Chamber Supports Public School Budget

The Ann Arbor Area Chamber of Commerce has conducted a review of the 2006-2007 Ann Arbor Public Schools (AAPS) budget, and we support the district’s budget and plan to bring expenses in line with revenues.   However, it is important to note that the current budget does not solve the structural deficit facing the district, and we encourage the district to consider the observations and recommendations below before going forward:

The Chamber regularly reviews local government budgets on behalf of our membership and our most recent review of the school district’s budget was in 2001.   We agree that the District should balance its current budget by cutting costs.  As the Chamber has stated in the past, it does not support any government entity continuing to use reserves to fund operations.  We are aware of the financial challenges facing school districts in Michigan and we recognize that these are tough changes. The Ann Arbor Public Schools has made important changes in the past few years to limit health care expenses and we do know that certain major expenses, such as retirement costs, are controlled at the state level. The 2006-2007 budget and the recent teacher contract negotiations are a step in the right direction, but in order to survive and succeed going forward, the Ann Arbor Public Schools must further reduce personnel costs and bring them in line with current revenues.

Many of our members and our fellow citizens have experienced dramatic reductions in benefits or are contributing a much larger portion of the cost. They have also necessitated a change in how employers provide benefits.  Employers are being creative and taking advantage of some of the new options available, such as health savings accounts.  We support the Ann Arbor Public Schools to continued consideration of options to reduce costs going forward.

We offer the following additional observations and recommendations on the 2006-2007 budget:

·        The rising costs of health care and benefits are driving the current school budget deficit.  Lack of increased revenue is also a major factor. The recent teacher contract agreement is a step in the right direction, limiting the growth of health care costs for teachers to 5% a year for the next three years.  However, further changes will be needed to personnel costs to eliminate the structural budget deficit the district currently faces. 

·        This year, the complete budget packet was not available until June 6^th and the public hearing was held June 14^th.   Although this is in line with state statute, it is not sufficient time for the public to review and comment on the school budget.  We encourage the Ann Arbor Public Schools to release the budget thirty days in advance of the public hearing. 

·        The financial issues the district is facing should be more transparent.  The district must provide citizens and taxpayers information that clearly explains the situation, and more importantly, provides the different options available for addressing the problem.

·        We encourage the district to consider options, such as an advisory committee, to get more input from members of the business community that have expertise on these issues. 

·        Given its current financial constraints, the school district has a responsibility to evaluate ways to save money, such as sharing costs with other districts and privatizing certain services.  The public should be given a clear idea of how much money could be saved and the tradeoffs involved.  One idea that should be considered is closing an elementary school.  The estimated savings is over $500,000, which is a savings that would help prevent further increases in class size or other cuts that would directly impact the classroom.  Other services to consider privatizing or sharing with other districts are transportation and payroll.

·        Although it was not part of the budget, a countywide operating millage for schools has been discussed as a way to provide more funding locally for schools in Washtenaw County.  The district should carefully consider options to reduce costs and evaluate whether or not current expenses are appropriate prior to moving forward with a countywide operating millage. 

·        When you renegotiate your labor contracts in the future, we hope that you will take the opportunity to make fundamental changes in your employee benefits packages.   Consider moving to a defined contribution retirement system and phase out defined benefit plans.  If state legislative changes are needed, AAPS should support this change.

·        We encourage the district to consider aligning all union contracts to expire and renew at the same time.  The City of Ann Arbor and Washtenaw County have done this in order to seek changes with all union employees at the same time.

It appears that the expenditure reductions in the budget were seriously and thoughtfully considered and designed for the least impact to the students.  We commend the district for their efforts and encourage you to consider the above options to address structural deficits going forward and begin work on a long-term financial plan.

A quality education system is a critical business issue, both in producing skilled workers for the future, and in enabling businesses to attract employees.   We encourage the district to consider the recommendations above in order to maintain the outstanding education provided by the Ann Arbor Public Schools.