Published Online: November 26, 2008

More States Grapple With Budget Shortfalls

The troubled economy continues to ravage states’ education budgets, with Alabama school employees bracing to get pared-down paychecks for the second consecutive month, and both Arizona and Delaware preparing for cuts in school spending.

In Alabama, all of the state’s 131 school systems have been informed that they will receive only 75 percent of their funds from the state allotted for payroll for November.

State schools Superintendent Joe Morton has sent school superintendents a letter informing them that the partial payments will be wired Friday to the system’s accounts. Morton said Tuesday that he hopes the systems will get the rest of the November payroll funds by Dec. 5.

This is the second consecutive month that the state has been unable to make its full payroll payment before the end of the month owing to sluggish income tax and sales tax receipts amid a stagnant economy.

Morton said the problem was also caused by starting the current fiscal year with almost no carry-over of funds.

Gov. Bob Riley has not decided if he will declare the education budget in proration. That would allow the state to access a rainy day account for public education. Voters in the Nov. 4 general election approved a constitutional amendment that allows the $437 million in the account to be used if the governor declares the education budget in proration.

Alabama law requires a governor to declare proration if tax revenue falls behind what is needed to fund the budget approved by the Legislature.

On Tuesday, President-elect Barack Obama is expected to meet with the nation’s governors in Philadelphia to discuss how the economic crisis is crimping states and their budgets.

Nick Shapiro, a spokesman for the Obama transition, said the discussions, hosted by National Governors Association Chairman Ed Rendell and vice-chairman Jim Douglas, will provide an opportunity for Obama and Vice President-elect Joe Biden to talk with state chief executives about “the unique challenges facing our states.”

No New Programs

In Delaware, education secretary Valerie Woodruff, who retires early next year, is not proposing any new programs for the next budget.

She asked state budget officials Tuesday why she would ask for more money when she knows her department is facing at least $150 million in cuts. However, she warned that more cuts to programs could have long-term ramifications. She said she saw successful programs cut 25 years ago that were never restored.

The education department was budgeted for more than $1.1 billion for the current fiscal year. Gov. Ruth Ann Minner has asked all state agencies to cut their budgets by 15 percent next year because of falling state revenues.

In Arizona, the next president of the Arizona Senate says spending for the state’s elementary, junior and senior high schools will have to be on the chopping block when lawmakers act to keep the state budget in the black.

“Obviously K-12. That is the biggest component of the budget,” Burns said when asked during a Tuesday panel discussion what would be targeted for spending cuts.

Democratic Gov. Janet Napolitano and her allies in the Legislature largely fended off reductions in school funding when the current budget was enacted, but circumstances are changing.

The state now faces a projected $1.2 billion shortfall in the budget year that ends on June 30. A bigger shortfall is anticipated in the next budget. Spending on K-12 schools accounts for $4.1 billion of the $9.9 billion budget, according to the Joint Legislative Budget Committee staff.

Most of that spending is protected from cuts because of a 2000 school funding law approved by voters.

However, that protection does not extend to all school spending. Exceptions include supplemental funding for special categories of students and per-student dollars provided for technology and equipment.

Burns did not specify what specific education programs could be targeted for elimination or reduction. But he said lawmakers and the public need to understand that state funding for education has increased by double-digits in recent years.

“There is no way that even in a strong economy in Arizona we can continue to spend at that level,” Burns said. “We have overspent, obviously significantly overspent.”

Difficult Decisions

In Alabama, the continuing crisis in the education budget has left local school systems with difficult decisions to make as they figure out how to pay teachers by the end of the month.

Sally Howell, executive director of the Alabama Association of School Boards, said a survey of some of the state’s school systems, showed superintendents are dealing with the crisis in different ways: A few borrowed money, some have delayed making some payments and some are borrowing from different funds in their own budgets to make sure there is enough money to pay salaries this month.

She said the economic slowdown has been well documented and she believes most school systems have been preparing for the current cash flow problems. “They’ve been preparing for this basically like you would prepare for a hurricane. They have been battening down the hatches,” Howell said.

Morton said starting the fiscal year Oct. 1 with almost no money in the bank made it difficult to raise enough money to meet payroll on time in October and November.

“Normally there’s a little bit of carry-over money, sometimes a lot,” Morton said. “This year it was virtually zero.”

Vol. 28

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