Schools face funding cuts

Area schools were among the hardest hit by a curtailment in state spending last week, and the funding picture may get worse next year as statewide revenues continue to fall short of projections.

Gov. Paul LePage this week ordered a $35.5 million curtailment, essentially pulling in the reins on spending promised in the biennial budget in order to keep the budget in balance after forecasts showed less-than-projected revenues for the fiscal year ending June 30, 2013.

One of the biggest pullbacks was in general purpose aid to education, to the tune of $12.58 million. Locally, Scarborough was sacked for $392,056.50 – a 1.2 percent reduction in its $4.8 million state subsidy. South Portland took a 1.1 percent hit, leaving it short $411,284.50 from the $3.1 million it expected to have to work with at the start of the fiscal year last July. The percentage cuts, based largely on local property values, were among the highest in the state. In terms of whole dollars, only Portland suffered a larger loss, at $870,089, but that was a smaller ding in its overall subsidy, at a 1 percent loss.

Cape Elizabeth also was docked 1 percent, for a total of $196,872.50.

“Well, we’ve figured out how to get the 50 cents and were working up from there,” joked Cape Elizabeth School Board Chairman John Christie on Friday.

Like other area school officials, Christie says Cape Elizabeth saw the writing on the wall in November and feels confident it can absorb the loss in funding – expected to show up in subsidy checks cut as soon as February – although where the cuts will come from remains up in the air.

“We’ve been anticipating this since November,” he said. “Meredith Nadeau, the superintendent, was not, I think, surprised by the final numbers as they came in. However, it’s always difficult in the middle of the school year to produce a savings in this amount. How we actually do that, we don’t know yet.”

On Nov. 28, the Maine State Revenue Forecasting Committee found sales and use tax receipts were off $8.9 million from what it foresaw in March for the fiscal year ending June 30, 2013. Additionally, the forecast for individual income tax revenue was lowered $23.2 million, while the projected take from corporate income taxes was cut $18.2 million. In all, general fund revenue estimates were revised from a 1.3 percent annual growth rate to 0.2 percent.

Still, there may be harder times yet to come. The state forecasting committee now sees negative annual growth for the following fiscal year, as well, at minus 3.5 percent, to $2.91 billion in total general fund revenue. If the forecast holds, that will be $101 million less than the state took in during the last fiscal year, 2011-2012.

The forecast committee sees revenue growth turning around in FY 2015, at plus 3.3 percent, although state coffers will remain below 2011-2012 levels. How much the diminished outlook will reflect in the 2014-2105 biennial budget LePage will unveil next week remains to be seen. Still, some acknowledge the future looks dim, indeed.

“I think there is much reason to be concerned about the condition of the state budget, because of other issues the legislature will have to deal with, including a DHHS [Department of Health and Human Services] shortfall in excess of $100 million,” said Jim Rier, deputy commissioner of the state Department of Education.

“They’re dealing with much bigger things than just this revenue reduction” said Rier. “My bigger concern is how to do we face what’s going on besides this, with the current economic conditions and no federal help?”

In addition to a biennial budget, LePage has said he will also introduce a supplemental budget next week to help finish out the fiscal year. According to Rier, when the Legislature gets a hold of that, there’s no real limit to what the Democratic majority may do. The curtailment order could well undergo major revision in the supplemental budget, he said.

Still, that has not stopped critiques of the governor’s effort to bring spending in line with revenue.

Lois Kilby-Chesley, president of the Maine Education Association, the union representing most Maine teachers, said LePage’s curtailment order “shortchanges Maine schools, again.”

“The Governor ordered a third of the money needed to balance the budget should come from public schools,” Kilby-Chesley said in a statement released to the press. “This is shortsighted and forces communities to balance the budget on the backs of our students. The question remains, how are our students supposed to succeed when the Governor continues to take from our public schools?

“The Governor already failed to fully fund schools at 55 percent as mandated by law, now he is asking to take more away from our public schools and students,” said Kilby-Chesley. “This is not the way Maine should be."

However, Rier points out that that state has not met the mandate to cover 55 percent of all local education costs since the bar was set in a statewide referendum in June 2004.

“Prior to 2009 we would have been on a path to reach that 55 percent by now, had the economy not turned,” said Rier, noting that a 52.5 percent funding level had been achieved at that time.

Today, Rier says, the state contribution is down to 46 percent. However, in the last two years the $200 million annual obligation to pay and insurance for retired teaches has been rolled into the calculation, brining the funding level closer to 50 percent.

Rier also notes that there was no change in the LePage administration to how education curtailments are handled, compared to larger de-funding orders under John Baldacci, in FY 2008 and 2009.

Those cuts came to $27 million and $38 million, respectively. The only difference between now and then, says Rier, is that at that time the federal government “backfilled” the lost funding with a $130 million infusion via the 2009 American Recovery and Reinvestment Act and the 2010 Jobs Bill.

With no bailout on the horizon, these latest cuts may have a more lasting sting. Still, Rier stresses, “the reduction has been made exactly as it has in the past.”

“The two biggest places the governor has to get at in the budget are education GPA [general purpose aid] and DHHS,” said Rier. “You’ll see the assigned curtailments to both of those very much in line with the total general fund appropriation that supports those.”

Combined, public education and social services account for roughly 70 percent of the state budget.

Rier said the curtailment was made by raising the mill rate for education – the minimum amount each municipality must pay to receive its state subsidy, from 7.69 per $1,000 of total valuation to 7.80.

Because they have higher property values, Scarborough, Cape Elizabeth and South Portland took hits higher than places like Gorham, which lost just 0.5 percent of its subsidy.

Of course, the curtailment was not unexpected.

Scarborough Superintendent George Entwistle says his district instituted a “discretionary spending freeze” in November, limiting purchases to “classroom essentials.”

“Of course, by this time in the fiscal year our staff is in place, most of our supplies are purchased, and contracts are signed for energy, software/systems licenses and professional services, so it is a significant challenge to find flexibility in spending,” he said.

“No one likes to operate with a budget that shrinks during the course of the year,” said Christine Massengill, chairwoman of the Scarborough Board of Education. “We are doing a great job running the district very efficiently already, so meeting the curtailment will be challenging. I am confident that we will meet our obligations while protecting the good work that is happening in our classrooms.”

Both Entwistle and Christie said there are no plans to dip into undesignated surplus money to bridge the gap. Although no official from South Portland School Department could be reached for comment, a draw from surplus seems unlikely there as well, given that the fund has been earmarked to mitigate tax hikes already expected thanks to the $41.5 million high school renovation bond.

Rier said it also is unlikely any school districts will cover the shortfall by laying off staff. State law says school districts must give teachers 90 days’ notice of a “reduction in force,” meaning anyone laid off today would still get paid through March.

Massengill and Christie said their boards will tackle their respective curtailments at meetings in early January.

Meanwhile, Rier says a study of the state funding laws for education has been commissioned by the Legislature and is due by December 2013. However, any changes recommended in that report are unlikely to affect state budgeting until 2016, at the earliest, meaning the projected revenue shortfalls in the coming biennium will have to be dealt with some other way.

Neither South Portland Superintendent Suzanne Godin, nor Cape Elizabeth Superintendent Meredith Nadeau could be reached for comment. Calls and emails to South Portland School Board Chairman Rick Carter and Finance Director Rafe Forland were not returned.