Breaking Down the Numbers: School Board Considers $6 Million Deficit for 2012-13

Though the search for ’ next superintendent has been top of mind for the members of the Birmingham Board of Education lately, approval of the district’s 2012-13 budget isn’t far away.

Members of the public will be able to comment on the budget beginning at 7 p.m. June 5 at the district’s administrative offices. At that meeting, school board trustees also plan to adopt the budget, as well as authorize any operating and debt retirement millages for the upcoming years.

Here’s what you need to know going forward:

How it works

The school board must complete a budget by June 30, the end of its fiscal year. In the months leading up to that date, the district takes a look at projected expenditures and projected revenue. If expenditures are expected to exceed revenue, the district factors in a deficit for the upcoming fiscal year.

The district must keep a certain percentage of its money in fund equity — funds that are kept in reserve and may be spent only on certain projects. According to School Board Policy 6215, a certain percentage of the fund equity may be transferred to the general fund if needed.

The situation

For 2012-13:

• Expenditures: $106,630,950
• Revenue: $100,684,348
• Projected deficit: $5,946,602
• Fund equity: Approximately $16 million

Where Birmingham will spend its money (percentages of total expenditures):

• Salaries: 54 percent
• FICA and retirement costs: 18 percent
• Employee insurance: 11 percent
• Utilities: 3 percent
• Other costs: 14 percent

Where Birmingham receives its money (percentages of total revenues):

• Property taxes: 47 percent
• State aid foundation: 44 percent
• Other state categorical aid: 5 percent
• Intermediate School District: 2 percent
• Other local: 2 percent

Where we’ve been

This isn’t the first year Birmingham Public Schools has had to deal with a deficit. In 2011-12, the district made up for $2.06 million deficit by transferring cash from its fund equity account. The last time revenues exceeded expenditures in Birmingham was in 2009-10, when the district had an excess of $1.5 million.

This growing trend of deficits can be seen in expenditure and revenue trends from the past few years. In 2012-13, Birmingham Public Schools will spend 2.9 percent more than they did 2011-12. Last year, the district’s expenditures grew by another 2.2 percent.

Meanwhile, revenues from both federal sources and property taxes have been shrinking. Revenues will decrease 0.84 percent in 2012-13. In 2010-11, they shrunk by 2 percent and in 2008-09, decreased by 3.7 percent.

The plan

To meet the looming deficit, Assistant Superintendent for Business Services Debbie Piesz :

• Make up the deficit by cutting transfers to the district’s building and capital equipment fund by $3.6 million, in addition to spend $2.7 million of the district’s fund equity. That fund, which doesn’t have a revenue stream, is used to repair school facilities as well as make major purchases.
• Spend the maximum amount of fund equity allowed by board policy — $2.89 million — and then break with that policy and spend an additional $3.4 million of fund equity to make up the difference.

Those options split the school board at its March 20 meeting, with opinions torn between fiscal responsibility and making sure money is there for important repairs and purchases.

Trustee Michael Fenburg said spending $6 million of the district’s fund equity would bring that account down to $10 million — a move the district may not be able to recover from.

"We need to make cuts," he said. "To take $6 million out of fund equity in one year is too severe."

Trustee Rob Lawrence said he was more in favor of the second option, noting that building improvements and equipment purchases should be one of the district's priorities.

"We're pretty much at the end of the hard decisions," he said. "We have to talk about our priorities."

At that March meeting, several trustees said they would like to see a third option — one in which money is held back from the building and capital equipment fund until the state releases its budget later in the summer.

Tied up the state budget, they pointed out, are any potential changes to state school aid or retirement rates — should the district see more money than they expect, that money would go straight back to the building and capital equipment fund.