District plans downsizing in light of looming deficit

Sunday Times Newspapers

SOUTHGATE — William Grusecki accepted the job of Southgate Community Schools Superintendent in July ready to embrace the difficulties of a financially struggling school system.

According to an audited account of the district’s finances received last month, the obstacles are about four times greater than anticipated.

“I’m always up for a challenge,” Grusecki said. “This is a little bigger than I thought, but I feel good about where we’re going.”

Grusecki said his initial understanding was a pending deficit of about $750,000 for the 2013-14 academic year. According to an audit by Hungerford & Co., that budget gap will be closer to $3.2 million.

“Coming in, there were indications we would be just under a million deficit,” Grusecki said. “After I started there were other things that came up.”

Some of the problems were anticipated, Grusecki said, such as decreasing enrollment. About 400 seniors graduated in June from a school year that welcomed just 350 kindergarten students. An estimated 100 to 150 fewer students are expected for the next school year, representing a loss in state revenues.

Another factor was a previous decision for the district to be self-insured rather than participate in a collective policy. Grusecki said a string of claims had to be satisfied.

“You have to bite the bullet and not submit claims for some things,” Grusecki said. “That cost the district about $750,000 and hit the 2011-12 budget in a negative way.”

Some of the problems were internal, to include missteps by former business and finance manager Daniel Phillips.

“There were some mistakes made in accounting that we hadn’t counted on,” Grusecki said. “That’s why it got where it’s at.”

Accounting errors reportedly masked the district deficit, and former manager Rick Henegar was brought in on an interim basis after Grusecki recommended that the board dismiss Phillips.

Grusecki said that the district is actively seeking a new business manager, and that the changeover revealed weaknesses in budget reviews.

The resulting policy changes are part of a proactive approach to resolve as much of the pending deficit as possible in advance of budget deadlines. A state committee granted Southgate a two-year extension until June 2014 to submit a deficit elimination plan.

In light of declining enrollment, Grusecki said the district could no longer operate the same number of buildings as it had. A “downsizing” process is expected for the 2013-14 academic year that will likely close at least one of the district’s current nine buildings.

Grusecki said that no decisions have been made just yet on any specific building, but one part of the plan will move ninth-grace students currently at Davidson Middle School over to Anderson High School.

Grusecki said that Southgate is one of a very few districts in the state where high schools hold only grades 10 through 12, although ninth-grade students are under high school curriculum. Putting the four grades under one roof makes more sense and will free up options in the other buildings.

“That’s more of a true high school configuration in Michigan,” Grusecki said.

The hope is that adjustments made now and during union negotiations next month will help ease the budgetary strain. Some things, including likely layoffs, will be necessary for the district to remain solvent.

“There’s no way we can avoid that,” Grusecki said. “About 85 percent of the operating budget is personnel. We have fewer students, that’s going to take fewer staff members.”

Although the challenge is far greater than anticipated, Grusecki said he remained optimistic due to the quality of people at the district.

“If that weren’t the case it would be tough to overcome what’s going on,” Grusecki said. “But everyone has jumped right into the fire and we’re going to do this together. It will be difficult for some; we’ll wind up next year with a building or two less, but the kids will still get a great education.”

(James Mitchell can be reached at jmitchell@bewickpublications.com.)