January 12, 2009

Tough budget times ahead for Racine Unified,
but new superintendent stays positive

Superintendent James Shaw (right) and School Board member Dennis Wiser (left)

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.

12 comments:

  1. The Start of the drum beat for ANOTHER referendum. Of course the RUSD has their flunking waiting to say "It's for the Kids"
    How in God's Earth can they spend so much and graduate so few?
    How can RUSD look themselves in the mirror?

    And look how much the Union gets for a very very poor school system.

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  2. "...The board's job is to shine the light so the district can take bigger steps..."
    Right on brother. How 'bout a big flashlight on school choice!

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  3. Bernice Thompson1/13/2009 8:30 AM

    Sounds like the REA and Voices are already gearing up the kids for pushing a refrendum. It's the six P's factor: Piss Poor Planning Promotes Poor Performance. Mr. Shaw, if you want to succeed in Racine do not stand with your hand out.

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  4. "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."

    Please Dustin, don't allow yourself and your readers to be misled here. Hazen is referring, I suspect, to the general fund only. There are several other funds including special ed, debt service, food service etc... that add up to many additional millions of dollars.

    I have in front of me the 2004-2005 Unified budget. The general fund was $190 million and that accounted for only 75% of the total budget of $253 million. I am quite sure that the total budget is up at least $20 million from then which would put our current budget in the $275 million range.

    Please don't take Hazen or any other school official at their word when it comes to the budget. And don't take mine either. Go get a budget from central office and see for yourself.

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  5. That's a good point, Dennis. I think the actual budget projection is closer to $260 million, with a $50 million gap between the general fund and the total.

    The problem for Unified, if I understand Hazen at last night's meeting, is most of that $50 million is assigned to specific programs; if you cut the program, you lose the funding.

    One of the board members asked about this. Hazen said they would look at how that grant money was spent, and see if it can be reassigned.

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  6. Dustin you are correct. I obtained a copy of the current budget today. Spending is just under $260 million. Thats about $12,380 in per student spending as Unified typically has about 21,000 students per year.

    It is interesting that the chief financial officer at Racine Unified misunderestimated spending by about $50 million. That can get you thrown in jail now post-Enron, in the private sector at least. Also, the recent budget also claims an actual year end fund balance of over $21 million in 08 and a budgeted fund balance of over $20 million for the 08-09 budget which is an amount far greater than the $1 mill cited by Hazen. Is there any reason to trust what this guy is telling you?

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  7. What is this medical and dental cost for? The children or the teachers? Why not let the teachers, etc. pay their own insurance, or at least half, like the rest of us are doing. With the raises they are getting I think they can afford it.

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  8. Denis,

    I just talked with Hazen. See the article above, but the upshot is I misunderstand a conversation about the fund balance. The $1 million I referenced was money the School Board tries to add to the fund balance every year. The actual balance is closer to the numbers you cited, minus some budgeted expenses.

    Thanks for checking into this.

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  9. I say TOUGH to Unified.

    1.) Make the teachers pay a larger portion of their insurance.

    2.) Go after PBCG and Hicks for civil damages for that disaster.

    3.) Put a freeze to merit increases like every other organization is doing these days.

    4.) Outsource maintenance and custodial duties like every other fiscally responsible company.

    Once those actions are taken, then lets talk. It's time for Unified to respond like every other company and school district in this world given the difficult times. The spending party is over and taxpayers are fed up with the antics!

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  10. Thanks Dustin for following up. Over the years I have noticed so many blatantly false statements coming out of central office that I can no longer entertain the idea that the false statements are accidental. Yes, I think they deliberately mislead reporters and the public.

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  11. Racine needs to look at the number of students that live in the district, but go to other schools. A lot of parents are applying for open enrollement in other districts (like the schools west of the interstate). When my children are old enough to go to school, they will not be going to RUSD. I will try for open enrollement or pay for private school.

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  12. Seriously...you want to save money....GO BACK TO NEIGHBOORHOOD SCHOOLS!!!!! That will save you a whole lot more than just a half a million dollars from changing the school start times.

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