District works to address historic budget shortfall

By Lisa Brody

Birmingham Public Schools, which recently discovered a $14.3 million budget shortfall due to a variety of factors – including an over-levying of property taxes – is working on improving both its short-term and long-term financial sustainability, as well as how the district can move forward and address the issues which contributed to its financial problems by inviting residents to a virtual financial information meeting on Monday, March 14, as well as to view or attend the board of education meeting on Tuesday, March 15.

The district first publicly acknowledged the unprecedented budget shortfall when superintendent Dr. Embekka Roberson sent out a letter on February 28 to the school community informing members that while working on budget amendments, a $14.3 million shortfall was discovered.

In her letter, Roberson wrote, “On June 22, 2021, BPS adopted a 2021-22 school year budget that estimated a $1.58 million shortfall. Upon assuming the role of superintendent in July 2021, the Board of Education and I immediately began a review of our school operations. Our recent work on the mid-year budget amendment process determined that the shortfall is actually projected to be $14.3 million due to discrepancies in both revenue and expenditure estimates including underestimations of salary and retirement calculations for the 2021-22 school year, an overestimation of student enrollment, and an over-levying of property taxes which will result in a credit to taxpayers.”

According to sources, early discrepancies were discovered by Roberson and leadership in October 2021, and can perhaps be attributed to inconsistent leadership while the district was led by an interim superintendent as former superintendent Mark Dziatczak was ill and on leave, and then resigned due to a long-term illness. Former assistant superintendent of finance Jim Larson Shidler, who is no longer employed by the district, would have been responsible for the budget, millage figures, and all other financial figures, sources said. Millage figures are determined by the finance director in conjunction with the Oakland County Equalization Department, which is supposed to run through a mathematical formulation which takes into account home values and enrollment numbers.

Kyle Jen, director of management and budget for Oakland County, explained the county's responsibility is to help school districts and other taxing entities calculate Headlee Tax Amendment rollbacks correctly. Under the Headlee Amendment, approved by state voters in 1978, property tax revenue growth is capped at either the rate of inflation or five percent, whichever is less, so millage rates are adjusted to meet this standard. That portion of the millage appears to have been accurately set, according to Jen. Where there were inaccuracies was in the hold harmless millage, for school districts like Birmingham that receive more than the basic level of state per pupil school funding, as dictated by the 1994 voter approved Proposal A, and which is based on enrollment figures. The district received funding for 7,297 students for this school year, an overcount of 545 students.

The millage overcharges to residents of the district were $2.2 million for the 2021-2022 school year and $1.4 million for the 2020-2021 school year, according to Anne Cron, executive director of communications and family engagement. Those were the only school years in which homeowners were overtaxed, she said.

In January of this year, Roberson brought in Dr. Maria Gistinger, a CPA and retired assistant superintendent of finance, to perform a thorough review and collaborate with the district's auditors from Plante Moran. Millage corrections are likely being worked on at the state level, sources said, and Cron noted adjustments will be made.

Of the $14.3 million in budget shortfall, current board of education policy will permit an approximate $3-$4 million use of rainy day fund for budget shortfalls. There is currently approximately $20 million in the district's general fund rainy day account.

Cron said the board adopted a policy over a decade ago that allows only a percentage of the fund to be used for shortfalls so that the district can maintain a healthy fund balance for strong borrowing power regarding bonds and other financial matters,“but the board does have the discretion to alter that policy if they choose.”

“We really are trying to be transparent and open in our communication, and Dr. Roberson has been very swift in her actions and directions for the district,” Cron said.

In a new FAQ email sent out to the district community, Roberson said, “Our leadership team is exploring other funding avenues at the federal and state levels, seeking cost-saving opportunities, expanding revenue generating programs, and creating a long-term financial planning process.”

She said the district is currently in a strategic planning process with a variety of stakeholders, and “we will make sure that our budgetary spending is in alignment with our community’s priorities. If the structural deficit persists or gets worse, we will have to make tough choices and difficult adjustments in the weeks and months ahead.”

Of concern is a sharp drop in enrollment due to the pandemic. While enrollment figures have declined steadily since 2013, Cron acknowledge “a significant drop of enrollment happened due to the pandemic,” with many families transferring their students to private and parochial schools, a pandemic-related trend experienced by school districts on a national basis.

In the FAQ letter, Roberson noted that the district plans to use data and research to ascertain the root cause of the enrollment decline “so that we can build an aggressive plan to reverse this trend.”

Those interested in learning more on how the board will address the future of the budget shortfall and how the district plans to go forward can attend the board of education meeting on Tuesday, March 15, at 7 p.m., or livestream it at youtube.com/birminghamPS.