Funding Constraints could become CATALYST for Disruptive Digital Learning

Michigan school districts fear budget cuts

Declines in state revenue could create deficits

BY PEGGY WALSH-SARNECKI • FREE PRESS EDUCATION WRITER • January 4, 2009

The January revenue conference -- when lawmakers meet to begin deciding how much money the state will have for next year's budget -- has an ominous feel for many Michigan school administrators this year.

They gratefully accepted an early Christmas present from the state, when Gov. Jennifer Granholm announced that midyear budget cuts would not affect schools.

But with 54% of Michigan's districts holding less than the recommended 15% of their budget in savings, and about one third of the districts approaching dangerously low levels of savings, administrators will be nervously watching the conference -- which starts Jan. 9 -- and hoping there will be enough money in next year's budget to keep their programs going.

"The thing that really frightens me for the future is, where do we go next?" said David Houle, business manager for Willow Run Community Schools. "We're going to come to a point where there are no additional cuts you can make that don't impact in the classroom."

In these uncertain economic times, state revenues could be down between $500 million and $1 billion next year, according to Mitch Bean, director of the House Fiscal Agency.

At best, any drop in state revenue could mean school districts have to make cuts in anything from supplies to transportation. At worst, cuts in school revenues would drive some districts into a deficit.

"This is not an environment in which we expect to get anything," said Tom White, executive director of Michigan School Business Officials. "It's really a question of how difficult it's going to be and what we're going to do about it."

"There are so many unknowns, it's like playing with a whole deck of wild cards," White said. His organization is recommending school administrators plan for no increase in school funding next year.

The good news is that there may be more money available for schools because there are fewer students. Michigan lost about 5,000 pupils, saving about $40 million because school money is doled out on a per-pupil basis.

The bad news is that schools don't necessarily lose pupils in cost-saving ways. A district that loses 25 students is unlikely to lose them in the same classroom or even the same building. So expenses such as teachers, heating and transportation remain the same.

What could help? Strong Christmas sales generating more tax revenue, help for the U.S. automakers saving Michigan jobs or a timely federal economic stimulus package that could include a significant savings for Michigan in Medicaid.

"As soon as those sales in the state go down, we're not funding our schools," Houle said.

But even if these situations materialize, no one knows whether they will be enough. Most worried are those whose districts are likely to fall into a deficit if the state cuts any funding.

"It's the equivalent of squeezing blood out of a turnip," said Charles Muncatchy, superintendent of Mt. Clemens Community Schools. He said his district is out of savings, and the likely result of any funding cuts would be a deficit.

East Detroit Public Schools also would be likely to end up in a deficit if state funding is cut. The district is down to a slim $57,000 in savings.

"It's a mess," said Superintendent Bruce Kefgen. "I can't tell you where we'd ultimately cut."

The Willow Run Community Schools district already was in a deficit, and files an annual plan on how it is reducing its deficit with the state.

"We've already made major changes and concessions with our employees and staffing," Houle said. "We don't have anyplace to go for discretionary spending."

Even well-heeled districts can struggle.

Bloomfield Hills Public Schools has a cushion in the form of $20 million in savings, but its officials still feel that it has to close two schools next year.

"Just because we have a fund balance doesn't mean our board wants to tap it," said district spokeswoman Betsy Erikson.

Educators say if money is tight, it's only fair for the state and federal governments to chip in by dropping some of the schools' requirements.

"If you don't have the money for us, you could cut some of those unfunded mandates," said Kefgen. He suggests cutting back on the state testing programs such as the MEAP, which he said costs districts thousands of dollars to administer, or rethinking all the databases that districts are required to keep.

Muncatchy said he would like the federal government to fund some of the requirements under No Child Left Behind.

"I'm all for rigor and that schools should be places of excellence, but other countries in the world spend 30% of their federal funds on education, and America spends less than 3%," Muncatchy said.

Contact PEGGY WALSH-SARNECKI at 586-826-7262 or mmwalsh@freepress.com.