Montana schools see rash of budget shortfalls

Alex Sakariassen

Montana Free Press

Recent months have seen a rash of headlines across Montana regarding multimillion-dollar budget shortfalls in many of the state’s largest public school districts. The specter of cuts to staff and resources for students looms large, and local officials are leveraging the harsh financial outlook in their appeals for additional taxpayer support as voters begin casting ballots in the May 7 school elections.

That outlook paints a distressing picture for educators and community members alike.

In Missoula, staff reductions in the face of an $8 million shortfall have triggered outcries of public frustration and expressions of solidarity from elected school board trustees and district Superintendent Micah Hill.

Trustees in the Billings Public Schools, in an effort to combat a $4 million deficit in the elementary budget, voted in January to close Washington Elementary, sparking outrage among hundreds of local residents.

Helena school officials briefly weighed a similar option this year, but instead adopted a strategy to cut nearly 100 positions if a series of levies on the May 7 ballot prove unsuccessful.

All told, seven of Montana’s eight largest AA school districts are asking local taxpayers to shoulder more of the financial load for public education.

And it’s not just AA schools. Havre Public Schools, for example, is asking voters to approve an increase of a little less than $140,000 a year, a tax increase of about $7.40 a year on a home valued at $100,000 a year or $22.19 a year for a home valued at $300,000, to help offset increased costs.

See a related opinion piece on Page A4 of the Friday, April 19, edition of Havre Daily News.

Most of the requests are coming in the form of voted levies designed to shore up elementary and high school budgets or support specific services in the hopes of creating more flexibility for district general funds. The lone exceptions in AA schools are Belgrade, where enrollment growth is fueling plans for expanded infrastructure, and Great Falls, which isn’t running a school levy this spring.

While the specifics of their financial outlooks vary from district to district, interviews with education leaders across the state underscore several common factors driving their budget projections and related ballot requests.

Federal pandemic relief funding has dried up, inflation has outpaced allocations from state lawmakers, and student enrollment in many larger communities is either flat or in decline as high housing costs discourage young families from moving in.

Those conversations also revealed a general consensus among district officials that rising property values and concurrently rising property taxes have made it more challenging to ask local taxpayers for additional support, and that the state’s overall approach to paying for public education is in dire need of revision.

Looking at the tough choices school leaders have had to make in Missoula, where he took over as superintendent last year, Hill said, it’s “hard for me not to feel emotional about it.”

“I don’t have the magic wand or anything that’s going to make these challenges just go away,” he continued. “Looking at people and hearing their stories of, ‘We moved here from Michigan two years ago, and my husband and I both got jobs (in the district) and now we’re out (of work) and we have two young kids’ — what do we do with that?”

THE COVID CLIFF

Arguably the most obvious factor contributing to the budget crises is that the federal government has pumped nearly $600 million in extra funding into Montana’s K-12 system over the past three years. This fall, that spigot will be shut off permanently, creating what Hill calls the “ESSER cliff.”

The acronym comes from a trio of pandemic-era education stimulus packages approved by Congress in 2020, collectively referred to as Elementary and Secondary School Emergency Relief funds. Lawmakers in the 2021 Montana Legislature set specific spending requirements for portions of that funding, but the bulk of ESSER money flowed directly to districts through the state Office of Public Instruction.

Under a congressionally mandated expiration date, that influx of money will no longer be available come September.

The cut-off has left public schools across the state and the country reeling. Some, like the Bitterroot Valley’s Florence-Carlton district, faced their first wave of related budget cuts last year.

An analysis by the Brookings Institute last fall forecast that as the $190 billion federal cash injection wears off nationwide, the impacts will be felt hardest by schools serving high-poverty communities and contribute to staff reductions that will harm teachers and students alike. Based on calculations made by OPI as part of the federal aid process in 2021, 141 of Montana’s 400 school districts met the congressional stimulus criteria defining high-poverty schools.

