Aurora Public Schools eyes future cost reduction as fiscal cliff looms

AURORA | Revenue for Aurora Public Schools will increase slightly next fiscal year, but expenses are projected to exceed revenue after that, requiring the district to think proactively about how to reduce costs.

District Chief Financial Officer Brett Johnson presented the findings and preliminary budget forecast for the 2022-2023 fiscal year to the school board Tuesday.

Overall, Johnson said the economy has made impressive gains from the pandemic despite setbacks caused by inflation and negative financial implications of the war in Ukraine. District revenue is projected to increase by 2% next year due to state funding increases.

However, APS will lose an estimated $5.7 million due to continued decreasing enrollment and has hit its financial cap for the mill levy override that voters approved in 2018.

Due to revenue from the mill levy override, the district was able to provide “very generous compensation increases” even in the midst of declining enrollment and the pandemic, Johnson said.

Now that the district has hit its cap, it can no longer benefit from the full amount of revenue growth and is effectively losing out on $16.9 million toward next year’s budget.

Due to these factors, APS is financially constrained moving forward, Johnson said. And because enrollment is averaged over a period of five years, even if enrollment stops declining, APS will continue to lose roughly $10 million over the next few years.

“This is where when we talk about fiscal cliffs, it’s very likely that the budget that we will present in the next month, our proposed expenditures will be slightly higher than our projected revenues and we will likely propose to spend some of our large reserves to offset that,” Johnson said.

This trend means that the district has to start “really proactively thinking about where in future years we might need to be more strategic about how we address our future budget,” he said.

The ongoing issue of the district’s Blueprint APS plans came up when board member Anne Keke asked how potentially keeping Sable and Paris elementary schools open would affect the budget.

Next year’s budget will not be affected regardless of what happens because under the superintendent’s recommendation the schools were not scheduled for closure until the 2023-2024 school year, Johnson said. However, he said the reason the district has been “banging the drum” about concerns regarding low enrollment schools is that they are more expensive to keep open.

As the district faces a fiscal cliff, having fewer small schools open is a way that the district can make itself more efficient without having to make staffing cuts, he said. (About 80% of the district’s budget goes toward paying salaries and benefits.)

“Because we have less buildings to pay utility bills and to maintain we can essentially have a similar level of staff but a decreased number of buildings that they’re occupying,” he said.

The Blueprint plan was created to address the structural deficit in APS’ budget where expenditures are outpacing revenue, Superintendent Rico Munn said.

Board member Stephanie Mason asked Johnson whether the district shouldn’t be looking into reducing administrative overhead as its student population decreases, an idea that several board members brought up at last month’s board meeting as well.

Johnson said the district should pursue all its opportunities to be more efficient, but that the budget decrease will continue even after enrollment has stabilized.

While enrollment is declining, the district can find other places to offset costs, he said, but because of how it receives funding the district’s budget will still decrease after its enrollment has stopped declining and levels out.

“At that point, there’s no offsetting decreased expenditures and that’s where the challenge really becomes more difficult,” Johnson said.

If enrollment is declining, Mason then asked why the district is moving forward with building new schools on the eastern side of the district.

“Those are in areas that are projected to have robust growth and homes and kids,” Johnson said. “Our challenge related to declining enrollment is not on the eastern side, it’s on the western side.”

He noted that in Region 1, where Sable and Paris are located, there are almost as many empty seats in schools as there are students due to enrollment declines, which makes those schools less efficient to run.

Mason said the board understands “the message and we understand the reality,” but that the district’s plans are still based on projections of growth.

“A projection is not factual and it’s not reality, it’s a projection,” she said. “So we don’t really know what it’s going to look like in the new development. And what happens if we move forward and we’re in a bigger hole than we already were is my concern.”

Johnson acknowledged that but said that, “I think on the western side of the district it’s pretty factual what the effects of declining enrollment have been.”

The district’s proposed budget for the next school year will be presented to the board next month, and will be voted on for final approval in June.