It’s going to be a hard year.

State budget cuts plus rising costs equal more pain for area school districts.

When the legislature passed the state’s 2012–2013 budget at the end of May, governor Rick Snyder made good on his promise to deliver a budget on time, something that hadn’t happened in Michigan in thirty years.

The Republican also made good on his promise to balance the $46.5 billion budget by cutting state spending by $3 billion—$1.6 billion to correct a structural deficit, and another $1.4 billion to offset a huge reduction in business taxes.

The governor touts his budget as shared suffering for the greater good of reinvent- ing Michigan’s economy, and citizens will certainly suffer. Among the hardest hit are Michigan’s school districts, which will see their state funding cut by $200 million. To make things even tougher, the state has increased the amount districts are required to pay into the state pension fund. It rose to 20 percent of payroll this year—and will climb to 24 percent next year, and 27 percent the year after that, with no end in sight.

For most school districts, lower income plus higher pension and health-care costs equals more pain: bigger classes, fewer programs, more fees, and fewer teachers. But for some, like Saline, it could mean acute agony. “If we don’t address those things in the next eighteen months,” says Saline’s superintendent Scot Graden, “we’ll be in a deficit and open for [a state takeover by] an emergency manager.”

According to Graden, “In the last four years, benefit and pension costs have gone up 44 percent.” Meanwhile, the state has cut per-pupil payments, and Saline’s enrollment has slipped from 5,500 to 5,350 over the past two years. It adds up to a $5.9 million shortfall.

At the end of May, the Saline teachers’ union made $1.35 million in concessions: teachers gave up 5.5 days’ pay (about a 2.5 percent pay cut), and agreed to pay 10 percent of their health insurance premiums. “We’re in the last year of a three-year collective bargaining agreement,” says Chuck Lesch, president of Saline’s board of education, “and they had no reason to give us anything, so we’re grateful.”

But Lesch says rising health care and pension costs are still the number-one financial problem for K–12 school districts. “And we have no control over them at all, so the state’s going to have to do something about that.” And even with the teachers’ concessions, “we’re going to do some cuts—there’s no way around it,” says Lesch. “Everything is on the table. And we’re going to dip into our fund balance again. I don’t see any way around that either. It’s going to be a hard year.”

Among local districts, Saline’s budget troubles are the worst. Chelsea is perhaps best off, because hard times hit them first. “We’ve been dealing with this for ten years,” explains superintendent Dave Killips, “and we knew 2011–2012 would be a difficult year, so we made tough decisions to prepare for it.”

With enrollment down from 3,000 to 2,500 students over the last five years, Chelsea closed an elementary school and reduced administration to match. And, Killips says, “our union stepped up so we were able to reduce our insurance policy 25 percent and get a hard cap on health insurance [spending].” As a result, while Saline’s fund balance is down to just 5 percent, Chelsea’s is a healthy 22 percent, allowing them “to use a portion of fund equity for a year or two to offset the state” cuts, says Killups.

The Dexter district has a 15 to 17 percent fund balance and a steady 3,600 students. “We’ve been frugal,” says board of education President Larry Cobler, “and for one year, we’ll be able to address the problems. But beyond one year, we’ll be in trouble.”

As in the Chelsea district, Dexter’s teachers agreed to share rising benefit and pension costs. “We negotiated a deal with the union that capped the district’s percentage increase in benefits to 5 percent and anything above is the responsibility of the unions,” explains Cobler.

Despite all this, Cobler says the state’s cuts in education funding will mean pain for his district. “We’ve cut all of the cutting we can without affecting the classroom, and there’s going to have to be some cuts in transportation or athletics.”

Saline would be grateful if that were the worst it faced. Even after the union concessions, it will need to cut spending this year by more than $4.5 million. And with no control over health and pension costs, says Graden, “if they continue to rise, we’re in trouble. We need long-term structural reforms, and they need to come from the state.”