The nonprofit Center on Budget and Policy Priorities echoed that assessment this year, arguing that the risks raised by ESSER’s expiration include educator layoffs, school closures and the “loss of crucial student programming.” The report also estimated that ESSER constituted 10% of the overall annual funding for Montana schools during the stimulus years.

A few of Montana’s larger districts took steps to anticipate the cliff. In the Great Falls Public Schools, Business Services Director Brian Patrick told Montana Free Press that ESSER funding was primarily directed toward short-term programs and upgrades to existing facilities.

Butte Public Schools Superintendent Judy Jonart said her district was careful to keep new hires to a minimum to avoid a future shortfall, and will eventually be able to resume summer learning programs launched in the ESSER years with new state early literacy funding established by the 2023 Legislature.

In other districts, the use of federal relief funds to recruit and retain staff was unavoidable, according to many officials. Students experienced not only challenges to their academic success during the COVID-19 pandemic, but began to demonstrate increased emotional and behavioral issues.

Missoula County Public Schools worked to address those needs with ESSER money by hiring interventionists and school psychologists — positions the district is now asking local taxpayers to continue supporting through a pair of school safety levies, valued at $2.5 million, on the May 7 ballot.

For more than a year, state Superintendent Elsie Arntzen has repeatedly reminded districts of the pending federal deadline and encouraged schools to take advantage of the remaining available relief funds. Still, according to data supplied by the Office of Public Instruction, roughly $153 million in third-round ESSER funds had not been spent as of March 2024 — about a quarter of what Montana received overall.

“The OPI ESSER team is working with districts to ensure that the dollars are spent,” agency spokesperson Brian O’Leary told MTFP via email. “Recently, the superintendent also charged our chief accountability officer with aiding our ESSER team in ensuring that all ESSER dollars are expended.”

Meanwhile, Republican lawmakers with a hand in the education funding process have expressed little sympathy for districts now facing an ESSER-induced budgetary cliff. 

Rep. David Bedey, R-Hamilton, heads the Legislature’s Education Interim Budget Committee and said he understands the situation is creating some “angst” among Montana educators and parents. But, he added, it was obvious from the beginning that the funding would expire, and the creation of any new education programs with ESSER money was a “fiscal mistake.”

“I’m not pointing the finger at anyone,” Bedey said, “but there is no expectation that federal money was going to continue, nor should there have been an expectation that the state would automatically backfill it.”

O’Leary echoed that position on behalf of OPI, noting that the agency has continually informed districts that while some ongoing expenses such as staff pay may have qualified for ESSER fund use, the money was never expected to be a long-term source of revenue.

“These dollars were used on a variety of budget needs such as teacher salaries, teaching and learning materials/programs, and building upgrades,” O’Leary wrote. “With ESSER closing, some schools may face challenges to their future budgets regarding budget needs that fell into the approved use.”

Billings Superintendent Erwin Garcia pushes back on that assessment, not because the funds were one-time-only, but because the needs the funding targeted weren’t. ESSER may have expired, Garcia told MTFP, but some students in his district are still struggling to regain the academic ground lost during the instructional interruptions caused by the pandemic. Other students continue to wrestle with emotional and behavioral issues, particularly on the elementary side. 

In Helena, Superintendent Rex Weltz remains skeptical about how widely state and local messaging about ESSER’s expiration truly resonated with the public. He said for many students, staff and community members, the enhanced level of funding became “the new normal.” The impending reductions those groups now face are painful, he added, especially after Montana got to see what a robust infusion of education dollars could do.

“We got a glimpse of what it could be with that funding,” Weltz said. “It’s like, this is what education should be.”

THE STATE FUNDING FORMULA 

Even before the pandemic, public education consistently accounted for roughly a third of the state’s overall two-year budget each cycle. That trend continued in 2023 as the Legislature allocated $2.3 billion to support K-12 schools through the 2024-25 school year. The lion’s share of that funding gets distributed via a series of complex calculations, passing through the Office of Public Instruction and into district general funds.

