Ann Arbor Schools Tackle Looming Deficit

Officials to hold second budget forum on Thursday at Forsythe
This sign in a hallway at Scarlett Middle School could apply to the Ann Arbor Public Schools budget.

This sign in a hallway at Scarlett Middle School, quoting basketball legend Michael Jordan, could apply to dealing with the Ann Arbor Public Schools budget. Superintendent Todd Roberts and other AAPS officials held a public forum on the budget Tuesday night at Scarlett.

Students outnumbered parents at Tuesday night’s budget forum for the Ann Arbor Public Schools, but only (we suspect) because it fulfilled a civics class requirement. At any rate, the 20 or so people who showed up at the Scarlett Middle School media center all got a lesson in the intricacies of public school funding, and a look at how AAPS plans to deal with an anticipated $6 million deficit in its next fiscal year, with the deficit projected to grow to $12 million by 2011-12.

Approaches include possibly floating a countywide millage as early as this fall, increasing student enrollment through online offerings, and lobbying state legislators for additional dollars and to reform the way schools are funded.

Superintendent Todd Roberts and Robert Allen, deputy superintendent of operations, laid out the challenges they face, not the least of which is the convoluted way in which the state funds K-12 education. Let’s just say the slide they showed to illustrate the various funding mechanisms looked Rube Goldberg-ian.

Todd Roberts, superintendent of Ann Arbor Public Schools, and Robert Allen, deputy superintendent for operations, look over their presentation before Tuesdays budget forum at Scarlett Middle School.

Todd Roberts, superintendent of Ann Arbor Public Schools, and Robert Allen, deputy superintendent for operations, look over their presentation before Tuesday's budget forum at Scarlett Middle School.

Funding factors

The bulk of funding for public schools in Michigan is allocated by the state on a per-pupil basis. For the current fiscal year, AAPS receives $9,723 per student, and has roughly 16,500 students system-wide. Its general fund budget was $182.7 million for 2007-08. The administration will be presenting an update on its current fiscal year budget at the district’s March 11 board meeting.

Revenue that the state relies on for K-12 funding includes local property taxes, sales taxes and state lottery revenue, among other sources – and many of these sources are showing declines because of the state’s overall economy, Allen said. These revenues are pooled into the state’s School Aid Fund, from which each district’s “foundation allowance” (per-pupil funding) is distributed. It’s a variable amount, set annually by the state legislature, that can increase or decrease each year. [An exponentially greater level of detail about school funding in Michigan is explained in the book "A Michigan School Money Primer," by Ryan Olson and Michael LaFaive.]

The current system was put in place after the 1994 passage of Proposal A, which aimed to create more equitable funding across all districts and to keep property taxes in check. (Districts can still seek local millages to pay for repairs or building construction and maintenance, such as the fairly recent construction of Skyline High School.)

Several other factors are at play. Ann Arbor is one of only 52 districts statewide that are classified as “hold-harmless” districts. These districts, at the time when Prop A took effect, were receiving revenues higher than the $6,500 per-pupil level set by the state under Prop A. Rather than have their funding lowered, they were allowed to levy additional funds to make up the gap. For Ann Arbor, that amount is 4.27 mills for 2007-08, or $1,234 per pupil (depending on property values, the tax varies in order to generate the $1,234 per pupil, which is a fixed amount).

Because of their special status, hold-harmless districts sometimes receive lower per-pupil funding increases from the state. For fiscal 2008-09, for example, Ann Arbor and other hold-harmless districts received an increase of $56 per pupil, compared to $112 received by other districts.

This year there’s yet another twist: The budget could be positively affected by federal stimulus dollars, though that’s not yet clear, Roberts said. They should have more information about that within the next month.

School board member Susan Baskett, left, attended Tuesdays budget forum at Scarlett Middle School.

School board member Susan Baskett, right, attended Tuesday's budget forum at Scarlett Middle School.

On the expense side, salaries and benefits account for 85% of the AAPS budget, primarily for teachers (71%) and other instructional support (14.1%). School officials are projecting incremental increases in these areas based on previously negotiated raises and increases to fringe benefits like health and life insurance, among other things. School board member Susan Baskett, who attended the Scarlett budget forum, also noted that contract negotiations are currently underway, so the outcome of that deal will have an impact on upcoming budgets as well.

