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Financial outlook provides little aid to New Berlin schools

District counts its blessings, and past financial decisions

Feb. 17, 2014

New Berlin — With state aid expected to continue to dwindle in the coming years, it could be a bumpy ride for New Berlin School District taxpayers.

For each of the next two years, state aid will go down 15 percent, said Roger Dickson, the district's chief finance and operations officer. In five years, it will be less than half of what it is today.

In terms of dollars, that means the $4.8 million the New Berlin schools get in state aid this year will go down to $2.1 million in the 2019-20 school year, Dickson said.

"It's because the school district is considered property-rich," he explained, alluding to the current nature of state aid funding.

Non-taxing decisions

However, the loss in aid won't translate into steep tax hikes. In a report to the School Board last week, Dickson predicted a property tax levy increase of 2 to 3 percent for the school year starting this fall but probably less than that in 2015.

"The next three to five years are looking strong," he said.

That is largely because of decisions the School Board made early on. Dickson commended the School Board for its approach on financial issues leading up to this point.

"You've made very good decisions over the last three years to put yourselves in a very good position," Dickson told the School Board last week in a report on his five-year financial projection.

One of those decisions was to go ahead with energy-saving projects that will start kicking in some real savings in fall 2015, he said after the meeting.

Acting on law changes

Other crucial financial decisions involved taking full advantage of all the tools given to districts in the sweeping public employment state legislation known as Acts 10 and 32. The board changed employee pay and benefits structures, Dickson said.

Employees are paying significantly toward their health insurance and pensions now, he explained. In addition, employee pay scales, with their many steps, have been eliminated, but no one took a pay cut except for the additional health and pension contributions they now have.

Although the pay scales are gone, the typical starting teacher pay for someone right out of school is about $38,700, which is higher than the $32,000-plus starting pay before Acts 10 and 32, he said.

Instead of having automatic raises tied to years of service and additional education, the district is currently developing a pay plan that will take performance into consideration, Dickson said. There is already a merit component for administrators and bonuses for accomplishments for all staff, he said.

Long-term concerns

Despite those decisions, Dickson predicted that the schools will hit a financial wall in about the 2018-19 school year.

"We'll get back into a structural deficit," he said.

But the board has time to make decisions now that will help when the schools get there, Dickson said.

Part of the problem is that the local schools face declining enrollments —an expected drop of 400 students over the next five years, he said. And fewer students means the state revenue limits won't allow the schools to raise taxes as much as school officials feel they need to in order to maintain education at its current level.

Open Enrollment answer?

At the Feb. 10 meeting, one School Board member asked whether that enrollment decline could be made up for by accepting more nonresident students through the state Open Enrollment program. Nonresident students fill classroom seats that would otherwise remain empty, and the state provides money to help educate them.

But Superintendent Joe Garza was dubious of that benefit.

State reimbursement is only about 50 percent of New Berlin's cost per pupil, he said. Cost per pupil is found by dividing the cost to run the schools by the number of students.

While some school districts do accept Open Enrollment students to bolster their budgets, they can lose flexibility needed to downsize, such as having four classrooms at a grade instead of five.

Administrators are keeping Open Enrollment as an option, Garza said, and are trying trying to find "that sweet spot," where the schools will get sufficient funding while maintaining operational freedom. But Open Enrollment is tricky.

"It's not a silver bullet," Garza said.

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