But leaders in several of Montana’s larger school districts identify that formula as another contributing factor to their current budget woes. Their main contention is that the Legislature’s adherence to a roughly 3% annual inflationary increase in school funding has not kept pace with the cost of operations. According to data presented to the Missoula County Public Schools board last month, the cost of utilities in the district’s elementary schools has increased by more than $500,000 over the past five years, and property and liability costs have nearly doubled in that same span.

Garcia cites a similar concern in Billings, where health insurance costs have become the “No. 1 issue” contributing to the district’s current $7 million budget deficit.

The rising costs of such essentials as lighting and heat speak to a broader reality underpinning much of the current crunch. Life has become increasingly expensive for Montana families, and the bulk of district budgets goes toward covering those expenses with the paychecks doled out to teachers, counselors, janitors, librarians, cafeteria workers and other school staff. Garcia and other superintendents estimate that between 80% and 95% of their general funds are dedicated to salaries and benefits.

Montana’s bottom-in-the-nation ranking in starting teacher pay is a point of regular discussion among state and local education officials, particularly when it comes to recruiting and retaining teachers. Increasing salaries to keep up with the rising cost of living has become a significant challenge, especially in high-growth areas such as Bozeman, Missoula and Kalispell where the cost of housing continues to spike.

The same price increases hitting schools for utilities, notebooks and toilet paper are also hitting school staff in their personal budgets at home, said Amanda Curtis, president of the Montana Federation of Public Employees, which represents the bulk of public school employees statewide. By not adopting a larger increase to state funding in 2023, Curtis argued, the Legislature created an “inflation hole” that districts and union members are now wrestling with.

“Our members are bargaining right now, and I’m not hearing from anyone that they’re getting any contracts that are shooting the moon or even keeping up with inflation,” Curtis added. “Instead they’re having to decide who’s getting cut and where and how that’s going to impact everybody else that stays in employment.”

Responding to email questions on behalf of Arntzen, O’Leary said the superintendent also recognizes that school districts and families alike are “feeling the squeeze of inflation.”

“Every Montana family has had to make hard financial decisions in the past four years,” O’Leary wrote, “and our schools are no different.”

The Legislature tried to address the issue in 2021 by establishing financial incentives for raising starting teacher wages, which Gov. Greg Gianforte has often touted as a promising tool in recruiting and retaining Montana educators. But some districts report they either didn’t qualify, or the state funding wasn’t enough to offset the impact on their budgets.

Others have recently accused the Office of Public Instruction of failing to adequately notify them about the program, preventing districts from receiving state aid for raises they’ve already approved. 

“That was a big hit for us this year because we weren’t able to take advantage of that,” Carrie Fisher, director of finance for the Belgrade Public Schools, told MTFP. “We didn’t know that there was a new form you had to fill out in order to get the money.”

Fisher added that 22 educators would have qualified for the funding in Belgrade, where the base teacher salary is $41,000. Even at that level, Fisher said, “I just don’t know how a new teacher can live on that in this valley.”

Administrators in large districts have a variety of recommendations for legislative fixes they say would help improve the overall financial picture for Montana schools.

Among the most commonly mentioned are increasing inflationary adjustments and raising the per-pupil funding rate for sixth-graders. While the current sixth-grade rate is on par with other elementary grades, larger districts typically house sixth grade in middle schools, where student instruction involves multiple teachers and classrooms.

Such suggestions aren’t likely to help in the near term. The 2025 Legislature is still more than half a year away, leaving districts largely on their own to weather the immediate financial storm without state intervention. But lawmaker Bedey recognizes the inflation-related challenges schools across Montana are experiencing and, in an interview with MTFP, characterized the biennial inflationary adjustments as a key mechanism legislators will have at their disposal next session to address ongoing funding concerns.

