I came across an interesting article published in The Wall Street Journal titled “Yellow Buses Put Schools in the Red.” In summary, many school districts are currently focusing their efforts on how to allocate costs for the upcoming school year. Many schools went over their budgets this past year to pay for their gas-guzzling yellow school buses. I never really took the bus as a child on my way to school; and I am sure every school district in the U.S. is wishing the same went for all children nowadays.
In a previous blog, a question was posed: “Are there a lot of gamblers in corporate America?” It turns out that some of the gamblers in America are not running a business; instead, they are governing our schools. The main challenge facing these individuals is predicting how many children will board the buses next year and what the price of fuel will be. I do not envy their position. There is great risk involved. While making negotiations with bus companies, school districts need to decide carefully whether to choose a fixed rate for fuel or remain with the market’s current price and hope it doesn’t rise out of control. One Pennsylvania school district has chosen a fixed rate of $4.33 a gallon out of fear that fuel prices will continue to rise.
When looking to source strategically, some costs just cannot be avoided. Therefore, school districts are doubling the size of their fuel budget and cutting costs elsewhere. Reiterating the statements I made in my last blog, these administrators are targeting the areas that complement the core, such as field trips and maintenance. Some measures that have been taken vary from ordering fewer new textbooks to not filling teaching positions. Some schools have also cancelled or postponed the purchase of new equipment, such as boilers.
One of the underlying reasons why school districts’ budgets are shrinking is due to the downfall in the real estate sector. In the past, when the budget got tight, schools relied on the cushion they received from high property taxes. That cushion no longer exists.
Although school districts and their situation are not fully relevant with strategic sourcing, it is important to note that everything eventually comes full circle. One thing will impact another. If schools continue to overspend their fuel budgets, we may eventually be paying more in taxes. The companies that manufacture the big yellow buses are already feeling the effects of school districts’ budget size. Many school districts have refused to purchase newer vehicles, leading to a 10% fall in sales compared to last year at this time.
We need to be proactive instead of reactive as both consumers and businesspeople. I know that others have discussed what measures to take when dealing with the rising price of oil, more specifically in the blog “Is Everyone Going to Stay Home?” If you haven’t done so already, begin to provide a cushion for yourself with regards to your transportation costs and fuel budgets. The higher the price of oil soars, the messier everything will get – even messier than a cafeteria food fight.