Stillwater Area Schools: How Does a $10 Million Budget Deficit Become $6.3 Million?

Over the last few weeks our communities have been abuzz with the long-awaited news that a new St. Croix River crossing will be built. It has been interesting to watch this process unfold, and even more interesting to see how the total cost estimates for the project have changed by as much as $100 million.

I have also observed the variations occurring in budget predictions at the state level, where the most recent forecast has improved to the tune of a positive $320 million. Like the fluctuating cost estimates for the new bridge and the state’s changing budget forecast, our school district’s estimated budget deficit for next year was also adjusted, changing for early estimates of $10 million to $6.3 million.

As taxpayers, it is easy to become frustrated with these variations and to question the processes at work. The purpose of this column is to explain a bit about our current forecasting model, but more importantly, to outline some of the changes district leaders are making in the future.

We recognize the need to tighten our forecasting model as much as possible and to involve even more people in the process to ensure transparency.

Just as many factors have led to changing bridge costs and state budget forecast numbers, many things have changed for the school district over the last nine months.

These changes included variations in student enrollment numbers from earlier estimates to the settling of employee contracts. The 2011 forecast was built last summer—long before we knew actual revenue and expenditures for the year—and was therefore based on many assumptions.

At the time our estimated budget deficit was shared in June 2011 four major areas were unknown including the actual outcome of the 2011-2012 fiscal year; settlement of employee contracts; the outcome of the 2011 Legislative session; and revisions to the 2011-2012 preliminary budget

The challenge with communicating budget numbers is that they are constantly changing—sometimes significantly—with each new piece of information we receive.

The Legislature did not complete its work until late July 2011. At that time the district could have revised the forecast, and if that had occurred, the estimated shortfall would have been $8.4 million.

In October the books were formally closed for 2011-2012, and if the district had revised the estimate at this time it would have shown the shortfall to be $5.9 million.

After all the contracts were settled and the estimated expenses were calculated in November, the revised shortfall would have been $7.6 million.

Finally, in January, when the 2011-2012 Preliminary Budget was revised, the shortfall was $6.3 million.

All of these factors, plus many other smaller ones, led us to share a revised budget shortfall for 2012-2013 of $6.3 million. It was from this forecast that our school board made its final list of budget cuts for the coming school year.

Moving forward we understand the importance of building trust in the community and finding ways to tighten, as much as possible, our budget forecasting process.

We’re excited to bring together a broader stakeholder group to work on forecasting for the future.

A new Community Finance Advisory Committee will be formed and will include staff from the Finance Department, district administrators, members of the school board’s Finance and Operations Work Group, representatives from teachers’ and principals’ bargaining groups, as well as several professionals from the community with financial backgrounds.

This committee will meet over the next 30 to 45 days to study enrollment projections and estimates on budget to actual variances for the 2011-2012 fiscal year, as well as discuss other assumptions included in the budget forecast.

This group will help develop a budget forecast for the coming year and present their recommendation to the board in late April for its consideration. Based upon this recommendation, the board will consider actions to address future budget shortfalls, which may include a levy proposal and/or additional budget reductions.

While I am personally not pleased that our budget forecasting process cannot be more exact, as an educator I am very pleased that budget reductions for 2012-2013 were not as deep as the original projection showed.

While this was the largest package of budget adjustment made in recent history, we were able to spare many of learning opportunities we so passionately desire for our students. However, this reprieve is short lived.

Without additional state or local funding, and with expenses that are expected to continue to increase, additional budget shortfalls are eminent.

Hopefully through a more engaged forecasting process, the shortfall estimates will be more accurate and better acknowledged and communicated for broader understanding.

Dr. Ray Queener is the assistant superintendent of the Stillwater Area School District and can be contacted via email at queenerr@stillwater.k12.mn.us and/or phone at 651-351-8321.