Transcript Document

Budget Workshop
March 24, 2014
“Tradition of Excellence”
Topics of Discussion
 2014-15 Budget
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Forecast with Governor’s Proposal
Senate budget proposal compared to Governor’s
Enrollment projection
Sensitivity analysis for 2014-15 budget
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What the impact would be to solve the current imbalance
What would it take to maintain structural balance once achieved?
Risks if we do not achieve structural balance
Is it possible?
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Historical benchmarking of our spending
History of budget reductions
Compensation
Budget reductions we have discussed, not implemented
 Structural Balance
 Where have we been, where are we now, where would we go?
 Budget Process: From now until June
 Summary
“Tradition of Excellence”
2014-15 Budget
“Tradition of Excellence”
2014-15 Budget Forecast
(Governor’s Proposal)
2013-14
2014-15
Revenue
$28,085,558
$27,992,573
Expenses
$28,410,270
$28,678,307
Net Change
($324,712)
($685,734)
Ending Fund Balance
$2,514,444
$1,828,710
8.8%
6.3%
Per Pupil Funding
$7,450
$7,554
EGRNow! Funding
$280,000
$0
Fund Balance
Cost of Step Increase
$370,000
“Tradition of Excellence”
2014-15 Budget Proposals
(Senate compared to Governor’s)
Current
Foundation Increase
Governor’s
Senate
n/a
$104
$257
$7,450
$7,554
$7,707
Best Practices
$52
$52
$0
Performance Funding
$40
$40
$0
MPSERS Credit
$75
$0
$0
Total Funding
$7,617
$7,646
$7,707
MPSERS Liability %
20.96%
19.76%
20.96%
($324,712)
($685,734)
Foundation Allowance
Projected Deficit
($658,531)
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Enrollment Forecast
 Current FTE Enrollment this year: 2,992
 Projected Enrollment for future years: 3,000
 Looking at next year
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Senior class this year: 257
Average size of grade: 228
Average elementary grade: 209
If the grade levels are rolled up, assume 185 new kindergarten students
and summer growth of 40 district wide: 2,965
 Available schools of choice openings would add to the 2,965.
 Future Years:
 Junior class: 241, Sophomore class: 235, Freshman class: 252
 Kent County birth rates 5-10% lower in last five years
 Very difficult to stay at 3,000 student level
 Revised assumption:
 2014-15: 2,980
 Future Years: 2,980 or lower depending on schools of choice availability
“Tradition of Excellence”
2014-15 Budget – sensitivity
analysis assumptions
 School Aid Budget:
 Different format from Governor to Senate. What does House
propose?
 May Revenue conference: More or less available revenue
 Election year….
 EGRNow!:
 $280,000 was raised last year
 $0 budgeted previously, whatever is raised will improve budget
situation
 Cost Increases:
 Seniority Step Increase for all employees: $370,000
 3% Health Care increase: $80,000
 Salary/calendar to be negotiated with teachers
 Examples based off of Governor’s budget proposal
“Tradition of Excellence”
2014-15 Budget Forecast
(Sensitivity Analysis)
EGRNow! At $280,000, $300,000 in
budget reductions
EGRNow! At $150,000, $300,00 in
budget reductions
EGRNow!: $150,000, No
Budget Reductions
Revenues
$28,297,276
$28,297,276
$28,297,276
$28,167,276
$28,167,276
$28,167,276
$28,167,276
$28,167,276
Expenses
$28,157,040
$28,313,415
$28,469,790
$28,157,040
$28,313,415
$28,469,970
$28,457,040
$28,769,790
$140,235
($16,140)
($172,515)
10,235
($146,140)
($302,694)
($289,765)
($602,515)
$2,654,679
$2,498,304
$2,341,929
$2,524,679
$2,368,304
$2,211,929
$2,224,679
$1,911,929
9.4%
8.8%
8.2%
9.0%
8.4%
7.8%
7.8%
6.6%
Foundation Grant
$7,554
$7,554
$7,554
$7,554
$7,554
$7,554
$7,554
$7,554
Enrollment
2,980
2,980
2,980
2,980
2,980
2,980
2,980
2,980
$280,000
$280,000
$280,000
$150,000
$150,000
$150,000
$150,000
$150,000
Incremental Comp.
$0
$185,000
$370,000
$0
$185,000
$370,000
$0
$370,000
Budget Reductions
$300,000
$300,000
$300,000
$300,000
$300,000
$300,000
$0
$0
Change in Fund Bal
Ending Fund Bal
EGRNow!
