How Michiana schools are navigating labor shortages, the supply chain and record inflation

SOUTH BEND — As Americans grapple with record levels of inflation, districts across Michiana are hunkering down for what could be another financially challenging school year.

In addition, families may notice some changes, from meal prices to the food available on student lunch trays, as districts navigate an economic strain some predict could last for months or even years to come.

From transportation costs to paper supplies, school finance directors say they’ve seen prices rise to record levels. And, it’s not just the increased cost of items such as milk, fuel and paper. It’s a trifecta of rising inflation, supply chain disruptions and labor shortages all striking at once.

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“I’ve never seen anything this severe,” said Jerry Hawkins, executive director of business services for Penn-Harris-Madison schools. “When you bring all three of those together, it’s a bit unprecedented.”

Inflation reached a 40-year high this summer and surpassed a 9% annual increase in June. Though that rate dipped slightly in August and local property values are climbing, tax collections haven’t grown at a pace to match inflation, said Kareemah Fowler, assistant superintendent of business and finance for South Bend schools.

It’s led some districts to delay certain projects, renegotiate contracts, and scale back on spending at a time where costs in some areas continue to rise.

“To go up that drastically in such a short period of time," Fowler said of this summer's inflation, "It's staggering."

Students get onto buses Thursday, Sept. 16, 2021, at Monroe Primary Center in South Bend.
(Photo: Michael Caterina, South Bend Tribune)
Students get onto buses Thursday, Sept. 16, 2021, at Monroe Primary Center in South Bend. (Photo: Michael Caterina, South Bend Tribune)

Costs rising for basic services

Schools are feeling the effects of inflation among some basic services. Things such as utilities, transportation and meals are necessities that can’t be easily reduced without affecting students, she said.

“Every single building, every department, we’re looking at supply line items,” Fowler said. “We’re also looking at professional development line items — things furthest away from the classroom.”

Instead, the district is looking to cut 5% from its budget, mostly through operating costs. That comes at a time when the South Bend school corporation has already engaged in a multiyear "right sizing" effort to scale back on spending amid continued enrollment decline and revenue lost to recently imposed tax caps.

Natural gas prices — fueled by an energy crisis in Europe and shortages in the U.S. — have soared nationally to a 14-year high. Locally, school administrators are worry that the trend will continue into the winter months as they prepare to heat classrooms. Waste removal services in South Bend have increased 11%, and school districts, just like everyday consumers, are feeling the effects of higher gas prices.

Last fall, P-H-M administrators secured competitive fuel pricing in a yearlong contract, but “it’s more likely to become a problem down the road,” Hawkins said.

“Any kind of world event, or weather, can impact fuel prices pretty dramatically,” he said. “We lock in typically at a good price compared to what you’d find at a typical station, but I just don’t know what the predictions are at this point of what we might see when we do our fuel bids.”

Both districts are looking at transportation alternatives that include electric buses, which have engines that are expected to last longer than those belonging to diesel powered vehicles. The buses could also bring fuel efficiencies, resulting in long-term savings for schools. But those vehicles are expected to be rolled out just a few at a time as districts work through multiyear bus replacement plans.

Meal offerings shift with supply shortages

The Northern Indiana Educational Services Center — NIESC — and the Northwest Indiana Educational Services Center — NWIESC — helpdozens of member districts, including the School City of Mishawaka, leverage group purchasing to secure better contracts for items such as milk, bread, beef and paper supplies.

Lisa Abell, the groups’ purchasing director, said she’s seen milk prices increase 4% to 5%, and some paper goods rise up to 20% over the last year. Rising prices have been compounded by supply chain delays and labor shortages.

One of her regular bread vendors recently lost most of its staff, leaving trucks with products and no one to unload them, Abell said. Another vendor, she said, lost its largest dairy distributor. Those challenges mean schools have had to get creative in adjusting their menus based on what products are available to them.

“We've gone to different vendors and asked for bread, but they told us there would be up to a 20% increase in pricing for that product,” she said. “It’s like a domino effect. Once one domino falls over, five more come right after.”

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There have been signs of progress recently. For instance, food service stock is now up 18% from this time last year, Abell said. And, one paper supply item is out of stock now compared to about half of paper products last year.

A federal supply chain assistance program directing more than $20 million to Indiana schools this year could help ease some food costs. But, an unpredictable market is leading some schools, after two years of federal meal waivers, to raise prices in anticipation of elevated costs continuing. P-H-M raised its breakfast and lunch prices this year for the first time in nearly a decade. Mishawaka also increased rates this year.

South Bend — taking advantage of a federal program for districts with a high percentage of economically disadvantaged families — will offer students free breakfast and lunch this year.

