How the Board Can Take the Lead on Budget Planning in Uncertainty

As unprecedented and unpredictable as this moment surely is, it’s also the time of year when vital board work normally happens. Especially planning and approving the budget for the upcoming school year.

And at a time when we’re hearing talk of potential closures, it’s important to remember that the majority of charter school closures to date can be tied directly back to something the board did or did not do — especially where financial oversight is concerned. 

So, while it might be tempting to hold your breath and wait for certainty, we’re urging boards to engage in the right financial work now. 

With that in mind, we recently invited Tricia Blum, VP of Business Consulting at Charter School Capital, to cohost a Continuity Coaching session on how boards can engage in downside scenario planning right now.

Prior to working at Charter School Capital, Tricia served as CEO of a five-campus charter school in Southern California. Prior to joining the charter movement, Tricia practiced transactional law. As a new attorney Tricia worked in-house at startup and high-growth companies in the Bay area. Safe to say, she’s spent some time working with boards.

If you’re a BoardOnTrack member, you can access a recording of this Continuity Coaching session here. 

Otherwise, read on to get the highlights of our fireside chat and live coaching session with Tricia and our Chief Governance Officer, Mike Mizzoni.

We’ve emerged from urgency to the new normal

Schools are starting to grapple with the facts of their new normal. Even if today’s “new normal” might not be the same as what we’re working with in the fall or beyond, the initial emergencies have been addressed. 

You’re starting to look to the future. The tenor of conversations has changed from crisis-driven — addressing incredibly important issues like getting kids online, ensuring kids still have access to free lunches — to really looking at: what’s next. 

While you might be getting back to work that’s more familiar, know that the planning you normally do at this time of year is not going to be easy. 

You’re trying to plan when you don’t know what to plan for

Board members and school leaders alike are trying to figure out a lot of big things all at once. They’re wondering: do I just do a regular budget and then plan to cut or do I try to figure out what my budget looks like? And the board is saying things like, do we even follow any of our spending policies or do we have a plan B? 

Still, the boards that are in the know are absolutely already working towards their new budget. Because this is the time of year that all schools and boards should be working on budgets, uncertainties notwithstanding. 

Many states are still requiring that budgets for next fiscal year are approved by boards and submitted to states sometime in June or very early July. That potentially leaves you just one or two board meetings to get the work done.

So the best course is for all school boards and school leadership to proceed on creating a budget like you do every year. 

Now is the time for boards to be thoughtful and strategic about how your school — and your governance team — will emerge from this crisis even better and stronger than you are today. 

It’s the time for staff to get in and roll up their sleeves and start doing those things that you would typically do this time of year. Write your plan for next year. And write a plan B (and possibly plans C, D, E…). Write your budget. With multiple scenarios. The board should be able to look at those and see if your priorities are matching, so you can work through it together, and find some solid footing.

What about investing in technology to help keep ahead of the new normal? 

There’s a lot of discussion right now that the changes that we’re managing with remote learning are a long-time coming. 

Charter school organizations, especially, have invested in technology for their kids — personal technology, wifi networks, and even licensed a curriculum platform, things like that. 

These may be a long-time coming and may push your organization into the future when it comes to responding to a crisis like this next time.  

For budgeting purposes, keep in mind that in the first several weeks of the pandemic, charter schools reacted quickly. So those dollars have been spent. That should be taken into account for now and for the budget for next year when you ask: How are you going to educate your students in the fall? 

For instance: boards and leadership might need to look at longer-term distance learning platforms. You’ll need to consider whether you’re ready to do a blended learning program, what that looks like, if you have the licenses to be able to roll right back into this bigger and better than you are right now.

For some of these scenarios, you might not need to spend the money right now, but a plan should be in place in terms of what distance learning looks like for the fall and beyond. Be clear about how it’s incorporated into your educational model as it would be in a more business as usual climate.

Members can access our Continuity Coaching on the board’s role in distance learning here.

For most boards, this year’s budgeting process is going to work differently.

Typically, we’d expect a school leader or a finance staffer to develop some projections and scenarios for the board to then review and address. 

But this year, people will need to plan for multiple scenarios and get ready to address all of them. 

As early as February, many schools had begun to have those conversations around the things that boards would typically start kicking around as you’re putting your budgets together. That means big things like whether to upgrade all of the school’s technology. Or smaller decisions like getting a new computer cart with new computers, or refurbishing playground equipment. 

In past years, this was a simple conversation: What are we going to spend next year? You’d look at your revenue, your enrollment projection, then what you planned to spend and why. And you’d fold in what’s needed for the more typical day-to-day operations. 

But this year, your day-to-day might be all that you can discuss. This might not be the year not to do any of those big things, or even the small upgrades.

If you’re the CEO and you’ve drafted a budget that includes the upgrades or other new things you were going to do for your organization, you might think twice before bringing that to the board. You might not bring a budget with any of those new things.

And if you’re a board reviewing a budget from your school leadership that brings those kinds of things, this is most likely the year to step in and say, “We’re just not going to spend that this year.” 

This is the year that the board has to buckle down and keep the safety net of as much cash as you can on hand. Err on the side of being a little bit more conservative. Prioritize that free cash over big initiatives like upgrading your school’s technology or introducing new curricula programs so that you can be more responsive as circumstances change. 

Three factors that could influence funds available to charter schools in the coming year

There are a lot of unknowns right now. CEOs and boards need to understand what’s at play, identify the key factors most likely to impact their school, and build alternative plans out of those conversations.

