point in the budget process, the district is looking at a $4.5 million deficit for fiscal year 2015, which runs from July 1, 2014, to June 30, 2015, and no magic-bullet way to erase the gap between revenue and expenditures.
“We’re spending more money than we’re taking in. That’s the big picture. We’ve been doing that for a while. We’re now reaching a point where it’s harder and harder to make that work,” said Steve Atwater, KPBSD superintendent.
The finances of the district are as difficult to try and budget as they are complex to balance, as they hinge on funding decisions from state and local government beyond KPBSD’s control that are settled after the district is required to figure its budget for the year. It took Dave Jones, assistant superintendent of KPBSD Instructional Support, about an hour and a half to give just a 10,000-foot-overview look at the budget in a public meeting Feb. 19 at Soldotna High School, explaining the 24-page preliminary budget with which the school board is working, which itself is a condensed version of the 195-page full budget document.
It boils down to a concept any third-grader would be able to figure: Tommy wants to buy a $5 ice cream sundae and only has $2. He’s got two options — come up with more money or find a way to get the sundae for cheaper. So, help a neighbor wash his car for a few bucks, ask his parents for a bump in allowance or raid the $6 he’s got in his piggybank. Otherwise, he might look for the sundae on sale or else scrape off the fudge, nuts and a scoop of ice cream until he can afford what’s left.
But what if Tommy had to wrestle with the sorts of conditions placed on either of those two options that KPBSD does? Sorry, Tommy, but child labor laws prohibit you from working for compensation (public school districts in the state can’t decide to charge admission or otherwise raise money on their own, and aren’t allowed to finish a year with more than 10 percent of the amount it spent the previous year left over). The costs of nuts and whipped cream aren’t getting any cheaper, and neither is the sundae. Think mom (state of Alaska) and dad (Kenai Peninsula Borough) are going to bail you out? Maybe they don’t want to, or can’t afford to, and anyway they told you they’d think about it so quit pestering and they’ll get back to you about your request. Now let’s say Tommy has already ordered the $5 sundae and is realizing his hoped-for monetary solutions might not come through. Looks like it’s the piggybank to the rescue, except Tommy then won’t be able to buy a sundae next week, nor the week after that, or after that.
It’s enough to put a kid off ice cream altogether. Schools districts don’t have the option to throw up their hands or passively pout. Planning must be done. School staffing levels and teacher contracts must be decided in the spring. The school board must pass a budget onto the borough in mid-April, even though the district won’t know for sure its funding at that point, as the Legislature is still in session until April 20, and the borough doesn’t take final action on its budget until June. Plus, the official count of student enrollment doesn’t happen until October, and state funding is allotted based on numbers of students.
“We’re in a really unfortunate sequence of timing in that we need to do this piece (budgeting) now, but the numbers that we plug in, we don’t know what they are. We’re just best-guessing right now. And we’re used to it, but we don’t know. And it’s really frustrating for our principals and for our teachers because they want to set themselves up with everything they can do now for August, so that when we open the doors for school in August we’re in position, but we don’t know how to do that until everybody plays their hands,” Atwater said.
Budgeting by the crystal ball
KPBSD’s deficit has been a growing problem, and though the district saw it coming as far back as 2008, it has avoided making deep cuts to spending to also avoid significantly impacting education, choosing instead to cover the widening deficit with money from its savings account, the general fund. But money set aside in the general fund to cover health care costs — $1.7 million in FY 2014, $2.1 million expected in FY 2015 and $2.1 million in FY 2016, leaves nothing to cover a gap, should there continue to be one, in FY 2017. Same with the unassigned general fund. It’s at about $6.2 million for FY 2015, with the district at this point $4.5 million away from a balanced budget.
“That works real well for next year, but what happens the year after that? We still have this large deficit but we don’t have our savings account left anymore, so that’s why the (school) board has tried taking a long-range view at the use of fund balance and to try and take steps down, as opposed to taking huge giant cliff steps,” Jones said. “… Fund balance is one-time usage money. You have it, you spend it, it doesn’t regenerate by itself.”
The big change came in 2008, when the Legislature instituted a three-year funding plan that gave the financially struggling public education system a sizeable boost. The district also was helped by the state recognizing that KPBSD deserved more compensation for the increased expenses of delivering education in the urban-rural mix of the vast Kenai Peninsula Borough. And since a local municipality can fund its district a percentage of what the state does, when the state started spending more on education, that meant the borough could, and did, spend more on KPBSD.
With the money, the district instituted a plan called programmatic staffing, which included lowering pupil-teacher ratios, increasing the number of school counselors and instituting an interventionist program, whereby students who are struggling academically receive intensive attention early on to get them back on par with their grade level. That created 40 new positions.
