Budget Committee Starts Work on 2015 Budget

by Save Our Schools Los Alamos

Now that Governor Martinez has signed the state budget, local school districts are beginning to work on their budgets for the coming school year.  The New Mexico Public Education Department (PED) will provide each school district with its share of state K-12 funding after its March 26-28 budget workshop.  State funding typically provides about 70% of K-12 funding for Los Alamos Public Schools (LAPS).

LAPS has formed a Budget Committee, made up of administrators, teachers, and a few community members, to develop the 2015 budget.  This budget will be submitted to the School Board for its approval in late May.  In the meantime, LAPS will hold a community meeting, tentatively scheduled for April 23, to hear feedback from interested stakeholders.

Although the state of New Mexico is raising K-12 education funding for the 2015 school year by 5.75 percent, it is not at all clear how much of that increase will flow to LAPS.  Often, LAPS receives an increase that is different from the overall percentage increase awarded to the statewide system due to the way the State Equalization Guarantee (SEG) formula is programmed.  The SEG is the mechanism used by PED to allocate resources among school districts with the goal of providing all students in New Mexico with a “uniform” and “sufficient” education as mandated by the New Mexico State Constitution.

PED will likely hold some of the gross revenues in case they need funds for emergency situations that might occur during the school year.  Then, every school district gets its share of state funding through the SEG and based on the school district’s weighted “unit value” — determined by a number of variables like the composition of enrollment by grade and special needs, teacher experience levels, and community demographics multiplied by overall gross enrollment.

So, as the LAPS Budget Committee undertakes its work it has a few factors to consider. 

First, there will have to be an understanding of Los Alamos’ share of SEG funds that will flow to our school system via the unit value.  The specifics should be more fully understood in a few weeks after the PED budget workshop.

Second, there is the issue of the target $8M in “reserve fund” LAPS has been accumulating over the past years.  According to LAPS administration, this reserve is being built in large part to satisfy the criteria of bond rating agencies.  In exchange for building and preserving this rainy-day set-aside, future LAPS capital borrowing through the issue of bonds could potentially occur at interest rates that are two-tenths to three-tenths of a percentage point lower than would be available without the reserve funds.  This decision relates to how much lease revenue will be available for operating use in the coming year.

Reasonable people will disagree on whether the accumulation of this reserve from school leased property revenue over the past several years is an appropriate move to achieve what some would argue are small savings in the out years, given current pressures on class size, programs and staff compensation.  The decision on whether to add to the current reserve, to draw from it to support operations, or to let it sit will impact the overall budget decision for the coming year.

Third, is the issue of school cost absorption by Los Alamos County.  We have often suggested in this space that considering the inadequacy of state funding for our schools, to preserve the quality of schools Los Alamos has enjoyed in past decades it will become increasingly necessary for the community to find more ways to supplement state-provided school spending.  One permissible way to do that is for Los Alamos County to absorb some categories of expenses which have been borne by the schools in the past.  We understand that LAPS and Los Alamos County officials are exploring that issue, so cost absorption should be on the Budget Committee’s radar.  

Finally, there is the issue of fiscal conservatism.  This is a risk management issue that centers on whether the school district should budget to end the year with a surplus (foregoing current year priorities) or budget more aggressively to fully use current funds for current year expenses.  The Budget Committee will have to balance the desire to fund programs against the importance of holding additional layers of reserve funding. 

In summary, as the LAPS Budget Committee begins its work, it’s not beginning from a fixed top line budget.  Rather, it’s working with a number of variables including the degree of certainty associated with state funding from the New Mexico PED; the availability of stockpiled funding in the leased revenue account; the opportunity to work with Los Alamos County to absorb costs that have been traditionally borne by the schools but which could be properly borne by the County coffers; and the degree to which fiscal conservatism should be properly and judiciously balanced with meeting today’s community priorities.

There are some key challenges facing the schools next year.  Most notably, fixed costs like medical insurance and utilities are rising.  Enrollment is expected to decline, negatively impacting SEG funding.  The buying power of the $8 million federal contribution to LAPS funding continues to erode due to inflation.  There are also challenges associated with the bulge in class size among this year’s second graders and an even larger bulge in the current sixth grade class size that is projected to overflow the newly remodeled Middle School in August.  Addressing those problems will require the careful attention of the Budget Committee, the LAPS administration and School Board, and ultimately, the community. 

LAPS administration has said it will make the meeting notes of Budget Committee meetings available on their website at http://www.laschools.net.

For more information about Save Our Schools Los Alamos, go to http://soslosalamos.com.

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