“Tradition of Excellence”
Structural Balance
“Tradition of Excellence”
What would the impact be to
solve imbalance?
 Assuming a $150,000 “midpoint goal” for EGRNow!, imbalance is
$600,000
 Compensation impact:
 No seniority step increment paid: $370,000
 1.14% pay reduction for employees: $230,000
 Or reduction in medical benefit costs to offset
 Budget Reduction impact:
 “Below the line” list from last year: ($735,000)
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Intervention Specialist: $90,000
Elementary World Language: $270,000
One High School Counseling position: $120,000
Elementary Art: $180,000
General Education Social Work: $75,000
 Revenue impact:
 Additional per-pupil funding: $201
 Additional students: 79
 Combination of all of the above
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What would it take to maintain
structural balance?
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Assuming district was “structurally balanced”
Assuming retirement rate is frozen at 24.58%
Assuming no restoration of prior budget reductions
Cost increases:
 Seniority step increment: $370,000
 3% Health Insurance increase: $80,000
 1% salary scale increase: $200,000
 Annual Per Pupil Increases required:
 To pay just a step increase: $450,000/2,980 = $151
 Step increase + 1% scale increase: $650,000/2,980 = $218
 Step increase + 2% scale increase: $850,000/2,980 = $285
 If retirement rate was reduced through further reforms:
 1% reduction in contribution rate reduced expenses $153,000
“Tradition of Excellence”
How would this year and next
hold up to staying “balanced”?
 2013-14: $53 per pupil increase = $158,576
 3% health care: ($80,000)
 $78,576 remaining for pay increase
 $370,000 to pay a step increment
 Step increment would increase imbalance by $291,424
 2014-15: $104 per pupil increase = $309,920
 3% health care: ($80,000)
 $229,920 remaining for pay increase
 $370,000 to pay a step increment
 Step increment would increase imbalance by $140,080
 Funding increases this year, and proposal by Governor for next year
insufficient to provide seniority step increase to employees.
“Tradition of Excellence”
Is an annual increase of $150 to
$300 per pupil possible?
(In Millions)
2013-14
Revenue Growth %
Revenue Estimate
Increase in Revenues
Students
Potential Increase
$11,560.0
2014-15
2015-16
2016-17
3.2%
3.4%
3.0%
$11,931.8
$12,337.5
$12,707.6
$371.8
$405.7
$370.1
1.5
1.5
1.5
$248
$270
$247
2014-15 and 2015-16 are state estimates, 2016-17 is district estimate
“Tradition of Excellence”
Risks if we do not achieve
structural balance
 Loss of Fund Balance:
 June 30, 2009: $4,683,818 (16.91%)
 June 30, 2014: $2,514,444 (8.83%)
 Fifth consecutive year of utilizing fund balance, ranging from
$102,449 to $748,823.
 Less cushion if state economy was to have another recession
 Increased borrowing for cash flow purposes. Once interest rates
return to normal levels, interest expense will increase
substantially.
 District credit rating:
 District’s credit rating was placed on negative watch at the time of
our refinancing in January
 Primary reason was use of our fund balance and lack of a solid
plan to discontinue the use of fund balance in future years
 Could affect interest rates on future bond sales
“Tradition of Excellence”
Risks if we do not achieve
structural balance
 District’s GASB 54 fund balance policy:
 In June 2011, Board was required to adopt a fund balance policy
per GASB 54.
 Policy adopted was to maintain a 10% to 20% unreserved fund
balance in the General Fund.
 June 30, 2014: $2,514,444 (8.83%)
 Policy also states a range of time to return the fund balance policy
to above 10%
“Tradition of Excellence”
Section 102a – Governor’s Budget
Proposal
 Governor proposed language in the School Aid Act to “identify”
districts with rapidly deteriorating finances and recurring “financial
stress” (Senate concurred with Governor)
 Department of Treasury will have full authority
 State Treasurer could require a “financial recovery agreement” that:
 Requires the district to receive “assistance and guidance” from Treasury
and other state departments
 Produce a financial and operating plan for the district
 Appointment of local auditor or inspector
 Remedial measures necessary to address the financial circumstances of
the district
 Alternative means to more effectively and efficiently provide educational
services to residents of the district
 Requires the retention of a consultant or other experts to help “achieve
our goals”
 Any other means deemed necessary by the State Treasurer
“Tradition of Excellence”
Is Structural Balance possible?
