School Districts Cope With Decline in Revenues During Economic Downturn

April 7, 2010

Editor’s note: School districts throughout the area are coping with shortfalls in tax dollars. The Journal focused on five districts to give readers a sense of the effect of declining revenues and the district’s proposed remedies.

Faced with the troubled economy, the Ferguson-Florissant School District has cut some planned work on its physical facilities, encouraged early retirement for eligible teachers and staffers and renegotiated health insurance rates.

As a result, the district has trimmed $13 million from the district’s 2010-2011 budget.

"We’ve reduced our capital spending by 90 percent," Chief Financial Officer Mick Willis said. "We saved $1.5 million renegotiating our health insurance. Can we afford big ticket items out of our operating budget? No, but we’ll be all right."

A sour economy has forced down property assessments, causing a corresponding decline in the property tax revenues that sustain school districts.

Ferguson-Florissant is not alone in having to cope in a troubled economy. The Hazelwood, Ritenour, Pattonville and Normandy districts are taking measures to cut costs.

"Revenues are down,&a mp;quot; Willis said. "It’s something we’re all dealing with."

Payroll, health insurance and benefits are the largest part of the districts’ budgets, ranging from 74 to 87 percent. With such a large chunk of the budget tied up in personnel, all five districts have policies in place to leave vacancies open when teachers or staff members leave or retire. These employees usually have the most seniority, which means higher salaries will not have to be replaced.

Hazelwood, with 18,432 students, is receiving more tax revenue than expected this year, but not enough to keep pace with expenses, Chief Financial Officer Dwight Lindhorst said.

"When we make a budget, we look at the conservative side," Lindhorst said. "We’ll still have to reduce costs, but we’ve gotten more revenues than we thought."

Hazelwood may still face a cutback in state funding. The state must cover a $43 million shortfall in the state’s $3 billion school funding formula this year. That shortfall will likely translate into a 2 percent cut in state funding for districts like Hazelwood and Ritenour.

For Hazelwood, that would be $2.3 million while Ritenour, with 6,355 students, would lose $427,000. The state legislature has not approved the cuts. A final decision may not come until the end of the legislative session.

Pattonville, with 5,366 students, and Ferguson-Florissant, with 11,764 students, may not be affected because they are listed as "hold harmless." The category is for districts whose funding level was frozen before the new formula went into effect four years ago. Legislators have expressed unwillingness to ask those districts to take cuts because of the funding freeze.
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If the lagging economy continues, the districts may see cuts in other state funding sources. Many districts depend heavily on state funding to pay their bills. Hazelwood receives 27 percent of its revenue from the state, Ferguson-Florissant receives 30 percent and Ritenour gets 36 percent. Pattonville is an exception. It receives just 7 percent of its revenue from the state.

The uncertainty over the economy makes it a tough task to finalize a budget.

"Making a budget up these days is like trying to shoot a moving target," Ferguson-Florissant Spokesperson Nancy Keyser said. "You just don’t know what’s going to happen."

Ritenour is facing a $6 million deficit for 2010-2011. It is cutting $2 million in its costs and pulling nearly $4 million from its reserves, the largest amount in recent history. The move will leave Ritenour with about $12.5 million in its reserve fund.

The district would not disclose how it will deal with its budget crisis until the completion of a community survey about educational priorities. The survey ask residents for their opinions on student-teacher ratios, transportation, extracurricular activities, school maintenance and staff salaries and benefits.

With the reduced staffs, districts are looking at ways to do more with less.

Normandy, with 5,275 students, aims to save $700,000 by reorganizing the district’s administrative staff and salaries. The teachers are not affected by this move.

All administrators and support staff will be required to re-apply for their jobs after their contracts expire June 30. Some positions might be eliminated or modified while salaries are adjusted for cur rent market values. The new positions will be posted April 9.

Pattonville has saved $20 million since 1999 by not filling 120 positions left by retiring teachers and staffers. About 60 Ferguson-Florissant employees took early retirement for this year, The district will offer it again for 2010-2011.

Others are using simpler ways to cut costs. Pattonville uses a Commerce Bank purchase card, which is similar to a credit card. This eliminates the need for a clerk to spend time writing checks.

Whatever it takes, districts have to be prepared to handle the economy and they’re not expecting any changes soon.

"Our methodology is to plan for the worst and hope for the best," Orr said. "There are some serious challenges coming ahead."