Business Practices

Life Has Changed

• By William T. Hartman Ph.D.
• 07/01/13

School districts are operating in a new environment — the new fiscal reality. In this very real world, life for school business officials is very different. The rules under which school finance operates have changed dramatically.

• Districts have less revenue or their revenue growth is slower.
• Expenditures are growing at a faster rate than revenues, resulting in serious structural imbalances.
• Unless districts make significant changes in fiscal practices, many will face considerable threats to their survival.
• The size of the adjustments — particularly budget cuts resulting in a substantial number of employees being furloughed or not replaced upon retirement — may well change the fundamental nature of public education.

In this new fiscal reality, school business officials are in a vital position to provide fiscal leadership. They play a critical role as the primary source of accurate, reliable and timely data about the fiscal future the district will face. Fulfilling this role involves several important steps.

1. Develop realistic multi-year budget projections for the district.

• Get a fix on where you are. Create your own fiscal GPS.
• Focus first on the next budget year. Will you be able to balance your budget? What will be required? What are your alternatives?
• Then, look three to five years into the future. What must you do to survive?

2. Interpret what the fiscal projections mean for the district and for other interested groups.

• Start with a vision of the future grounded in as much reality as possible — not budget numbers alone, but what they imply for the district.
• Select a few key results; don’t try to explain everything, just the most important facts.
• Move others in the organization out of denial.

3. Help other members of the leadership group in the district build a unified consensus on how to deal with the district’s fiscal problems.

• Clarify attitudes about the changes needed for the new fiscal reality (see the bullet item above).
• Focus on looking forward not backward. Steer the district by looking through the windshield, not the rearview mirror. You can’t change the past, only the future.

4. Recommend fiscal actions.

• Start by tightening the current way of operating.
• Challenge old approaches and assumptions where appropriate; seek creative new alternatives to replace or improve operations.
• Focus on bigger actions. It’s better to have one successful $200,000 project than trying to manage twenty $10,000 ones.
• Identify potential new revenue sources.
• Find and analyze areas for cost reduction.

Throughout this process, school business officials must shift gears regularly among explaining the concept of the new fiscal reality; convincing others that the new environment requires changes in the way the district must operate; dealing with the practical steps of identifying, evaluating and implementing changes in operations; and raising expectations for performance in the era of fiscal constraint.

Big Picture Concerns

In a world of details and regular crises, and with every item important to somebody (no matter how trivial in the overall scheme), school business officials need to devote some time to formulating the successful transition to the new fiscal reality. They need that time to focus on the larger concerns, those critical to the fiscal stability of the district. Such issues include the following.

• What are the key fiscal areas that are most important for the district’s health? Areas might include salaries, health insurance, pension costs, charter school costs, local tax revenues, facilities, major state subsidies and federal funds.
• How will each of these areas likely change over the next few years?
• What assumptions underlie the estimates of change? Such aspects would include the status of the economy, the impact on local and state tax revenues, state aid, future growth of uncontrollable expenditures and significant remodeling or construction of facilities.
• What does the district need from negotiations for upcoming union contracts? Negotiations would revolve around the basic question of what the district can afford. Issues could cover salaries and benefits; changes in health care coverage; and concessionary bargaining.

These times are certainly interesting. However, beyond interesting, the conditions facing school business officials may well be the most professionally challenging and rewarding of their careers. In summing up an appropriate response to the challenge, a school business manager from Pennsylvania said, “I wouldn’t miss this for the world.”

This article is excerpted from the June 2013 issue of School Business Affairs, published by the Association of School Business Officials International, www.asbointl.org.