Budget deficits for AAPS are nothing new, Roberts noted – they’ve dealt with deficits for the past three years, and have cut more than $14 million in expenses over that period. He also noted that this year they’ll likely need to use $2 million from their fund equity balance, also known as the “rainy day” fund, to cover expenses. They have about $28 million in the fund at this point.

Allen said that the more they are required to cut, the less attractive the district will become, which in turn would cause parents to seek other options, like private or charter schools. That, in turn, would reduce enrollment, which would cause additional revenue declines based on the state’s per-pupil funding model. It’s a snowball effect that would just keep growing unless other strategies are found to deal with these funding challenges.

Steve Norton

Steve Norton, executive director of Ann Arbor Parents for Schools.

What can be done?

Roberts outlined several approaches that AAPS was pursuing, or might pursue, to address the projected deficits. Those options include lobbying state legislators and the governor, increasing student enrollment, raising more funds through private donations, and passing a countywide educational “enhancement” tax.

Lobby the state legislature. Roberts said that legislators are more inclined to listen to parents and others who don’t work for the public schools, and he urged people at Tuesday’s meeting to contact the governor and state legislators, asking them to give local communities more control over school funding. He then introduced Steve Norton of the advocacy groups Ann Arbor Parents for Schools and Michigan Parents for Schools.

“The system that’s been in place since 1994 is not working,” Norton said, adding that under the current state funding model, there aren’t many options. Legislators need to hear from citizens that it’s important to invest in education, he said. Donating to organizations like the AAPS Educational Foundation is another option, as is a possible “enhancement” millage which would provide additional funding for all districts in Washtenaw County.

The important thing, Norton said, is to become engaged in these efforts now, at meetings like these, “where you can have your voice at the beginning of the process, rather than the end.”

Increase student enrollment. As long as the state funds districts based on a head count, then increasing enrollment is one sure way of getting additional revenue. Roberts estimated there are 1,200 students within the AAPS district who don’t attend public schools. They are either home-schooled or attend private or charter schools.

One way to attract new students countywide is through online course offerings, Roberts said. Children who are home-schooled, for example, might want to take some AAPS courses this way. This year AAPS brought in 19 students through its online courses with very little effort, he said. Officials are projecting they’ll add 50 students in the next fiscal year through online courses and other efforts, and with additional marketing.

Wendy Correll, executive director of the Ann Arbor Public Schools Educational Foundation, described how that nonprofit helps fund educational programs.

Wendy Correll, executive director of the Ann Arbor Public Schools Educational Foundation, described how that nonprofit helps fund educational programs.

Increase private donations. The Ann Arbor Public Schools Educational Foundation works to raise money that’s used to fund programs within the schools. Wendy Correll, the group’s executive director, attended Tuesday’s meeting and described the foundation’s efforts.

For the current academic year, the foundation is providing about $7.50 in funding per student – an increase from $2 per pupil provided a couple of years ago. Yet in some communities, she said, foundations raise as much as $800 per pupil. “Are we there yet? Certainly not.” To cover the $6 million projected deficit, they’d have to raise about $350 per pupil. As much as they can, the foundation is trying to provide a safety net for the district’s programs, she said.

During the current year, those programs include a web-based writing literacy program called My Access, music tutoring for talented but economically disadvantaged middle school students, funding for “Plan and Explore” tests for all 8th and 10th grade students to help in post-high school planning, among other efforts. The foundation also awarded $37,000 in various grants to teachers this year.

Pass a countywide millage. Roberts said that leaders of all Washtenaw County school districts have been discussing the option of putting an education millage on the Nov. 9, 2009 ballot. It would be distributed based on the number of students in the district, and could provide about $4.5 million in additional funding for AAPS. He said a decision about that will likely be reached by the end of this school year.

Irene Patalan, vice president of the Ann Arbor school board,

Irene Patalan, vice president of the Ann Arbor school board, speaking at Tuesday night's budget forum, said "I worry about how much more we can cut."

Next steps

Roberts and Allen will be holding a second budget forum on Thursday, March 5 from 7-9 p.m. at Forsythe Middle School, 1655 Newport Road. [confirm date] The event is open to the public. Early next week, they plan to post their presentation online, with a place for people to post comments. As the district fields questions and comments, they’ll be forming a FAQ (Frequently Asked Questions), which will also be posted on the district’s website.