After programmatic staffing, the district hasn’t added any large new programs or expenses to its budget, but its costs have gone up — in health care, in utilities, in salaries and benefits after a newly negotiated contract went into effect — and revenues haven’t kept pace. Since the Legislature raised the base student allocation — the amount a district receives for each student enrolled, with more kicked in to compensate for special-needs students, high school vocational education and other added costs — to $5,680, it hasn’t increased since. The Legislature has helped in other ways, last year giving the district money to cover a shortfall in its transportation budget, for example, but the funding formula hasn’t changed.
Meanwhile, the district’s enrollment has been declining, down about 8 percent from 2001 to 2011, and if enrollment drops unexpectedly when the official enrollment count is done in October, that leaves the district shorted in state funds that it already committed to spend when it issued teacher contracts the previous spring. That was the case this school year, when an unexpected drop in correspondence and home-schooled students left the district 111 kids short of the enrollment projection on which it had budgeted.
“We have to be careful that these numbers aren’t too optimistic, because if the kids don’t show up in October that we budgeted on and issued contracts on, then we have more of a deficit problem than we anticipate,” Jones said.
Cuts — fat, flesh or bone?
In July, the school board directed administration to trim the amount the district had deficit spent in FY 2014 out of the FY 2015 budget, to the tune of $1.3 million.
“The board said what we want to do is make sure we don’t put ourselves in a place where we all of a sudden have a huge deficit we can’t handle. So, looking forward, we know that we’re going to need to start reducing our budget,” Jones said.
Those cuts came in staffing, raising the pupil-to-teacher ratio by 0.5 full-time equivalent positions across the board, eliminating 10.5 positions. As well as in utilities, thanks to cost savings in heating buildings in the Homer area with natural gas service coming on line (cheaper than fuel oil), a planned closure of the Skyview pool, and a little bit trimmed from the budgets for supplies, equipment and school board travel.
But that’s it for easy cuts. Utility costs are mostly fixed, as the district can’t decide to just not heat a school every Monday or institute no-electricity Thursdays. The supply and materials budgets to schools have already been trimmed, but even if eliminated altogether that expenditure is only 6 percent of the overall budget, nowhere near $4.5 million.
That leaves staffing, which accounts for the lion’s share of district spending.
“When you look at a budget that has 84 percent of the money in salaries and benefits, it’s hard to address any kind of deficit if you’re not looking at salaries and benefits,” Jones said. “… (But) people are very reluctant to go there, because those are faces, those are individuals, that’s my neighbor.”
To give a sense of scale, if the district were to make $4.5 million in cuts to personnel next year, that would be 57 teachers. That’s not the plan, Jones said, as cuts would be spread among all personnel — teachers, administrators and support staff — but that’s the scale of the hole the district is in.
“That’s a lot of teachers, folks. That would make a big difference and our classrooms would be completely different than they are now. And so that’s why we’re here. That’s why we need to figure out what we’re doing. So we’re in the process right now of where the board is evaluating, ‘What can we do to increase our revenues, and what can we do if we have to do reduce our expenditures more than we already have?’” he said.
The district has been reticent to make any large cuts that would hinder programmatic staffing.
“We want to continue what we’re doing in schools because with programmatic staffing we’re seeing great results, and we want to move that forward,” Jones said.
According to Clayton Holland, KPBSD director of Pupil Services, the percentage of special education students identified as being learning disabled, as compared to students with other eligibility categories, reduced from 53 percent to 37 percent of the total special education population, due to the intervention program.
“We are able to identify who is struggling quickly through our universal screeners and strategic monitoring, and then provide research-based interventions and evidence-based practices that are matched to the student’s individual needs. Our interventionists are the key components of this happening,” Holland said.
Currently, KPBSD students are receiving 1,927 interventions, with 882 of those interventions happening in grades kindergarten through third, according to Michael Hanson, KPBSD intervention coordinator. Of the interventions, 651 are reading related and 625 are math. Since programmatic staffing, the measure of students falling below proficient in reading has decreased by four to five percent, Hanson said.
But if significant cuts must be made it will come at a cost to programmatic staffing. Even if the district doesn’t cut interventionists, it would mean a sizable increase to the pupil-teacher ratio in order to eliminate positions. Classes with 24 students might go to 28. That, too, harms the interventionist program, since it relies on individualized attention and monitoring.
“We’ve got it to where our teachers are individualizing instruction (to kids falling behind on standards) and we’re seeing good results. The problem is when you start throwing another four students into their classroom they no longer can do that for every kid, they just don’t have the time,” Jones said.