 Kent County statistics:
 In 2011-12: 11 of the 20 districts increased their fund balance,
county average was 13.02% (EGR used $661,107, 12.78%)
 In 2012-13: 5 of the 20 districts increased their fund balance,
county average was 11.22% (EGR used $748,823, 9.99%)
 Other districts have been able to achieve (Wyoming both years)
 Structural Balance is possible, but should consider the following:
 What is a minimum acceptable fund balance?
 Quality of the educational program and desire to move the district
forward
 Impact on employees, who have experienced financial reductions
already, some that have helped the district (health care), some
that haven’t (retirement reform)
“Tradition of Excellence”
Where have we been?
Where are we now?
Where are we going?
“Tradition of Excellence”
Bulletin 1014 – State spending
comparison
2011-12
2008-09
2003-04
1998-99
1993-94
Total Sample
797
775
744
687
524
General Fund Revenues
186th
237th
241st
155th
98th
- Basic Program
52nd
115th
173rd
72nd
59th
- Added Needs
703rd
662nd
561st
508th
374th
- Instructional Support
147th
81st
127th
80th
64th
- Operations & Maintenance
309th
254th
227th
145th
12th
- Business & Administration
476th
414th
404th
262nd
101st
Total GF Expenses
202nd
262nd
323rd
123rd
90th
Avg. Teacher Salary
44th
75th
83rd
105th
40th
Expenses:
“Tradition of Excellence”
History of Budget Reductions
 $2.6 million in budget reductions last 4 years, plus a $600,000
reduction in health care expenses in 2012.
 Over the last 10 years:
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Middle School teaming
All media center personnel (3 specialists, 5 paraprofessionals)
Reduction of five elementary “sections”
8 other teaching/professional positions (MS, HS, Spec Ed, MS counseling)
27% reduction in school building secretarial staff (4.1 positions)
37% reduction in central office support staff (3.7 positions)
40% reduction in custodial/maintenance staff (10 positions), plus a 15% pay cut for
custodial in 2011
 General fund support for athletics has been reduced $200,000 (33%) in last 4 years
 3 administrative positions
 30% reduction in school building and department supply budgets
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Compensation Trends
 Base salary scales:
 Teaching staff: No increase in last three years
 Administration: 1% less than four years ago
 Support Staff: 1% higher compared to four years ago.
 Seniority Step Increases:
 Teaching staff: 3 of last 4 years
 Administration: 2 of last 4 years
 Support Staff: 3 of last 4 years
 Health Insurance:
 Base plan is a $1,250/$2,500 deductible medical plan, with some employees
contributing up to $600 this year towards premium.
 Four years ago was a $100/$200 deductible plan with no contribution to premium
 Total medical premiums this year are $2.6 million. Medical premiums in 2011 were
$3.2 million.
 Retirement:
 In 2010, all employees mandated to pay 3% of salary for retirement health care
 Employee contributions towards pension increased from 0% to 4.3% to 4% to 11%
in September 2012.
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Budget Reductions we have
discussed, but not implemented
 Last year’s “Below the Line” items:
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Intervention Specialist position: $90,000
Elementary World Language: $270,000
One high school counseling position: $120,000
Elementary Art: $180,000
Elementary general education social work: $75,000
 Others:
 PAC Director: $85,000
 One tech support staff position: $70,000
“Tradition of Excellence”
Budget Process Timeline
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Timeline until June board
meeting
 Staff & Community input and feedback (March/April):
 Process changed a little for this year
 Thorough process carried out the last two years, results of those discussions
are the “below the line” list.
 Community group: Superintendent’s Advisory council (discussed in March,
will again in April)
 Staff group: Will be scheduled soon to get their perspective and feedback on
options
 Administration: (April)
 Will discuss options and review staff and community feedback
 Will finalize recommendations for Board of Education
 Proposed Budget for 2014-15: (May Board of Education meeting)
 Budget Hearing: June 2 (5:30 pm)
 Budget Adoption: June 9 Board of Education meeting
“Tradition of Excellence”
Summary
 State’s economy is recovering, School Aid Fund is now growing
 Will legislature invest in K-12 education to level it potentially could?
 Budget projections have “improved” compared to last few years
 Structural balance
 Five consecutive years of a structural deficit
 Carrying a structural deficit cannot continue indefinitely
 Possible significant increase in state oversight and loss of local control towards
budget decisions
 Educational programs and employee compensation are the offsets
 $2.6 million in budget reductions last four years. Any further budget
reductions are going to impact educational programs
 Employee take home pay is considerably lower than a few years ago
when considering contributions to health care and retirement have
greatly exceeded wage/salary increases
 Proposed plan will be brought forth in May that administration feels
in the best solution for 2014-15
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