More often than not, carving out time for long-range financial planning can be difficult. How can you add another task to your plate in this increasingly do-more-with-less environment in public education? However, prioritizing the time needed to look three to five years into the future is worth it if you can identify potential funding fluctuations, enrollment shifts, state aid changes, or any other aspect of your budget that may be a problem down the road.
Certainly, lagging indicators, which measure past outcomes and results, clearly show what has already happened. But what happened in the past doesn’t always correlate to what will happen in the future.
Proven-Use Cases
Certainly, lagging indicators, which measure past outcomes and results, clearly show what has already happened. But what happened in the past doesn’t always correlate to what will happen in the future. Is the 10% decrease in state aid your district saw last year going to be the new normal? Or was that a one-off problem that has been dealt with?
Some of the most relevant proven-use cases for long-range financial planning are related to enrollment, salary costs, and capital project planning.
Enrollment. Building an annual budget and making modest assumptions with enrollment will likely yield somewhat sustainable results in the short term. However, as total enrollment dips by five to eight students per year over five years, the district could experience an overall decline of 40 students.
This may not be a major issue in isolation, but depending on where those enrollment shifts occur, does that warrant a reduction in teaching staff by attrition? Smaller class sizes are preferred, but when budgetary pressures are knocking at your door, this may be something to consider.
Look beyond past enrollment trends and consider current data such as live birth rates, housing costs, and other factors that may affect who is moving in or out of the district’s community. Using relevant data to get ahead of these issues is critical.
Salary Costs. The largest cost factor for school districts is the people. What data are you using or providing at the negotiation table to make sustainable, long-range financial decisions? Most unions are on step schedules, and taking retirements out of the picture, you should be able to accurately predict your salary budgets for the next three to five years.
Using a combination of lagging indicators and long-range planning in conjunction with negotiations is one of the more straightforward approaches and easy to quantify use cases.
Capital Project Planning. Keeping facilities up-to-date and safe for students and staff is an ongoing priority. Implementing a multimillion-dollar improvement in the district requires an incredible amount of planning and effort from more than just the SBO. Knowing what needs to be done soon versus reacting to what must be done now is critical. Layering projects into future budgets is a benefit to long-range planning.
Your roofs may need to be replaced in five years, but can your budget support it? Knowing those needs ahead of time allows for a more comprehensive plan of attack with building upkeep and capital improvements. For instance, if a budgetary shortfall is expected in two years, consider altering the timing of a capital improvement rather than owing on a bond note while struggling to make ends meet for next year’s budget.
Steering Toward Stability
Staying prepared and ahead of what’s to come is a multi-faceted approach. Here are just a few tips to keep in mind when planning long-range:
- Enrollment drives many decisions that have a financial impact. Monitor enrollment trends, community demographic shifts, and local economic conditions.
- Schools are victims of economic shifts and inflation. Be aware of possible inflation trends, labor costs, and facility maintenance needs.
- Participate in ASBO International and your state ASBO affiliate to stay ahead of any potential funding formula changes.
Long-term financial planning is a tool that helps SBOs mitigate risks, stabilize district finances, and prepare for inevitable changes. As we’re asked to do more with less, take advantage of gazing into the not-so-distant future and steer your district’s finances toward stability and growth.