Although school districts across the state approved spending plans for the current school year (2014-15) back in June, the October 2014 student count will reveal how much money they will have to operate this year.  This, despite the fact, that schools have been open for one month already.  For many districts, especially those battling declining enrollment, a lot is riding on the result of the student count.  Districts that overestimated enrollment gains (or underestimated enrollment losses) when preparing budgets last spring will likely have to take corrective action in the coming months to ensure budget balance.  Failure to do so will exacerbate the financial problem and cause, or add to, district fiscal stress.
By law, the first of two student count days occurs on the first Wednesday in October (October 1, 2014 for the 2014-15 school year).  The other count will take place on February 11, 2015.  The two counts (each with different weights) are blended to arrive at a total enrollment figure for purposes of distributing state aid to school districts.
The total amount of funding a district has to operate each year is a function of its student enrollment and its per-pupil foundation grant, which is $7,126 for the 55 percent of all districts that receive the minimum grant.  Because the October student count carries the heaviest weight (90 percent), much will be revealed about school district finances for 2014-15 with the result of the today’s count.
By law, school districts are required to adopt their budgets for the coming school year by July 1.  Districts base their initial budgets on estimates of student enrollment and their per-pupil foundation grant, which is set annually by Lansing lawmakers as part of the state budget process.  In recent years, lawmakers have completed the state budget in advance of the July 1 deadline, providing districts with certainty for the foundation grant portion of the funding equation.
With respect to the other half of the total funding equation, districts have to make estimates about student enrollment for the coming year.  In doing so, districts consider a number of factors, including past enrollment experience, birth rates, migration patterns, and competition from other public schools, both traditional public schools and charter schools.  Missing the mark on these estimates can have profound fiscal consequences for districts, especially for those that previously have had to cut programs, reduce staff, and find alternative service delivery models in response to declining enrollment.  Fewer students this year means further budget adjustments.
For many districts, budgeting for declining student enrollment is the new norm.  Two thirds of all traditional public school districts (360 of 543 districts) saw their enrollment decline from 2012-13 to 2013-14.  Overall, approximately 19,000 fewer students (a 1.4 percent decline) enrolled in traditional public schools in 2013-14 compared to 2012-13.
The statewide decline masks considerable variation among individual districts.  Enrollment declines among traditional districts topped out at nearly 50 percent (Bendle Public Schools in Genesee County), while many large, central city districts experienced declines well above 10 percent (e.g., Education Achievement Authority – 20 percent, Flint – 15 percent, Pontiac – 19 percent).
Looking at the five-year period from 2009-10 to 2013-14 reveals that over 70 percent of all districts saw some amount of enrollment decline.  Over one-quarter of all districts had declines of 10 percent or more, which is equivalent to 2.6 percent per year on average.  The causes of decline are many, including fewer births, net out-migration, and competition from other K-12 schools.

Declining enrollment has not been as pervasive in the charter school sector.  In fact, over the last five years, the opposite is true.  Nearly two-thirds of all charter schools have experienced annual jumps in student enrollment between 2009-10 and 2013-14.
Fewer students mean fewer total resources for districts, which can lead to increased fiscal stress.  Managing in an environment of declining resources, at least in the short term, can be difficult, especially when the funding reduction is sizeable.  All schools face some fixed (or semi-fixed) costs for building operations (i.e., lighting, heating), employing teachers, and staffing various non-instructional positions.  When students leave a district, many of these costs remain with the district.  The reality is that the relationship between enrollment and district costs is not completely linear, at least in the near term.
Over time, districts are able to “right size” their budget to accommodate a significantly smaller student body, for instance, by closing buildings or reducing staff.  But, in the short run, declining enrollment can increase fiscal stress associated with meeting the “sticky” fixed/semi-fixed costs.  The bottom line is that declining enrollment will continue to be a challenge requiring affected districts to think long term to effectively manage their resources without incurring undue stress.
Hopefully, as the results of the October 2014 student count become known, school officials will revisit their original budgets to see where things stand.  If the original student enrollment estimates were too optimistic, steps must be taken sooner rather than later to adjust spending to meet the new revenue projections or tap into reserves to make sure budgets are balanced.
Delaying corrective actions that are necessary to meet the new enrollment figures can contribute to fiscal stress and exacerbate financial problems.  Taking action earlier provides district officials with more time to implement requisite spending reductions and/or program adjustments.  Based on recent trends, many districts will be re-visiting their budgets to address declining enrollment revealed in the October student count.