Budgeting School: How will state's tight COVID-19 budget impact MCSD's budget?

The Montrose County School District Board of Education adopted their 2020-21 budget Tuesday, June 23, which has been tightened due to the coronavirus.

Colorado Gov. Jared Polis signed a $30 billion budget earlier this week that takes effect July 1 and dictates state spending through the end of June 2021. The budget was signed later than usual and is much leaner than previous years as the state tightens spending because of COVID-19.

The $30 billion budget cuts committed spending by about 3% compared to the current fiscal year as lawmakers work to close a $3 billion deficit.

So what does that look like for the Montrose County School District? $1.1 million in deficit spending from the district’s fund balance.

MCSD’s board of education adopted their 2020-21 budget Tuesday evening during a regularly scheduled board meeting. The budget runs from July 1, 2020, through June 30, 2021.

“The final proposed budget includes just under 6% state revenue cuts in the amount of approximately $2.6 million less in state funding than last year,” Emily Imus, the director of finance for MCSD, said during the board meeting. “The Budget Stabilization Factor (Negative Factor) is at its highest in history at $7.8 million, which is 14% of the total formula funding for 2020-21.

State funding for the FY 2020-21 will be finalized in October 2020 when districts submit student count information. The state will adjust for any increase or decrease in enrollment from the June estimate.

Negative Factor Share

$7.85 million. According to the Colorado School Finance Project website, the Budget Stabilization Factor (Negative Factor) is a state budget tool that equally reduces school districts’ funding across the state. For the 2019-20 school year, MCSD’s Negative Factor decreased funding by approximately $3.80 million (roughly $633.05 per student). The district’s per-pupil funding was $8,379 for the school year, an increase of $278 per pupil from 2018-19. The COVID-19 financial impact has resulted in a Negative Factor increase to $7.85 million (roughly $1,314 per pupil) for the 2020-21 school year. Projections reflect a $350 per pupil decrease at $8,042 per pupil for 2020-21 compared to the $8,379 for the previous school year.

Imus said, “The State’s formula determines the extent of about 94% of the District’s General Fund revenue. This formula provided $50.9 million in revenue for MCSD in 2019-20, but it decreased to $48 million for 2020-21.”

Since the recession in 2008, the state’s Negative Factor has decreased MCSD funding by over $65 million.

General Fund

$55.7 million. This fund is used to account for all financial resources not specifically allocated to another fund in the budget. Ninety-five percent of the general fund revenue comes from state sources and property taxes. Other revenue sources come from federal, local, intermediate sources and specific ownership taxes. MCSD will operate with a 4% decrease in revenue funding compared to FY 2019-20 ($48,974,757 versus $46,956,000). Employee compensation and benefits account for 85% of budgeted General Fund expenditures. The amount budgeted for salaries and benefits have been budgeted to decrease.

Superintendent Stephen Schiell said the district has $10.6 million within the fund balance reserve. Approximately $5 million of this general fund balance is restricted. With a decline in state funding, total reserves are budgeted to decrease by 10.5%, leaving the total expenditures and reserves around $57 million compared to $60.9 million. MCSD salaries for FY 2020-21 are budgeted at negative 5.5%.

General Fund expenditures for 2020-21 are budgeted over $48 million compared to the 2019-20 projections at $50.2 million.

Itemized breakdown. The budget for instruction saw the largest negative change at 6.9% ($31,922,000 versus $29,733,000) for FY 2020-21. Instruction expenditures still accounted for the largest program expenditure in the General Fund at 61.8%. The district anticipates some instructional costs will qualify under the CARES Act funding that is accounted for in the Special Grants Fund. Currently, MCSD does not anticipate a significant change to staffing.

Student transportation saw the largest increase in budgeted amount at 17.5% ($1,887,000 versus $2,218,000). That increase in the 2019-20 Project Budget variance reflects savings in the spring due to COVID-19-caused school closures. The student transportation contractor passed on savings in 2019-20 because of the closures, but the district cannot count on these savings in 2020-21.

$3.9 million. Revenue within the General Fund is budgeted to decrease by $3.9 million over the FY 2019-20 projected revenue.

· Approximately $2.5 million decrease in Legislature Driven Program Funding (per pupil)

· $600K in lost Small Rural School Funding (Marijuana tax funds)

· $500K is one-time funding sources (Forest Service)

· $200K in interest income (declining cash balances from use of bond funds and drop in interest rates)

Enrollment

State per-pupil funding is the largest percentage of revenue for MCSD. Over the past 12 years, the district’s student counts have fluctuated from over 6,000 to 5,700. The district projects decreased enrollment in the future due to the loss of Russell Stovers and J.C. Penney in the county.

Cost Savings Measures

The district has taken a couple measures to account for the revenue loss from the state through discretionary spending reductions, allocating CARES Act grant funds toward instruction and dipping into fund balance monies.

Imus said the district’s primary cost savings taken by the district to off-set the revenue cuts from the state is $550,000 school and department discretionary spending reductions of 10%, $800,000 in compensation to be covered by the CARES Act grant for increased instructional hours from the spring to the fall and use of $1.1 million of fund balance, which required board approval.

The district reduced spending during the spring. Review of district spending has been extensive and continues as COVID-19 continues to impact the economy. Some items under review include:

· Cutting discretionary budgets at the district and school levels by 10%

· Reviewing staffing levels in the district: no significant change in staffing levels is anticipated as the planned return to school this fall will require appropriate staff to educate effectively.

· Fund balance spending of $1.1 million, which reduces the district’s reserves

Funding used to alleviate district costs

Cares Act. CARES Act funding comes with restrictions and will come out of the district’s Special Grants Fund. The funding will go toward

· Cleaning schools, vehicles and equipment to provide a safe and clean learning environment for students

· Providing additional education opportunities and recover for lost learning of students last spring

· Improve and enhance remote learning effectiveness of instructional staff through professional development training

· Prepare for the potential of future COVID-19 school and/or community outbreaks

· Address technology and curriculum costs needed to improve the effectiveness of remote or hybrid learning models

While MCSD takes steps to safeguard the district’s finances without sacrificing a quality education for students, it’s likely school districts’ financial situation will continue to be tight into next year.

Regardless of continuing impacts of COVID-19 on the district’s finances, Imus said students remain the district’s number one priority as staff adjusted to a new education environment quickly and continue to provide food resources to students and families during this time.

Lauren Brant is a staff writer and digital content coordinator for the Montrose Daily Press.

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