High diesel prices creating a big challenge for rural AZ school districts like Flagstaff Unified

MARK BRODIE: Diesel costs on average about $6.28 per gallon in Arizona as of today, according to AAA Arizona. That’s 41 cents higher than a month ago and more than $2 higher than a year ago. A big culprit for the rise in prices is supply shortages from the war in Iraq and Russia’s invasion of Ukraine.

Those higher prices are affecting school districts across the state, especially those in rural Arizona. The Flagstaff Unified School District runs 31 diesel buses. Last year, the district’s entire fleet drove more than 460,000 miles.

Michael Penca is superintendent of the Flagstaff Unified School District. He joins me now to talk more about how they’re responding. Michael, good morning.

MICHAEL PENCA: Good morning.

MARK BRODIE: So how big of a concern is this for you?

MICHAEL PENCA: Well, it is a big concern because the prices have been so volatile really since last March, and we see a lot of up and down, but kind of steadily increasing. And that’s additional costs for the school district. ... Last year, in our last fiscal year, we spent over $240,000 on diesel fuel, and for much of that year, the price per gallon was in the $2-something range. And now we’re hitting upper $4. Just a couple of days ago, our last purchase for our school district was just over $5 a gallon. And so we could see that cost of fuel go from $240,000 up to $400,000, $500,000 if these prices continue.

MARK BRODIE: Is that kind of what you’re estimating at this point, $400,000 to $500,000, like potentially almost a 50% increase?

MICHAEL PENCA: Well, if we continue to run — ... last August, we were paying $2.53 a gallon. And like I said, a couple days ago, we paid over $5 a gallon. So if we continue to see prices double, that’s kind of would be our rough estimate.

MARK BRODIE: How big of a challenge is — you mentioned volatility. Obviously higher prices are not great for you, but I wonder if the fact that you just don’t know where they’re going to go from one day to the next is sort of an additional challenge?

MICHAEL PENCA: It certainly is. I’m really proud of our transportation staff. They really are monitoring different factors that might increase prices or have an impact on prices. And so that could be production, world events, all those kind of things. And so we kind of are like hedging and like, “It dropped down. Let’s buy today,” and try to fill up our tank so that we can save a little bit of, a few hundred dollars with every purchase just on timing our purchases correctly.

MARK BRODIE: Obviously, your district, like every district, does not have unlimited money. So if you’re spending potentially 50% more on fuel ... where are you getting that money from?

MICHAEL PENCA: Well, it comes right out of our operational budget. And in Arizona, our school districts are funded on what’s called current year funding. So it’s really based on the number of students that we serve over the first 100 days of this school year. But we set our budget last June, we’ve issued contracts to teachers and staff, and so a lot of our expenses are kind of fixed, but our revenue, our students ... the students that show up, that can wane over time over those first 100 days.

Flagstaff Unified School District is a district that has experienced declining enrollment in the ... last several years. So again, we just have to carefully manage our funds. ... Any increase that’s happening in real time this year, as we amend our budget throughout the year, that means we may have to pull back in some other areas.

MARK BRODIE: Like are you looking at potentially fewer teachers, fewer class offerings, that kind of thing?

MICHAEL PENCA: It wouldn’t be in this year, but again, if we continue to see increased expenses — and that can be diesel or other utilities, I mean, the cost of everything, the cost of doing business is more expensive than it was a year ago. And it’s challenging.

I mean, our state increases our base support level by 2% or the lesser of 2% or the cost of inflation. Well, you know inflation’s been running way above 2% for the last several years, but our state funding’s coming in at 2%. And then if you’re experiencing a decline in students, you’re kind of seeing a flat budget. And so, yes, you have to make very strategic and sometimes ... decisions about staffing model, programs, all kinds of things. And that’s a process we go through really starting late fall all the way through next spring before we set the budget for this current year.

MARK BRODIE: Well, so then, as you say, you’re starting probably in the next coming weeks or so to start looking at what next year’s budget is going to be. Are you planning to plan for these continued higher diesel prices?

MICHAEL PENCA: Absolutely. Absolutely. And so that’s — we look at kind of previous year trends, what we’re seeing in real time this year, and then we have to really project out as we set that budget for the next year.

MARK BRODIE: Are there things that you can do sort of within — you mentioned, you know, sometimes you’re buying diesel at — just trying to get it just the right moment. Are there other things you can do to try to reduce the cost even as the price of diesel’s going up?

MICHAEL PENCA: Absolutely. One of the strategies we’re working on right now is just reducing the idling time of buses. And so we’re working with our transportation team and manufacturer. There’s actually timers you can install so that when it hits a five-minute limit and the bus hasn’t been moving, it’s been idling, it can turn it off. So those are ways that we can save a few dollars and a few gallons of diesel here and there.

Over the last several years, we’ve really worked to diversify our fleet. And so we have 31 diesel buses, 15 propane buses, and then we currently have two electric vehicles. And just recently, our governing board approved the purchase of five more additional electric buses. So really that diversity.

We’re a very large school district, 4,400 square miles, largest school district by geographic area in the state of Arizona. And so we are busing students in really from an hour and a half in every direction from Flagstaff to come to our schools. We’re traveling all over most of Coconino County, onto the Navajo Nation to transport students. And so we rack up a lot of miles.

And so we can use those different fuel-type buses strategically to reduce those diesel costs. ... So in town, we’re using electric, propane buses. But we still have to use diesel when we’re going out to Cameron or trips for students down to Phoenix area for athletics, we still have to rely on diesel. And so just how we strategically use our fleet ... continuing that diversification, reducing idle time, and then try to time our diesel purchases ... monitoring kind of the volatile market.

MARK BRODIE: Right. All right. That is Michael Penca, superintendent of the Flagstaff Unified School District. Michael, thanks so much.

MICHAEL PENCA: Thank you for the opportunity.