Facing ‘dire’ budget shortfall, Denver school board may consider pay freezes, school mergers

The Denver school district is bracing for a “dire financial situation” next year, in the likely case that a coronavirus-induced economic downturn decimates Colorado education funding.

At a virtual meeting Thursday, the school board discussed drastic options to cut district spending, including freezing teacher pay, merging small schools, and furloughing employees.

“All of these are really tough,” Superintendent Susana Cordova told the board. “I want to make sure as we sit around this metaphoric table that we understand the reason we are having this conversation … is because of the depth of the budget deficit that we anticipate.”

Colorado lawmakers are preparing for a budget hit of as much as $3 billion, a 10% reduction from the budget that Gov. Jared Polis recommended in November, as widespread job losses and business closures related to coronavirus affect sales and income tax projections. Some of the losses could be offset by federal assistance, but school districts around Colorado are likely to lose some of the state revenue that makes up a major share of their budgets.

Denver Public Schools officials predicted the 92,000-student district could lose from $19 million to $61 million in state funding next year. The district operates on an annual budget of more than $1 billion.

Before the coronavirus, the district was projecting its revenue would increase 2% next school year. Now, the best case scenario is that it stays flat, while the worst case scenario — the one involving a $61 million reduction in state funding — would be a 5% revenue decrease.

The shortfall comes even as many experts predict schools will need to spend more next year to make up for lost educational opportunities during remote learning.

Jim Carpenter, the district’s chief financial officer, presented the board with several options for cutting next year’s budget. He and Cordova stressed that the options are not recommendations or even proposals. At this point, they said, the options are just ideas.

The ideas include:

🔗Freeze teacher pay increases

The Denver teachers union went on strike last year to win significant increases in teacher pay and a return to a salary schedule that gives yearly raises. One option is to freeze “step and lane” increases for teachers. Doing so would require agreement from the union.

Potential cost savings for next school year: $11 million

🔗Other wage freezes or cuts

Another option is to stop cost-of-living pay increases for all employees, which would save $12 million. A 1% pay decrease across the district would save an estimated $6 million, while districtwide furloughs days — days off without pay — would save $4 million per day.

Yet another option would be to delay pay increases for low-wage workers, such as food service workers, custodians, and teachers aides. The district had been planning to raise hourly pay starting in July. Delaying those raises until January would save $1.5 million.

“Hopefully those are kind of like last resort things,” board member Scott Baldermann said.

🔗Merge small schools

Even before the coronavirus, the board was talking about how to merge small schools — both to save money and to provide quality programming at every school. Denver schools are funded per pupil, and small schools often have to cut programs like art and music to save money.

But school consolidation is controversial because it involves closing schools that have a long history in the community. It’s such a fraught topic that the district isn’t even using the word “consolidation,” preferring the term “merger.” At Thursday’s board meeting, Cordova suggested the district could call the mergers “school marriages” instead.

But merging schools would take time. The earliest it could happen would be fall 2021, not providing relief in next year’s budget.

Potential cost savings: $500,000 per school

🔗Adjust school bell times

This option would allow the district’s transportation department to route its school buses more efficiently. Carpenter said that no school’s bell time would be adjusted by more than 15 minutes on either end, and the length of the school day wouldn’t change.

Drawbacks include that principals would lose control over their schools’ schedules.

Potential cost savings: Up to $4 million

🔗Ask Denver voters for more funding

The district could ask Denver voters in November to support a bond issue and mill levy override, both of which allocate tax dollars to schools. The district could use the mill levy money to fill budget gaps — and it could do so in a way that wouldn’t raise taxes, Carpenter said.

The bond money could be used to pay for things the district currently funds out of its operating budget, such as school remodeling projects and school bus purchases. That would free up money for salaries and student needs.

Denver voters have a track record of supporting tax increases for schools — though this time the district would be asking at a time when many households are struggling financially.

Potential financial impact: $3.7 million cost savings due to bond proceeds, plus $10 million to $15 million in new revenue each year from the mill levy override

🔗No longer give schools extra money for good ratings

Denver’s school rating system is largely based on student test scores, and it’s highly controversial. (A committee is in the midst of “reimagining” it.) Currently, schools get extra funding if they improve their rating or maintain a high rating year over year.

This option would eliminate or repurpose that funding. A potential drawback is that some schools would lose funding, a scenario the district would like to avoid.

Potential cost savings: $2.2 million

🔗Cut all district department budgets by 1%

This cut wouldn’t apply to school budgets or things over which the district has little control, such as utility costs. The drawback here is that such a cut would likely result in layoffs, another scenario the district, one of Denver’s largest employers, would like to avoid.

Potential cost savings: $2 million

🔗Use some of the district’s budget reserves

The district aims to keep 10% of its budget in reserves, colloquially known as a rainy day fund. It could temporarily reduce that percentage to 7%, which would free up $34 million it could use to fill the gap in state funding next school year.

The drawback — and it’s a big one — is that the $34 million would be one-time money. Unless the economy rebounds in a single year and state school funding increases, the district would need to find a different solution for subsequent years.

District officials hope to know more next month about the size of the state education funding shortfall. The board must pass a budget for next school year in June.