Racine Unified is looking at a $3.5 million budget deficit next year, and that may be the good news that came out of Monday night's School Board meeting.
The district is also losing students, drawing down (see below) its fund balance and trying to figure out how to raise student achievement while spending half the money per student then the average school system in Wisconsin.
Despite the tough news, district officials vowed changes from past years. They're not going to rush to referendum this spring to fill next year's budget shortfall. They're not going to scare employees into thinking their jobs may be cut. And they're not going to exchange a long-term focus for short-term gain.
But the numbers are troubling.
Based on the state revenue caps, the district's budget is expected to increase $7.4 million, or 3.7 percent, next year to $210.5 million, according to Dave Hazen (right), Unified's finance director.
All of that increase is already taken up by:
* $5.5 million in estimated health care costs increases
* $200,000 in estimated dental cost increases
* $500,000 increase in salary increases office workers union Local 152
* $700,000 increase for teachers moving up salary step system
* $1.7 million increase for teachers in salary negotiations
* $1.5 million in general cost increases (based on an average 3 percent increase)
* $800,000 in one-time expenses put off in this year's budget
And that's just next year. This year, the district expects to lose $400,000 on investments, Hazen said. The district budgeted 4.5 percent interest on money market funds last year and got burned when the rate came in at 2.5 percent. So the district budgeted 2.5 percent return this year, but the tanking market only returned 1.2 percent.
The district is also facing rising utility bills. Through November, the district has spent nearly $100,000 more on natural gas than in 2007-08, and $23,000 more on electricity.
The source of the excess utility spending: it's been a cold winter. The district has used 52,000 more therms this year compared to last year, and that's not including a frigid December and, so far, January.
The problem for Unified is its savings are tight. The district has a general fund balance of about $14.5 million, which it likely will have to draw on this year to balance its budget. The overall budget's fund balance is $19.5 million (actually, it's a little higher, but the district is planning to spend out of the fund at the end of the year).
The good news is district staff is working on solutions. Changing school start times next year could eliminate the need for 20 buses, which each cost $25,000 a year to run, Hazen said.
The district is also looking at redistricting to cut down on the distance special education students are bused every day. While cost savings are unknown, it will save money, Hazen said.
During the School Board meeting, Superintendent Jim Shaw tried to alleviate concerns the district will layoff employees. Shaw noted the district turns over 10-15 percent of its staff every year, which makes it possible, if needed, to reduce employees through attribution.
He also backed up Hazen's recommendation that the Board not consider a referendum this spring, while also noting that, eventually, the community will need to spend more on public education.
"Money does matter," Shaw said. "You do need resources to educate children."
While Shaw stayed positive, School Board members voiced concern. Julie McKenna wondered aloud how the district could cut its budget every year and still improve student performance. While a $3.5 million shortfall next year may not seem significant, she said, the district has little more to cut.
School Board member Don Nielsen edged toward frustration.
"We're spending half of the state average," said Nielsen, noting even three-quarters of the state average would be a windfall to Unified. "If we had half of that half, we wouldn't be in trouble."
School Board member Melvin Hargrove (right), a local pastor, tried to rally the board with a non-sermon sermon. He pointed out if you walk in the dark you take small steps to avoid tripping on unseen objects. The board's job is to shine the light so the district can take bigger steps.
"We're the Board of Education," Hargrove said. "We have to lead this thing."
Correction: Initially, this story suggested the district's fund balance was $1 million. The balance is actually $14.5 million for the general fund, and $19.5 million overall. The fund balance is basically the district's savings account; it exists for unexpected expenses and generally as a cushion for downturns.
The district is committed to adding $1 million a year to its fund balance to build up those reserves, but doesn't always meet those goals. Last year, an unexpected worker's comp case and loss of revenue from interest forced the board to skip that commitment. But a year earlier, the board added $4 million to the fund balance, so it's averaged out over time.
Hazen said the district would need between $40 million and $50 million in reserves to avoid borrowing money every year to deal with cash-flow issues. That would save money, but it's unlikely Unified is going to come up with $25 million in the near future to tuck away for a rainy day. It's already raining.