10% Reduction in State Aid: What does that mean for the Earlham Community School District

On October 7th, the State Revenue Estimating Conference met to determine the anticipated revenues for the upcoming State budget. The Governor is required by law to use these figures to develop a State Budget that is revenue and expenditure balanced. You may have read where the Governor used monies from the State Reserve Fund to cover revenue/expenditure differences from the previous year.

With State revenues being estimated to equate to nearly $1 Billion short of projected expenditures for the current year, the Governor is required to make adjustments. In response, the Governor has ordered a 10% across-the-board reduction in State Aid for all agencies. The reductions in State Aid payments are set to begin in November 2009 and continue through June 2010. This obviously presents a significant challenge for all schools in Iowa and Earlham is no exception.

For the Earlham Community School District, this reduction in funding equates to $290,000. The district receives State Aid payments each month. This reduction equates to a loss in General Fund revenue of over $36,000 each month. The General Fund expenditures include salaries, benefits, textbooks, utilities and supplies.

An important concept to keep in mind is that this reduction in revenues does not affect the funding received through local property taxes. The District receives property taxes to pay for the bonded indebtedness for the building, the Physical Plant and Equipment fund which helps to maintain the building and purchase equipment and the Management Fund which pays for property insurance for the buildings, grounds, transportation fleet and liability.

The District is working to develop two plans: One to address revenue shortfalls for the remainder of the 2009-10 school year and another to address budget issues related to the 2010-11 school year and beyond. The District is fortunate to have some Cash Reserve funds that will assist in meeting financial obligations for the 2009-10 school year. Once the budget is approved on April 15th, there is no way to generate additional revenues for operating. We have started work with the School Board Finance Committee and ideas on how to reduce expenditures and operate more efficiently are being solicited from the staff.

It is very challenging to predict the future as the State revenues are always subject to change. The next Revenue Estimating Conference is scheduled for December. The Legislature can affect funding levels during their next session beginning in January. Economic conditions for the State and Nation can change between now and then. As these factors become more clear, I will attempt to keep updated information available.