“We want to offer our kids the very best. We don’t want to reduce our services to our kids,” Atwater said, adding that the district especially doesn’t want to make sudden, obvious cuts, like canceling a Spanish class at the start of school because it can’t pay the teacher.
“We’re trying to avoid that scenario. And what we’re doing now is positioning ourselves so that a year from now we can have really a more difficult conversation,” he said, “… The issue is you want to sustain yourself, you don’t want to just fall off a cliff. You definitely want to slowly ease down.”
Budget low, hope high
The plan for next year is to budget conservatively and hope for increased funding from the state and borough, and make up any remaining deficit with the general fund balance. And if an increase in education funding doesn’t come through, the district will address more significant cuts next year.
“We’re not in a dire strait this year, in that we are fortunate we have money in our back pocket, we have reserves. The sky isn’t falling because we’ve set ourselves up for this, but it’s not rosy, either,” Atwater said.
Aside from the $1.3 million it has already trimmed, the district is carrying forward a status-quo budget, not proposing any increases in expenditures nor counting on increases in funding. But it’s hoping the situation will be better than that.
“You, as a community, need to know that (school board members) are counting on the Legislature to provide additional moneys, and they are counting on the borough to provide additional moneys,” Jones said.
And there’s a good chance an increase in state funding will come, especially with school districts in Anchorage, Fairbanks and elsewhere in the state in far worse financial shape than the Kenai. The governor’s budget proposal includes an $85 increase to the base student allocation. That would mean $1.4 million to KPBSD. The district is hoping for more than that. A BSA increase of $100 would mean $1.7 million. A $200 BSA increase would be $3.4 million, Jones said, though he thinks hoping for an increase of that size or greater is unrealistic.
“If just the state Legislature was going to solve our problem, if they passed an increase to the base student allocation value of $268, our $4.5 million deficit that we’re looking at is gone. (But) the likelihood of seeing a $268 increase is not good, folks,” he said.
Next would be looking to the borough for additional help, but there’s a cap on how much local municipalities can provide, scaled to the amount of state funding. And the district’s current $4.5 million deficit is beyond the $2.5 million extra the borough could contribute.
“We’ve just crossed a threshold in this district. This is the first time that when you look at our deficit, and you look at what the borough can give us, they can’t solve our problem anymore,” Jones said.
It seems that it will take a combination of increases to funding, plus budget cuts and/or pulling from the general fund to get KPBSD in the black next year, and the district is hoping for more of the former, less of the latter. In that vein, part of the series of public budget presentations is to stress the need for parents and community members to voice support for public schools.
“There is some skepticism in the Legislature and in some of the public that what we do in schools is not great,” Atwater said. “You’ve probably heard some criticism of our schools, ‘Public schools are failing, some schools in Alaska are terrible,’ wherever you’ve heard that. It’s really important that you counter that message and push back on that and say, ‘Actually, the kids in the Kenai school district do pretty well, and I’m pretty happy with my kids’ education.’”
The usual complaint, Jones said, is that the district’s budget has increased while enrollment has decreased, giving the appearance of KPBSD living fat beyond its slimming means. But it’s more complicated than that, Jones said. Yes, the borough’s expenditure budget has increased from $85.8 million in FY 2006 to a projected $161 million in FY 2015, but the vast majority of that is money that isn’t being spent by the district, yet must be accounted for in its budget.
For instance, the state of Alaska in FY 2008 started making payments on behalf of municipalities and school districts to bail out the underfunded public employee and teacher retirement systems. In KPBSD, those payments have been to the tune of $19 million in FY 2008, and a projected $33.6 million in FY 2015. The district budget also reflects the dollar value of in-kind services provided by the borough, such as building maintenance and liability, property and workers compensation insurance, to the tune of nearly $9.2 million in FY 2014. None of that is money the district is spending, nor has control over, but must reflect it in its budget. Without counting these in-kind, on-behalf values, the district’s FY 2015 expense budget drops from about $161 million to about $127 million, Jones said.
“We have to reflect that. That’s why we had people in the community that were saying, ‘What are you doing? You’re losing kids and your budget is increasing by that amount?’” he said.
As a self-professed bean counter, Jones said he feels good about the value of educational services provided with public funds in KPBSD, and encourages anyone with questions or concerns to visit with board members or district administration, attend upcoming school board meetings or set up a visit to a school.
“I’m biased, but I’m fairly impressed with our buildings,” Jones said. “And I think if we invite people in and show them, ‘This is how we’re spending your money, please come take a look,’ they’ll understand we are providing a good product on the Kenai.”