Janesville schools' budget woes detailed
Many Janesvillians recently became aware that their school district is staring down a budget shortfall of nearly $10 million next school year.
That's a pretty big chunk of an operational budget of about $115 million. How could the school board and administration let it get this bad?
Officials say they knew it was coming, and they knew they'd have hard choices to make.
"I think (school board members) have been warned. I certainly knew about it. That's why I ran for school board last year," said school board member Kristin Hesselbacher. "I don't know how you could have been a school board member and not been aware of it."
Every budget in recent years has been difficult. The board has cut maintenance, supplies and some high school sports, for example. The mantra of every official has been to cut "as far from the classroom as possible."
The school board spent months last year debating how to balance this year's budget. In the end, they got an unexpected windfall. The federal government decided to send school districts nationwide money to help them preserve teachers' jobs.
Janesville got about $1.8 million from the federal program and used it—as allowed—to pay teachers' salaries.
School district chief financial officer Keith Pennington called the money "a very welcome and pleasant surprise. It had a shiny wrapper and a bow on top of it."
However, that money could be spent only once. There's not a second wave of federal money coming. That's a part of the school district's 2011-2012 budget gap.
The school board also decided to spend down its reserves last year by nearly $2.3 million. Unless the board decides to dip into its reserves again—not a sure thing—that's another pot of money that has to be made up in next year's budget.
Those two pots of money last year helped the board to hold the tax levy increase to 3.17 percent. But the board could have taxed more. In fact, the board has kept taxes lower than the maximum allowed under state law for the past three years.
Board members have argued that Janesville is suffering more than most from unemployment and the other effects of a nationwide recession, and taxpayers should get a break.
A common misconception is that if the board had taxed to the max—as many school districts continue to do—that it would have plenty of money.
Not true, Pennington said.
It is true that the more a district spends, the more state aid it gets the following year, Pennington said. The district taxed about $6.5 million less than it could have over the past three years. If the district had taxed the extra amount and spent it, then state aid would have been nearly $2 million more over those three years.
That's a rough estimate, based on this year's state aid calculation, Pennington said.
"That would not have filled a $10 million gap," Pennington said. "It might have helped."
The federal money and the use of reserves account for $4.1 million of the $9.77 million budget gap. The rest of the gap might sound familiar, because it happens every year: The cost of salaries and benefits—for all employees, not just teachers—went up. The health-insurance increase alone is estimated at $2.6 million.
School board President Bill Sodemann said one reason the budget picture looks so dim this year is because the process has changed.
"It's bad, don't get me wrong, but it sounds worse than it is because we're starting out with an assumption of zero," Sodemann said.
Zero, as in no tax increase and no spending of reserves.
In past years, a tax hike was assumed. That was not the case as budget planning began, Sodemann said.
For many years, in fact, a tax-to-the max budget was assumed and regularly approved.
The school board Tuesday night seemed to agree that some kind of tax increase will be needed, and it might even take more from its reserves. The board asked officials to build a budget based on $6.5 million in cuts. That leaves a gap of $3.2 million, and the assumption is that taxes and perhaps reserves will fill that hole.
"I hate to raise taxes on anybody, but it's about keeping our school district alive and well," Hesselbacher said. "We want to be the flagship school district in this area, and I would say that's in danger."
Hesselbacher added: "Janesville has done a great job about having services and programs and classes available for every student, especially compared with districts around us. Even if we make some of these course reductions at the high schools, we're still better than our neighboring high schools."
Hesselbacher noted that enrollment has declined in recent years, which also has led to budget difficulties in a school-funding system that rewards enrollment growth.
"If anyone has a couple hundred students that would like to move into the district, I'd highly encourage it," she said.
School officials statewide, meanwhile, are anxiously awaiting Gov. Scott Walker's budget speech later this month. Given huge state budget problems, Walker might have ideas about how to save on one of the state's biggest expenses: school funding.
The Janesville school budget projection assumes no increase in state aid next year. If the state cuts school aids, Janesville's budget gap grows.
Here's a breakdown of the factors that led to the Janesville School District's projected $9.77 million budget shortfall for the fiscal year that starts July 1:
The Federal Education Jobs Fund—The district received about $1.8 million as part of a $10 billion federal job-saving program that was distributed nationwide last summer. The rules allowed it to be used to pay teachers' salaries, which is what happened in Janesville. This money was a one-time grant. It is no longer available.
The "fund balance"—This refers to the use of district reserves. The school board opted to fill a budget hole in the current year's budget by spending $2.27 million of fund balance. The school board could dip into the fund balance again for 2011-2012, but only about $1.1 million would be available under current board policy. The board has not yet decided whether to go this route again.
Salaries and benefits—Teachers, administrators and some other employee groups will get raises this year. Two other employee groups still are negotiating contracts. The projected cost increase for all employees is about $3.1 million. This figure does not include health insurance.
Health insurance—The district has a self-funded health insurance plan for employees. Each year the district budgets an amount that includes a projected increase in health-care costs. The district's health-care consultant recommended a 21 percent increase, but district officials believe they can get by with a 15 percent increase, which amounts to about $2.6 million.