Budget Reduction Tier I Message

2008 has been a tumultuous and challenging year for all of us with Liberty Public Schools. The dedication and commitment of all of our stakeholders, including our staff, students, parents, and community, have allowed our District to overcome many of the challenges that have confronted us during the past several months.

However, like many employers throughout the country, our District faces a significant challenge that, despite our best efforts, cannot easily be overcome. This challenge is financial. Simply put, our Board of Education and administration have determined the District cannot continue to maintain its present level of spending in light of the financial realities the District faces.

Our Board and administration have made a commitment to explaining, in an open and candid manner, the challenges and the changes that lie ahead. The process of confronting these challenges and making the necessary changes will be difficult for all of us, but it is our responsibility to make these changes.

I will explain why these changes have become necessary. After doing so, I will explain the administration’s recommended action going forward.

I. The Causes of the District’s Financial Challenges
The District’s financial challenges are two-fold. They exist because of external and internal developments.

A. External Factors
Our District faces disturbing economic headwinds that are beyond our control. All of us know our national and state economies are in a state of tremendous weakness.

Many people think that school districts are immune from national and state-wide economic weakness. Unfortunately, this is not true. In many ways, a school district is like a large business. Unlike a business, however, we do not sell a product or service for profit. Our only service is educating our students. Therefore, we must rely upon state funding – which we often refer to as “state aid” – and tax revenue to fund our operations. Looking into the foreseeable future, our state aid and tax revenue streams are far from ideal.

A new state funding formula is being phased-in for all Missouri school districts. The new state funding formula is less generous to certain school districts, such as ours, than it has been in past years. The rate of increase of state aid to our District is slowing and will continue to slow. Therefore, we must adjust our District’s budget and tighten our spending accordingly.

In addition, like our school district peers in and around Clay County, we are seeing little or no increase in the assessed valuation of the property within our District. Because state aid does not fund all of our operations, we rely significantly upon property tax revenues. The assessed valuation of the real and personal property within our boundaries determines how much tax revenue we receive. Therefore, any decrease in this tax revenue adversely affects our District’s finances. Furthermore, the projections in the years to come are not positive. Although we are fortunate to have more new construction than many area school districts, the anticipated increases in assessed valuation will not support our present budget levels.

B. Internal Factors
External economic forces are not the only problem that we face. The District overextended itself in the past by making recurring financial commitments. Increases in spending on programming, salaries, benefits, and other areas were made when our state aid and local tax revenue streams were more positive than they are today.

However, although our District’s revenue streams have been slowing for the past few years, our District did not plan accordingly. Projections of future revenues versus expenses proved not to be accurate. Money was borrowed to balance the budget through what is known as a “lease-purchase.” Like anyone who takes out a loan, the amount we borrowed must now be paid through regular loan payments. These payments are on top of the rapidly growing expenses of running a public school district the size of the Liberty Public Schools. The unavoidable escalating costs of electricity, fuel, equipment, and necessary supplies only contribute to the problem.

The Board and administration recognize the problems now faced by the District have developed over a period of years, and the challenges presented by these problems will not evaporate on their own. We must now turn our attention to the substantive steps that the District must take in light of these challenges. I will explain these steps as clearly and thoroughly as I am able to do.

II. The District Must Take the Necessary Actions to Address the Fiscal Challenges.

The District has already taken concrete steps to address the fiscal challenges it faces and will continue to evaluate the budget.

A. The Board and Administration’s Actions During the Fall of 2008

Since the summer of 2008, the District’s administration has been working hard to find ways to conserve District finances through such steps as energy conservation, cuts in department budgets, and the like. Moreover, this October, the Board took the necessary step of approving a budget amendment with a net reduction of $2,066,429. The budget reductions included a decrease in expenditures for salary and benefits and miscellaneous supply codes. The salary and benefit expenditure reductions were made as a result of not filling all of the positions originally budgeted for the 2008-09 school year. Other reductions in expenditures were also made. However, the savings obtained from these efforts are not sufficient. Further and more difficult cuts are necessary.

B. Tiered Approach Toward Reducing the Budget

Our District’s administration has carefully considered the options to achieve the necessary budget reductions that will allow the opening and operation of two new schools, Kellybrook Elementary and Liberty North High School, in the next two years.

The administration has determined the most prudent and fiscally responsible method of achieving this reduction is a three-tiered approach. These tiers may be described as follows:

· Tier 1 identifies certain “programs and positions” that will be cut first – i.e., to be effective at the end of the 2008-09 school year. These permanent cuts will amount to approximately $5.7 million in recurring savings to the District. Because these are ongoing savings, in a three-year period, the accumulated savings will be $17.1 million.

• 79 percent of the District’s operating budget is expended on personnel expenses. Therefore, the District has identified several programs and positions that must be eliminated totaling 74.875 positions to be eliminated at the end of the 2008-09 school year. These programs and positions will cease to exist at the end of 2008-09.

   

  The programs and positions to be eliminated will remain intact for the remainder of the 2008-09 school year. Employee contracts for the 2008-09 school year also will be honored.

  The elimination of the identified program and positions is considered to be permanent. Some of the positional job responsibilities will be absorbed by existing employees.

  The Interim Superintendent will make a recommendation to the Board to approve the Tier 1 elimination of programs and positions. The Board is expected to vote on the recommendation at its January 5, 2009, meeting. This meeting is open to the public and will be held at the District Administration Center at 7 p.m.

  · Tiers 2 and 3 are currently being formulated and will not take effect during the 2009-10 school year. The District’s developing financial position, growth, and assessed valuation are among the factors to be considered in the formulation of these tiers.

  The decision to recommend the elimination of programs and positions as part of the first tier of budgetary reductions was not made lightly or easily. The District’s administration realizes the impact this decision will have on all of our stakeholders, including personnel, parents, and patrons. However, this decision is intended to minimize the effect upon our students as a whole and is a vital component of reducing recurring expenses the District simply cannot continue to incur.

  III. Conclusion
  
  The District has determined it must take prompt and substantive action to address the financial challenges – both present and future – that confront it. A first step in this process is to reduce expenditures by $5.7 million for the upcoming year. In the first tier of budgetary reductions, the administration has recommended the permanent elimination of specific programs and positions, effective at the end of the 2008-09 school year. The Board is expected to vote on this first-tier recommendation at its meeting on January 20, 2009.

  The District’s administration is confident the actions it has described are necessary steps toward the establishment of a financially strong, stable, and efficient school district. At the same time, these actions will enable the District to maintain the high quality of education our community has come to expect.

  The District appreciates the understanding and patience of all of its stakeholders as it confronts existing financial challenges and repositions itself to be able to effectively confront the challenges of the future. We ask all of you for your support as we undertake this difficult, but vitally important, effort.