Ann Arbor schools face $15-21 million budget deficit for 2011-12

Related stories:
Washtenaw voters consider special education millage on May 3
Schools of Choice plan would invite other Washtenaw students for 2011-12
View the presentation from Interim Superintendent Robert Allen

From AAPSNews Service

Heading into the 2011-12 budget season, the Ann Arbor Public Schools faces a $15.1 million deficit based on projected funding cuts and increased retirement costs from the state and a $21 million deficit if a countywide special education millage does not pass in May.

Ann Arbor Interim Superintendent Robert Allen
Ann Arbor Interim Superintendent Robert Allen

In the coming weeks, Interim Superintendent Robert Allen and his staff will share a draft budget plan that will detail proposed budget reductions. The district is estimating General Fund expenditures of $195 million for the coming year but expects revenue of only $180 million.

This is the second year the district has faced a similar financial dilemma, but this year has the added burden of the proposed state use of the K-12 School Aid Fund to fund higher education institutions.

“That’s what’s creating this problem for us in K-12,” Allen said. “We don’t have a local option. You can’t tie K-12 into higher ed. It’s a totally different playing field.” Allen said colleges and universities have the option of increasing tuition when faced with a deficit – whereas K-12 districts do not.

Under a state budget proposal from Gov. Rick Snyder, Ann Arbor faces a $700 per pupil hit: a straight $300 cut to aid, a $170 funding cut from last year that will not be restored and another $230 in increased pension costs to the district.

This $15 million expected deficit for Ann Arbor assumes that the May 3 countywide Special Education millage renewal will be approved by voters. If it does not pass, Allen said, the Ann Arbor Public Schools must continue to fund mandated special education services, taking the $5.8 million from the district’s General Fund and pushing the expected budget deficit to $21 million.

Included in the $15 million projected deficit, the district is anticipating an annual expenditure of 8 percent in health benefits over the next three years and a retirement rate increase from 20.66 to 24.46 percent for the 2011-12 year. A portion of state retirement costs are pushed down to local school districts from the state and are not controlled locally.

“They are expected to continue to escalate,” Allen said. As more district employees enter the retirement system and employee numbers and salaries are reduced, less is contributed to the system and costs rise. “That’s where the imbalance comes in,” he explained.

Actions at the local level

Allen shared the stark numbers the district has faced in recent years: The district has cut $34.4 million since the 2006-07 school year.

Eighty percent of the Ann Arbor district’s general operating costs are instruction and support, 10 percent are operation and maintenance, 3 percent are transportation, and the remaining 7 percent are for central administration and other costs.

Last year, the district cut $18.6 million from the General Fund budget by restructuring programs and reducing some positions because of state-level retirement incentives which prompted some early retirements. The district also moved its bus service to a countywide consortium, placed a cap on health care over several years and negotiated cost reductions with its collective bargaining units. The district also opened up limited schools of choice for out-of-district residents and plans to continue to offer this in the coming year to gain students and additional per pupil revenue from the state.

“We’ve consolidated, we’ve outsourced, we’ve asked for concessions, we’ve put caps on health care,” Allen said. “We have deliberately tried to keep things away from the classrooms.”

But now, he added, “we’re looking at everything. As we’re required to do more and more cuts, we will have to go deeper and deeper which will end up impacting the quality of education.”

Allen said the district would look at multiple ways to attack the 2011-12 deficit:

  • Continue collaborating with local universities, the Washtenaw Intermediate School District and other area ISDs and local districts on programs ad partnerships.
  • Expand private giving to the school district through donations and grants and through groups such as the AAPS Educational Foundation, school PTOs and booster clubs.
  • Continue to make expense reductions.
  • Lobby the state for a change in the way schools are funded. This could involve increasing local control over school funding or changing the funding or retirement costs (controlled at the state level, but partially funded by individual districts.)
  • Focus on increasing student enrollment. The district now has an estimated 1,274 K-12 students living in the district who attend non-AAPS schools. The district would see an additional $903,600 in additional revenue with 100 new enrollments. The district will have an expected 190 seats open for the 2011-12 school year in grades kindergarten, first and sixth grade and selected seats in grades two through five.

Allen also stressed that each fund in the district has specific uses and that only the district’s General Fund can be used for operating expenses including salaries, benefits, utilities, supplies and equipment. Other funds and their restrictions and allowed uses include:

  • Grant Funds are restricted by the grantor, such as Title I, IDEA, and Career & Tech Ed.
  • Bond Funds are restricted by the voters to fund capital projects such as construction, technology and bus purchases.
  • Debt Services Fund is restricted by law to pay debt service on bonds sold by the district.
  • Sinking Fund is restricted by state law to fund capital projects including land acquisition and remodeling and repair of current facilities through contracted sources.
  • Special Revenue Funds are restricted for specific purposes such as food service and the district’s Community Education and Recreation Department.

Actions at the state level

In 1994 Michiganders voted on a state funding model for schools – Proposal A, which shifted the responsibility of funding the K-12 system from local property taxes to the state. It also limited a local district’s ability to levy local school operating millages.

Last year, when the legislature shifted $208 million from the School Aid Fund to the General Fund for community colleges it was designed to be a one-time transfer being used under a tight deadline and extreme circumstances, according to officials from Save our Schools, a Lansing-based coalition of education groups.

This year, Gov. Snyder has proposed to shift $900 million of those resources from K-12 to universities and community colleges. The transfer will result in a minimum $470 per pupil cut for every district, according to information from SOS.

The cuts will be on top of the increase in state mandated costs for retirement, which will cost schools another $230 per pupil. Adding these numbers together, there is an effective $700 per pupil cut, SOS said.


2011-12 Ann Arbor Public Schools budget process timeline

•    January-March 2011 – Revenue  and Expenditure projections
•    Jan. 24-March 18, 2011 – Budget Planning by department and level
•    Jan. 24-March 18, 2011 – Meeting with bargaining units regarding budget planning
•    March, 2011 – Input-gathering forums (Staff, Parents, Community)
•    March 1-25, 2011 – Development of Draft Budget Plan
•    March, 2011 – Meeting with Instructional Council regarding Draft Budget Plan
•    April, 2011 – Briefing to Board of Education on Draft Budget Plan
•    April, 2011 – Meetings with Staff, PTOC, AAPAC, BPSSG
•    May 11, 2011 – Briefing and approval on Budget Resolution and Notice
•    calling for a Public Hearing
•    May 19, 2011  – Publish Notice for a Public Hearing
•    May 25, 2011 – First Briefing & Public Hearing on Proposed Budget
•    June 11, 2007 – First Briefing of Millage Resolution
•    June 8, 2011 – Second Briefing and adoption of Millage Resolution; approval of the General Appropriations Act

The AAPS District News welcomes thoughtful comments, questions and feedback.

All comments will be screened and moderated.

In order for your comment to be approved:

  • You must use your full name
  • You must not use  profane or offensive language
  • Your comment must be on topic and relevant to the story

Please note: any comment that appears to be spam or attacks an individual will not be approved.