They’ve been developing a draft budget and will be briefing the board of education on it, starting later this month. Public hearings will be held in May, with the budget likely being voted on at the board’s June 10 meeting.


  1. By Patricia Lesko
    March 5, 2009 at 4:26 am | permalink

    At learning institutions all over the United States, union leaders are asking members to forego pay raises, roll back salaries, and support staff are taking voluntary furloughs in order to meet budget shortfalls. There is no way teachers, administrators or support staff members in our District should get raises this year; it’s unfortunate, yes, but the union, administrators and our School Board need to look around the country to see what other Districts and unions are doing to address budget shortfalls without cutting programming or raising taxes. The number of homeowners in Washtenaw County who’ve lost their houses thanks to property tax default is at an all-time high at the moment. It seems that raising taxes is akin to slowly strangling the Golden Goose.

    If the AA Teachers union is unwilling to revisit the terms of their most recent bargaining agreement, and parents and students are forced to bear the brunt of the cuts they will surely have to impose, the School Board members should refuse to bargain with the union the next time the contract comes up for renewal. The teachers will scream and picket, some parents will be upset, but in the end all who refused to work would be replaced and that 71 percent of the budget that currently goes to teacher salaries and benefits (and MEA, NEA kick-ups) would fall.

    Yes, the teachers’ contract may call for pay raises, our support staff and administrators may expect them and even deserve them, as well, but it’s time for some creative thinking on everyone’s part.

  2. By Alan Pagliere
    March 5, 2009 at 7:45 am | permalink

    What a shock. Who would have ever thought that the AAPS would experience financial problems? The Pfizer move and the current economic trouble in Michigan and beyond notwithstanding, much of the district’s troubles are of its own making.
    The previous superintendent, George Fornero, who skipped town, and others in the administration and on the Board, invented reasons and numbers to sell the community on the building of the new high school knowing full well that its operation and maintenance could not be paid for, let alone that it would increase class size, not decrease it (its main reason for being). The bond paid for its construction (which was mismanaged into overruns and a full year delay), but there was no realistic or foreseeable funding source for its operation.
    FOIA-ed emails proved the corruption, the Board knew about it. Many of those responsible for the deception still work for the district.
    The AAPS and at least one member of the Board came out for a county-wide millage to cover the self-imposed disaster well before the current, larger economic meltdown.
    Dealing with that fiasco’s financial consequences (leave aside its other ramifications) is more difficult due to the economic environment and now the AAPS can ask for more money as if none of the problem is its own fault. The economic downturn is just the next chapter in AAPS’s woes and is, ironically, being used as a means for the AAPS to divert attention from its previous actions.

  3. March 5, 2009 at 8:39 am | permalink

    Washtenaw County seems to have an awful lot of different school districts (does anyone know how many?), which inevitably results in inefficiencies. I’d like to see some serious consolidation efforts take place before we’re asked to pay higher taxes.

  4. By Mary Morgan
    March 5, 2009 at 9:56 am | permalink

    Re. consolidation: Todd Roberts did mention that consolidating services among the county’s 10 school districts was one way in which they’re trying to reduce costs. He said AAPS has saved $400,000 from such efforts, but didn’t describe in detail how those savings were derived. I’ll ask for more details and post them in this comment thread.

    According to Roberts, consolidating services was among the ways AAPS has cut $14 million over the past three years, a figure mentioned in this article. Other examples he cited were staff reductions, a restructured middle school program, reduced property and liability insurance costs, reduced legal expenses and capping the district contribution to employees for MESSA health insurance at a 5% annual increase.

  5. By Steve Bean
    March 5, 2009 at 10:40 am | permalink

    Alan, how would class size increase? Fewer teachers per student?

    I agree about the expense of the new high school making matters worse. I wonder what can be done about it at this point beyond learning from the mistake. I hope people will keep in mind who was responsible (i.e., Fornero, the past board members, and voters) and support Roberts and current administrative staff and teachers who have to try to make the best of the situation that’s resulted.

