It’s a good thing the East Lansing Public School district has been steadily saving money.
The district’s Director of Finance Richard Pugh told the school board’s Finance Committee this week that, with the State of Michigan expected to see billions of dollars in revenue decline in the coming years due to the pandemic, the district will likely see large per-pupil cuts in state funding to public schools.
Before the pandemic, the district had been expecting to be able to add to its fund balance next year. Now, it will likely need to draw that savings account down significantly, as Pugh told the Finance Committee that the state could cut $500 per student.
If that happens, that will mean a $1.84 million revenue reduction to ELPS. Other state and federal cuts could bring the total revenue reduction to $2.28 million.
“Projecting forward to next year remains a work in progress,” Pugh told ELi in a follow-up email exchange on Thursday. The school board will need to pass a budget and then vote through a series of amendments as more is known.
Pugh and others in the district administration are looking at where they can cut expenditures, but this level of cut at this speed is really unprecedented.
Among the big unknowns are “state funding and Federal funding and restrictions on use of Federal funds,” says Pugh.
The funds set aside from the ELPS $94 million bond for elementary school reconstruction cannot legally be used for any purpose other than what the voters approved. But there may be money in other funds that can be moved to help the budget.
Pugh told ELi yesterday, “At June 30, 2020 we project to have approximately $500,000 in the 2012 Capital Project Fund. The monies in this Fund have been used for capital purchases but we are exploring if they may be used for General Fund operational expenditures.”
Pugh supplied a “what if” scenario chart running through what the district had previously expected versus what the budget and fund balance would look like under various per-pupil cuts. See it here.
“The district is fortunate to have a healthy General Fund fund balance at approximately 16% of total General Fund expenditures,” explains Pugh.
That means that, right now, the district has “in the bank” the equivalent of 16% of its annual General Fund expenditures.
“A primary reason to have a strong fund balance is to help address budget challenges during economic declines,” Pugh notes. “The district will need to balance the appropriate use of its fund balance so not to create a structural deficit that is too large to correct going forward.”
That job won’t be easy.
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