“We’re going to have to address inflation in a more significant way,” he said.

As for more substantive changes to the formula itself, Bedey said leaders from across Montana’s K-12 system will have a prime opportunity to explore potential long-term improvements next year when the state conducts a legally mandated 10-year review of its education funding scheme.

Local officials interviewed for this story were well aware that process is forthcoming and said they fully intend to weigh in with recommendations gleaned from their recent struggles.

In the eyes of Montana School Boards Association Executive Director Lance Melton, who has helped shape state education policy for decades, the decennial review is a “high stakes process” and will enable Montana to take stock of the changes its K-12 system has experienced in the past decade.

“The pandemic is a major feature there,” Melton said. “We have to recognize the significant change in our society and the challenges to learning that have occurred as a result of this once-in-100-year pandemic. We didn’t have any inkling that this was going to knock us off our perch the way that it has.”

ENROLLMENT IN DECLINE 

During the 2020-21 school year, districts throughout Montana reported sharp declines in student enrollment associated with the COVID-19 pandemic. The Office of Public Instruction estimated the statewide drop at 3,549 students, roughly corresponding to the dramatic uptick in homeschooling numbers that same school year. The trend reversed quickly, with public school enrollment largely rebounding by the spring of 2022, but certain districts continue to report student headcounts at or below their pre-pandemic highs — a key concern given the weight Montana’s funding formula places on enrollment.

Some prominent voices in public education say the declines are part of a troubling decades-long trend. According to data compiled and shared by Melton, the ratio of school-age children as a share of Montana’s overall population dropped steadily from 20% in the early 1990s to 15% last year. Those figures include both public school enrollees and children enrolled in private and homeschool settings. 

Melton told MTFP the long-term decline reflects a “change in the complexion of the state,” where the average age has steadily risen and population growth has not translated to an increase in young families with school-age children.

“It just makes you realize that declining enrollment can happen in spite of everything around it suggesting otherwise,” Melton said, referencing his data. “If you talk about those days when we had those kinds of (higher) numbers, we would have over 210,000 kids in our public schools today instead of 149,000 or something.”

Officials in larger districts have recently cited this long-term statewide decline as a key contributor to the stagnant or downward enrollment trends they’re noticing locally. Missoula Superintendent Micah Hill said his district’s elementary numbers have dropped by as many as 400 students over the past five years. Superintendent Rex Weltz in Helena added that K-5 enrollment in his district is starting to dip as well.

“Our housing market’s really tough. We just don’t have the availability,” Weltz said. “And then you throw in the price of what’s out there, young families are not moving to our community at this point. There are people moving to Helena, it’s growing, but it’s not with young kids.”

That assessment has been challenged somewhat in data from the Office of Public Instruction, which shows a statewide enrollment increase since 2010. But even there, the annual totals fall more than 15,000 students short of a late-1990s peak, and indicate a downward trend in the past year as well.

Student enrollment is a critical factor in school budgeting because much of the state’s education funding formula is derived from enrollment numbers. Those totals — referred to in school finance circles as “Average Number Belonging” — exert a heavy influence on how much direct aid districts receive from Montana’s General Fund. Funding is calculated based on a district’s enrollment the previous year, meaning gains or losses in student counts have a delayed impact on local school coffers.

When districts experience short-term declines, Montana’s formula cushions the blow by calculating state funding based on a three-year average of the district’s ANB. That mechanism has increasingly kicked in for the state’s eight largest districts. OPI budget reports indicate that Butte, Great Falls and Helena public schools have utilized three-year averaging in at least seven of the past nine years. Hill said the latest ANB peak in the district’s budget in 2020-21 helped delay the financial impact of more recent enrollment declines. But that peak is now four years past, meaning its fiscal influence has finally worn off.

Even stagnant enrollment is raising budgetary challenges. Elementary enrollment in the Butte Public Schools has hovered around 2,900 students since at least 2016, and high school enrollment around 1,200.

