Education funds expected to shrink further in 2002

There may be dark days ahead for public education.

A major player in the Spring-field economy that is heavily dependent on state funding, public education faced considerable belt tightening this year, and education officials say it isn't likely to get easier in 2002.

Southwest Missouri State University, Springfield Public Schools and Ozarks Technical Community College, employing more than 5,800 people, were allotted more than $155 million in state money for operating expenses this year.

But that amount is expected to shrink next year unless state revenue makes a dramatic re-bound from its current decline.

Estimates show Missouri may not have enough new revenue to cover legally mandated core aid to elementary and secondary schools in the budget year that begins July 1, 2002, said state Budget Director Brian Long.

And that doesn't take into account the needs of other mandated programs, such as Medicaid, he said.

Budget officials estimate that an additional $650 million in new revenue will be needed to cover projected state budget needs next year, but they now believe that new revenue will amount to only $183 million.

That's far short of the $220 million required by the core aid funding formula for elementary and secondary schools, Long said.

Shrinking funds

The Springfield public school system already has seen a $2.4 million decrease in state money compared to a year earlier, said Charles Drewel, finance director for Springfield Public Schools. Incremental reductions in various aid categories including the core funding formula, transportation, gifted education, textbooks and grants account for the decline, he said.

"My personal projection is that our system here could see a reduction of 10 percent in state funds, which is close to $4 million," he said. "The talk among school finance people is that next year will be a real tough year."

Drewel said the situation is the worst he's seen in 12 years of public administration, dating back to his days as director of the Missouri Rehabilitation Center in Mount Vernon.

The Springfield school district's operating budget is $164 million, and nearly $45 million, or slightly more than 27 percent, is from state aid. About half the system's income is from local property tax, and the remainder comes from the special state sales tax for schools and federal sources. The district employs more than 3,000 people on a full-time-equivalent basis and has a payroll of about $123 million.

Higher education

Several months ago, when it became apparent Missouri government revenues were down due to the depressed economy, the state imposed a 5 percent withholding on most appropriation categories. The policy included public colleges and universities like SMSU and OTC, and prompted new budget management decisions.

Brian King, vice president of administration and business at OTC, said the state has shifted from quarterly to monthly payments of the school's appropriation, which is indicative of money woes and the need for tighter fiscal management.

"They had to prepare for the possibility of being behind," he said, referring to tax income that may not measure up to budgeted spending.

That means schools could be subject to further restriction of their current appropriations if the income picture worsens, King said. His school has adjusted so far by cutting back on such things as travel and conferences, he said.

OTC's operating budget this year is $27.5 million, and 46 percent, or $12.8 million, comes from the state. The rest is supplied through the local property tax, tuition and federal funds. The school employs 800 people and has a payroll of $10.7 million.

Balancing the budget

Missouri, by law, is obligated to maintain a balanced budget and is not permitted to engage in deficit financing. As an ordinary precaution, all state appropriations are subject to a 3 percent "withhold" reserve, which means the money can't be spent unless there is extraordinary need. As the sluggish economy unfolded last summer, Gov. Bob Holden ordered the additional 5 percent restriction that affected all state departments, including colleges and universities.

Public higher education has contributed about half the state's $500 million savings so far this year, which includes sacrificing capital spending and cuts in operating funds, said Tom Allen, vice president for financial services at Southwest Missouri State University.

"Higher education has al-ready helped with 50 percent of the holdback," Allen said.

Major ways in which the university here has coped is by reducing the planned start of new programs, not filling some staff positions and cutting back the remodeling project at Sice-luff Hall, he said.

"But we didn't have to lay anybody off," Allen said.

Putting the best possible light on the situation, he said, "The saying is that this year is not as good as last year, but better than next year."

The state's appropriation to Southwest Missouri State this year is $89 million, which is 60 percent of the school's total operating budget. Most of the remainder comes from student tuition.

The university employs more than 2,000 people on a full-time equivalent basis and has an annual payroll of $95 million. The budget also includes operations at the West Plains campus and the Mountain Grove re-search center.

Competing needs

Public education in Missouri is big business. The state's current operating budget is nearly $19 billion, and 29 percent of it, or nearly $5.6 billion, is devoted to spending on public education programs preschool through college. Of that total, elementary and secondary education receives more than $4.4 billion and higher education gets more than $1.1 billion.

Of the state funds it receives, elementary and secondary education's core formula aid of $2.6 billion is at the top of the list of funding priorities, but there is competition. As state budget director Long noted, officials estimate there won't be enough new state revenue to fill that requirement, let alone other items in the total package of $650 million or more in additional spending needs.

Other needs include $250 million for Medicaid and children's health and social services; $40 million to open a new prison at Bonne Terre; and $45 million as the state's contribution to its employees' health insurance premiums.

There is concern that the crucial money need could go much higher. For instance, Long said, the state has begun spending on new public security measures prompted by the Sept. 11 terrorist attacks on the United States, and it is uncertain how much this cost may increase in the future.

If the economy continues to suffer, the shortfall will have to be made up by deep spending cuts or new tax rates, Long said. And neither, he added, are very palatable to most interests.

If it's any consolation, Long added, Missouri is not the only state experiencing money trouble.

Many other states have taken drastic measures to keep budgets solvent, he said. Michigan closed a prison, North Carolina raised taxes on business by about $300 million, Alabama borrowed $100 million from its school fund to pay for income tax refunds, and Iowa laid off 300 state workers.