The ongoing state budget crisis that is impacting school districts and other public entities that rely on state funding has led to several questions from patrons and staff regarding the various funding mechanisms used by school districts in Oklahoma.  The most frequently asked questions (and answers) are below for your convenience:

Question: With the $295,000,000 bond issue recently passing, why can’t BAPS just use some of those funds to pay staff during this state funding crisis?

Answer: Bond elections/bond dollars cannot (by law) be used to pay salaries.  Bond elections provide funding for construction projects, maintenance projects, instructional equipment and transportation items like school bus purchases.  The money provided by a voter approved bond election must be used to complete the projects that were approved by the district’s voters and cannot be used to pay salaries and benefits of employees.

Question:  Is funding for the bond projects jeopardized by the state funding crisis?

Answer:  No.  Ad valorem tax revenue is the source districts use to pay off bonds.  The Constitution makes bonds an exception to the requirement that obligations cannot be incurred past the fiscal year.  After voters approve the issuance of bonds, money needed for the school project (or to pay for items purchased through the lease-revenue financing) is collected by selling bonds.  Thereafter the bondholders are paid off over a set period of time with tax levy collections later received by the district.  The money to pay off the bonds and accruing interest payments is placed in the district’s sinking fund.  Thus, the sinking fund is an account formed from ad valorem tax money that is used to pay off bond judgments against the district.

Question: So why exactly are school district’s general fund dollars decreasing right now? 

Answer: State revenues are down, meaning the state has not taken in enough money in tax collections in order to meet its best educated guess for how much it would have to fund the various entities including public education.  Thus the level of the funding is reduced (because the state doesn’t have as many dollars to give out as it originally thought it would when the state legislature established this year’s budget in May 2009). So even though school districts were told to expect a certain amount of money and made plans with hiring of employees, contracts with employees and vendors based on the state’s promise, now the amount of the funding is reduced even though the obligations for salaries and bills from vendors continue without being reduced. This pattern has already led to a reduction of funding for BAPS of $2,000,000 during the 2009-2010 school year, and this pattern of cuts and cutbacks seems destined to continue well into the 2010-2011 school year, which is why school districts are scrambling to meet their financial obligations.

Question:  When I’m at home and go through some bad luck with my personal finances, I cut back.  Can’t the district cut back?

Not as easily as it sounds. Even though your question reveals what must happen- School Districts must cut back because they are not receiving funding at the level they expected. School districts are told during the summer based on the state legislature funding announcements how much they can expect from the state. They sign teachers to contracts which cannot be broken by the school district (even if funding from the state is reduced).  School Districts use vendors and their services, and the vendors rightfully expect to be paid at the full rate for their service, but school districts have been receiving cuts of as high as ten percent a month meaning what the school district expected to be given by the state is reduced by ten percent.

Question: So what is BAPS going to do about it?  How is BAPS going to handle it?

Answer:  BAPS is fortunate that unlike many other districts, BAPS planned for 2009-2010 to be a bad budget year by decreasing departmental budgets by 25 percent and by not filling several vacant positions. On Jan. 21, Superintendent Gary Gerber sent a video message to school district employees in which he asked them to come up with ways to save money. In the video, Gerber said the district is considering furloughs for nonteaching personnel, a budget freeze on expenses not essential to teaching, early retirement incentives, freezes on extra-duty stipends, hiring freezes for support and administrative positions and case-by-case reviews of teacher replacements until the end of the school year. Dr. Gerber also asked teachers to help cut substitute costs by using sick days judiciously. In addition, Dr. Gerber said 20 BAPS employees now at the Education Service Center (currently in roles as program and subject coordinators but who are also certified to teach) will be tapped to be substitute teachers for at least one day a week even as the district is busy training volunteer substitute teachers for this year and next year.

Question:  When do budget experts believe the funding crisis may be over for school districts?

Answer:  That’s one of the major problems with this funding crisis.  Not only is it bad now, but most experts including the Governor, State Treasurer and legislative leaders predict next year(2010-2011 school year) will be even worse for schools and public entities from a budgetary perspective.  Governor Henry has indicated that the State will continue to cut school districts and other public entities by 10 percent each month this year.  That’s why some believe the cuts may reach as high as 20 percent next year.  That’s why many school districts (even those like BAPS that planned for this to be a bad budget year) are looking at ways to reduce expenditures this year to protect as much of their fund balance going into next year when additional reductions and cuts are expected from the State of Oklahoma.