Superintendent Judy Jonart argues that the costs of educating the same number of students have risen in that time more than the Legislature’s adjustments have kept up with. Jonart said she’d love to hire additional specialists to help students struggling with math and reading, or to satisfy the local appetite for expanded student mental health services revealed in recent parent surveys. But funding levels have barely allowed recent budgets to keep up with the basics, she continued, and while her district isn’t facing a shortfall this year, she said, it’s tough enough holding on to the resources Butte already has.

“We don’t have a lot of fluff in our staff,” Jonart said. “We are very conservative in everything. But we’re going to get to the point where we’re not going to be able to maintain all of it.”

Nearly every educator interviewed for this story agreed that educating fewer students doesn’t necessarily mean a decrease in the cost of making good on their educational mission. Tim Tharp, chair of the Montana Board of Public Education, said that’s a reality smaller rural districts have been contending with for far longer than their more urban counterparts. Tharp also serves as the elected superintendent for Richland County in eastern Montana, where he believes public schools have already “tightened their belts” so much that thin operating margins have become an “ongoing thing.” He said he can’t remember the last time the schools he oversees ran a voted levy.

While he said the budget issues now facing larger districts are already familiar to smaller schools in the state, Tharp acknowledged that there are basic educational infrastructure needs that transcend simple student counts.

“Just because you have a drop of students and then a drop of budget doesn’t mean that you can simultaneously just reduce your staffing to that level,” Tharp said. “You still need a minimum level of staffing in order to operate. Whether I’m running a school with 10 kids in a classroom or 12 kids in a classroom, I still need to have that teacher.”

LEVIES AND LOCAL CONTROL

News of multimillion-dollar school budget deficits this spring is now fueling appeals to voters in Montana’s largest communities for additional financial support to weather the crises. Ballots for May 7 school elections will be hitting mailboxes over the coming week, many of them featuring an array of levies aimed at addressing operational costs and redistributing pressure on district general funds.

School boards in Helena, Missoula, Butte and Billings this year opted to pursue specialized levies designed to fund equipment and personnel tied to school safety. The proposed investments under those levies include cameras, door locks, school resource officers, counselors and mental health workers.

Bozeman became the first district in the state last year to pass a pair of safety levies for its elementary and high schools, utilizing a tool established by Montana lawmakers and former Gov. Steve Bullock in 2019.

In Missoula, Superintendent Hill said that in addition to improving safety for students, the elementary and high school safety levies — at $1.5 million and $1 million, respectively — will help the district pay for several staff positions initially created to address pandemic-related behavioral needs. Hill argued that shifting those costs to a new specialized revenue stream will also free up money in the district’s general fund to direct elsewhere. But he was candid in acknowledging that the safety levies, even coupled with a pair of operational levies, still won’t save Missoula from significant staff reductions. Success on the May 7 ballot, Hill said, would restore “maybe 20” of more than 100 affected positions.

“We lost a bunch of students, and there’s a $3.4 million budget shortfall in the elementary district. We had to cut,” Hill said. “We have to get back to class sizes that are basically staffed to (state) accreditation standards. We do not have the luxury to say we’re going to add an extra kindergarten teacher to get one kid out of everybody’s class.”

Officials in several other districts articulated similar positions, describing their levy requests as bids to, at best, maintain existing programs and facilities and fend off deep staffing cuts. Billings is pursuing a pair of elementary and high school safety levies. In addition to two safety levies, Helena Public Schools is asking for voter approval on a $242,000 operational levy for its elementary schools and a pair of elementary and high school technology levies. Butte has paired its high school safety levy on the ballot with an elementary operational levy worth roughly $204,000.

With its safety levies already established, Bozeman’s public school district is seeking two operational levies: one for $250,000 at the elementary level and the other for $430,000 at the high school level. Superintendent Casey Bertram said approval of those levies would raise the district to the maximum budget allowed by the Legislature, which caps local school budgets via the state funding formula.

