This is the first in a series of stories expanding on selected sections of Superintendent Husk’s Budget Message and presentation.
Creating a budget for 2011-12 is about more than getting through the next lean year or biennium. It’s also about preparing the district for the future.
Our district is dealing with an unprecedented shortfall created by changing conditions that impact the district’s ability to sustain the current level of service that the community is accustomed to. A number of factors contribute to the $55 million deficit such as rapidly declining state revenues, loss of federal stimulus funds, exhausted reserves and increasing expenses such as PERS.
The economy is a significant contributor to the problem. The largest portion of funding for our district comes from the State School Fund (SSF). The SSF is fed mainly by the state general fund. So in very simple terms, when the state economy is bad, state revenues go down, and so does the SSF.
Economists predict a slow recovery from this recession as compared to previous recoveries, and caution that “there are still headwinds on the horizon.”* Some economists have called this a “bathtub” recession, meaning if you were to graph the economic recovery time line it would look like a bathtub, with a long slow climb up out of the bottom. A more typical recovery would have a “V” shaped pattern with a quicker and sharper rebound from the bottom.
In other words, the economy is not expected to recover soon. It could take several more years. Add to this the fact that inflation is predicted to increase, and the cost of doing business continues to rise.
The cuts projected for 2012-13 come from this combination of shrinking revenues and increasing expenses, plus the “roll forward” of employee concessions. Concessions from employee groups are temporary, one-year arrangements. Concessions don’t permanently change the long-term agreements between the district and employee groups. So, each year’s budget planning begins with adding back the previous year’s concessions to the expense side and “roll forward” the next year’s increased costs. The result of this combination of factors is a repeating deficit that must be balanced with cuts every year.
Although funding projections are estimates and the numbers will very likely change (for better or worse), next year’s deficit is estimated to again be tens of millions of dollars.
The organization must change in order to live within shrinking means. Making one-time reductions in one budget year does not create a sustained change in the organization. One-year solutions to multiple year problems will not prepare the district for the future.
Next week's Clarifying the Proposed Budget story will talk about the criteria, or guiding principles, that reductions should meet.
If you would like to suggest a topic for Clarifying the Proposed Budget, please nominate a slide number or topic from the Budget Message presentation by emailing email@example.com or call Community Relations and Communications at 503-399-3038.
*State of Oregon Economic and Revenue Forecast, March 2011