Planning for Anticipated Reductions in Subsidy

INFORMATIONAL LETTER NO: 43
POLICY CODE: DB
TO: Superintendents
FROM: Susan A. Gendron, Commissioner
DATE: November 3, 2009
RE: Planning for Anticipated Reductions in Subsidy

This is a brief update on the status of education budget reduction targets. As I informed superintendents in an October 13 Informational Letter, we have been given initial education budget reduction targets of $38.1 million for the current fiscal year and $36 million for FY 2011. These are initial budget targets and I was charged with submitting a report to the Department of Administrative and Financial Services on how these reductions could be made. I delivered that report last week. Governor John Baldacci will review the reports from all state agencies and then make a proposal to the Legislature for a budget adjustment to reflect the decreased revenues. We anticipate that this supplemental budget proposal will be made to the Legislature sometime in December.

It is important to remember that, for now, these are only “targets.” There are many steps to be taken before there is a final number. The Governor will have to make a final recommendation in his proposed supplemental budget, which will go to the Appropriations Committee and then to the full House and Senate for approval.

I know that many of you are wisely trying to take action in the coming days and weeks to prepare for these anticipated reductions in subsidy. While we do not know the exact amount, and will not know the exact impact on individual SAUs until we run spreadsheets based on the final amount in the proposed supplemental budget, there is a simple calculation that will help you estimate the impact: multiply the subsidy reduction for your SAU in the FY 09 supplemental budget by 1.4 because the $38 million target is 1.4 times the $27 million statewide reduction in FY 09. While factors such as enrollment and valuation will cause some fluctuations in this amount, this estimate should be a reasonable “ballpark” figure. You can find your FY 09 supplemental reduction on our new School Funding Outlook web page: http://www.maine.gov/education/funding .

Meanwhile, please do not forget as you make plans for these FY 10 reductions that the reductions for FY 2011 will be even more significant. The already-approved GPA amount in the biennial budget combined with this new target, would result in statewide subsidies of $910 million – which is $92 million less than the original FY 10 appropriation of $1.002 billion.

We continue to work with you on developing financial strategies and proposals for actions that could be taken by the Legislature, the Maine Department of Education, and by local school systems. I met with a group of superintendents and representatives of the various associations last week and we continue to invite your input.

Some of you have asked for assistance with tools for communicating the financial situation to your boards and the public. Two simple illustrations of the current budget situation can be found on our website: http://www.maine.gov/education/funding . The chart and the simple spreadsheet will help illustrate the situation for you, your boards, and others.