New State Cuts, Local Tax Limits Strain Districts

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Alex Heard and correspondents Glen Macnow and Cynthia Smith contributed to this report.

Nearly midway through the academic year, more than one-third of the states have cut their appropriations for elementary and secondary education--by as much as 10 percent in some extreme cases--prompting threats of more layoffs and temporary shutdowns.

In many states, as one leader of a state teachers' union put it, "There's not an awful lot of wiggle room." Statutory or political constraints prevent school districts from increasing local taxes to pick up the slack, and state emergency funds have run dry.

The financial pressures are forcing school districts to dip into their cash reserves, ordinarily set aside for emergencies, to pay for day-to-day operations. Public-finance ex-perts ordinarily frown on the expenditure of nonrecurring revenue for recurring costs, but district officials say they have no choice: The "rainy day" has arrived.

Florida last week became the latest state to cut its aid to school districts when the Governor's cabinet decided to meet a projected $400-million revenue shortfall by paring 2.5 percent off the budget of each state agency. School districts will lose $55.9 million in state aid--on top of a 2-percent cut imposed just a few months ago, according to Roger D. Stephon, executive director of the Florida Teaching Profession, the state affiliate of the National Education Association.

'Programs and Personnel'

"It's going to have an impact on both programs and personnel," Mr. Stephon said. "Some districts are already freezing positions and curtailing substitutes. In one district, they're using parent volunteers [as substitute teachers], and in another they're talking about bringing administrators into the classrooms.

"It cuts at the very foundation of what we've all been trying to do in the past few years, which is to bring Florida into the top quartile in student test scores and teachers' salaries."

Like officials in other states, Mr. Stephon pointed out that the latest rounds of cuts are "going to be especially tough on the districts because they only have seven months to absorb them."

In Nebraska, Idaho, and Arkansas, as in Florida, the authority of school districts to raise revenue locally is strictly curtailed.

"There are no options available to local governments in terms of making up lost revenues except for cash reserves," said Dale E. Siefkes, assistant director of the Nebraska Association of School Boards. "The levies were set in August. There's no way boards can go back now and adjust those."

In a special session this month, the Nebraska legislature cut 2 percent from the budgets of virtually all state agencies and state aid to local governments, including school boards.

"On top of that," Mr. Siefkes noted, "we're working with a 7-percent [limit on annual budget growth]. There's just no open door for districts to get it all back. It strangles those districts that are close."

Similarly, about 10 percent of the school districts in Arkansas have cash balances so small that they have little hope of making up for a $10.8-million cut in state general aid, according to officials of the state education department and the state's largest teachers' organization.

"We have some [districts] that are running extremely close," said Charles L. Brown, general finance coordinator for the state department of education. "Their only option is to cut operating expenses."

Eighty percent of the money cut from the budget was earmarked for teachers' salaries, trimming the state-financed raise for the average teacher from $675 to $344 this school year. Since Arkansas law does not permit districts to renege on raises promised under teachers' contracts, school districts must make up the shortfall locally.

But state law allows local tax elections only once a year, in March, and local governments do not begin to collect the proceeds until the following year, so there is no chance for local relief until the spring of 1984, Mr. Brown noted.

Low cash reserves are also a problem this year for districts in California, where the legislature declined this fall to increase the state appropriation for aid to elementary and secondary schools. The Los Angeles Unified School District last week announced that it would spend half of its reserve fund this school year to avoid laying off teachers, to air-condition schools that are used in the summer, and to buy textbooks.

And in Alabama, the Conecuh County school board voted last week to close on Dec. 10 because a cutback in state funds would leave it with a half-million-dollar debt at the end of the school year. School officials and pta members in the 3,000-student district are circulating petitions calling on the Conecuh County Commission to impose a one-cent sales tax for schools.

Schools, so far, have been the only state function exempt from state cuts totaling 10.5 percent in Idaho this year. But eventually the schools will have to take their share of cuts, and state officials have been exploring several options to make up for the shortfall, according to V. Reid Bishop, associate state superintendent for finance and administration.

The legislature, which probably will not meet until January, could allow the shortfall to be made up locally by an automatic increase in local property taxes; raise the state sales tax or find some other form of new state revenue; or force the public schools to absorb the cuts.

Since about 70 percent of the average school district's budget is obligated for salaries under contracts with employees, the third option would be almost impossible to put into effect, Mr. Bishop said. "Halfway through the school year, we just can't save that kind of money."

"Most of our districts are watching their expenditures rather prudently," he added. "They have the option to raise taxes on their own, but the date has passed [to receive any new revenue this fiscal year]. And we have a ceiling; districts would have to go to the people for levies in excess of a 5-percent increase."

In states where districts have attempted to pass school budgets and local tax increases this fall, results have been mixed.

In Oregon, only two of the 94 school districts that submitted new tax requests to the local electorates this month were successful. And in another five Oregon districts, voters rejected continuation levies to keep the schools operating.

As a result, state education authorities consider four districts to be candidates for temporary closing. The Gresham-Union and Astoria districts, each of which has lost at least two levy referendums in recent months, are attempting to try again in special elections.

In Ohio, 42 percent of the new operating levies--local tax increases--on the Nov. 2 ballot passed. "That's much the same rate as we've had over the past decade," said G. Robert Bowers, assistant state superintendent of public instruction. More than 90 percent of continuing levies passed, he added.

State emergency loans for schools, which were in high demand last spring when districts were faced with almost-daily changes in estimated state aid, have tapered off somewhat, Mr. Bowers said. "I don't anticipate any great rush to the loan fund," he said. "The increased state funding and the levies that passed have resolved the problems in the great majority of school districts."

Districts Stay Open

But in Michigan, where two districts closed briefly last year after they ran out of money and voters rejected new taxes, 33 districts that had been considered candidates for bankruptcy now appear to have enough money to stay open through June.

The districts, which made up the state department of education's "critical list," were saved from financial ruin in October and November when voters in those districts approved tax hikes or renewals.

Since 1979, the percentage of successful school-millage elections had declined dramatically in Michigan, which has the nation's highest un-employment rate and third-highest total property-tax rate. Earlier this year, state officials predicted that unless that trend was turned around, as many as 60 of Michigan's 529 school districts might run out of money.

Despite the recent good news, Michigan public schools are not out of trouble. Many districts have been forced to cut staff and programs--ranging from transportation to physical education. Others are finding that despite the higher tax rates, they are losing funds because of a shrinking tax base caused by local business failures.

In Colorado, where levy elections come late in the year, a spokesman for the Colorado Education Association said she expects "more mill levy elections than we've ever had." Most districts, she explained, re-ceived less than they requested from the state budget review board, which approves or disapproves districts' requests to raise property taxes without referendums. During the first year after a tax hike is approved by the review board, all the new money is generated by local property taxes; in the second year, half the cost is reimbursed by the state.

Denver, with a $12.9-million shortfall projected for 1982-83, was the first district in the state to announce that it plans a levy referendum. The election, which would raise $3.9 million and is scheduled for Nov. 30, will be the district's first ever.

The services currently offered in the district "cannot survive another round of budget cuts," said Superintendent Joseph E. Brzeinski. So far, the system has reduced its staff by more than 250 positions; in the last two years, 10 percent of its teaching and adminstrative positions have been cut.

Vol. 02, Issue 12

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