ASBO+Economic+Crisis+-+A+new+future+for+education+funding



EXECUTIVE SUMMARY THE CURRENT SITUATION The current economic environment is unlike any in recent memory. As school business ofﬁcials, you have faced challenging budget situations in the past. Participating in budget reduction exercises, reallocating and maximizing resources, looking for new and creative ways to economize, and in some cases, postponing infrastructure maintenance have become routine for many. In the majority of cases, these have been short-term ﬁxes to long-term problems. Even while funding for education increased, many times those increases did not keep up with inﬂation, making it more difﬁcult to manage resources. The current economic environment is unlike any in recent memory. As school business ofﬁcials, you have faced challenging budget situations in the past. Participating in budget reduction exercises, reallocating and maximizing resources, looking for new and creative ways to economize, and in some cases, postponing infrastructure maintenance have become routine for many. In the majority of cases, these have been short-term ﬁxes to long-term problems. Even while funding for education increased, many times those increases did not keep up with inﬂation, making it more difﬁcult to manage resources.

The present state of the economy signals a paradigm shift with unprecedented challenges, but also a rare opportunity for a vision of sustainable support for education. The challenges are clear. The foundation of the traditional sources of revenue for school budgets—local property taxes and state funds—are in jeopardy. They are not likely to return to their present level in the foreseeable future. The downward spiraling nature of this recession—from the mortgage meltdown and home foreclosures to the credit crunch and subsequent rise in unemployment that will inevitably lead to more foreclosures—means that revenue from property taxes likely will continue to decline for the next 18–24 months before leveling off. In some cases, based on demographic and geographic locations, the decline could be even longer.

Forty-four states have already reported severe revenue deﬁcits or budget shortfalls for 2009. It is not likely that they will be able to provide additional funding to make up for the loss of property tax revenue. On the federal level, the incoming administration is preparing an economic recovery/stimulus plan that probably will include an education component. It is not clear how large it will be or how long it will take to make a difference on the state or local level. There is no question, however, that we cannot rely on the federal government to balance our district budgets or provide all the resources that we need to educate our nation’s young people.

WHAT DOES IT MEAN? Any decisions we make now must be made with the future in mind. You’ve already cut the “low hanging fruit” and identiﬁed which reductions will have the least impact in the classroom. Relying on only short-term solutions will inevitably lead to long-term consequences. Instead of looking at ways to make it through the next budget cycle, school business ofﬁcials need to look at ways to make these cuts sustainable and generate revenue from other sources.

This means engaging all stakeholders (school ofﬁcials, board members, teachers, parents, students, the business sector, and members of the community) in a discussion about the future. That may include redeﬁning the core curriculum, prioritizing extracurricular activities, and renegotiating contracts. Everyone will bring a different perspective to the table and argue that certain elements of both the academic and non-academic aspects of the school district are inviolate. It is possible that in order to effect long-term change you will have to engage lawmakers on both the state and local levels while ASBO actively works for you at the federal level. But even then, there may not be enough money to fund even the basic activities of a school district. Cost cutting, budget trimming, looking for cost efﬁciencies and economies of scale, even eliminating some ancillary programs may not be enough to balance the budget. The key to achieving a reliable new foundation of support will require well-designed strategies for revenue generation and cost shifting/sharing. Opportunities for increasing revenue and sharing costs abound, but may be less recognizable than those for cost cutting.

