Brace yourself: School budget season is coming

Every year, school boards around the country buckle down and spend months finalizing their district budgets.

Lately, those conversations in Oregon have become messy, painful and long, as schools face the challenging financial realities brought on by declining enrollment, increasing costs and the end of additional federal dollars.

Corbett, a small district on the eastern edge of Multnomah County, has been one of the latest to face high-profile budget problems. In a November video to the school community, Corbett Superintendent Derek Fialkiewicz attributed the issue to an outside Multnomah Education Service District staffer whose accounting errors went unnoticed until this summer.

“I didn’t catch it, I just didn’t. So there we are,” Fialkiewicz said, apologizing for the district’s financial issues.

To ensure the district doesn’t face a $3 million hole at the end of the school year, the district has cut a few staff positions, laid off administrators, and is requesting staff take six furlough days. The district also hired a new chief financial officer in-house and received a $2 million emergency loan from the Multnomah ESD.

In a joint statement attached to the loan agreement, Supt. Fialkiewicz and MESD Superintendent Paul E. Coakley expressed a “shared responsibility” for the budget problems and a commitment to working collaboratively on a solution.

“It was all on the up-and-up, it was just bad accounting is really what it was,” Fialkiewicz said in the district’s November video.

Other districts are struggling too. The Ashland School District in Southern Oregon recently announced a $890,000 anonymous donation that will keep operations running. Newberg, Salem-Keizer, and Portland Public Schools, all experienced tough budget seasons at the end of last year.

And this year may be more of the same.

Why now?

Fewer students are enrolling, and that means less in state dollars going to school districts. At the same time, costs are going up. Oregon Gov. Tina Kotek is proposing increased education funding through new structures, but retirement costs are projected to skyrocket over the next two years. In Oregon, education finance expert Marguerite Roza found special education identification is increasing, which adds to costs that districts have asked the state to help with for years.

Roza is the director of Edunomics Lab, a research center focused on education finance based in Georgetown University’s McCourt School of Public Policy.

Roza said the current financial situation districts are facing is comparable to school operations during the last recession in 2007. Districts were dealing with smaller revenues back then too. But she said the millions in COVID-19 relief funds were new, a “fire hose of cash” that districts welcomed, but now miss.

Executive director of the Oregon Association of School Business Officials, Jackie Olsen, said remaining financially stable after COVID funds ended has been a challenge for school leaders.

“Some districts did a great job in planning for that, some used some for staffing and some for other things,” Olsen said of the federal dollars.

“For those districts who used it for the majority of staffing, I think they’re having a little bit of a harder time.”

But adding to that are “operator-error” problems like the one in Corbett. During that November video explaining the budget situation, Corbett’s new Chief Financial Officer Regina Sampson said she found several sets of “alarming numbers” when going over the books.

“The skillset just wasn’t there,” Sampson said of her predecessor.

Olsen says there’s been a lot of turnover in district administrations in Oregon - from superintendents to business managers and CFOs.

Between elected school board members new to managing budgets and turnover in school district administration, Roza said she’s not surprised that financial missteps happen. They just become more apparent when money is tight.

“For school districts that are already making difficult tradeoffs, when the public hears about these financial missteps, it can cause them to lose confidence in their leaders,” Roza said.

“So we need leaders to be really forthright with these things, to come forward right away, say what we’re doing to correct them … what doesn’t work is to limp along without real capacity to manage public dollars in these amounts.”

What should school districts do?

Overcommunicate.

“And that doesn’t mean just publish a 300-page budget on your website,” Roza said.

It means helping everyone understand what those 300 pages mean - and what the tradeoffs might be.

Roza presents an example of this centered on class sizes, an often-cited concern of both parents and staff: When facing a budget gap, does a district increase class sizes? Or should district leaders cut a few days off of the school year and eliminate a couple of sports options?

“The question isn’t, increase class sizes or not increase class sizes. The question is, increase class sizes and save a bunch of things, or get rid of those other things, and protect our class sizes,” Roza said.

“So they understand there are options and there are none that are painless, but there are some that might be preferred over others.”

Roza said school leaders need to pay attention to what works for students.

“These rising costs, you know, might continue to spiral out of control if we don’t accompany any new investments with a hard look at what we’re doing, and making sure that all these investments are really adding value,” she said.

What can students, parents and teachers do?

Roza says if parents and teachers want to make sure their voices are heard in budget talks, they should get involved early. Showing up at a board meeting with signs and petitions in May or June might be too late, she says.

“Through this winter and spring is the time people should be engaging with their board members about what they want to see protected, and families can make those requests clear to their principals too, and the principals can share that feedback with the district,” she said.

In Corbett, planning for next year’s budget is already underway. In December, Superintendent Fialkiewicz shared another video, introducing the budget process and asking for community input on what they want to see in next year’s budget. Once school is back in session after the break, the board plans to meet to talk through and approve those budget priorities – all before the end of January 2025.

Olsen agrees that families and staff should get involved in the process, attending budget meetings and asking questions. But she said they should do so knowing that districts have to pass a budget before they know for sure how much money they’ll get from the State School Fund.

“Every other year, we’re budgeting, making a best guess on what we think the revenue is going to be and making sure that our expenditures balance to that,” Olsen said.

“I always say a budget is a plan. It’s nothing that’s ever set in stone, and the minute it’s published, it’s wrong.”