PPS forecast includes budget cuts, short-term facilities work

The economic downturn is having a serious impact on Portland Public Schools’ budget – and after two years of a fragile budget stability, cuts are once again in our forecast.

Fortunately, in 2007-08 our school district collected some unanticipated one-time revenues, offsetting the state’s $4.2 million in funding custs during the current school year. We expect to finish this school year with adequate reserves, roughly 9 percent of operating costs.

However, even those reserves will be drained by 2010-11 unless the school district significantly cuts spending,

Chief Financial Officer Heidi Franklin and Budget Director Mark Murray presented our latest financial forecast to the Portland School Board’s finance committee today, building a budget picture that contained both good and bad news.

On the plus side, our school district received more than $17 million in unexpected revenue in 2007-08 that carried over into this year. Some of the largest factors in this one-time revenue were:

An unpredicted increase in state per-student funding for last year
Local property taxes coming in higher as new construction added to the tax base
Collection of almost $2 million in delinquent county income taxes
Higher revenues from school building use and leases, as well as advance payments on the KBPS-FM license
Interest earnings on investments greater than budgeted
At the same time, in 2007-08, Portland Public Schools under spent its budget by 1 percent. Net effect? A $20 million increase in the reserve balance as the school district started the 2008-09 budget year.

The news since then has not been so positive, with increased costs for facilities projects and that $4.2 million cut in state funding. We’ve already decided to use our reserves to prevent any drastic mid-year cuts, such as closing school early or laying off staff.

But as we look ahead to the new fiscal year, which starts next July 1, we must tighten our belts. I’ve already asked our senior leaders to act now to cut costs, by leaving some positions unfilled or cutting back spending on services, supplies and travel. Right now, the forecast is that we will end this budget year with a $38 million ending balance, or almost 9 percent of the operating budget.

Looking forward, the outlook is serious. Using the governor’s proposed budget as a base, the projections call for a total of $421 million in total revenue in 2009-10. Running all programs and services as they now exist – a no-cuts budget – would cost $443 million. That would leave a $22 million shortfall. Without cuts, reserves could dwindle to only 3 percent, leaving nothing in the bank to cover an uncertain future.

We have two options, I believe. We could postpone the tough decisions, live in denial for one more year and keep doing everything we’re doing – only to fall off the cliff in 2010. Or we can weigh our priorities, make some strategic but perhaps painful reductions, and set ourselves on a path to fiscal sustainability. I will do all I can to protect the services most vital to our students, but I will have to propose a budget with significant cuts for next school year.

Despite our tough budget picture, the School Board and I have asked our 21st Century School staff to move forward with out long range plan for facilities, which includes a list of short-term projects that would stabilize and improve school buildings across the city.

Totaling more than $270 million, these capital improvement projects would touch every school building in the district, with energy efficiency projects, roof rebuilding, replacement of unsafe wooden playground structures and other significant renovation efforts.

If the school board approves, we could tackle up to $60 million of these projects in the next two summers. Knowing how scarce our general operating dollars are, I want to stress that these projects would be paid from entirely separate funds. COO Cathy Mincberg will return to the school board with financing options through sources dedicated to building improvements, such as the construction excise tax, a capital bond or other targeted funds.

As Cathy notes, many of these projects would save energy and reduce our utility bills, helping us lower our operations costs just when we need to most. Other projects will eliminate the need for constant repairs, such as fixing leaky roofs, which have drained our general fund maintenance budget. Moving forward with these projects will take nothing further away from our schools, teachers and students.

If you want all the details, both the financial forecast and the short term building stabilization projects and program investment plan are posted on the Web.

I know this is a long message, but I wanted to share all the information available with you. After all, our budget affects our work, our schools and most of all, our students.