Budget Cuts Affect Us All: How do we Cope?
At year end of 2008 we see a dismal economic outlook. The broad market (Standard & Poor 500) is off by almost 40% since the beginning of 2008 and the Dow Jones industrial index is down 34% for the year. We see that your dollar, from January 1 to end of the year, only buys about 62 cents of goods and services. How does all this affect education? Well, we see endowment funds of colleges/universities, state retirement funds and 403b accounts have lost value and to make a grim situation look even more depressing, interest rates on no risk investments such as U.S. Treasury Bonds are paying literally no interest while the cost of goods and services are increasing. Couple this with the crash in the credit markets, cash is drying up. When cash dries up, creditors can’t get paid and defaults become common place. It is all a domino effect.
We are all in the budget squeeze. State budgets are being cut which is forcing cuts in the education budgets of the states which we are directly hitting the school districts budgets. Many of the members of AAEE are experiencing this. They are being forced to cut travel, professional development, staff, custodian services, programming and many more activities.
Ultimately we are trying to reduce expenses to match revenues so that we are not operating at a deficit. Let’s look at some examples of what is happening.
• In Ohio, tuition and fees at colleges and universities will increase, on average, nearly $2,000. The state education budget might have to be cut by $2 billion starting in July, 2009.
• North Kitsap, Washington school district is looking at $600 thousand budget cuts. How will this affect class size and special ed kids needs?
• Gov. Arnold Schwarzenegger has proposed budget cuts to K-12 education in the food program. Berkeley Unified School District may face and estimated $3.5 million budget cut.
• Lee County School District (Florida) needs to cut $14.6 million from its budget.
• Capistrano Unified School District (California) is facing at least a $12 million budget deficit next year
• Bakersfield School District (California) is also expecting a $12 million reduction in expenses
How do we work with these challenges? Where will the cuts occur and how do we continue to provide quality education and staffing excellence in education with these trying challenges? Do we increase class size, reduce staff, stream bus service, reduce custodian personnel, eliminate sports or implement a pay for play policy, reduce food programs, have fee for service programs such as music and art? What are the choices and how do we make the decisions that will least affect our kids?
Next week we will look at how some of the decisions are being made and some opportunities for revenue.
Neil Shnider, MBA, CPA
Executive Director, AAEE