Business finance school

Superintendent Rick Berry came to the fast-growing Cypress-Fairbanks school district 11 years ago because of its reputation for high-grade instruction and strong staff, but it would be his school board's financial decision that would divide his community and dominate his agenda for the next five years.

The Cypress-Fairbanks school system, located northwest of Houston, began as a German farming community so small that children traveled an hour by bus into the city to go to high school. Today it's a booming bedroom community of eight high schools and 71,000 students, with room to grow. When Berry arrived, developers were putting homes on the ground so fast the district was about to outpace the state tax cap on facilities. Paced with financial constraints, the school board decided to give year-round education a try to maximize use of the district's existing buildings.

Cy-Fair, as it's known to locals, would be one of the largest school districts in the nation to move its schools to a year-round schedule, and one of the few in Texas to try a multitrack calendar for financial rather than academic reasons. Early estimates suggest Cy-Fair could save $90 million in avoided facility costs. Berry, a former financial officer, put his business director to work to verify the estimates.

Even when the debate was heated--and there were plenty of board meetings with passionate parents on both sides of the issue--Berry approached the implementation of year-round education with a methodical hand: He studied the academic performance of the school district' s pilot program and tried to build consensus in the community. He hired a then-Big 8 accounting firm to help his staff build various financial models. And Berry brought along his chief financial officer from the Arlington, Texas, school district to figure out how to maximize the dollars and resources for children.

A Financial Fit

Berry had met George Hobson when both were school business officials. Berry was deputy superintendent in Arlington while Hobson was the assistant to the chief financial officer in the larger, neighboring Fort Worth district. Berry hired Hobson when he was named superintendent in Arlington in 1988, and the two honed their common fiscal philosophy in the crucible of a district facing a tough tax cap.

While most school districts in North Texas were capped at $1.50 per hundred-dollar valuation, Arlington voters back in the 195 Os chose a tax cap of $1.20. An election in the early 1990s to raise the cap had failed. As the school district grew, its financial capacity was stretched to its limit. Berry knew the skills Hobson learned in Arlington would be valuable in Cy-Fair.

"We had some really significant budget issues, especially that last year, Berry says. "A lot of the reason why I brought George with me to Cy-Fair was because I knew that he understood my philosophy. He knew how to work the budget on both the revenue and expenditure side, and he was experienced exploring all possibilities as to how to get the most Out of every dollar."

He knew how to cut programs, but he also knew how to generate new district revenues through appraisal protests. Hobson knew how to run the numbers on administrative costs and how to build the fund balance. That cool-headed approach--an even-handed presentation of the facts--would be the way Berry presented year-round education.

"The curriculum was up to the educators," Hobson says. "What I always tried to do was to provide the specifics on the financial impact of year-round, the savings that we could derive from the calendar. The board never doubted the financial impact numbers we gave them. The concern was always how year-round education divided families."

Arlington's tax cap paled in comparison to the overwhelming issue of shifting an entire community to a year-round calendar, Berry admits. By the time the task was completed, a board election coup had left the anti-year-round education lobby in power, and district officials faced with the daunting task for dismantling year-round education even as the school district continued to grow.

So Berry and Hobson went back to the drawing board and drew up a plan to add portable buildings to handle the campus overflow while the school district worked on its next bond issue.

"As soon as the board turned around, we had to come up with options to financially and physically handle the growth immediately," Hobson says. "We started purchasing portables to enlarge the size of our campuses, which helped us in the interim as we moved from year-round back to a traditional calendar. It took two of the largest bond elections that the district ever had--$765 million in construction--to catch up with our buildings."

Strong test scores are a given in a suburban district like Cypress-Fairbanks. What set Berry apart-and landed him his job (although he retired in June) was his ability to balance the finances without sacrificing the academics. Berry says that takes focus and a common direction understood by the leaders in both curriculum and finance.

As the paths of the two strongest trends in education today cross-the accountability standards of No Child Left Behind and the spending shortfalls created by shrinking state budgets--a strong and focused relationship between a superintendent and chief financial officer has become more important than ever. Clark Godshall, immediate past president of the Association of School Business Officials, says money is just as important as academics to a superintendent's future.

"They say the superintendent is the curriculum leader of the school district, but not too many people get fired over curriculum," says Godshall, district superintendent of the Orleans-Niagara BOCES in Medina, N.Y. "They get fired over financial management."

A Full Picture

Most school districts still rely on the state for at least half their funding, and revenue m most states looks grim. A report from the National Conference of State Legislatures this spring indicated that states are going into a third straight year of budget shortfalls, closing a cumulative $200 billion budget gap. This year alone, states are facing a $49 billion gap between revenue and reality.

"What's interesting on a macro-level perspective of budgets is that states have only increased taxes to a third of the extent that they did during the 1990s," says Steve Smith, NCSL's senior educational policy analyst. "We have 49 out of our 50 state constitutions that require the state to balance the budget, so in many cases you have zero dollars coming in. Add to that the fact that a third of the taxes that were raised came from tobacco settlements, and you can see that there is a general reluctance to raise taxes on any of the major revenue streams."

Superintendents like Howard Carlson of the Delano Public Schools in Minnesota recognize the pressure. Carlson says it's getting harder to pass an operating levy in his district. The 2,000 students in Delano, just 30 minutes from downtown Minneapolis, are in the top 5 percent of the state on test scores and the bottom 15 percent on expenditures. Still, the taxpayers want more.

"We are now entering a period of time where people are much more tax conscious," Carlson says. "They don't want to put the money out that they used to. Many times, they don't want to talk about revenue being increased. They want to talk to you about how you can be more efficient."

And as the taxpayers in Carlson's district begin to age--most are baby boomers--they will feel less inclined to spend money on the public school system. To answer questions and build their case, Carlson and his chief budget officer have projected a 5-year financial forecast for the school district. It's a useful tool to tell Carlson what he may lose, but it doesn't tell him where he's going to find more cuts.

"We've cut out all those items that might have been on the periphery," Carlson says. "We've cut out the frills. We've cut out the administrators. We're just about to the point where we're going to have to cut teachers and increase class size. We're getting to a point now where there's nothing else to cur. It's almost at a level where it's hard to sustain."

Cost-Benefit Analysis

School districts must combine those limitations with the new standards set out by the No Child Left Behind Act. Anne Miller, executive director of the Association of School Business Officials, says it's not only critical to make the right cuts but also to make the right purchases. Superintendents and school business officials must work hand-in-hand to make sure the district is getting the best "bang for the buck," she says.