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The Bottom Line

    Safeguarding Savings: Tips to Prepare for Revenue Reductions

    The day-to-day management and monitoring of district resources become even more important during times of economic downturn.

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    School districts are not immune to the impact of a global economic recession. But with careful planning and strategic reprioritization, district leaders can mitigate the impact of revenue reductions on students. We've compiled three sets of tactical to-do lists to help your district navigate these unprecedented times: today, tomorrow, and beyond. 


    To-Do Today (if you haven’t already)


    Give priority to protecting your district’s in-year cash and planned underspend. 


    Decide whether to implement spending, salary, and hiring freezes. Closeout any open vacancies and place a hold on step raises. While not ideal, this combination can add up to millions of dollars in cost avoidance for your local schools.


    Consider renegotiating your fleet insurance or locking in fuel rates. With the ongoing school closures, district buses and vans sit idly. With fewer miles traveled and lower fuel costs during the past few months, this can be an ideal time to review your policy and ensure your district isn’t overpaying for insurance. 


    Look into locking in current diesel prices. Some companies may allow your district to digitally lock-in current diesel prices. Doing so can convert your largest variable business cost into a known fixed cost over the life of the contract.


    Don’t take projected savings for granted. Concerns about the security of their pensions may have some of your more senior staff delaying retirement. The savings you may have hoped to realize as a result of staff turnover and retirement may not be available during this time as employment becomes a precious commodity.  Review any areas where you anticipated savings, and don’t count on those savings to help. 


    To-Do This Summer


    No one knows what the full impact of this economic crisis will be on school districts in the long-term, but district leaders know they must prepare for the unexpected. 


    Create a backup plan for your district’s backup plan. Get continuous feedback from your community and district stakeholders to build buy-in on solutions. Involve your unions EARLY to mitigate resistance and unnecessary confrontations. 


    Build your district’s “comeback” plan. Ideally, you’ll create a comprehensive 3-5 year plan that takes into account reductions and “add-backs.” With the input of your finance team and district stakeholders, build a process of adding back resources once funding is available. Make sure to share the process with your community as well to help build buy-in and provide context for the short-term budgeting decisions made. 


    Ensure reductions do the least harm to students. Leverage your district priorities and ensure that you aren’t cutting funding or programs that are a top priority for your students. Consider if there are other areas or priorities that presently receive more funding that may not be as affected by a budget reduction. 


    To-Do During FY 20-21 and Beyond


    The economic impacts of COVID-19 will likely be long-term, so districts need to develop a multi-year forecast and plan. Not having a true grip on your fiscal reality may make you feel as if you’re working in the dark, but it’s important to act quickly. 


    Assess your district’s reserves and “rainy day” funds. Think about how to spend and deploy those funds strategically. Education funding typically recovers more slowly after an economic downturn, so ensure that you have enough money in your reserve or “rainy day” fund to cover expenses for the next 2-5 years. 


    Get reacquainted with your fund balance policies. What are you allowed to do per your board or legal policy? Resources in your general fund are typically available for any purpose. However, other fund reserves may have limitations on how those funds can be used.


    Remember: your entire budget will need to be reviewed. Even a 1 or 2% reduction in revenue can throw off your initial projections and it’s not feasible to assume all cuts can come from the central office. Unfortunately, school-based programming will likely be affected - a strategic and holistic review of the budget can help mitigate any impact. Review one-time grant funds to ensure all funds have clear, outlined use. This is not the time to leave any money on the table. Model the impact this may have on the next one to five years. Use this information to identify your district’s priorities and non-negotiables and determine where you can comfortably make cuts that minimize impact while working towards student outcomes. Your district could potentially lose families to other public or private school options, so model scenarios that take dips in enrollments into account. 


    Review your multi-year contracts. Ask if your vendors can provide the district with a better rate. If not, you may have to resort to canceling the contract altogether. Most contracts allow for an "out" clause, so investigate whether “lack of delivery on contract deliverables” or another cause might allow you to cancel without penalty. Prioritize contracts above a certain threshold so that you can maximize the savings potential. Revisiting a $500K contract could generate more savings than a $5K contract.


    Evaluate personnel as a lever for additional savings and/or reductions. Review your negotiated agreements to identify who you are obligated to pay. Are there staff reduction deadlines that must be met? If a reduction cannot happen within the time frame you anticipate, it’s likely that your district may not realize the entirety of potential savings.  


    Don’t forget about equity! While all of your focus may be on keeping staff employed and the lights on, you don’t want to discount the impact that funding reductions may have on equitable opportunities for students. During a recession, low-income districts are hit the hardest and students’ needs intensify. How can you deploy any strategic reserves to soften the blow? How can you minimize the impact on students? Your most vulnerable students are even more vulnerable now, so ensure that your district’s strategy, finance, human resources, and any unions are all aligned with proposed cuts.


    Consider cutting operational, administrative, and central programs first and tread carefully with any planned bond or levy. It’s important to understand your priorities and identify the trade-offs when considering what and where to cut.


    Remember, good schools are a good thing! Resist the temptation to cut so heavily from schools, especially those that are struggling, that you may push them past the point of no return and further damage vulnerable student populations.


    The day-to-day management and monitoring of district resources become even more important during times of economic downturn. Here are the four things you need to remember:

    • Stay compliant
    • Find savings
    • Eliminate waste
    • Ensure resources are being spent strategically 

    Allovue works with districts and state departments of education across the country to allocate, budget, and manage spending. Allovue's software suite integrates seamlessly with existing accounting systems to make sure every dollar works for every student. Allovue also provides additional services such as chart of accounts and funding formula revisions.