LOCS anticipates funding cuts heading into 2020-2021 school year

By Megan Kelley

Review Writer

As COVID-19 continues to spread throughout the country and the world, it’s difficult to find anyone who has not been impacted in some way. Even with summer in full swing, schools continue to operate under uncertainty as they prepare for the 2020-2021 school year.

During their June 24 board meeting, the Lake Orion Community Schools Board of Education heard from Assistant Superintendent of Business and Finance John Fitzgerald regarding the 2019-2020 final budget amendment and the 2020-2021 proposed budget.

The board had previously held their first reading of the budget amendment and proposed budget during their regular meeting on June 3. Since then, the 2019-2020 final budget amendments have seen one large revision which has, in turn, created a few changes in the 2020-2021 proposed budget.

“We’ve had the recognition of a $600 per pupil reduction. It’s about a $4.4 million overall reduction,” Fitzgerald said.

With this change, the total revenue budget for the 2019-2020 fiscal year now is expected to be about $80 million as opposed to the originally anticipated $84 million. This also results in about $3.4 million as the total starting fund balance for the 2020-2021 school year, with the fund equity at about four percent, said Fitzgerald.

“The logic behind that is…from a practical point of view, whether it’s the Republican draft bill or any further conversation coming down the road here near, the existing law requires the school aid fund, if it ends in a deficit to require a proration or negative budget supplementation.

“So, I’m fully expecting something of that nature to occur in August, roughly in the neighborhood of $4.4 million. If they end up using some rainy-day money to reduce some of that, it might be less. But taking a conservative position in terms of the district, I’d rather prepare for the worst and hope for the best,” Fitzgerald said.

As for the proposed adopted budget for the 2020-2021 fiscal year, LOCS expects to start out the year with a total revenue budget of $79,269,756 and a total expenditure budget of $79,221,597, generating a small surplus of $48,159, district documents showed.

“The overriding approach to next year’s budget is to try and get to a balanced situation so we don’t completely devastate our fund balance,” Fitzgerald said. “We are, again, targeting property sales. How that goes through the course of this year, God only knows, with the strike to markets and things of that (nature). But there is no budgeting for revenues in the adopted budget for you. If something is concluded within the year, it would of course be amended in and added to the fund balance.”

While it is still unclear how hard school districts will be hit as far as state funding, several house bills have also recently been introduced that could allow taxpayers to hold off on paying their taxes in response to the impact that COVID-19 has had on many families and businesses, Fitzgerald explained.

Should these bills pass, school districts may be unable to collect all of the expected tax revenue from taxpayers in the district.

“Built into this budget, there are multiple budget reductions that are based on really targeted areas and targeted concepts similar to what was earlier talked about in terms of concept of ways to cut costs, whether it be some form of layoffs, some form of wage negotiation, things of those nature,” Fitzgerald said.

“There is multiple adjustments to positions and/or position reductions built-in on assumptions, in total about $5.2 million in reductions,” Fitzgerald said. “So, adding the two together, with an anticipated student decline, a reduced foundation allowance and these kinds of budgetary changes, all in all, what’s before you is a balanced budget — it has a very small surplus. Again, it’s one of those situations that, if the situation moves an eyelash to the left or right of expectations, the small surplus becomes a deficit.”

With all of these changes that are anticipated but not yet confirmed, the district expects to have more budget amendments this coming school year than in years past.

“It’s a lot of material and it’s about as firm as warm Jello,” said board President Jim Weidman. “So, it’s very hard to get a real grasp of it until we know more of what’s coming down the road.”

Additionally, it is important to note that the district cannot borrow money to keep the fund balance from dropping below $0.

“We’re not allowed to borrow money, we can use our fund balance and we will still collect our Sinking Fund, we will still collect our debt service levy, but as was presented when those funds were passed by voters, they cannot go to be used for operating costs,” board Treasurer Jake Singer explained.

“There is no mechanism under state law that allows those funds to be redirected from the bond or sinking fund to compensate for loss of operating funds…that money for the sinking fund will go to capital projects. You’re seeing bond projects go on — those are things that the voters passed and that money still exists and those projects will continue.”

 

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