Future Funding

The economic results of social distancing will be long term. Federal, state, and local budgets will be trimmed. Educational organizations that depend upon these budgets will once again be asked to “do more with less.” And while they are typically under-resourced, the next two years will be particularly harsh.

Most districts are still in the covid19 response mode. But you must prepare your budgets for FY 20-21. Although most school funding comes from property taxes, this slowdown will reduce other revenue and result in strained budgets. You will, of course, still ask for what you actually need. But I expect those organizations that are fiscally dependent will be told there will be budget reductions. Those that are fiscally independent are already experiencing those reductions, especially if the millage is related to sales tax.

In order to prepare, consider doing the following:

  1. Freeze current operating expenditures and require every exception to be justified.
  2. The end of the fiscal year typically comes with some funds left over. “Christmas in July” isn’t coming this year. Do not use the funding surplus for one-time purchases as you have in the past. Use those funds to pay operating expenses forward into the next fiscal year.
  3. Identify all of your activities and weight those activities in order of strategic importance. Ask staff to participate in applying priorities as well as finding more efficient ways to deliver results. (There are several decision-making tools that can help with this.)
  4. Do not cut the budgets across the board. Fund the high priority activities first. And fund in descending order. This may mean that some low priority legacy programs will be eliminated and other lower priority programs will be funded at minimum.
  5. This downturn will affect capital expenditures unevenly. Since construction was allowed to proceed in many jurisdictions, prices have remained high. The exception will be those materials that are petroleum-based. So prices overall may be stable or slightly lower depending upon the specific scope of work. Fiscally dependent districts may be told to reduce capital cash flow as well, since many jurisdictions limit their long term debt to a percentage of their operating budget.

I anticipate that unlike the last recovery, this one should be faster. But it depends upon the availability of reliable tests, the ability to track exposures, and the implementation of a vaccine protocol. Since budget preparation is typically an annual exercise with no upward adjustment when more revenue than anticipated is collected, we are facing at least two lean years in our educational organizations. It is better to be prepared.


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