Saline Area Schools faces budget deficit for upcoming school year
If tough decisions aren’t made prior to July 1, Saline Area Schools could find itself adopting a deficit budget for 2012-13.
It would join Willow Run Community Schools, Ypsilanti Public Schools and charter school Victory Academy on a list of Washtenaw County public schools operating with a deficit.
The district depleted its fund balance from about $2.75 million to a projected $1.16 million in a year, said Interim Finance Director Janice Warner at Tuesday’s Board of Education meeting.
The fund balance as of June 31, 2011, was about 5.39 percent of the district’s annual general fund expenditures, while the $1.16 million Saline is expected to retain by June 30 of this year is just 2.25 percent of its approximately $51 million operating budget.
The district has a policy stating it will maintain a minimum unassigned fund balance of 5 percent of its annual expenses in an effort to “protect against cash-flow shortfalls and to maintain a budget stabilization commitment.”
If the fund balance falls below 5 percent, the district’s policy calls for the board to replenish the equity within two years.
Superintendent Scot Graden said in 2011, the district took a "three-legged" approach to balancing the budget that included concessions, raising additional revenue and reducing expenditures. He said if the board were to do something similar for this year, Saline would run out of money by November or December.
“We are in a very different position than we’ve been in in the past,” Graden said. “The plan from last year is not a viable plan for this year.”
Warner explained the district experienced a net loss in projected revenue of about $153,000 for 2011-12. It also experienced an increase in expenditures of about $138,000.
Add these numbers to the loss in fund equity and an anticipated loss of about 120 kindergarteners — or about $820,000 using this year’s foundation allowance — and Saline could be looking at a $5.14 million deficit.
Graden said when it comes to looking at ways to cut expenses, personnel is the “largest piece of the pie.” He estimated about 85 percent of the general fund budget is for staff.
“That’s an area that is going to need to be looked at,” he said.
Saline’s three labor unions — the Saline Education Association, Saline Area Schools Administrators Association and the Saline Education Support Personnel — all have contracts that expire June 30.
The best revenue-gaining option is adding more students, Graden said, followed by increasing services through the district’s community education department. But generally, neither of these options comes without an initial cost to the district, he said.
“This is sobering,” added Board Trustee David Holden.
Holden said the district must bring the fund balance back up so there is money when schools have emergencies, such as the hot water heater breaking at Harvest Elementary School.
“This will test the resolve of this board, but it is something we need to do for the long-term viability of this district,” he said.
Some reasons, Warner said, that Saline experienced a loss in revenue were:
- It projected a loss of 25 students from last year to this year and actually lost closer to 50, for an estimated foundation allowance reduction of $314,000.
- It eliminated two sections of extended day option kindergarten for a loss in tuition of about $129,000.
- It lost about $99,000 in grants from various outlets.