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Managing Transportation Funding Cuts: minimize costs and maximize revenues

All indications are that school officials and transportation leaders will soon be confronted with the harsh reality that state budgets will, at best, hold transportation funding steady -- but will more likely end up cutting this funding. With expenditures such as driver salaries, benefits, fuel, insurance, and buses themselves becoming costlier, how are districts left to cope without impacting their transportation system?

Many districts are conducting transportation audits to highlight areas where the operation could be more efficient, save money, and create a safer form of transportation for its students. In fact, our consulting arm, School Bus Consultants, is currently engaged with Union R-XI School District in Missouri to identify ways in which to maximize the services provided with the available budget while identifying where efficiencies could be realized.

The questions being asked by Union R-XI are the same questions that districts across the U.S. will be asking: What can you do to prepare for and respond to the likely cuts in funding?

Understanding the budgeting process is a good first step. For example, there are two parts to the transportation budget:

• The Expenditure side: Driver salaries, benefits, fuel, new bus acquisition
• The Revenue side: State funding, Medicaid reimbursement, field trip reimbursement, paid riders

Transportation leaders have traditionally focused on expenditures and how to change their operations to influence cost. Considerations like bell time changes, routing assessments, fleet replacements that help minimize total cost of ownership, and software purchases are all proven methods of attacking the cost question. However, we all know we will never drive the cost to zero without putting ourselves out of business, so we also need to be aware of how transportation is funded.

Most transportation leaders have placed much less emphasis on understanding the revenue side of the budget due to its complexity and the sense that there is very little that you, as the transportation leader, can do about it. However, by understanding how your revenues are received -- particularly your state funding approach -- you can help design your service to best balance expenditures and revenues.

To fully evaluate the impact of changes to transportation, you must understand how your state’s funding approach works and what it is trying to accomplish. There are four general types of approaches used to fund transportation. They include:

• Transportation block grants: Funding is provided as part of basic per-pupil foundation grants.
• Per unit allocations: A fixed amount of funding is provided based on a specific unit of measure (e.g., per student, per mile).
• Approved costs: A certain percentage of all costs incurred within specific categories are reimbursed (e.g., 85 percent of driver salaries).
• Efficiency formulas: Funding is provided based on operational efficiency rather than cost.

Knowing how your state’s funding approach works will help you avoid making bad choices that appear to be good.

For example, many states have set minimum walk distances to school for purposes of funding. If your district decides to exceed those distances to try to reduce cost, this may seem like a logical strategy. However, if the revenue you lose by not transporting these students exceeds the costs you reduce, this approach becomes illogical. Only by understanding the full impact on expenditures and revenues can you make a “good” decision about where to set walk boundaries.

The more you understand your state’s approach to funding, the better able you will be to explain both the operational and financial impact of changing your approach to service.

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