Rates in Mishawaka are increasing 15 cents to 30 cents per meal, depending on the student’s school and meal type. Prices this year will be $1.50 for breakfast and $2.50 for lunch in elementary schools and $1.75 for breakfast and $2.75 for lunch in secondary schools.

In Penn-Harris-Madison schools, rates are increasing 5 cents to 25 cents depending on the meal. Students will be charged $1.25 for breakfast and $2.25 for lunch in elementary schools and $1.50 for breakfast and $2.50 for lunch at the secondary level.

“We never like to see increases in prices, but we really didn’t have a choice,” Hawkins said. “It just helps to cover some of those added costs that we’re experiencing.”

Priorities being set for school projects

Supply chain issues, labor shortages and rising material costs have also put a strain on maintenance and construction. Bidding for work on school improvement projects has returned higher-than-expected responses over the last year, meaning administrators in some districts are prioritizing their schools’ greatest needs before moving forward with other expensive repairs or replacements.

Upgrades that most directly affect students or the classroom experience will generally come first, administrators said. For Mishawaka, that means moving forward with playground replacements. In P-H-M, Hawkins said, projects such as roof repairs must also move forward to prevent leaks and internal damage that, if unaddressed, could lead to more costly repairs in the future.

Other needs, however, such as new air handling systems, may come later if school leaders feel they can get a few more years out of expensive items such as boiler units. The wait time alone for some products, as schools navigate supply chain issues, has also drawn out some replacements and repairs.

Administrators say it's difficult to put a number on just how high costs have risen for construction projects because each comes with its own variables from material costs to labor.

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“You have to make some tough decisions,” Mishawaka Superintendent Theodore Stevens said. “Do you delay the project? Do you narrow the scope of the project? Or, do you try to move forward with the project knowing that now, because it’s going to cost you more, it’s going to impact something else along the lines in the future?”

Schools have supplemented their budgets with federal pandemic relief funds the past two years. The federal relief, which began in the early days of the pandemic, has broad allowances. Schools can use the money for everything from academic investments in tutoring, mental health services and afterschool programs to physical improvements for better air quality and capital projects that reduce the risk of potential health hazards.

But, even that support comes with limitations. Schools have until September 2024 to set plans for their use of the one-time funds.

“Is that the golden ticket to solve all of these issues? No,” Stevens said of the federal relief. “That's not a long-term solution, but it’s something that we’re trying to utilize now as we can to sort of hold things over for a bit.”

Districts keeping an eye on staff salaries

Although districts are tightening their belts, administrators say they also see the need to invest in employee pay as the job market grows increasingly competitive and their own staff feel the effects of inflation at home.

Schools across Indiana will begin bargaining with teachers this month, and though district leaders say they hope to boost pay where possible, it may not come easily.

“The rate of inflation is probably going to be higher than the rate of employee compensation,” Stevens said. “It’s always been a concern in the education sector, and I think it’s exacerbated when you have inflation at the rate that it is right now.”

In South Bend, school board members approved slight increases this month in hourly wages for office personnel, food service staff and paraprofessionals, bringing rates this year to anywhere between $12.75 to $18.50, depending on experience and job classification.

The district exceeded its budget for negotiations this year, Fowler said during a recent school board meeting. Board Secretary Stephanie Ball, however, drew attention to the district’s lag in some areas behind a continuing increase in the cost of living.

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While Indiana’s minimum wage has stayed at $7.25 for years, one MIT-developed calculator puts the state’s living wage well over $15 per hour for a single adult with no children.

“It’s great that we’re working towards getting closer to a living wage,” Ball said. “I hope that we can continue on in that vein, just keeping in consideration what other trade offs might have to occur as that dollar figure is going to just continue to increase over time.”

Indiana lawmakers will meet this winter for a biennial budget session, which will include discussion of how much state funding to provide local schools over the next two years. Legislators, during their last budget session, directed a historic $2 billion increase to K-12 education. The state closed its most recent fiscal year with $6.1 billion in reserves, prompting hope among some that another significant boost in education spending could be on the table.

While increases in state funding can support a variety of educational needs, a recent law requires schools to put at least 45% of their state funding toward teacher salary — something administrators said they had hoped to work on even before the pandemic. Now, a competitive labor market is making salary, even amid other demands to scale back, a priority.

“We talk about it almost every day,” Hawkins said. “We are aware that inflation is hitting all families, really. Trying to find ways to help with that as much as we can and stay within our means is really our biggest goal.”

Email South Bend Tribune education reporter Carley Lanich at Follow her on Twitter: @carleylanich.

This article originally appeared on South Bend Tribune: 'A domino effect': How Michiana schools are handling record inflation