  6. By Marvin Face
    March 5, 2009 at 1:57 pm | permalink

    First, I agree with Patricia Lesko that the teachers should not get raises this year whether they are deserved or not. I am in an industry that is decidedly non-union so it’s hard for me to understand that mindset but my company has been moderately hit by the economy and we have all decided not to take raises or bonuses for the coming year based on $ projections. This is even though we had our best year ever in 2008 and certainly think we deserve them.

    Second, I would not have any issue whatsoever paying more in taxes if that’s what the board, superintendent, and ultimately the voters thought was necessary to assure the best schools.

  7. By Kris
    March 5, 2009 at 2:07 pm | permalink

    1. Hack or hold salaries, top to bottom. (typically by a percentage basis)
    2. Rationalize all schools
    3. Rationalize all activities and offering
    4. Rationalize all support costs

    Or maybe this is better put as “run it like a BUSINESS!”.

  8. March 5, 2009 at 11:50 pm | permalink

    Thanks to Mary Morgan and the Chronicle for such good coverage of a sparsely attended event. I just wanted to try to clarify some issues that seem to cause a lot of confusion.

    While there were clearly problems during the construction of Skyline, it’s simply incorrect to say that the new high school is at the root of the district’s financial problems. As the article noted, they have been facing multi-million dollar deficits for several years – long before Skyline came online.

    The real problem is flat or declining funding from the state (AAPS’s per pupil allocation, set each year by the state Legislature, has declined nearly 9% in real terms since 1994). At the same time, many costs, including health care for current employees and retirees, have been going up much faster than inflation. AAPS teachers have to pay for increases in health care cost beyond the 5% the district will cover (teachers choose from a menu of plans, including MESSA plans that are the most expensive to employees). Right now, they are projecting an 8% annual increase in health costs, of which the district will pay 5%.

    Retirement costs are controlled by a state agency, and the retirement system is regulated by the state legislature. Since the health portion of the state retirement system is “pay-as-you-go,” and costs are going up while the number of contributing employees is shrinking, the state teacher pension system is in the same bind as Social Security. The percentage of payroll which districts are required to contribute has been on a sharp upswing over the last ten years. Changes to the retirement rules in 2007 will not have a major impact for at least 10 years when people covered by the new rules begin to retire.

    So, $14 million cut over the last three years, and even more before that. The schools have been “rationalizing” for many years now as funding has stagnated. The choices are getting harder, even if people are reluctant to talk about what might be on the chopping block. For their part, teachers have been making concessions for some years (while the economy supposedly “boomed”), so it’s not surprising that they are nervous about giving up even more that might never come back. But, unlike cars, demand for a good education has never been stronger – is cutting (real) teacher compensation year after year the best way of providing that good education?

    We as a community and as a state need to sit down and think real hard about what we want from our schools and what it will cost. Taxes are the dues we pay to live in a civilized society, and public schools aren’t necessarily any less efficient than private businesses (and what is the standard – GM? AIG? Lehman Bros.?). The time for empty rhetoric has passed, and the time for a real commitment to invest in education has arrived. Too much is at stake.

  9. March 6, 2009 at 9:12 am | permalink

    The idea of increasing private donations struck a chord with me. For many years, I have believed that charitable giving in the United States is vastly overdirected to elite colleges and universities, where it serves a population of, say, 100,000 students per year, rather than to local educational and charitable causes. (Here, at least, I am completely sympathetic to the “think local” meme.) The problem is, frankly, that many rich people get more egoboo from donating to Harvard (or Michigan) than they do from donating money to the primary and secondary schools that need the money the most. It’s time for us all to rethink the ties to alma mater.

  10. By Kris
    March 6, 2009 at 12:25 pm | permalink

    Steven Norton,

    I have a hard time believing there have been any true concessions with an average Ann Arbor teachers’ salary of $71,080 (in 2007, the highest in the area at that time), raises based of seniority (not merit), a nine month work year and a pension! (Almost NO ONE has pensions anymore) Please note as I stated before, reductions should be across the board not just by teachers and should be tiered to reflect a higher percentage cut for the folks that make more. And any numbers being discussed should be true cost numbers including ALL benefits (accrued and otherwise).

    The average teachers’ salary in MI is $58,482 in 2007, the fourth highest in the USA!

