Building a school system budget: the basics, and the basic problem

On Thursday, Dr. Duran presented his FY25 proposed budget to the School Board and the community. At present, there is a $29 million budget shortfall that we will need to close before the final budget is approved in May. Additional revenue may be coming from the County (per an advertised tax rate increase) and Virginia (as the General Assembly works to finalize the state budget); however, even with additional revenue, the School Board will have to find additional cost savings.

Below are the remarks I shared at Thursday's meeting. I invite your participation in our budget process this spring and thank you in advance for your questions and ideas. 

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​One of the things I have learned in my first two years on the school board is that it can be tempting to receive the budget and immediately jump into its specifics—in essence, the problem of not seeing the forest for the trees. There will be time in the weeks ahead to dig in, question, and scrutinize the details. Tonight, though, I believe it’s important that we intentionally spend some time talking about the larger, structural elements that we’re seeing in this budget.
 
The first element is revenue. I have spoken before about my concern that we do not operate in a world where we can be completely confident that revenue growth will exceed the growth in our expenses. I have spoken about my concern that we cannot rely forever on using reserves to plug the gap in our budget and fund ongoing costs. Over the past few years, we’ve used reserves in large measure to fund a compensation increase that was several years overdue for our staff. This is an ongoing cost if we are to fairly compensate our employees for their work and recruit new people who want to work in Arlington.
 
Since I have been on the board, and even during the years before, I have heard various people bristle at the claim that APS has a “structural deficit.” In fact, we do. Our share of local tax revenue, our funding from the state, the very small amount we get from the federal government, fees we collect from programs like Extended Day and our pools—these revenues do not cover ongoing expenses.  Our Budget Advisory Council has expressed this concern multiple times, and I am grateful for the volunteer energy and ideas that group brings to this challenge.
 
Other local school divisions acknowledge the revenue issue as well. Fairfax County Public Schools states: “A structurally balanced budget occurs when recurring revenues are equal to recurring expenditures in the adopted budget. Since FCPS has needed to use one-time savings from the prior fiscal year to meet recurring expenditures, FCPS has a structural deficit. While this helps address funding needs in the short term, FCPS and the County both recognize that using one-time funding for recurring expenditures is not fiscally sound over the long term.” 

In Loudoun County, the school division notes “Since the current state funding methodology significantly underfunds the true cost of the mandated minimum instructional program, each school division in the state uses a greater share of its local revenues to cover the costs of education.” 

In Loudoun last year, the local government funded 69% of the school division’s operating budget, and the state funded 29%. That left just 2% to be covered by other sources, including federal funding. In Fairfax, 69% was funded locally and 27% was funded by the state. In Arlington, our FY24 school operating budget is 78% locally funded and 15% supported by state funds—leaving a larger gap, of 7%, to be covered by federal dollars, fees we can collect, and reserves. $38M in reserves that we used to plug the expense gap and balance our budget. (See breakdown of funding for local school divisions here.) 
 
This brings me to the second structural element, which is expenses. If you don’t have the revenue you’d like to have—whether that’s in your family, in your company, for your faith community—you look to cut expenses. Some will naturally wonder why expenses and enrollment don’t track at the exact same rate in a school division. I have two things to say about this.
 
The first thing I’d encourage us to acknowledge: our schools, not just in Arlington but across the country, are being asked to do more and more. First and foremost, we expect our schools to modernize and personalize instruction according to what research is telling us about the science of reading, necessary supports for English Learners, the most effective accommodations for students with disabilities, and more. We expect our schools to operate in an environmentally sustainable way to mitigate the climate crisis, which is both a practical measure and a moral obligation to our youngest citizens. We expect our schools to be the first responders to students with mental health needs—which our local and national data show are escalating. We expect our schools to educate students about drugs that are more addictive, lethal, and accessible than anything previous generations had to reckon with. And at the most basic level, we expect our schools to be safe places, in an era of all-too-common school shootings.
 
Even if enrollment held steady over the past ten years—and even building in market-competitive salaries for our staff—due to the factors I’ve just described and more, our financial needs would increase.
 
The second thing I will say about expenses is this: we absolutely must be getting the maximum value for every dollar we spend. I have spoken before about our need to have a more intentional process for evaluating return on investment. This is true in all times, not just in times when we are revenue-challenged, because we are stewards of a significant amount of public money and trust.

None of what I have stated tonight absolves us of our responsibility to operate as strategically and efficiently as possible, and in a way that aligns with our values and priorities. And while I hope we will continue to talk about our budget in this high-level, structural way, the immediate work before us is to balance our budget. We have to do that in a manner that invests in the most high-leverage, critical components of our work—even as society’s definition of our work is expanding.
 
To do that, we need to leverage all the expertise at our disposal, and I believe many individuals and groups have expertise to contribute.

Families, you know better than anyone how high-level budget and operations changes will affect the real day-to-day of your children and your home.

Our school staff contribute their practical, on-the-ground experience to say, “Here’s how policies and investments actually impact our direct work with students.”

Our central office staff look across schools to understand trends, meet shared needs, and apply research and best practices from the field.

The superintendent applies his expertise to say, “Here are my recommendations about the best ways to invest to meet our strategic goals.”

Our County Board colleagues hold the expertise to understand how APS’s needs align and coexist with other community needs, and within our shared, long term revenue forecast.

It is my belief that the School Board makes its best decisions when we listen carefully to the expertise each of these groups can contribute and synthesize these perspectives into a fuller, more informed understanding to guide decision making. I look forward to doing that work together.