Published Online: December 17, 2008

States Eye Solutions as Budget Ax Hits Schools

Funding for public schools continues to come under the ax in states hit hard by the financial crisis, forcing lawmakers and education officials to look for alternative sources of revenue to make up for some of the funds lost.

As Idaho schools braced for deep cuts this week, Kansas officials were hard at work to stave off reductions in education spending in the state, while Alabama lawmakers brainstormed over a gambling tax to fund public education.

In Idaho, Gov. C.L. “Butch” Otter has asked state agencies to prioritize programs to be trimmed in fiscal year 2010 in anticipation of possible cuts of as much as 6 percent. For the state’s public schools that could mean a $85 million hit.

Superintendent of Public Instruction, Tom Luna, said the state’s school districts have already instituted holdbacks of their own, planning to apply some of the money to next year’s finances.

“I’ve made it very clear to educators we are going to get less money next year,” he said, adding he’s still optimistic schools will fare better than some other agencies. “Every agency is going to get a haircut. Education is going to get a trim, but there will be some other agencies that end up with a crewcut.”

The education department has been able to tap about half of a $114 million public education stabilization fund to cover $61 million they otherwise would have lost due to the previous 4 percent budget cut. That reserve fund is available for hard times, to fulfill existing contracts negotiated last year with teachers, administrators and staff.

Idaho’s state board of education, already stretched thin after financial miscues last year left the agency facing a potential deficit of about $1.4 million, has covered its previous 4 percent, $205,000 budget trim by leaving vacant positions unfilled, delegating more job responsibilities and returning thousands in unused scholarship money.

Board officials met Tuesday to consider how to cut an additional $294,800, said agency spokesman Mark Browning.

Tougher Times Forecast

In Kansas, Gov. Kathleen Sebelius said Tuesday that she wants to exclude public schools from cuts that must be made in the current state budget to erase a $141 million deficit, while lawmakers hoped to act quickly on the reworked spending plan.

The governor said when the Legislature convenes Jan. 12, she will present lawmakers with her proposed cuts in the $6.4 billion general fund budget for fiscal year 2009 that ends June 30 and her budget plans for fiscal year 2010.

Sebelius said the plan for this fiscal year is to have the schools receive money they have committed to.

“One of the problems with school districts is they are in the middle of a school year,” she said. “They have teachers working under contract. They have kids coming every day, we know the count. They have relied on the fact that these budgets will be in place,” she said. But it may be different story for fiscal year 2010.

“The 2010 budget will make some adjustment but they will have an opportunity before they enter budget negotiations, before they enter into teacher contracts to know what’s coming for the next fiscal year,” she said.

Her comments came after a meeting of the State Finance Council, which authorized $250 million to help pay various bills through mid-February. It already has authorized $300 million.

Sebelius, who chairs the committee, wanted to council to approve a $400 million “certificate of indebtedness” which allows the state to borrow from its idle accounts but requires repayment before the fiscal year ends.

The certificate deals with cash flow, which State Budget Director Duane Goossen said can be a problem during the first part of a budget year because a large portion of the revenues comes toward the end of the year. He said the state currently has received $2.4 billion in revenue but has $3.1 billion in bills.

Goossen said approval of the $250 million certificate allows the state to pay public schools the remaining $55 million of the monthly $220 million due Dec. 1, plus an $87 million quarterly payment for special education.

Gambling Tax Proposed

Meanwhile, in Alabama, where Gov. Bob Riley this week announced the biggest cut to public education in 48 years—12.5 percent for the $6.3 billion education budget—some legislators lobbied for a gambling tax to fund public schools.

Riley said he would pull money from a state “rainy day” fund to erase part of the shortfall, but the effective rate of cuts would be 9 percent.

Sen. Hank Sanders, D-Selma, and Rep. Richard Lindsey, D-Centre, said the Legislature should look at gambling taxes when it convenes Feb. 3, especially taxes on the growing number of gambling halls featuring electronic bingo.

“It’s a serious problem that we don’t get any state revenue from bingo,” Sanders said.

They have the backing of one of the state’s most influential lobbying groups, the Alabama Education Association. At AEA’s delegate assembly in Montgomery Dec. 4-6, members passed a resolution urging the Legislature to tax bingo and other electronic gambling games to help public education.

Alabama legislators will begin holding hearings Jan. 12 to prepare the education budget for fiscal 2010, which begins on Oct. 1, 2009.

Sanders, chairman of the Senate Finance and Taxation-Education Committee, said he expects economic conditions to worsen before they get better, and fiscal 2010 budget could be $600 million to $800 million below the $6.3 billion what was appropriated this year. The result would be that Alabama would be spending the same amount it was four years earlier.

“The situation is just overwhelming,” he said.

State Superintendent of Education Joe Morton said he will have to see what’s proposed before taking a position on gambling taxes.

But he said, “There will be — in my prediction — pretty hard looks at that in the legislative process,” he said.

“Financial Emergency”

The education cuts have left education officials facing difficult choices on what areas to cut. In Florida, where Gov. Charlie Crist has directed state agencies to offer proposals for a theoretical 10 percent cut, state schools Superintendent Eric Smith testified before a House panel saying the deep cuts, around $865 million, would put some districts into a “financial emergency” or at least uncertainty.

“This is a staggering number,” he said.

The Florida legislature, which is trying to erase an estimated $2.3 billion state budget deficit, will meet in a special session set for Jan. 5-16 to work on its budget shortfall.

“Reductions in the middle of the year are extraordinarily, extraordinarily challenging,” Smith told the Prekindergarten-12th Grade Appropriations Committee which is holding hearings on the deficit in advance of the special session. “They have employees under contract — legal contract — teachers, support personnel. They have vendors under contact. They have purchased their books.”

Many districts already have depleted reserves and cut support services due to a 1.2 percent midyear cut in last year’s budget and a 6 percent reduction in this year’s original budget.

To make another midyear correction, schools probably would have to cut support functions again, including central administration, food and custodial services, transportation, psychologists, counselors, social workers and reading coaches to spare classrooms, Smith said.

Meanwhile, in one state at least, schools were set to get more money under an economic stimulus plan.

The Hawaii Department of Education will get $317 million from the $1.9 billion infrastructure spending package announced by Gov. Linda Lingle this week.

Schools will get more funds than any department in the state, except transportation, over the next 18 months.

Vol. 28, Issue 16

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