Uncertainty in Augusta impedes SAD 1 budget
By Scott Mitchell Johnson
Staff Writer
PRESQUE ISLE — Local school districts continue to receive bleak financial news.
At last Wednesday night’s SAD 1 board meeting, administrators announced that the district’s budget schedule is about a month behind due to slow proceedings in Augusta.
“There’s so much uncertainty at the state level about what’s going to happen with school funding that we feel like we have no choice but to delay the presentation of a full budget proposal to the board,” said Charles Anderson, business manager.
“One of the things we’re concerned about is a proposed change in the retirement system cost sharing system and the resulting implications for local school districts,” he said. “This is a fairly large unknown in the grand scheme of school budgeting statewide.”
Anderson explained to school board members that — for the first time — the state is suggesting that local school units take on a portion of teacher retirement costs.
“The label ‘teacher retirement’ is a bit disingenuous as it really includes most administrators, ed techs and substitute teachers. The initiative is that within the governor’s proposed budget, local units would pick up a certain portion of costs that the state has borne since the inception of the retirement system … going back to the 1930s,” said Anderson. “There’s a huge hole in the state budget and this is one effort to address part of that hole.”
Without the proposed change, the total projected retirement costs to the State General Fund on behalf of local school units for fiscal year 2013-14 is $201,413,602. The state’s contribution to retired teachers’ life and health insurance is a combined $30.4 million.
“When you look at the total ‘normal’ costs of retirement — both the state ($14.5 million) and local ($14.5 million) shares of costs related to current employees of public schools — that’s $29 million, which is a significant amount, but if that were the total cost involved in maintaining the retirement system, I don’t think this would be an issue,” Anderson said. “The real issue is the Unfunded Actuarial Liability which is $142 million. That’s really the drag on retirement costs. Actuaries assumed that the retirement system was going to earn 10 percent on its investments from now until infinity. This factor has driven up the UAL, but that’s not what’s being addressed in Augusta.”
If the law passes, all school units — collectively — will pick up $14.5 million.
“What that means for SAD 1 is we would lose about $135,000,” said Anderson. “Part of the state’s share would be funneled through the funding formula and we’d receive approximately 60 percent of $131,000, so the new costs to us would be approximately $200,000 if this legislation were to pass.”
SAD 1 administrators hope to get a handle on what’s going on in Augusta before getting too deep into the local budget process.
The proposed SAD 1 budget schedule includes a workshop April 24, with a second workshop — if needed — May 1. A special board meeting will follow for the approval of the budget and warrant articles. A regular board meeting with a district budget meeting to follow will be held May 15, while the budget validation referendum is set for June 11.
A loss of approximately $600,000 in state aid, a negotiated wage and benefit adjustment for all employees, and staff and other cost reductions are included in the proposed budget.
“I don’t see a lot of progress in terms of school funding or even what the final number is going to be,” said Anderson. “All I can say is that school officials are playing defense, which we have been for the last several years. There’s no way we’re getting our legally required share of 55 percent. The only question is how much are we going to lose at the state level.”
While state cuts in funding are imminent, SAD 1 will also be impacted by the federal sequestration, which are the across-the-board cuts to government agencies in an attempt to deal with the growing U.S. national debt.
“Regarding federal programming for education, if the sequestration goes through, we will be affected in two significant ways,” said Superintendent Gehrig Johnson. “The first will be a $29,000 reduction, or 5 percent, cut to the Title I program. This would cause reductions in personnel, primarily ed techs.
“Another large category is Federal Local Entitlement which supports our SAD 1 special education program. We anticipate a $25,000 cut to that program,” he said. “Both of those cuts would take effect in September 2013.”
The next regular SAD 1 board meeting will be held Wednesday, April 10 at 5:30 p.m. at the board conference room at Presque Isle High School.
