District Superintendent Todd Roberts held his second community forum on the school budget last night at Pioneer HS. Dr. Roberts told the small group in attendance that his hope was to raise community awareness of the financial limits facing the district, and to lay the foundation for a community-wide discussion of school priorities this coming spring. He clearly hoped that his presentation would also build support for Proposal 5, on the ballot this November. During the discussion that followed, Dr. Roberts also admitted that the school district had to earn back some credibility with citizens, which has been eroded in recent years with delays over construction projects, handling of the new high school, and other issues.

The burden of his presentation was to explain how the bulk of AAPS budget funding is determined: he outlined the school finance system set in place by Proposal A in 1994, explained how the per-pupil “foundation allowance” is determined and funded, and provided AAPS revenue and expense histories for the past six years. (For more information on school finance, Proposal A, and the foundation allowance, see the Penguin Talk! article What’s Up with School Funding.)

In short, Ann Arbor’s per-pupil foundation allowance has not kept up with inflation, and our total student enrollment has had slow to flat growth since 2000. (AAPS has lost 150 students in the last 3 years.) Since funding is dependent on the size of our student population, that has meant continued belt-tightening at the district level. The district’s budget has been in deficit since the 2003-04 school year. Deficits have been covered by transfers from the school system’s General Fund, which is supposed to provide emergency and swing financing for the school system.

Dr. Roberts emphasized that the vast majority of school funding (close to 90%) was determined by state formulas and state revenue collection, completely out of our local control. AAPS is not legally permitted to raise new taxes for school operations (though we can, and have, approved bond issues for construction and remodeling), so the only measures we can take to increase revenue locally is to try to attract more students. Budget cuts that result in increased class size, he noted, work against attracting new students to the system.

For fiscal 2007 (this school year), the school board had to cover a nearly $9 million projected deficit; they did this with $6.5 million in direct budget cuts, and $2.3 million in health care and other savings that did not require staff cuts. Dr. Roberts emphasized that the Administration and Support portion of the budget has been bearing the brunt of the cuts so far, but that instructional spending would need to be cut more heavily should the funding situation not improve.

The state Department of Education has already told districts that revenue collection on taxes that support schools fell below projections, meaning that schools would lose between $50 and $80 per student in anticipated revenue for the current school year. (For AAPS, this amounts to between $800,000 and $1.3 million less revenue than had been budgeted for this school year.)

Without significant changes, the AAPS projects another $6 million deficit in fiscal 2008, and an $11 million deficit in fiscal 2009 (when the new high school comes online). If transfers from the district’s General Fund were used to cover these deficits, the fund would be exhausted by the 2010 fiscal year.

While constrained by legal requirements that he not advocate a political position, Dr. Roberts said that he personally supported Proposal 5 because it would be “good for the students.” (The two board members in attendance made their support for Prop 5 very clear as well.) [For more information on Proposal 5, which calls for more secure funding for schools and colleges, see the Penguin Talk article Considering Proposal 5. Dr. Roberts said that the proponents of Proposal 5 had not intended it to make it to the ballot, but had hoped that the original petitions would have prompted the Legislature to re-think school finance. When the Legislature declined to act, the proposal went on the ballot.

Aside from guaranteeing that state funding for education would increase by at least the amount of inflation each year, the proposal also addresses school pension funding. Dr. Roberts noted that, before Proposal A’s changes in 1994, the state carried most of the burden for funding school pension contributions. After Proposal A, school districts were required to make all the pension payments out of their general budget (using the funds provided by the state with foundation allowances). Ann Arbor’s pension contribution requirements have increased from $12.6 million in fiscal 2001 to $18.3 million last year.

Dr. Roberts stressed that while school districts have been liable for the pension contributions, the contribution levels have continued to be set by state officials who are not responsible for finding funding for them. Proposal 5 would put a cap on a school district’s pension contributions, making the state responsible for required payments above that level. This change would have the largest effect for Ann Arbor, he said, saving the district over $3 million this year and much more in later years.

Over all, Proposal 5 would not eliminate the district’s budget deficit in the near term, Dr. Roberts acknowledged, but it would significantly soften the blow of needed budget cuts.

Responding to questions following his presentation, the superintendent emphasized that the opportunity presented by Proposal 5 did not relieve the district from getting its own financial house in order. More opportunities for efficiency can be found, he said, indicating that services provided by the district, legal expenses, and educational programming would need to be evaluated. Dr. Roberts also admitted that the district is “not where I want to be” on the construction projects funded by the recent bond issue, and said that he and his staff were taking steps to get the projects back on schedule and within budget. Continued support from the community is crucial for the strength of the school system, the superintendent stressed, and he admitted that the district needed to earn back the credibility it has lost over the last several years.