The Baltimore school system is facing a $35 million shortfall as it plans for its fiscal 2013 budget, a gap that officials said could have a serious effect on schools' spending power for the second year in a row.
The system is projecting about $8.5 million more in revenue next year but has also noted a $43 million increase in expenses, primarily driven by labor costs tied to the system's pay-for-performance contracts for teachers and administrators.
The school system has not presented a full budget as it waits to find out how much funding it will receive from the city and state.
Michael Frist, chief financial officer for the schools, said at the school board's meeting Tuesday night that while the system is in a better position than last year, "our purchasing power is decreasing in some areas" because of flat revenues and increased expenditures.
However, Frist said, it was too early to speculate on the effects of the shortfall until the state budget is adopted, which will account for about 70 percent of the system's budget. The system is expecting that its funding from the state, and the city's roughly 17 percent contribution, will remain flat this year.
In the first talks of the budget season, schools CEO Andrés Alonso also emphasized the impact of flat funding, saying that the district should interpret it as "sacrifices need to be made."
"Just because the money is flat doesn't mean the money is the same," Alonso said. "Last year, the schools felt that because we got Annapolis to hold flat, the schools thought they were riding free. But when the overall pie stays the same, it's going to be painful."
The schools chief also said that while the district has continued to chip away at its central office to give more money and resources to schools, "the more resources you push into schools, the less you have to support schools with."
The district made a controversial decision last year to expand administrative school support "networks," and hire 14 new administrators at $125,000 salaries while schools lost money to spend freely on staff and programs.
The executive directors were hired to support principals, and the networks were expanded to provide more support to schools. The decisions drew the ire of union leaders and education advocates, who eventually supported the plan after the district made its case that the system was going through critical reforms that required more support.
The school board adopted a $1.3 billion budget last year with an $11 million increase in funding going to schools. But due to "fixed costs" like personnel, it was the first time since Alonso gave schools control of their budgets that principals had less say over how to spend them.
Beginning in 2008, Alonso began allowing schools to formulate their own budgets under a program called "fair student funding." The funding model attaches a per-pupil expenditure to each student, which can vary depending on whether students are basic, advanced or special education.
The system, which is beginning its budget process as some systems start planning for 2014, also has not yet proposed per-pupil expenditures.
Officials said that because of the city's unique budgeting process, presenting a budget without concrete numbers causes angst as principals begin to make choices based on the money they expect to receive.
School board members cautioned that the school system relies on a state budget that is projecting a $1 billion deficit.
"We need to be very mindful about what we're communicating in our planning because that could change," said school board Commissioner Lisa Akchin. "There's a larger conversation that we need to pay attention to."
The system will host a public work session on fair student funding at 5 p.m. Tuesday.