Budgeting in Times of Uncertainty

Questions relative to your 2021-2022 budget include: 

• How many students will we have next year? 

• Will we operate both virtual and in-person instruction? 

• How many teachers will retire? 

• Will we need to implement additional support for students whose learning gap has widened? 

• What will happen to our medical insurance rates because of the pandemic? 

• What kind of enhanced cleaning procedures will we have to implement on a permanent basis?  

You get the picture—you live it every day. 

So how should school business leaders deal with this uncertainty and what does it mean to us on a daily basis? The heightened uncertainty essentially boils down to two major impacts: increased demand and increased stress.  

One consequence of the increased uncertainty is increased demand—demands on our time, our technical skills, and our people skills. Doing what we you always done is just not going to cut it.  

We attend more meetings, spend more time developing alternative plans (only to dump one plan and develop a new one the next day), accommodate more requests for data, provide accurate and relevant information more quickly, and communicate more often and with greater urgency.  

Heavier demands increase our stress: stress of having to spend more time on work, potentially sacrificing time spent taking care of our personal lives; stress of not knowing the right answers to all the questions; stress of greater responsibility for the health and well-being of students and staff while monitoring own health and that of our friends and family. 

Now that I have caused you more stress than you had a few minutes ago, please allow me to offer some suggestions for dealing with the increased demand and stress as you navigate the tough budgetary waters. 

The Three Cs 

The increased demand on our time requires more attention to three “Cs”: character, competence, and communication.  

Character. Character is comprised of the mental and moral qualities distinctive or unique to an individual, including trustworthiness, credibility, respect, and integrity.  

Many writers have addressed the importance of trust, but perhaps none has had more impact than Stephen Covey in The Speed of Trust. The book centers on the idea that the speed at which you can reach goals increases if you are part of a trusting relationship. Think about it: If you have a trusting relationship with your supervisor or the board of education, there tend to be fewer questions to answer, less need to dig for additional data, and less time spent justifying your position on any given topic. 

Covey defines and outlines the 13 behaviors of high-trust individuals and divides those behaviors into three categories: those that are character-based, those that are competence-based, and those that overlap both categories. With respect to the increased demand brought on by current circumstances, five behaviors are vital: (1) talk straight, (2) create transparency, (3) deliver results, (4) confront reality, and (5) clarify expectations.  

Your ability to talk straight and create transparency is based on your character and reflects your integrity. Both are demonstrated in the way you communicate.  

Your ability to confront reality, clarify expectations, and deliver results is based on your competence. Your knowledge of the overall responsibilities and requirements of school business in general and specifically in your own district lets you know and share the realities of the situation, establish appropriate expectations for moving forward, and deliver results.  

Your skills in these areas will in large part contribute to your success as a leader.  

Competence. School business officials pride themselves on being competent in navigating budgets and making the numbers work. Who doesn’t love Excel—the way it keeps everything in neat little rows and columns and flags you when something is askew? Numbers either add up or they don’t.  

However, competence encompasses more than technical skills—especially in uncertain times. Many studies show that 15% of job success is related to technical skills and 85% to “soft” (people) skills, such as the ability to work in a team, communicate effectively, relate to others, and empathize. 

Dealing with people is demanding and challenging. 

Your ability to deal with people is important in determining your success. A quote by Herb Kelleher (founder and former CEO of Southwest Airlines) comes to mind: “You don’t hire for skills, you hire for attitude; you can always teach skills.”  

Communication. Communication is more than conveying information. True communication is relaying the information in terms that the recipient understands. To do that successfully, you must be familiar with your audience so you can educate them. 

Educate your audience by being transparent and clear. Use terms they can understand. Keep it simple and use the information to tell a story. Every good story has a great beginning, a strong middle, and a captivating ending. Use visuals when possible; a picture is worth 1,000 words. Avoid the data dump; provide an action plan in terms of what you want them to do with the information.  

Exhibit transparency. People have access to a lot of data from myriad sources—some of which may be unreliable. Even if the data are reliable, when used without the proper context, users may draw their own incorrect conclusions. You have the correct data which you can provide in the proper context to help them reach the appropriate conclusion. 

Transparency is important but needs to be smart. Use good judgment in the way you share certain information and remember not all information is appropriate for public consumption. Don’t hide from negative information, however; present it in a way that provides a short and simple explanation of the negative material with a plan for moving forward. 

Be vulnerable. People appreciate your showing vulnerability; they know you are not perfect. Pretending to be perfect erodes the level of trust. When you share vulnerabilities, you build trust. If you don’t know the answer to something, say so. Be honest. The follow-up to the response “I don’t know” is “I will find out and get back to you.” Obviously, make sure you get back to them. 

Enhancing Financial Competency 

In terms of budgeting, increased demand is likely to impact these specific financial pieces: the annual budget, monthly reporting and analysis, and the multi-year (five-year) projections. 

The following 10 tips are key to dealing with these financial pieces in trying times.  

1. Build in Flexibility

Building flexibility into your budgets is necessary because it is impossible to predict unanticipated expenditures and the magnitude of those costs. Find places in your budget where you can add some contingency funds. Be transparent with your board about your need to provide funds that can be transferred should they be needed in other categories. Use a budgetary reserve account if possible. 

Provide a cushion by figuring extra conservative estimates for your utility costs, benefit increases, substitute costs, and potential retirements. After the budget is passed, consider seeking additional revenue sources such as potential grant opportunities that are not tied to specific expenditures. 

2. Benchmark

Use benchmarking to find efficiencies in your expenditures. Identify places in your budget that are worthy of further investigation based on peer group comparisons. You may be able to reduce your budget and find those savings after the budget is approved, which will provide flexibility to move funds from these accounts to accounts that may exceed the budget due to unanticipated events. 

