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Use of One-Time Funds to Generate Long-Term Ongoing Benefits

By Tahir Ahad, TSS and Brett McFadden, ACSA - March 20, 2009

Whether or not one agrees with the causes, logic and rationale of the recently enacted state budget “correction” and federal stimulus packages, the fact remains that they will result in making substantial one-time, uncommitted funds available for local education agency (LEA) governance teams.

Through a combination of fund balance sweep ups, categorical flexibility, and expected federal stimulus funding for schools, a large amount of funds will be available for one-time use during the next several years.

Although some programmatic changes, such as modifications in the K-3 class size reduction program, may erroneously create an illusion of long-term ongoing savings, one must remember that the “normal” rules have been relaxed only for a period of a few years, making those savings essentially short-term and temporary.

As such, these one-time funds should be utilized on products, programs and services that are one-time and temporary in nature, but that will have lasting results on instruction and academic achievement for your students.

The following “do’s” and “don’ts” can help you navigate your way through the budget and expenditure planning that lies ahead.

Don’ts

LEA management teams should expect demands from their bargaining units for one-time bonuses.  Since most employees will not see a costs-of-living salary increase during the current and the coming fiscal year, and many have in fact suffered pay reductions and/or furloughs, there will be strong temptations to use these funds for one-time off-the-salary schedule bonuses.

Our experience with one-time, off-schedule bonuses has taught us that their long term benefits are limited.  Any political gains from these bonuses are usually short-lived, and the expenditure often becomes forgotten in subsequent contract negotiations.  In our current fiscal environment, one-time bonuses will merely buy you some time to wait out the economic turmoil.  Getting “labor peace” is certainly important, but that needs to be weighed against how you can use one-time money in a manner that has long term benefits for students.

Keep in mind that policy makers and other non-employee stakeholders will be watching how the K-adult management community utilizes federal stimulus dollars and state-level fiscal flexibility.

In addition, beware of your community’s reactions when it comes to using one-time dollars.  If you are like most LEAs, you have likely provided information to your community on how state budget cuts will impact your district and/or County Office of Education (COE).  Your constituents may not understand why, after pleading dire straits ahead, you are granting bonuses to your employees.  Added to the fact is that the current national climate and news introduces a certain level of toxicity in regard to “bonuses.”

Finally, the use of one-time funds to add new programs or avoid necessary on-going reductions has significant risks. The use of one-time funds for new programs can help garner only marginal academic gains, since the funded programs do not get the time to take root and mature before funding runs out.

Using one-time funds to avoid on-going reductions can have the short term benefit of keeping some programs alive for an extra amount of time.  But it has its risks as well.  Such programs can end up suffering a death by a thousand cuts, making the experience even more painful and politically difficult.  Education leaders will need to carefully analyze the benefits and disadvantages of using one-time funding to provide short-term protection to on-going programs.

Do’s

The use of one-time funds to buy-out teachers at the bottom right of the salary schedule can create long-term ongoing savings in the unrestricted general fund.  Funding an “early retirement incentive” with one-time funds can also satisfy the political need to spend part of these monies on bargaining units.

Think creatively and plan spending on projects that may help enhance efficiency, reduce waste and expenses, and generate on-going savings.  Installing a central climate control system to ensure savings by remotely and electronically manipulating classroom temperatures is an example of such an expense.

This is also the time to fund those long needed but overlooked projects involving health and safety. Another prudent use of one-time funds would be to invest in equipment and technology which may be essential to deliver services with reduced staffing levels.

This is a good time to re-examine your instructional and professional development needs.  Federal and state accountability requirements have not gone away.  Using one-time monies may be a way to backfill reductions to state professional development funds and target resources to instructional and academic needs that would otherwise be delayed or eliminated.

Districts that are implementing professional learning communities and/or response-to-intervention/instruction programs may want to consider how they can target resources to these professional development purposes.  They are one-time in nature, but can have long term benefits on student achievement.

Softening the blow to the programs at the school sites by allowing a gradual reduction in certain programs -- thus avoiding drastic sudden cuts -- may be appropriate, based on the circumstances in a district.  Utilizing a part of these funds to conduct efficiency studies and to implement the recommendations in order to enhance productivity and generate operational savings will be a wise use of these funds.

The common theme these next few years should be this:  one-time funds used for one-time purposes, with an eye on creating on-going long-term benefits, efficiencies, and savings to enhance services to students.

Editor's Note: Tahir Ahad is President of educational consulting firm Total School Solutions (TSS) and Brett McFadden is Management Services Executive with Association of California School Administrators (ACSA).