Prioritizing Budget Decisions: Aligning Mission to Budget

1. Prioritizing Budget Decisions: Aligning Mission to Budget March 4, 2011 Austin, Texas Michael Griffith Senior Policy Analyst Education Commission of the States

2. Education Commission of the States • The only nationwide education interstate compact • Founded in 1965 to enlighten, equip and engage education policy makers • 53 member states, territories and the District of Columbia • Web Site: www.ecs.org

3. Overview • Education spending – A national picture • What does this mean for your state? • How can you still support your education mission in this environment?

4. So, how bad are state budgets right now? FY 2011-2012 will be the worst budget year since the Great Depression

5. Are any states making is through the recession unscathed? Yes, Wyoming

6. Why are states cutting budgets when we have all of the federal money from the Recovery and EduJobs acts?

7. Coming to the Rescue?Additional Federal Funding • American Reinvestment & Recovery Act ($100 billion) • Funding: Early Learning ($2 bill) • K-12 ($70 bill) • Higher Ed. ($28 bill) • Education Jobs Fund (Edu-Jobs) ($10 billion) • States must distribute the funding in FY 2010-11 but districts have until FY 2011-12 to spend it.

8. Funding Sources for K-12 Education Fiscal Year Fiscal Year 2007-082010-11* State 47.9% 40.3% Local 43.3% 44.0% Federal 8.8% 15.7% Each 1% swing in funding represents $5.7 billion *Estimated

9. Percent of Education Funding From Federal Sources ARRA & Edu - Jobs NCLB

10. What other budget issues are states facing? Pensions Health Care

11. National ProblemsPensions & Health Care • Pensions • Teacher Pensions: Pew estimates that there is a $500 billion shortfall nationwide. • Health Care Costs: • Account for up to 10% of all K-12 spending • These costs are increasing by a rate of 10% to 15% each year

12. Can anything be done about health care and pension costs?

13. Pensions Other than cutting benefits what can states do? • Move new employees to defined contribution plans – like 401k plans • Create hybrid systems • Increase vesting time for new employees • Close loopholes in the system

14. Health Care Costs • What can state’s do other than cutting services or increasing employee contributions? • Move to joint purchasing: • Some states have look at mandating that all school districts participate in a health care pool

15. We Already Know How Bad It Is What We Need are Solutions!

16. Make Sure You Have The Information You Need • Salaries & benefits drive education costs: • 65% - educator salaries & benefits • 15% - other staff salaries & benefits • Benefits alone account for 20% of education spending • Total administrative costs account for 7.5% • Transportation costs account for 4.2% • Instructional supplies (including textbooks) 3.3%

17. What are States Doing?School District Policies • Promote school district purchasing co-ops • A study in Delaware found that if school districts pooled their purchasing power, they could reduce their costs from 8% to 14%. • Encourage districts to work together to educate high-need special education students. • Studies have found that this can result in both improved quality of education and reduce costs.

18. What are States Doing?School District Policies • Texas: Combining services • The state is providing financial incentives to districts that are willing to combine services • School district consolidation • Maine has been working on this over the past 3 years • Kansas, Michigan and other states are currently reviewing this option • Iowa provides financial incentives to districts to consolidate

19. What Are States Doing?Class Time • Some districts are moving to a four-day school week • ECS has found that 120 districts (less than 1% of total) make use of a four-day week • Districts who move to a four-day week tend to save less than 3% • In 2009-10 Hawaii shortened it’s school year by 15 days • Teachers are donating 6 days in order to eliminate 15 furlough days • Banks provided funding to schools to help them bridge the gap

20. What Are Other States Doing?Funding Systems • Adopting New Funding Systems • Ohio and Rhode Island in 2010 • Pennsylvania in 2009 • All three states took the opportunity to streamline their systems • New York has recently allowed districts greater flexibility in spending

21. Sometimes Savings Can Be Found in Odd Places • California: Changing Kindergarten Start Date • California is pushing date from Dec 2nd to Sep 1st • This will reduce Kindergarten enrollment by 100,000 • State grants will be made available for Early K programs • This change will produce $700 million in savings

22. Will these bad times ever end? Or Are bad times the new “Norm”?

23. This Too Shall Pass • Traditionally it takes 18 to 24 months for state budgets to recover after a recovery begins • Most economist agree that a recovery started in 3rd or 4th quarter of 2009 • If this recovery holds education budgets will begin to see improvement in mid to late 2011

24. This Too Shall Pass • For the first time in four years state income and sales tax revenue has increased for three straight quarters.

25. Michael GriffithSenior Policy AnalystEducation Commission of the States 303-299-3619 mgriffith@ecs.org www.ecs.org