    Regarding the 8% health care increase vs. the district covering only 5%… I can only wish the rest of us in industry were so lucky!

    The new high school might not be the root of the problem, but it is certainly a contributor and is a stellar example of the mismanagement of AAPS through their lack of ability to forecast trends and manage budgets.

    Reference for salary: link to Ann Arbor News article

  11. By Bob Martel
    March 6, 2009 at 1:10 pm | permalink

    I wonder how much money could be saved by closing down one of the older high schools and redistributing those students to Skyline and the remaining older facility? We clearly do not need three high schools at this time in the community. I never thought that we needed Skyline, but it makes no sense not to use it to its full potential now that it’s here.

  12. By Linda Diane Feldt
    March 6, 2009 at 1:27 pm | permalink

    If you look more deeply, we have three large public high schools (Pioneer, Huron, Skyline), and three smaller public alternatives (Community, Roberto Clemente, and Stone). Then there are the private high schools – Greenhills, Rudolf Steiner, Clonlara (independent study and home schooling options), and Gabriel Richard. And the high school at Washtenaw College. So that is 11 high schools, and I may have missed one or two as some of the Charter schools have been adding classes.

    So Bob says we don’t need three high schools, but we already actually have almost a dozen. And each is unique and serves a certain population. I was never in favor of Skyline and voted against it. Why create another Pioneer/Huron clone when Community High has a waiting list (now about double the number of openings) and there are other alternatives desperately needed?

    But I do think that one of our strengths in Ann Arbor is the alternatives that are offered. There SHOULD be at least a dozen choices in how to learn. I just wish they were all affordable, as many are not. Full disclosure – I am a frequent volunteer teacher at CHS (and alumni), and am a current part time faculty member at the Rudolf Steiner High School. I have strong biases on this subject I am happy to confess to.

  13. March 6, 2009 at 3:19 pm | permalink

    Bob and Linda,

    Just for the record, while Skyline is certainly not Community, they are doing some very innovative stuff there – experimenting with how the school is organized, smaller “learning communities,” and so on. The teachers and staff there had to lobby the district and the AAEA to let them do this – and I welcome this kind of experimentation. As Pioneer and Huron get more elbow room, they plan to make some of these same changes in those schools as well.

    While our student population might be dropping marginally, Pioneer was the largest high school in the state until Skyline opened. We may not have smaller classes after Skyline because new staff could not be added (a disappointment, and a result of the Proposal A funding system), but the overall crowding, and the resulting security and morale problems, will be eased. As I recall, Pioneer was operating at about double its design capacity.

    Remember, even if we lose 200 students in a given year, we have 21 elementary schools, 5 plus middle schools and 3+2 high schools. Even if they were all elementary students, that would average just one student per school per grade level. Hardly enough to make closing buildings worthwhile, but it would still lose us on the order of $2 million.

    I am very pleased that the district is experimenting with making the high school experience better, and I hope they have a chance to extend it to Pioneer and Huron soon. As a parent of kids who will be in HS in a few years, the old situation gave me great pause and the new efforts give me hope.

  14. By Bob Martel
    March 8, 2009 at 9:11 am | permalink

    In suggesting that we look at consolidating facilities I was not in any way advocating for an inferior school system. Rather, I am suggesting that we save money by operating fewer buildings to cut some of the associated overhead and redirect that money for direct instruction. It’s all about choices, I think that the cost of an extra high quality English teacher, for example, will do way more for the advancement of education in our community than will a little extra elbow room.

  15. By Patricia Lesko
    March 8, 2009 at 7:42 pm | permalink

    Steve Norton makes some very interesting comments about the falling/flat funding. So, per pupil funding is down 9 percent since 1994. In addition, there are 1,300 pupils in Ann Arbor who do not attend the public schools, or fewer than 10 percent of the total 16,000 member student body. Now, if your funding is down, and teacher salaries account for 71 percent of your expenses, the problem is not that you have too many teachers, is that you are paying more than you can afford for their services.

    As Kris points out, “The average teachers’ salary in MI is $58,482 in 2007,” and in Ann Arbor the average is $71,000, or 17 percent higher than the already high state average. The simple truth is that, as a District, we have the money we have and our School Board members need to negotiate the next union contract keeping this simple fact in mind.

