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Pandemic-related uncertainties overshadow schools budget process

 

May 13, 2020



While preparing a budget for the 2020-21 school year, the Sweet Home School District faces substantial uncertainty with the response to the COVID-19 pandemic, which has put hundreds of thousands out of work in Oregon and millions nationwide, endangering the income tax funding that funds the majority of the School District’s budget.

The district Budget Committee approved the proposed 2020-21 budget, which takes effect on July 1, following the superintendent’s annual budget message Monday evening. The meeting was held as a video conference.

“Prior to mid-March, we were preparing to implement the Student Success Act, along with a fully funded Measure 98,” said Supt. Tom Yahraes. “This legislation had been described as a once-in-a- generation investment that would be a game-changer for Oregon’s schools and students.

“Then COVID-19 hit, resulting in substantial reductions to Oregon’s largest revenue sources: income and business taxes, lottery revenues slashed by bar and restaurant closures, and fuel taxes reduced by plummeting vehicle travel.”

Gov. Kate Brown has ordered state agencies to plan for billions in spending reductions, Yahraes said. That will likely translate into reductions in state funding for schools. That represents a shift approaching $5 million from what the district had been expecting months ago.

District staff have, consequently, chosen a “modest budget approach” that meets programming commitments but eliminates plans for Student Success Act funds, Yahraes said. The proposed General Fund budget is $26.4 million, down from $26.9 million this fiscal year, which ends June 30.

The total proposed budget is $45.6 million, which in addition to the General Fund, includes bond payments for the Public Employees Retirement System, general obligation bonds used for construction, a total of around $10 million along with various grant-funded programs, $1.4 million in nutrition services, $620,000 in Title I funds, $586,000 in Measure 98 funding for CTE and graduation programs, $1.4 million in special revenue funds; $645,000 in early retirement funds; and $815,000 in long-term maintenance.

Student Success funding would have provided some $1.7 million to Sweet Home schools for a variety of new programs and expansions, such as an elementary music and additional behavioral specialists. The funding is derived from the state’s Corporate Activities Tax, which was passed by the legislature last year and implemented Jan. 1. It is supposed to raise $1 billion per year for education by levying a .57 percent tax on gross receipts for businesses with $1 million or more in sales. The tax remains in effect, although the threshold for making quarterly payments as opposed to annual payments increased from $5,000 to $10,000.

The budget proposal is based on the state’s 2019-21 biennial budget, Yahraes said. Sweet Home receives approximately four-tenths of 1 percent of the state’s biennial education budget of $9 billion.

Each $100 million in reductions at the state level reduces Sweet Home funding by approximately $400,000. A $500 million reduction at the state level would mean a $2 million reduction at the local level, and a $1 billion reduction translates to a $4 million in Sweet Home.

Business Manager told the committee the state is telling districts to expect a shortfall of 17 percent in state school funding in 2020-21.

On the positive side, Yahraes said, he expects the district to receive $437,000 in federal CARES Act funds, which also provided small business loans, $1,200 checks to taxpayers and $600 in additional weekly payments to those on unemployment.

If the district receives any Student Success Act funding, Yahraes said, it will use the money to prevent deeper reductions elsewhere in its budget.

From a staffing perspective, the proposed budget is “largely status quo,” he said. At this point, staffing levels remain the same next year as this year.

The budget anticipates higher property and liability insurance rates, he said. Reasons include reduced investment returns, significantly higher costs for property reinsurance coverage, insurers being hard with abuse claims and a growing number of cyber coverage claims.

The budget also reflects a significant increase in water rates, Yahraes said.

An increase in custodial supplies will help the district frequently deep clean the schools, Yahraes said, and the budget contains an increase from 1.5 full-time equivalent nurses to 2 FTE.

The budget proposes funding for heating, ventilation and air conditioning system improvements at Foster, Holley and the high school. The upgrades are meant to improve air circulation and air quality while extending the lives of the district’s heating systems.

The budget preserves a behavior specialist and behavior class teacher that had been included in Student Success Act spending, Yahraes said.

If funding falls short, staffing will bear the brunt of any reductions in state funding, he said. More than 80 percent of the General Fund budget consists of labor costs. Many remaining expenses, such as property and liability insurance premiums, cannot be reduced.

The schools cost about $88,000 per day in variable costs to operate, he said. To make up a $2 million funding shortfall, the district would need to take 23 furlough days.

The average cost of a full-time equivalent employee is approximately $75,000, including benefit costs, he said. At that amount, the district would need to lay off 27 FTE to make up a $2 million shortfall.

“Realistically, this number will be much larger because those with the least seniority and lower payroll costs would be let go first, meaning we would need to cut deeper to achieve the necessary savings,” Yahraes said. “We are hopeful that, through the state and federal budget processes in the coming months, that relief funds may close much of this gap.”

District staff will continue to monitor economic data and news out of Salem and Washington, D.C., he said. Adjustments may be incorporated into the budget in June, and the board can make adjustments if necessary after the budget is adopted.

“This budget prepares us to continue our programming while also providing guidance for worst-case scenarios,” Yahraes said.

“I would like to end the budget message by thanking Sweet Home’s students, parents and staff members for the outstanding job they have done continuing our education program during these challenging times. This is a historic moment, and I am extremely proud of how the entire Sweet Home School District community has responded.”

The approved budget moves to the School Board, which will hold a public hearing during its regular meeting at 6:30 p.m. on June 8 and then decide whether to adopt the budget.

Present at the meeting were board members Chanz Keeney, Jenny Daniels, Joe Kennedy, Debra K. Brown, Jason Van Eck, Angela Clegg, Jason Redick, and Mike Reynolds and citizens member Colton Emmert. The committee elected Emmert as chairman. Absent were board member Jim Gourley and citizen member Don Hopkins.

The Budget Committee has seven vacancies. Anyone interested in serving on the Budget Committee should contact the superintendent’s office at (541) 367-7126.

 
 

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