2010-09-23 / Front Page

Spencer-Owen Schools Will Continue To Face Budgetary Challenges In 2011

Total Budget For Six Tax Supported Funds Is About $28 Million
by Randy Roberts S-OCS Business Manager

Everyone who will read this article about the budgetary challenges for Spencer-Owen Schools has been affected by the recession that our country has been in for more than two years. Spencer- Owen Schools is no exception, and the end to tight budgets for school systems is nowhere in sight. Despite declining budgets, the school system is still expected to provide the students of Owen County with good educational opportunities.

Providing good educational opportunities is expensive, and finding the money to fund education is becoming more difficult each year. However, education is the key to our future. Education is the key that unlocks the doors of opportunity for our youth. Our young people will be the leaders of tomorrow, they will make the decisions that shape the future of not only Owen County, but the futures of Indiana, the United States, even the entire world. However, even though education is so vitally important to our society, those of us charged with the responsibility of administering the budgets for education must never lose site of the costs of education that are borne by everyone who pays taxes in Indiana and the United States.

Recently those of you who own property received a notice telling you how your property was valued by the recent assessed valuation trending formula. Your property taxes are based on that assessed valuation. Due largely to the recession the assessed valuation of many properties decreased. The assessed valuation of property in the nine townships that are taxed by Spencer-Owen Schools decreased from $534,516,335 to $525,222,737, or by $9,293,598. The majority of your property tax bill is for Spencer-Owen Schools. The school board and administration consider the impact for our citizens in every decision we make.

Spencer-Owen Schools’ total budget for the six state and local tax supported funds will be about $28 million in 2011. Five of those budgets are supported by local taxes. The local taxes are: property, financial institution, vehicle excise and commercial vehicle excise taxes, with the majority being property tax. The budgets for the local tax generated funds for Spencer-Owen Schools are:

Debt Service – The Debt Service Fund is used to pay primarily for any debts for building projects. Our 2011 budget for Debt Service will be approximately $3.9 million.

Pension Debt Service – The Pension Debt Service Fund is used to pay for a Bond that was issued to pay unfunded pension liabilities of the school system. Our 2011 budget for Pension Debt Service will be approximately $259,126.

Capital Projects – The Capital Projects Fund is used to pay for repair and maintenance of buildings and facilities (75 percent) and for technology (25 percent). The 2011 budget for Capital Projects for Spencer-Owen schools is approximately $1.9 million.

Transportation Operating – The Transportation Operating Fund is used to pay for the expenses of transporting our students. The 2010 Transportation Operating budget is approximately $2.3 million.

Bus Replacement – The Bus Replacement Fund is used strictly to replace buses that are at least ten years old. For 2010 the Bus Replacement budget for Spencer- Owen Schools is approximately $140,056.

The State supported budget for Spencer-Owen Schools is the General Fund. Revenues for the General Fund come primarily from income taxes and sales taxes.

General Fund – General Fund is our largest budget totaling about 19.5 million for 2010. The General Fund is used for most operating expenses of the school system including salaries, educational supplies, utilities and operational expenses.

The authorized use of money from the funds above is very defined. We cannot spend money from one fund to pay for expenditures from a different fund. Nearly all school systems are having tight budgets in General Fund, and we are no different. In fact, the General Fund is the only fund where we are having major problems. Many of you have undoubtedly noticed that school systems across the state have had to lay-off some teachers and staff and have had to cut back programs. Staff and programs are largely paid out of the General Fund. In the last two years Spencer-Owen Schools have had to cut nearly 50 positions in our attempts to stay within budget. The positions that have been cut include administrators, teachers and support staff.

What has caused the General Fund budget problems for Spencer- Owen Schools? A “Perfect Storm” of events in the last two years has been the cause. A listing of some of those events includes:

The worst recession since the 1930s.

The removal of school’s General Fund from the property tax rolls in 2009. While none of us particularly like property taxes, they are the most dependable revenue source because they are not impacted to the level that income taxes and sales taxes are impacted by a bad economy. The state revenue to pay for school’s General Fund comes primarily from income taxes and sales taxes. And, when the economy is bad and people lose jobs, less income tax is generated and people reduce their spending, which has a direct impact on sales tax.

Due to the reduced state revenue, Spencer-Owen Schools’ budget was cut by the state in the amount of $866,000 in 2010 and will be cut by the same amount each year in the foreseeable future.

A loss of 384 students since 2004. This year alone we have lost about 100 students. The number of students in a school system is the main factor the State uses in figuring General Fund revenue.

To compound the loss of students, the state school funding formula was changed by the legislature two years ago. In the past we lost 20 percent of the revenue for each student lost for five years. The state used this factor to try to soften the financial loss from declining student numbers. Two years ago that percentage was changed to 33.3 percent per year for three years. As a result, we lost 33.3 percent of the annual General Fund revenue per student each year rather the 20 percent. So, in the past we were losing about $1,120 per lost student per year, and in the last two years that amount has increased to $1,867 per lost student. The impact of declining student numbers since 2004 will be about $1.5 million in 2011.

There are periods during our budget year when we have a fairly high balance in our checking account. During those periods we invest a portion of the balance in certificates of deposit. We have made as much as $250,000 in past years. In 2009 and 2010 we will make only $17,500 because the interest rate on investments is so low.

Wages, benefits, and utility costs have increased even though our budget has not increased.

Finally, due to the decrease in revenue and student numbers, we ended up having more staff than our budget could support. We have been in a recovery mode for the last two years and have cut about 50 jobs.

Managing the budget of Spencer Owen Schools is no different than managing your budget at home, just on a larger scale. When you spend more money than you are taking in you either use up your savings account, you borrow money hoping for better times, or you use a charge card. You can’t spend more money than you take in for long without going into major debt. A school system can’t spend more money that it takes in unless it has a large cash balance. Spencer-Owen Schools has spent more General Fund money than we have taken in for about three years, and as a result our General Fund cash balance has declined steadily. The measures taken by the current board and administration have reversed the trend, though we are by no means out of the woods. However, we have made enough reductions that we will actually take in more than we spend in 2011.

The financial future for schools is still very tenuous. The federal stimulus money has helped schools get by for the last two years, but may not have done schools in favors because it will dry up suddenly in 2012. At that time, schools will have to live within the General Fund budget that the state provides. We must stay within that budget, and do so without impacting the educational opportunities that we offer our students any more than is absolutely necessary. Eventually the economy will improve but school General Fund revenue will never go back to the level it once was relatively. In the meantime, we will keep our belts tight and do our best to manage your tax dollars in an efficient manner.

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