Be careful in your benchmarking endeavors. Don’t jump to conclusions without having the complete picture and without further investigation to verify your findings. Make sure you are making fair comparisons and that you have the whole story. 

3. Develop Assumptions

Develop assumptions that attempt to replicate what might happen based on programs and plans that have a chance of being implemented. As you build your budget and your multi-year projections, list the assumptions on which your financials are based. Don’t list too many different assumptions. List the major assumptions that could have a major impact on the numbers and focus efforts on those primary influencers. You will need to clearly articulate your assumptions with the board and other key stakeholders. Keep it high level.  

4. Develop Rationale

Build rationale that accompanies each assumption. Your rationale might be based on historic data or on information from a similar economic time period. Develop strong rationale based on conversations with other experts. Once you have the rationale for your assumptions, find a way to communicate them clearly and succinctly to appropriate stakeholders. Although your rationale may at times be based on a hunch or a gut feeling, avoid communicating that as a rationale. Make sure you can offer a more defensible reason. 

5. Create Scenarios

Create a couple of different scenarios based on those assumptions and rationale. Obviously with all the moving parts of the budget during uncertain times, an infinite number of scenarios could be created. Use just a few of the major “’what-ifs” to create a couple of different scenarios that reflect what effect each has on the bottom line: taxes, fund balance, and the educational program. 

Although it is helpful to create a few scenarios and provide helpful comparisons, at the end of the day it is your job as the financial leader to make a recommendation. You know the financial status better than anyone else and are best suited to determine which scenario is best for the district, at least from a financial standpoint.  

6. Collaborate

Collaboration is critical. Your financial plan must be flexible and reflective of the various educational program offerings that result as a consequence of changing conditions. You cannot operate effectively in isolation. 

Collaborate with the educational and program administrators to make sure your financial recommendation is reasonable in terms of providing an appropriate educational program. Talk with program staff about the “what-if” and explain the financial implications of the various circumstances.  

Work together to develop plans that are educationally sound and fiscally responsible. Those conversations are challenging and sometimes difficult, but they are essential. Don’t avoid the tough and challenging discussions. They help build relationships that are so important in fostering and building trust. 

7. Use Tools

Use technology and tools. Don’t try to do this all on your own using past processes and practices. Utilize your financial software systems to the fullest; grow your Excel skills to use all its amazing features and seek other analytic and projection tools that can help you navigate these uncharted waters. 

8. Review Long-term Financial Planning

A five-year financial plan is always an important strategic planning instrument. It is critical to review the future implications of current circumstances. The annual budget is more than just a one-year decision. The decision made on each year’s budget impacts the next year and the years after that. Understanding the ramifications of that one-year budget and tax decisions on future years is vital. A review will show the stark reality that things don’t get any easier as each year passes. 

9. Attend to Monthly Analysis and Reporting

With circumstances changing dramatically each day, it is important to develop a system to analyze your financials on a monthly basis. What is happening to the budget as circumstances change? A flagging system will alert you to any occurrences outside of the norm—you don’t want any surprises at year end.  

Regularly report budget information to stakeholders. To ensure principals, supervisors, and other appropriate staff are informed about budgets they are responsible for, present reports in a format that provides them with the data and information they need to make wise budget decisions. If necessary, revise your reports to make them more helpful to their recipients. 

10. Make End-of-Year Projections

In conjunction with the monthly analysis, put in place a method for determining where you will be at year-end. You will need a method of estimating where you will be with revenues, expenditures, and fund balance at the end of the year. Provide your best estimate with a few caveats that reflect some of the major assumptions you have made in developing your projection.  

Dealing with Increased Stress 

Times of extreme uncertainty increase the levels of stress in our lives. Stress affects our professional performance as well as our personal relationships. When you are excessively stressed you do not do your best work. You are not able to function optimally and being concerned about your stress is just one more thing that adds to the “stress pile.” It seems counterintuitive then to put another thing on your plate. However, there are three things that you must do in order to keep your sanity and reduce your extreme level of stress.  

1. Sleep. Make sure you are getting enough sleep. Studies have proven that proper sleep and rest are essential to keeping your body and mind functioning at optimal levels. An excellent article from the Harvard Business Review, “Sleep Deficit: The Performance Killer,” clearly outlines the detrimental effect on your performance when you fail to get adequate sleep on a daily basis. Make sleep a priority, be deliberate about it, and make it a habit. Your life depends on it.
2. Break. Failure to take a break during the day has negative effects on the body, the mind, and relationships. It might seem like foregoing a break is being more productive, but studies show that a break can actually improve your ability to process information and respond more effectively. Occasionally circumstances require you to put in some extra effort; however, it should not be the norm. Taking a lunch break results in fewer aches and pains, improved concentration and health, lower levels of stress, feeling happier, and being able to accomplish more. 
3. Play. Play is anything we do simply for the joy of it. We need this now more than ever. Play reduces stress, stimulates the brain, and makes us better equipped to solve complex problems. What is it that you enjoy doing just for the fun of it? Make a deliberate effort to make room in your schedule for play. If you are type A, schedule it as an appointment on your calendar. 

Final Thoughts 

Think about the ideas presented in this article for dealing with uncertainty and reflect on a few with the intent of making changes. Sit back and think about what you can do better.  

• What behaviors can I work on that will boost my character? 

• What financial and budgeting practices can I adjust to enhance my competency? 

• What strategies can I employ to improve the effectiveness of my communications? 

• What will I do to make sure that on a regular basis I am getting adequate sleep? 

• Whom can I enlist to hold me accountable for taking a lunch break?  

• How can I weave play into my regular routine? 

So many things to think about. So many changes to make. Don’t be overwhelmed by the magnitude of the change; just take one step at a time. Make small strides and don’t put off change because you don’t have the time. Make it a priority.