    What if A2 lowered all teacher salaries by 10 percent in order to increase staffing levels, and reduce class sizes? What if we reduced all District employee salaries by 15 percent? Would every teacher, support staff member and administrator in the District run screaming to, say, another District? Which one? I think not, particularly if the goal were to increase teacher staffing and, ultimately, decrease class sizes. A 15 percent cut would result in $14 million dollars in savings.

    What if one-third of the savings each year went toward hiring more teaching staff?

    I suppose my point is that as a District we can’t continue to act as though there is an endless supply of state and local tax dollars to support an endless supply of raises, benefits and pensions for our teachers. If funding is down by 9 percent, than salaries, which make up 71 percent of the General Fund expenses, must be cut. Instead, we are cutting teachers, and increasing class sizes to continue to raise the already artificially inflated salaries of the teachers we already have.

  16. March 9, 2009 at 1:31 pm | permalink

    I think the discussion here is valuable, because it highlights some of the disagreements, as well as some of the misunderstandings, about school funding. More on that below.

    Let me put out some data, just so we are not left citing a two-year-old AA News article (which, by the way, got its national data from NEA research documents):

    Ann Arbor average teacher salary, FY06-07: $66,624
    (from MI Dept of Ed bulletin 1014) Please note that there was a buy-out of teachers near retirement at the end of that year.

    Michigan average teacher salary FY06-07: $55,526 (MDE)
    US average FY06-07: $50,758
    Michigan ranked 10th in the US, and second in the Great Lakes after Illinois.

    Michigan average teacher salary FY07-08: $56,096 (NEA estimate)
    US average FY07-08: $52,308
    Michigan ranked 11th in the US, again behind Illinois and with Ohio catching up.

    Average change in public school teachers’ salaries in inflation-adjusted constant dollars, FY98-08:
    Michigan: -11.1%
    US: -0.6%
    Michigan ranked 50th of 51 (including DC).

    Michigan Dept. of Education data can be found here.

    The NEA comparative data can be found here.

    I guess the message here is teacher pay in Michigan is not as out of line with national averages as many people often think. Michigan teachers have also lost considerable ground in real pay over the last ten years. When we talk about asking teachers to make sacrifices now, we owe it to everyone to know what the real history has been.

    Ms. Lesko – My point is that the main cost drivers for teacher pay are not raises and increases in benefits; they are the dramatically increasing cost of simply holding on to the same benefits. This is not a one year problem, but has been going on for years. To solve it only through cuts doesn’t mean a one-time cut. It means cuts year after year, with no end in sight. The 15 percent pay cut you propose, as drastic as that is, would only close the deficit for about two years. Then what?

    We can continue to “solve” the problem by making continual cuts in programs and in staff compensation. But that is a never-ending downward spiral. Remember, the $14 million the AAPS has cut over the last three years was not a one-time cut to cover a one-time gap. It was regular cuts of $4 to $6 million **just to keep up**. If we were somehow able to push the cost of health care and retirement completely on district employees (which, legally, we cannot do), then we would simply be shifting the cuts. Teachers then would be seeing a higher and higher percentage of their stagnant salaries going to health insurance and retirement, lowering their pay well below inflation.

    Is that a recipe for committed and caring employees who help shape the minds of our children five days a week?

    [I should say here that a real solution to all this will require a change so that health costs are sustainable for the economy as a whole.]

    You point out that “we have the money we have.” But where schools are concerned, I think the truth is “we have the money we decide to spend.” With Proposal A, we took the bait of lower property taxes, and hoped everything would somehow work out. I believe that this system is doing long-lasting damage to our schools, and I hope I can convince my fellow citizens to act before the cost of neglect becomes too great.

  17. By Vivienne Armentrout
    March 9, 2009 at 4:21 pm | permalink

    This is way out of my area, but I’m surprised that I haven’t seen a discussion of the effects on the public schools of diversion of pupils (and head count) to the charter schools. I would guess that the loss is not enough to generate efficiencies, but is enough to cause financial hardship. And don’t the public schools have to maintain capacity in case some proportion of those students come back?

    Sounds as though our teachers are near the median income for our area. I’m sure that in other parts of the state the median income is less. That might be another factor to consider in making comparisons, since the cost of living in an area will probably track median income to some extent.