As the walls close in on Iowa school districts, forced to battle the State's 10-percent across-the-board (ATB) budget cut in October, plus the loss of State aid dollars due to declining enrollments and empty State coffers, most districts now face perilous financial times in the next few years.
Information discussed at the Cherokee Board of Education's Management Team meeting Monday night revealed that the Cherokee district could possibly face $700,000 in budget cuts next year. That staggering amount can only be balanced with a workable combination of reduced expenditures and increased revenue, that increased revenue coming from a spike in property tax rates.
"A lot of school districts are in a panic mode," Cherokee Superintendent Dr. John Chalstrom told the Board Monday night. "We're not as bad off as many and we will get through this, but we're going to be facing some tough decisions as we continue down this road."
The ATB budget cuts in October cost the Cherokee District $492,000, which forced the District into making $129,200 in mid-year reductions.
According to Chalstrom, the mid-year reductions will subtract from the $492,000 hit from the State-level budget cuts, leaving the District with the need to draw $362,800 from its $900,000 cash reserve fund.
Once spent down, anticipated to be by the end of this school year, the cash reserves can be replenished through a cash reserve levy. Chalstrom said in the past that in the coming budget year (FY 2011), the District will use its spending authority to implement a cash reserve levy to help replenish the expended cash reserves.
This year the ATB budget cuts were cushioned by the American Recovery and Rehabilitation Act (ARRA) funds. Those stimulus monies were a one-time offering meant to stimulate the sagging economy and will not be available again.
After making staff reductions in the past, schools forced to make more staff reductions will be hard-pressed to do so without negatively impacting valued educational and extra-curricular programs.
According to the Cherokee Board and Chalstrom, it's readily apparent that the Federal and State education funding formulas need re-evaluated, the sooner the better.
As it is, without increased or restored State funds, the financial shortfalls must be made up on the backs of the taxpayers in each struggling school district - through such tools as the cash reserve and Instructional Support levies.
All of the budgetary crises in Iowa the past 20 years have resulted from lagging State revenues, triggered by a seriously depressed national economy. Income tax generates 60 percent of the State's general fund budget, and Sales tax accounts for 20 percent, together totalling 80 percent of the total general fund budget.
K-12 receives 45 percent of the State's general fund budget, and when you add in Community Colleges and Regents, that number climbs to 60 percent for education in Iowa.
That's a sizable cash expenditure that needs to be funded year after year to sustain the schools' and the State's educational goals.
According to Larry Sigel, president of the Iowa School Finance Information Services (ISFIS), as the revenue shortage continues to impact schools, Fiscal Year 2012 could be the most critical year yet, and may possibly be the breaking point for Iowa school districts' financial well-being.
Chalstrom says that Sigel recommends districts begin controlling and lessening expenditures now and to continue making reductions wherever possible in FY 2011 to help buffer the culminating financial hit expected in 2012.