Discretionary funds may be cut by a third to avoid future deficits

Sunday Times Newspapers

MELVINDALE – Failure to make cuts – and drawing from its fund balance this year —could place Melvindale-Northern Allen Park Public Schools in a budget deficit position for the 2010-11 school year.

At a Nov. 23 meeting, district personnel learned they may have to cut discretionary funding by a third to maintain current teacher staffing levels at the existing salary and benefit level. The district faces unprecedented financial funding cuts from the state of Michigan.

The current school year budget, approved June 30, indicated a budget deficit. With revenue expected at that time to be $26 million and anticipated expenditures of $27 milliion, the district planned to draw just over $1 million from its surplus to cover the need. The move would have reduced the surplus from $3.1 million to just over $2 million.

Since then, however, the district has been hit with three unexpected revenue losses. The first was a reduction of the foundation allowance by the Legislature and Gov. Jennifer Granholm of $165 per student, which had a $461,000 budget reduction impact on Mel-NAP schools.

Then came the loss of 20J, or hold harmless funding, which was set aside in 1994 by legislators for higher-spending school districts as a way to equalize statewide per-pupil funding after the passage of Proposal A. Granholm’s line-item veto of that funding triggered another per student reduction of $270, reducing Mel-NAP’s funding by an additional $754,000.

Finally, the pending proration imposed by the governor would impose another $127 to the per-pupil reduction for an additional loss of $355,000.

Combined, the three amounts come to a $562-per-student funding loss to the district of $1.6 million.

The district’s budget allocates 57 percent for salaries, 24 percent for benefits, and 19 percent for other categories. If it takes its shortfall out of the “other” discretionary category (the one not impacting teacher salaries or benefits), which is 19 percent of a $27 million budget, or $5.1 million, then taking the $1.6 million reduction from the “other” category reduces the account by 31 percent — nearly a third of its budget.

The surplus available to offset unexpected revenue losses or expenses was nearly $6 million in 2005. It dropped to $4 million in 2006 and $3.5 million in 2007, rose to slightly over $4 million in 2008, but dropped to just over $3 million in 2009.

If the district rode out the school year at current funding levels and drew from the surplus, the fund could be left with less than a half a million by the end of the school year, which could force the district into a deficit position for 2010-11.

The district has looked at several ways to reduce costs: teacher layoffs or early retirements; custodial staff reductions or early retirements; student transportation elimination or reduction; and athletic cuts. Miscellaneous cuts also were contemplated.

Reducing teaching positions through layoffs could save $666,000 a year after unemployment fund contributions. Alternatively, early retirement incentives for five teachers could save the district $881,000 in salary.

Eliminating two day and four night custodians could reduce costs by $307,000. An alternative would be early retirement incentives, which could impact the budget with a net reduction of $442,000.

Eliminating middle and high school bus service would save $55,000. The elimination of kindergarten bus aides would save $30,000, while field trip elimination would produce $19,000 in savings. Cutting one summer special education transportation run would save $1,500, and eliminating weekend athletic bus transportation would save $5,400.

Since sports league schedules already were in place for the school year, athletic savings would be relatively limited during the current budget period. Combining seventh- and eighth-grade teams would create $8,400 in savings. Eliminating ninth-grade teams would save the district $12,000. Postponing banner orders ($2,500), eliminating the third referee in basketball ($1,000) and eliminating community recreation ($2,300) also would reduce expenses.

Other cost cutting considered included reducing the operations clerk and counseling clerk positions by two hours a day ($16,000 savings); contracting with an outside agency for substitutes at all levels ($39,000), and encouraging administrative retirement and subcontracting ($48,000).

Postage reduction, and the collection of 100 percent of nonhomestead taxes in the summer also were considered.