It is School Budget Season again, with a preliminary budget presented at the March 17 BOE meeting.  Like a conjoined twin, we also have School Budget Hysteria Season, with people I’m sure know better abusing terminology to frighten others into a politically valuable panic.  

The scary word of the season is “deficit”.  The preliminary budget presented at the March 17 meeting has a preliminary deficit of M$2.45 (9:30 in video).  As part of the calamitous cacophony of complaints, someone on social media – someone involved enough to know better – claimed that last year’s preliminary budget had no deficit.  Wrong.  It had a deficit just short of M$0.5.  The year before, it was M$7.5.  Before that: M$3.

The most important consideration here is that these are all preliminary numbers.   As one BOE member explained during the meeting, this balances our expected revenues with our desired appropriations.  One way to think of this is when planning packing for a trip.  One starts with an ideal list, and then whittles it down to what fits.  Complaining about an imbalance at this point is premature at best.  In some cases, these complaints – from people who know better – are purely to score political points.

A secondary, but still significant, consideration is whether a deficit is good or bad at this point in the process.  Let’s assume that the administration presented a preliminary budget with no deficit to the BOE.  This could be a good thing, signalling that we’ve managed to afford everything we want.  The more likely situation, especially in the current environment, is that the administration has made its own choices concerning what should be cut from desired appropriations.  Those choices may be good, but the administration making these choices on its own disempowers the political leadership of the district: the Board of Education.  That has been an issue in the past when administrative budgets were constructed in a fashion that “weakens the Board’s ability to exercise oversight over the district”.

Disempowering the BOE also disempowers the voters of Montclair.  Budgetary choices like this should be a collaborative effort, balancing the various priorities of the community.  Moreover, such choices should be made in public.  We should know how our school tax dollars are spent – and how they’re not spent.  Therefore, although deficits may seem scary, this is a case we want to see the “making of the sausage”.

It is also crucial to note that, regardless of the deficit with which this preliminary budget starts, at the end of the process we will have – we’re required to have – a balanced budget to deliver to the county and the state.

That a preliminary deficit in a preliminary budget is not a problem does not suggest that there are no issues with this budget or that there are no reasons to be concerned.  In fact, one issue with this deficit hysteria is that it can obscure serious concerns.  Unfortunately, there are several.  This is all based upon the presentation during the meeting because, at the time this is being written, no additional information has been made available on the website.

The most significant concern involves the federal government.  The current federal administration has made it abundantly clear that it wants to shut down the Department of Education and pull the federal government out of the education business.  As noted during this meeting, the funding Montclair receives from the federal government is appropriated by Congress and therefore, in theory, not at risk.  With the current administration’s willingness to impound appropriated funds, though, nothing is certain.

This puts approximately 1.2% of the district’s revenue at risk.  Although this may seem small, cutting a little over two million dollars from this already tight budget would yield unpleasant results.

A more general concern – though hardly new – is just how tight the budget is.  As noted during the meeting, this budget involves “leveraging all these options in the toolbox” to reach this point with only a preliminary deficit of M$2.45.  Despite auditors’ concerns about fund balance, for example, some of this is being used as revenue (though apparently less than in the 2024-2025 budget).  Unlike the past couple of years, M$2.5 in interest earned on cash from bond sales but not yet spent is used as operating budget revenue.  Previously, these earnings on interest had been used to reduce taxes.  The banked cap accumulated over the last couple of years is also being used.  Finally, there is an additional M$2 of tax revenue, beyond the state-mandated 2% cap, resulting from increased health care costs.

With all these “options in the toolbox” already exercised, little room is left for additional revenue to be found.  Assuming that no further revenues will be added to the budget, building a final budget from this preliminary budget will include identifying M$2.45 in spending cuts.  As we see every year, salaries and benefits are almost 80% of the budget.  Cuts of this magnitude will be difficult to achieve without affecting staff numbers, though there’s no public information of which I’m aware regarding what cuts might be planned.

This would be a good time to resurrect the discussion of returning some of the PILOT revenue appropriated by previous town councils to the school district.  As discussed in this article, that could be the difference between staff cuts and no staff cuts, whether in 2025-2026 or future years.