Schools struggle with rising costs, decreasing income

April 27, 2011 —

Even if the bond issue passes at next week’s election, the Hudson Area School District faces a sobering financial future, Jackie Bowen, Business Manager for the schools, told the Hudson Area School Board at last week’s meeting.

The problems come from various sources, but they can be summed up by saying that the school faces a history of declining enrollment, along with decreases in state aid and increases in expenses.

For various reasons, the school has been losing students almost every year for more than a decade; in the last ten years student count has dropped by approximately 170 students. Since state aid depends on the number of enrolled students, the total number has meant an ongoing decline in state aid, even if the aid per student was to stay the same.

However, state aid hasn’t stayed the same; the per-pupil amount, known as the “Foundation Allowance” has declined every year for the last several years. The foundation allowance for the current school year is $7,316 per student, but if Governor Snyder’s proposed $470 per pupil cut is authorized and no other changes are made the schools will be looking at a foundation allowance of only $6,846 next year. Current projections show a student count of 901 for next year, which amounts to a $423,846 cut in aid to the school from this year.

Even with that, the school faces rising costs from health insurance and retirement costs. In 2008, 16.34 percent of salaries paid went into the retirement accounts; by this year it had reached 20.66 percent, and by the 2012/13 school year the rate will reach 27.37 percent, or a total cost of $1,108,697.

Wages and benefits make up a total of 85 percent of the total school budget. In 2011-12, the projected General Fund Expenditures are projected to be $7,537,724, of which $6,416,714 went to wages. This included $4,050,755 in salaries, $978,932 in retirement expenses, $327,818 in FICA and $1,059,189 in insurance.

The schools have made reduction after reduction over the last several years in an effort to keep up with the problem. In September 2009, the district began the year with a $195,899 deficit and was facing an additional $475,631, potentially ending with a 2009-2010 deficit of $671,530. Through mid-year layoffs and concessions, the actual 2009-10 ending deficit balance was $302,623. Beginning the 2010-11 school year another $591,388 in reductions were made. In 2009-10 Hudson schools had to borrow $2.64 million to meet short-term expenses, and then $1.25 million in 2010-11.

Even though significant cuts have been made the past few years, the schools are still facing more cuts. If nothing is done, student counts remain as projected and the foundation allowance is dropped as expected, the school will face a budget shortfall of $1,057,736 in 2011/12, $1,288,884 the next year and $1,446,941 the year after that.

The huge budget shortfalls will cause the needs for further cuts in staff and services, even if the May 3 bond issue passes. If it doesn’t the cuts needed will be even deeper.