School Finance in the Time of COVID-19

During the past five months, our articles and monthly finance reports have been increasingly pessimistic. Even with the less-than-positive news, we strive to give accurate, timely information to school leaders, and we will continue to do so through this crisis. The conclusions we are drawing from the current financial situation is there will probably be a two-pronged problem in school finance that will affect school budgets for the rest of this year and into next year.  

The first issue:

We face a definite revenue failure risk. Revenue losses may take different forms, but COVID-19 is causing a major disruption and drop in state revenues including gross production and sales taxes. An additional problem for education in that the 1017 Fund will not collect correctly with the drop in sales tax and Indian gaming being shut down. A revenue failure could cause significant losses, and we advise districts to prepare for these losses if the state doesn’t mitigate the decline in revenues.

The second issue:

The state will probably have to reduce collection projections for FY21, which may cause a funding drop. Be overly conservative in developing budgets for FY21. Until the legislature publishes a budget, we also recommend pausing for as long as possible on hiring staff for FY21. It is critical that districts with declining enrollments consider staffing requirements realistically needed to serve students. Not doing so could cause a cascade effect and reduce carryovers and general operating revenues.

OPSRC has tools available to help you project actual FY21 WADM. The most accurate data you have to work with is the final ADM per grade level that your district had prior to spring break. This can then be transformed into a projected revenue amount for the district. We are refining the tool to include this year’s chargeables and to project monthly revenue based off the best information available for state revenue. Our goal is to give budget makers a tool to keep up with the changing school finance landscape for next year.

One last note:

If you see a need to reduce staff in your district, we have trainings available for your board. This is not an easy task, but it is made more difficult if the board doesn’t understand the necessary processes. This is available through our NextThought platform, and we do submit board points for board members who complete these programs.  We also have due process and school finance trainings in our catalog.  

Please feel free to contact me as often as you need our assistance.

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