Budget Director: Farmington School District Faces $14.5M Shortfall in 2011-2012

With costs on a rapid incline, and state funding and residency on the decline, Farmington Public Schools is facing a possible $14.5 million budget gap for the 2012-2013 school year – about 10 percent of its total budget.

By 2013, the shortfall could be as high as $25 million.

If nothing changes, said Mary Reynolds, executive director of business services, the district will simply run out of money shortly before the end of the 2012-2013 fiscal year.

Even if officials dip into the fund balance, they still must make approximately $3 million worth of cuts before the next fiscal year, which starts in July, Reynolds said.

She broke the news Tuesday at the Board of Education meeting at the Schulman Administration Building on Shiawassee in Farmington.

Rising retirement costs account for a significant part of the expected shortfall. This year, the district pays 20.66 cents for every dollar of payroll into a state retirement fund. Next year, Reynolds said the district will have to pay 24.66 cents.

Reynolds said state per-pupil spending is expected to drop, something which was announced Feb. 17 when Gov. Rick Snyder unveiled his proposed budget for the next two years.

Farmington currently receives $10,195 per pupil; that amount drops to $9,8895 next year, representing a $3.4 million decline. The district is also expected to lose 394 students, based on population trends and birth statistics, which represents a budget hit of approximately $4 million.

Further, falling property values means fewer tax dollars collected to support schools, which will cost Farmington schools $2 million, Reynolds said.

At the same time, salaries are expected to rise by $1.6 million, retirement costs will increase by $4.1 million and benefits will cost an additional $1.3 million over this year.

Reynolds said the district must maintain an 11 percent fund balance to meet expenses during the lag time between when school starts and when the state disperses money from the School Aid Fund. As the budget shrinks, the actual amount of that balance grows smaller.

However, if the district does nothing to reduce costs, next year it would have to use half of its $29 million reserve. The following year, there wouldn’t be enough left in the fund to continue to make payroll until the end of the year. In fact, Reynolds predicted the district would run out of money nine days before the end of the school year.

This year, the district is on track to finish the year with a balanced budget, thanks mainly to $4.9 million in wage and benefits concessions from the schools’ various employee groups, Reynolds said. And some other factors, such as mild weather and the closure of four schools, led to a $454,000 decrease in utility costs.

But next year, she’s not counting on any such windfalls.

To put the shortfall in perspective, Reynolds said that the district achieved an $18 million budget reduction this year by closing four elementary schools, a move seen last year as a drastic measure to avert an impending budget catastrophe. 

“Our current cost structure is unsustainable,” she said. “The key is we can’t leave any stone unturned.”

Superintendent Sue Zurvalec told the board she wished she could deliver some good news regarding the budget.

A small consolation, she said, is that four of the district’s senior administrators are retiring at the end of this year.

While facing the budget challenges will be difficult without them, Zurvalec said their departure allows for some restructuring of the district’s administration.

“I am in the process of developing a restructured organizational plan,” she said. She’ll consolidate some of the retirees’ responsibilities and replace only two of the four administrators.