While there are many unknowns at this time, there are several things we do know that we must keep in mind as we move forward: • There will be a continued shift in local, state, and federal ﬁnancing. • There is growing competition for all resources, especially in healthcare and other demands of an aging population. • Foreign direct investment will be a driver in the economy. • Any recovery will reinforce the role of small businesses - Increasing labor mobility - Looking for resources, not giving out funds. REVENUE GENERATION/COST SHARING The generation of revenue to offset long-term budgetary shortfalls and fund ongoing projects will have to be signiﬁcant and sustainable. This presents opportunities on several fronts. Successes have included: **Public – Private Partnerships (PPP)** //“A Public-Private Partnership is a contractual agreement between a public agency (federal, state// //or local) and a private sector entity. Through this agreement, the skills and assets of each sector// //(public and private) are shared in delivering a service or facility for the use of the general public.// //In addition to the sharing of resources, each party shares in the risks and rewards potential in the// //delivery of the service and/or facility.”// //-// The National Council for Public-Private Partnerships Public-Private Partnerships (PPPs) have been used successfully to leverage taxpayer funds with private sector investment to reduce the public sector’s costs and transfer some of the risk involved in infrastructure projects. They have been used in a variety of sectors, including transportation and water/wastewater projects. There are more than a dozen types of PPPs, ranging from Contract Services to Build-Own-Operate (BOO) to Lease-Develop-Operate (LDO). The key to making a public-private partnership work is that it has to be viewed as a real partnership by both parties, with shared risks and shared rewards. In short, there must be a shared stake in the outcome. President Obama has said he will support entrepreneurship and spur job growth by creating a national network of public-private business incubators. Business incubators facilitate the critical work of entrepreneurs in creating start-up companies. It is anticipated that $250 million per year will be invested to increase the number and size of incubators in disadvantaged communities throughout the country. This portion of the stimulus package is consistent with successful past practice and part of what the economic summit has identiﬁed as potential alternative resources. 4 www.asbointl.org One example of venture philanthropy is the use of education foundations to provide additional funding for local school districts. The education foundation movement began in California in the 1980s after Proposition 13 forced massive state budget cuts. Properly organized and effectively run, an education foundation can have a positive effect on the bottom line. The purpose of a local education foundation (LEF) is twofold: • Fundraising – They raise funds from the community, business, and foundations to provide funding for programs and projects that can no longer be supported by the school district. • Advocacy – They can help ensure that the general public and other stakeholders are aware of and motivated to support these programs. The goals of the education foundation should be to build stronger alumni support, begin to partner with business and corporate leaders, and encourage the citizens of the community to take a more active role in the education of the next generation. MOVING FORWARD Public-private partnerships and venture philanthropy are only two of myriad opportunities available to school business ofﬁcials as they develop a sustainable framework for the new budget environment. But remember that there is no “silver bullet” or “one size ﬁts all” solution to the problems your school district faces; balancing cost cutting against revenue generation/cost sharing will be the formula for success. This recession likely will be a watershed moment. We are already experiencing fundamental changes in the economy not seen in a generation. Although most analysts expect the recession to bottom out in early 2010, the full impact of the decline in property and sales tax revenue is un known. To continue to build an effective education system in the coming decade, school business ofﬁcials must be proactive. You know your school district and the unique challenges it faces. You are uniquely qualiﬁed to initiate the discussions about issues and strategies described in this report. Only you can enlist the cooperation of all the individuals who are affected by the budget as well as those who can effect change. All available resources must be explored in an effort to create and build effective education and development programs that don’t just deal with a short-term downturn, but position your district to succeed in a very different future. As was echoed throughout the course of the summit, the most successful school districts will be ﬂexible, inventive, and entrepreneurial. Only two things are certain as we move forward in this new environment. The ﬁrst absolute is that change is coming and that it is here to stay. The second is that ASBO International will continue to be an advocate for you, help you identify opportunities, overcome obstacles, and strengthen the job skills and knowledge you will need to successfully meet these new challenges. The Economic Crisis Summit began the process of creating awareness of the new challenges and identifying opportunities, models, and processes for moving toward a sustainable future. To address your continued development as acknowledged leaders, ASBO International is developing a certiﬁcation for school business ofﬁcials. This //...there is no “silver bullet” or “one size// //ﬁts all” solution to the problems your// //school district faces, and balancing cost// //cutting against revenue generation/cost// //sharing will be the formula for success.// certiﬁcation will ensure stakeholders in the education community that school business ofﬁcials who carry this credential have been trained in all areas critical to the position: from leadership to the latest ﬁnancial management methods. The Economic Crisis Summit was not meant to be a static process but the beginning of a dialogue that we know must take place in every school district and jurisdiction across the United States and Canada. ASBO International will continue to facilitate that dialogue and we hope that you will share your accomplishments and challenges with us and your fellow school business ofﬁcials as we navigate these uncharted waters.
 * Venture Philanthropy**