Major decisions are ahead for Superintendent Lewis Ferebee and the school board as they work to build Indianapolis Public Schools’ 2015 budget.

But it wasn’t Ferebee or the board doing the talking late last month at the district’s first-ever budget committee meeting. The superintendent instead called on parents, teachers, their union and students to help him guide the district’s financial future. While many of them had no previous experience managing a $246 million general fund, they were eager to learn.

“Who mandates the budget year? Is it statutory?” asked Weston Young, a parent of a third-grader at School 27 and a budget committee member, seated at a table usually occupied by board members.

Building support for the budget from IPS supporters like Young is a key strategy for Ferebee, who must navigate the district’s tough financial realities to bring to life his his vision of how the schools can change for the better.

A first step is to rebuild trust in IPS’s finances.

Ferebee’s surprising discovery earlier this year — that the district was not operating with a $30 million deficit, as past administrators claimed — is one big example of why observers may be wondering if they can trust the budget numbers. Instead of being in the red, it turned out, IPS ended 2013 with a modest $8 million surplus. Ferebee said the district had been systematically over estimating its budgets without telling the school board for years.

“We’re at a critical time where we need to make some key decisions,” Ferebee said. “With ownership, I think we’ll gain tremendous support.”

Among the financial issues IPS is facing as it aims to finish the budget by August are

  • a $7.35 million anticipated drop in the district’s general fund budget due to changes in state funding. That’s the account that pays for teachers, school support staff, administrators, central services, supplies and daily operations;
  • a teaching force with many teachers who have not received a pay raise in five years and negotiations starting Aug. 1 with the teachers union;
  • and a recent history of poorly managed finances, according to two outside studies of its operations, and an unsophisticated investment strategy for managing the district’s cash reserves, now estimated to be around $60 million.

Trying to do more while receiving less

Ferebee’s plan are ambitious. He wants to turn around about two-thirds of the district’s schools, which rate a D or F for low test scores. But he’ll have less money from the state as he tries to fix those schools.

IPS expects to receive $7.35 million less from the state next year, a result of reduced tuition payments and extra support for poor students.

The state is gradually transitioning to give each district the same base amount per student, meaning IPS stands to lose $365 per student once the process is complete. Previously, several state programs offered extra aid to districts with large numbers of low income kids, declining enrollment or other challenges that IPS benefited from.

Each IPS student is expected to receive $4,861 in basic tuition support next year. Republican legislators who pushed this strategy say it is more fair if all districts receive the same aid amount. But critics, mostly Democrats, argue that districts facing tougher challenges, like high poverty, need extra dollars to help their children overcome challenges and succeed in school.

There is still extra aid in the state budget for poor students, but it’s increasingly less than what district like IPS received in the past.

Also straining the budget is more than $18 million annually that IPS is required to pay to other schools. Most of money is redirected to pay for the operation of four schools in state takeover, which were severed from district control by the state in 2012 because of poor performance and given to other organizations to be managed for five years.

Restructuring teacher pay

Teachers, meanwhile, have made it clear they expect a raise.

Ferebee and IPS board members have said they hope to restructure teacher compensation, and last week they decided to pay IUPUI about $85,000 to help them overhaul their teacher evaluation system. Administrators say they want to reward top-performing teachers with raises.

IPS officials also hope to institute more regular raises, a higher starting salary for new teachers that is competitive with township salaries and possibly performance-based bonuses. Current starting teacher salary currently is $35,650.

But those changes would not be cheap. Ferebee estimates even a small 2 percent raise for teachers would cost $4 million per year for the district.

“We want to be more competitive,” Ferebee said. “The next step is identifying the resources.”

Shadowed by past mistakes

One of the district’s key challenges will be figuring out a better way to manage its finances. IPS’ financial management practices were lambasted by two independent audits earlier this month for being unsophisticated, unorganized and intentionally obscured from public scrutiny.

“The district’s financial reporting lacks transparency at virtually every level,” found an audit by the Council on Great City Schools, a coalition of large urban school districts hired by IPS to review its finances.

IPS has cash reserves of about $60 million, which Ferebee said he is either looking to invest or use to cover the state funding shortfall.

One suggestion from the audits was for IPS to move its budget year to align with the district’s academic calendar, which would help the IPS have more flexibility and control over spending. That could also help teachers, said budget committee member Casey Hawks, who sweat every year as IPS scrambles to determine if it needs to make layoffs for the upcoming year, by backing up the process so it can be done more systematically with less pressure.

“In March, when you’re talking about staffing for the next year, a lot of teachers are nervous,” said Hawks, a teacher at School 44. “If we did move to a school calendar year budget, that might be positive.”

Recommendations coming

The timline is short for Ferebee and the budget makers. By the end of August the board is expected to vote on the district’s plan.

But Ferebee said a better public understanding of the process, aided by the committee, will help. He hopes it will make recommendations to the school board first.

“Think about how powerful that would be,” he said. “It sends a really strong message of where we are.”