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School district faces ‘deepest cut’ in state funding since 2009

Mustang Public Schools has been cut $3 million in funding from the state of Oklahoma, along with other cuts to some of its major state sources of revenue.
While another stimulus package is on the way, Chief Financial Officer Nancy McKay said her main goal is to save the district as much money as she can, while working to
protect its staff and faculty positions.
“We want to keep everyone gainfully employed,” said McKay.
While the district does have funds to replace people, they currently do not have the ability to increase their payroll at this time.
“We cannot spend more money,” she said.
While McKay doesn’t have a crystal ball to determine when the COVID-19 economic rut will be over, the district has a strategic plan for improving fiscal stability. To combat foreseen cuts, McKay works to maintain an 8% to 10% fund balance, which is essentially MPS’ savings account.
However, because of the increased cuts to the district’s general fund revenue this year, that won’t be possible for McKay. She’s hoping to end the school year with about 6% in the fund’s operating balance.
The fund balance is used for cash flow purposes. MPS’ fiscal year begins July 1 and ends June 30. However, payroll and supply demands continue despite most state revenue beginning in August and September, so the fund balance is used to meet those needs.
“What I have to rely on is one of two things — that fund balance, it has to be stable and fiscally sound in order to address payroll, in order to absorb those revenue cuts,” McKay said.
The district’s payrolls alone run about $4.5 million per month.
When cuts are significant, McKay has to work her budget in one of two ways, let the fund balance absorb the shortfalls or cut expenses to align with available revenue.
“It’s a juggling act,” McKay said. “It’s, if I don’t get it here, then I’ve got to reduce expenses over here and reduce budgets.”
McKay has decreased 85 of the district’s 88 budgets this year.
Over a three-year period, MPS’ general fund operating budget has increased in expenses by $30 million. McKay attributes it to the district’s growth in terms of facilities and staffing.

How schools’ state revenue works

While school districts receive many revenue sources from the state, there are four major sources — state aid; oil and gas production tax; motor vehicle license; and school land interest earnings.
On a local level, the largest income for the district is property tax.
The school district is down $1.7 million in oil and gas production tax.
“At all times, the economic indicators drive the structure of our budget,” McKay said.
Although gross production is down, homeowners have not stopped buying houses, leaving the district with a steady uptick in local property collections. Throughout the past three years, MPS has grown about 8% a year in local property tax. The average is between 5% and 6%.
“Our Mustang district patrons are very good about paying their taxes and supporting the school,” McKay said. “We collect about 95% to 96% yearly in property tax.”
In a five-year period, the district has grown $7.2 million in property tax collections.
“There are so many housing developments starting up,” McKay said. “That’s an economic indicator to our board that says, we’re going to continue to grow in kids.”
Motor vehicle license revenue, which is where consumers purchase vehicles and tags, has also seen a $1 million decline. Its revenue is divided amongst the 537 school districts and their populations and is then equally distributed.
Regarding interest earnings, investments were making about $750,000 a year prior to COVID-19. This year, MPS is expected to earn $254,000, another $1.5 million cut.
School land interest earnings come from land the state has leased to developers, farmers and royalties. School districts earn a portion of the interest that is accumulated by the state from these sources.
Distributions of the interest are divided the same as motor vehicle license revenue.

Teachers step up,
CARES funds approved

While the unprecedented year of 2020 brought complications to many teachers’ classrooms, many have applied for more grants for supplies, as the district’s budget took a hit.
“I can’t say enough or praise our teachers enough about them stepping up to the plate and what they’ve done, not just addressing and functioning around the COVID-19 situation, but also getting out there and working to get dollars and donations through grants …,” McKay said.
While MPS will soon receive another COVID-19 relief package, this time in the amount of $2.3 million from the CARES Act, McKay acknowledges that it is a band-aid fix. Since the district is down about $5 million from its major revenue sources, the CARES funds will slightly help, but MPS will still be down about $3 million.
“We still have to be extremely careful because next year, everyone says is really going to be the ugly year in terms of the state not being able to collect revenue themselves in order to be able to turn around and divide it up amongst all the school districts,” McKay said. “Our board and administrative finance team are strategically planning in our decision-making process to face this issue.”

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