Schools

School Finance Head Warns of 'Self-Imposed Structural Deficit'

Models warn district savings will drop with salary, benefit increases

The head of school district finances warns that salary and benefit increases in the budget as placeholders will put the district on course for a “self-imposed structural deficit” if they go through unchanged.

The district penciled in a 2 percent salary increase and an 8 percent fringe benefit increase for a budget that aims to err on the conservative side. Contract negotiations for the 2011-2012 and 2012-2013 school years will likely continue through the year.

John Toop, the district’s director of business services, warned during his budget presentation Thursday that placeholders on that scale aren’t sustainable in the long run. Hopkins remains a district . Salary and benefit increases like those will lead to decreased staff and programs, he said.

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A structural deficit results from a fundamental imbalance between revenues and expenses, not from one-time or short-term factors.

Salaries and benefits account for about four-fifths of the district’s expenses. The last teachers contract—which was settled December 2009 and runs through June 30, 2011—resulted in a 5.9 percent total increase spread over two years.

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Running the numbers

Toop is not unfamiliar with advocating against raises. , he said he has philosophical problems with giving anyone a pay increase—teachers, support staff, even himself—when the district is not bringing in any additional revenue.

Philosophy isn’t the only thing on the table, though. A December Citizens Financial Advisory Committee report—compiled using the —estimated that the above salary and benefit increases, together with , would drop the district’s fund balance below the minimum by the 2013-2014 school year.

That forecast assumes a 3 percent drop in state per-pupil funding that would cost the district about $1.3 million in the upcoming year.

(Click on the PDF to the right to view the entire report.)

Relative strength

The district’s finances are in good shape at the moment—especially compared to the many Minnesota districts hard hit by declining state revenues and delayed payments. Hopkins has had five bond-rating upgrades in the past five years—the latest that leaves Hopkins behind just nine districts in the state.

And despite anticipated cuts, the district’s budget leaves class sizes at 2010-2011 levels.

But if the assumptions above take place, the 2014-2015 school year will once again see the district enter so-called “statutory operating debt”—a legal term for when districts go in the hole by more than 2 ½ percent in a single year, according to the advisory committee’s report.

“If these expenses increase above the increases in revenue, it becomes increasingly difficult to keep reductions away from the classroom, decreasing programming/curriculum or increasing class sizes to levels that become unacceptable in the public’s eye,” the report states. “There is little wiggle room in reducing expenses that do not affect the classroom in some way.”

Hopkins Public Schools last entered statutory operating debt in 2005—overspending by 5.3 percent, or about $4.2 million. It has been a difficult, albeit relatively rapid, slog out of that hole.

Their own battle

Hopkins teachers face their own challenges, though. They haven’t had the statutory level of professional development in the past eight years, although the district has set aside money for that in the upcoming year’s budget.

The Legislature has also approved measures that weaken collective bargaining and eliminate teacher tenure. Those measures will likely be up for discussion when lawmakers and the governor attempt to resolve the state budget impasse.

Statewide, teacher cost of living raises averaged less than 1 percent for 2010 and 2.3 percent in 2009. Teachers also typically get additional increases for years of service and college credits earned. 


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