Echoing a point raised repeatedly in MTFP interviews, Bertram added that the challenge of asking local voters for additional support has been compounded by widespread frustration over rising property taxes and a well-publicized dispute over the so-called 95 mills — a state revenue stream designed to equalize tax-base inequalities between school districts across the state.

The Montana Supreme Court last month resolved a dispute between county governments and the state over the 95 mills, resulting in a new wave of supplemental tax bills going out to property owners in the weeks preceding this year’s school levy requests. That money will fund part of a state effort to balance funding between tax-base-rich and tax-base-poor school districts.

“We know that there’s property tax fatigue,” Bertram said. “But we also know that Bozeman values high-quality public education. We have a long run of passing operational levies and bonds, and despite all the challenges we are continuing to provide a great product … So it’s a bit of a sales pitch and educational session at the same time, to try to keep our voters hanging in there with us as we are all struggling to make ends meet in the community.”

Two large school districts stand as outliers among their peers this year when it comes to local levies. Great Falls Public Schools declined to pursue any levies on its May 7 ballot, while board trustees in Belgrade have set their sights on a $60.5 million bond instead, which directs taxpayer funds specifically to planned construction projects. Belgrade School District Superintendent Dede Frothingham told MTFP the request is, in a way, tied to one of the factors other districts have highlighted in discussing their financial hardships: inflation.

Back in 2019, Belgrade voters approved a $48 million bond for the construction of two new elementary schools to accommodate anticipated enrollment growth in the Gallatin Valley outside Bozeman. One of those schools opened in fall 2022, but before the district could break ground on the second, pandemic-era inflation drove construction costs well beyond initial estimates. Frothingham said Belgrade now needs an additional $20 million to complete the project. The district’s elementary classrooms are already near capacity, she added, and without a fourth school, “we can’t last much longer.”

If successful, the district’s plan is to move fifth-graders back into elementary schools and out of Belgrade Middle School, which is also slated for improvements under the bond, leaving roughly 400 elementary seats open for future growth. So far, Frothingham said, she’s received little public pushback to the district’s long-term strategy ahead of the May election.

“Nobody yet has told me ‘that’s a dumb idea,’” Frothingham said. “People are supportive of the idea. They recognize that we’re a growing community, that these are important things, and I think that’s great. The challenge of talking about increasing taxes at this time with property values going up is definitely a challenge. Our voters are going to make a decision about, ‘Is this the right time or not?’”

As districts await the results of votes aimed at resolving their near-term financial challenges, school officials are also looking ahead to the next round of state budget talks in the 2025 legislative session. They’re also casting their eyes beyond the session to next year’s decennial study of Montana’s school finance system — a process set in law by the 2005 Legislature to review the costs of educating Montana students and modify the state’s funding formula accordingly. That study arose in answer to the most recent lawsuit, decided in 2004, challenging the adequacy of Montana’s investment in public education. And district leaders already have some big ideas about the changes they’d like to pursue.

For Bertram, in Bozeman, the desired change is a fundamental one: reenvisioning how Montana law defines the free, quality education guaranteed by the state’s Constitution to account for the athletic programs, extracurricular activities, physical and mental health services, school meals and additional staff that schools in the 21st century offer. It’s a change his district — which now faces a potential $3 million shortfall even after reducing its budget by more than $4 million last spring — took steps to promote in an October 2023 resolution asking state lawmakers to expand Montana’s legal conception of public education’s mission.

“We’ve noticed over time that what our communities expect and depend on public schools to deliver, there’s a lot of things missing from the definition,” Bertram said.

Until then, it will be up to Montana voters to decide how much more of their own money to put behind the mission as it stands.

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Havre Daily News staff contributed to this report.

https://montanafreepress.org/2024/04/24/montana-school-districts-budget-shortfalls-education-levies .