RUSD Budget Deficit a Foregone Conclusion

The Racine Unified School District Board of Education learned Monday that possible cuts in state general education aid and other funding could blow a nearly 10 percent hole in the next budget.

David Hazen, RUSD chief financial officer, told the School Board that an anticipated cut in state aid, totaling $10.7 million, plus the expiration of federal stimulus funding and anticipated increases in wages, benefits, transportation and utilities, leaves the district with a $20.5 million deficit for 2011-12. RUSD’s current general fund budget for 2010-11 is about $246 million.

While the funding cuts would be partially offset by employee contributions to pension and health insurance premiums, Hazen and Marc Duff, the district’s budget director, said the district may face a budget hole ranging from nearly $5 million to $8.4 million.

Budget projections are extremely difficult to make because a controversial bill to repair the current state budget is stalled in the Legislature and Gov. Scott Walker has postponed delivering his 2011-13 state budget until March 1.

“It’s definitely shooting at a moving target,” said Hazen. “We truly don’t know at this time where we’ll end up.”

RUSD officials typically prepare the upcoming fiscal year’s budget in the winter and spring using revenue projections from the Wisconsin Department of Public Instruction and other sources. But, conditions are drastically different this year. The Legislature is currently wresting with Governor Walker’s proposal to require most public sector employees to contribute 5.8 percent of salary toward the state-run pension program and to eliminate employee collective bargaining rights for fringe benefits and working conditions.

In addition, the governor has indicated that cuts in state aid to local education are planned to help balance the state’s upcoming budget. Although the governor has not offered specifics, the Wisconsin Association of School Boards last week warned its members to expect state aid cuts of $900 million—or about $500 per student.

A budget scenario that Hazen and Duff shared with the School Board included that cut and other adjustments. Here’s a recap:

Anticipated revenue cuts and increased expenses:

• Reduction in general state education aid: $10.7 million
• Expiration of federal stimulus funding used for salaries:  $5.3 million
• Expiration of 10-year referendum for general fund:  $1 million
• Wage increases:  $1.9 million
• Transportation/utilities increases:  $500,000
• Wage/benefit increases related to teacher level changes:  $1 million.

Possible deficit reduction options:

• Employee pension contributions:  $8.1 million
• Federal jobs education funding:  $4 million
• Voter approval of operations referendum: $2.5 million
• Voter approval to renew 10-year referendum for general fund: $1 million.
• Employee contribution to health insurance benefit:  $4.2 million.

Hazen said that despite the savings achieved from the employee pension and health insurance contributions, the district will still have to overcome a 2011-12 budget shortfall. Currently, RUSD employees pay an average of 2 percent of their health insurance premiums and make no contribution toward their state pensions. The governor has proposed that public sector employees pay about 12 percent of their health insurance premiums.

 School Board member Don Nielsen, who chairs the audit committee, suggested that the budget deficit picture could get even worse.

Citing conversations that Board members have had with Rep. Robin Vos, R-Rochester, co-chair of the Legislature’s Joint Finance Committee, Nielsen said that state funding to aid school integration and aid to high poverty school districts could be eliminated. RUSD receives about $10.2 million annually from those programs.

In addition, Rep. Vos has indicated support of expanding a voucher program—currently in place in Milwaukee—that would direct state education money to families for their children to attend any public, charter or parochial they choose, Nielsen said.

“I’m afraid that Racine could have close to a 15 percent (budget) deficit if all these things happen,” he said.

Hazen, who is attempting to schedule a meeting with Rep. Vos to get an update on the state education funding picture, said he’ll do his best to keep the School Board apprised of the district’s budget projections.

“It’s not pretty, no matter how you look at it,” he said.