Understanding the key factors involved will help your board make informed decisions about your primary and alternative plans, so that you’re prepared for the worst-case scenario even as you hope for the best. 

1. Enrollment

Enrollment is as important as ever, but it’s a different type of enrollment question than schools normally have. And boards have to spend a little more time on those tough discussions.

Charter school enrollment might change in the coming year. If, and how much, will vary widely. 

Speculation continues about the possibilities of a second and a third wave of this virus. So we can’t know if the kids are going to come back to the buildings in the fall, or if schools will be fully open and operational. And if schools are open in the fall, the possibility remains that the virus surges mid-school-year.

Some parents are going to choose to keep their kids at home even if the schools do open up. If you have a really robust online learning program going, that impact on your enrollment may be less. But in general, for the traditional site-based schools, enrollment is something to consider. Write some version of a budget that includes reduced enrollment. 

And note that, on the flip side, some online schools are looking at increases and talking about whether they should have a lottery or not. 

2. State-driven revenues

In a lot of states, boards and CEOs are hearing rumbles that there will be either deferrals or even reductions in revenues. 

If you’re a state that relies on local income tax, there is potential for reduced revenue that way. And there is a reality for deferred revenue. 

Take into account things like: how do we manage our cash if we have deferrals; if our revenue is reduced either because of state payments or because our enrollment is reduced or is uneven. Those are really big questions. 

If your board is hesitant to dig into the weeds at that level, know that these are big questions and this is exactly what you need to be exploring.

3. Private funding sources

It happens every time we go through a recession. The personal donations fall, as do institutional funding. 

If your school has relied heavily on grants or donations, know that those are going to be reduced — if not gone entirely. Your alternative plans will need to account for this shift, and/or build in new funding sources.

Don’t wait to have these conversations once you know that your funding sources or enrollment have changed significantly. 

Do the hard planning now. At the most essential level, the question is: can the school pay their bills. And if not, how are you going to manage that going into the fall. 

Before there’s a major shift in your funding, you’ll be prepared if you’ve already thought through how you’re going to manage so that there isn’t a deficit and so the school can continue to pay its bills. 

Ideally, staff would still continue to be paid and you would be operating much like you have been or are right now, but we don’t really know what the future will bring. 

If you’re a multi-school organization, you’re likely going to need to write some version of the budget where you’ve made some closures. We’re already starting to hear some talk of these potentialities. 

Look at those challenges and make a decision about what is going to need to be cut and when.

These are going to be hard decisions. And right now into the summer, the school leadership is not struggling with day to day management of students as they normally would be in the school year. So they have the opportunity now to really focus in on these things and really work in conjunction with the board to make a plan. 

Work together. Nurture your partnership and allow your governance-management line to move.

The board and management have got to work together as a team. That’s what it takes to start talking about what you’re going to cut and when you’re going to cut it. You don’t want to get into December and have those tough decisions suddenly looming. You want to be ready for them, and know you’re all on the same page together about what you’ve decided to do and why.

Right now, it’s really important to nurture that board-CEO partnership. Boards need to be thoughtful about all the stress that’s being put on school leaders — the tough decisions that they have to make, the pressure that’s on them to get this right. We’re looking to boards to be highly supportive. 

To that point, there’s likely to be a lot of change in how boards interact with their CEOs. That includes much more frequent but informal touchpoints to just to see how things are going.  

Normally,  we strongly caution the board about staying at the 30,000-foot level. But right now, if you’ve got a team that’s willing to dig in together and work cooperatively, go with it. 

In all aspects, whether it’s approving remote learning plans or financial considerations, just think about what the appropriate communication cadence is today and whether it’s different than it was six months ago. For instance, is your finance committee meeting with the CEO more frequently now? Or should they be giving the CEO more space right now?  

And roles still should be well defined. We shouldn’t have board members stepping in and running the day to day operations in any way, shape, or form. But if you’re a CEO who’s got a board that’s willing to be a sounding board, take full advantage of that. Because while the school leadership are absolutely the experts in what they do, no one’s an expert in what’s happening right now.

Be careful of what happens three or four months down the road, when really engaged board members have gotten used to stepping up and volunteering. That rolling up their sleeves in a crisis might turn into some overstepping of roles longer term, unless you’re clear from the beginning. 

It’s not that now is the time to dispense with policies or procedures. Rather, it’s the time to create a workable plan where everyone’s working together to carry the school through this period and come out stronger. As we get to a new normal, everyone steps back into their roles and responsibilities. The board goes back to planning and oversight; leadership goes back to managing and running the day to day.  

Still, as we move into a new normal and things become less crisis-driven, boards are really taking that step back and helping with the big picture. 

This crisis will end. Continue to aim for the high bar. And begin to envision life for your school after the pandemic.

Boards should be thinking about what their financial world, what the sustainability, is going to look like after this. That’s the question for boards to tackle now: How can we move through this? 

And then what does it bring once we’ve gotten through this initial crisis, which is different one week to the next. 

The coronavirus crisis will end. Boards still have responsibilities. Boards and CEOs still need to be running a board, to reach for that high bar. The board needs to be meeting regularly. 

While boards and CEOs remain committed to delivering for the kids who count on their schools, many are realizing that there are new obstacles and pitfalls to running an active board now, and that those things are not going away. Working online, together, is the new normal. It’s incredibly important that that work does get done. 

If your board needs help ensuring that it continues to function at a high level through this crisis and beyond, contact us. We’re here to help.