SIOUX CITY | Higher costs for salaries and benefits, falling student counts and smaller than hoped for increases in state aid are combining to squeeze the Sioux City school district's budget.
The district's preliminary plans for the fiscal year that begins July 1 calls for $2.9 million, or 1.75 percent, more spending than the roughly $168 million in estimated expenditures for the current budget year.
Gov. Terry Branstad last week proposed to boost state aid to K-12 public schools by 2 percent for the 2017-18 school year. Republicans who control the House and Senate may accept the GOP governor's recommendation, but also are reportedly considering a smaller increase.
Either way, Sioux City district leaders are preparing to reduce its proposed spending next year by around $2 million.
The state’s complex state school financing formula is designed to guarantee schools the same funding per student, regardless of local property valuations. For the current school year, most districts are receiving $6,446 per pupil.
Each year, state lawmakers set the level of state aid, which triggers an increase or decrease in the per-pupil amount. That essentially establishes spending limits for each district, also known as the annual spending authority.
Based on a 2 percent increase in state aid, the Sioux City district expects its spending authority to increase by about $900,000 for fiscal 2018, according to budget documents.
To help fill a projected budget gap, the district has proposed to dip into its reserves to the tune of about $2 million. But that would still require the school board to scale back its proposed spending by around $2 million.
“If we didn’t use reserves, we would have to cut $3.9 million…” said John Chalstrom, the district's chief financial officer.
Fewer students in the classroom are contributing to the budget challenges. In the 2016-2017 school year, enrollment fell by 110, which is expected to result in $700,000 less state aid in 2017-18. On a weighted scale, the district's certified enrollment for the current school year stands at 14,503.
Superintendent Paul Gausman said much of the loss in students is related to the recent completion of the CF Industries' expansion at Port Neal. A large number of temporary construction workers with school-aged students have since returned to their home states.
Gausman said he expected enrollment to again grow in the next few years as hundreds of workers from outside the region take jobs at the Seaboard Triumph Foods pork plant, which is scheduled to open in July. But a resulting increase in state aid for the children of those new workers won't take effect until fiscal 2019, at the earliest.
District officials also are preparing a contingency plan for a 1 percent increase in supplemental state aid in fiscal 2018. That could force the district to cut further into its reserves, but could put the district in danger of overspending its authorized budget in future years, Chalstrom warned.
The spending authority does not equal extra cash on hand, but rather, is a line of credit of sorts.
If a district goes two years in a row with a negative balance, the Department of Education could order a plan of correction, he said.
“The health of the district is oftentimes measured by the unspent balance,” he said. “By not spending the full amount, you can carry forward unused spending authority we call unspent balance.”
Under its current plans, the district expects to reduce its unspent authorized budget from $16.3 million at the end of fiscal 2017 to $14.2 million by June 30, 2018.
Chalstrom said inflation has resulted in increased costs for the district, but increases in state aid has not kept pace with that growth for the last seven years.
Last year, state legislators approved a 2.25 percent increase in supplemental state aid.
Along with rising costs, Gausman said the loss of some revenue sources add to how much spending the district must trim.
"We have to reduce in other areas because we know there will be increases in certain other areas," he said. "There are all kinds of examples of costs that could go up."
In excess of 80 percent of school district budgets are devoted to personnel costs. Last year, the Sioux City district approved two-year contracts for teachers and other staff represented by unions. That essentially locked in salary and benefit costs for the budget year local officials are currently fashioning.
For fiscal 2018, teachers will receive a 3.55 percent salary increase, and pay for support staff will increase by 3.9 percent.
With much of its expenditures locked in, the district is trying to reduce costs by offering a revamped, one-year early retirement policy. The district has targeted 45 positions for elimination through the program.
Gausman said early retirement will help ease the budget gap in two ways. Teaching spots vacated by early retirement will be left vacant. And, retiring teachers at the high end of the pay scale may be replaced with new teachers at lower salaries.
There is a possibility the amount of money saved through early retirement may exceed the goal, but an excess bring some alleviation to the budget process the following year, he said.
Early retirement eligibility in Phase I of the program for teachers enrolled in the Iowa Public Employees Retirement plan, or IPERS, begins at age 58. A teacher must have served a minimum of 20 total years in the district.
Phase II expands the criteria to include more people. Teachers now will be eligible for reimbursement for banked sick days. Broken down in four levels, Gausman said a teacher could earn a “sick day stipend” of up to $8,000 a year until a person reaches Medicare eligibility, based on how many sick days have been accumulated.
Both phases are part of the new, one year plan.
As of Jan. 11, 35 teachers have signed up for Phases I and II, nine have applied for the regular early retirement plan and three more have filed for normal retirement.