Wichita district estimates up to $27 million in cost increases next year

Wichita schools could face as much as $27 million in cost increases next year with no increase in state funding, the district’s top financial official said.

“I kind of gulped” at the number, said Jim Freeman, chief financial officer for Wichita schools. “The decisions we will have to make are going to be tough.”

According to Freeman’s projections for the 2017 fiscal year, which begins in July, estimated cost increases for the Wichita district will range from $14.7 million to $27.3 million. Revenue is expected to be flat under the state’s new block grant funding system.

The estimates do not include a pay increase for employees. An across-the-board raise of 2 percent for teachers and other personnel would cost another $16 million to $18 million, Freeman said.

The district’s top concern – and largest projected cost increase – next year will be for its self-funded health insurance system, which will need a $6 million to $12 million boost to its reserves “to remain viable,” Freeman said.

The district has not increased its annual contribution to the health plan since 2007, he said. Meanwhile, claims have risen dramatically and reserves have been dwindling.

Last year Wichita schools paid $48 million into its health plan and paid out about $65 million in claims, Freeman said.

Wichita also needs to replenish its contingency reserve fund, which the district has tapped into the past few years to balance its budget, Freeman said.

“We committed $3 million of contingency reserve into this year’s budget for operating funds,” he said. “It will be my recommendation that we do not continue with that path because we’re now down to $10 million in contingency reserve.”

That’s about six days of operating expenses for Wichita, the state’s largest school district, Freeman said.

State funding, while not decreasing, “has not kept pace” with the district’s expenses, Freeman told school board members Monday. In coming months the board will get more specific cost estimates and consider program cuts.

Costs will increase at least $14 million “unless we make some conscious decisions not to do some things,” Freeman said. And cuts likely will affect classrooms and students more directly than in the past.

“Yeah, it’s gonna hurt. There’s no doubt about it,” Freeman said.

Other estimated increases by category include:

▪ Utilities – electricity, heating fuel, water and sewer costs: $675,000 to $1 million. Next year, the district will add 367,350 square feet of space at six locations, including the new Southeast High School. Westar Energy rate increases also will add to the district’s expenses, Freeman said.

▪ Transportation – $200,000 to $500,000. Wichita will require more buses next school year, in part to serve the new high school, which will increase the cost of its contract with First Student. Additional fuel for bus routes will add another $200,000 to $400,000 in expenses, Freeman said.

▪ Property insurance – $200,000 to $1.6 million. The low estimate includes a likely increase in premiums; the high estimate includes a transfer to “keep the reserves at a safe amount,” Freeman said.

▪ Software – $1.2 million to $1.7 million. The estimate includes regular license increases and additional software aimed at boosting the district’s cybersecurity in response to a computer hacking attempt last fall.

▪ Textbooks – $2.5 million to $5 million. Textbook fees, which parents pay at enrollment, “are insufficient to fund costs of new curriculum adoptions,” Freeman said. The fees bring in about $1 million a year, he said.

▪ Enrollment (including increases in high-needs students) – $800,000 to $2.1 million. The district’s enrollment has increased steadily over the past several years, requiring additional teachers to maintain reasonable class sizes, Freeman said. High-needs students, including low-income children, refugees and English-language learners, require more resources.

In coming months, Freeman will present school board members with more detailed proposals for cutting expenses. Options could include further cuts to part-time staff and classroom supplies or consolidating bus routes.

“But really there’s not much more low-hanging fruit left that adds up to a lot of dollars,” Freeman said.

“If we can’t cut on the operational side, we’re going to have to cut on the educational side in some fashion.”

School board president Betty Arnold said school leaders need to be clear with the public that state funding for classroom operating expenses is not increasing, despite overall budget figures that may show funding increases.

The state already shifted teacher pension funds to districts. Gov. Sam Brownback recently recommended transferring money earmarked for infant, toddler and early childhood programs to the general fund under the Department of Education to help fill the state’s projected $190 million budget hole.

“We call it ‘Houdini funding’ because it magically disappears, real quick,” Arnold said.

Even though the state’s overall budget may show increased education funding, “As board members, when we look at the budget and what we have to do, we certainly feel like we’ve been cut,” Arnold said.

“It’s very important that we understand what’s happening and communicate what is actually happening,” she said.

This story was originally published January 26, 2016 at 9:32 AM.