AHSD Budget Presentation 4.3legacy.ahsd.org/Budget/BudgetPresentation41812.pdf · Revenue Shortfalls • 2011‐2012 brought unprecedented state aid cuts (basic ed.Subsidy, charter

Budget Presentation

Abington Heights School District

April 18, 2012

Tonight’s Presentation• Current and projected economic environment

– Revenue status and outlook– Expenditure status and outlook

• Draft preliminary budget summary– Revenues– Expenditures– Fund Balance

• Budget Timeline

Revenue Status and Outlook 

Revenue Shortfalls

• 2011‐2012 brought unprecedented state aid cuts (basic ed. Subsidy, charter school reimbursement, grant reductions, etc.)

• The economic recession has hampered local tax collections (high unemployment = lower wage tax)

• Act 1 Index caps the amount the district can raise taxes

• Interest earnings on checking have evaporated as interest rates dropped

State Revenue Decline

 ‐

 2,000,000

 4,000,000

 6,000,000

 8,000,000

 10,000,000

 12,000,000

 14,000,000

2006‐07 2007‐08 2008‐09 2009‐10 2010‐11 2011‐12 YTD

AHSD State Revenues

State Revenues

State revenues have historically included: Basic Ed Subsidy, Special Ed Subsidy, Social Security Reimbursement, PSERS Reimbursement, Transportation Subsidy, Charter School Reimbursement, Accountability Block Grant, EAP Grant, etc.

Stagnant Local Revenues

 ‐

 5,000,000

 10,000,000

 15,000,000

 20,000,000

 25,000,000

 30,000,000

 35,000,000

2006‐07 2007‐08 2008‐09 2009‐10 2010‐11 2011‐12 YTD

Local Revenues

Local Revenues

Local Revenues include Real Estate Tax, Wage Tax, Real Estate Transfer Tax, Checking Account Interest, Local Service Tax, Tuition, Etc.

Value of 1 Real Estate Tax Mil

 180,000.00

 185,000.00

 190,000.00

 195,000.00

 200,000.00

 205,000.00

2006‐07 2007‐08 2008‐09 2009‐10 2010‐11 2011‐12 2012‐13

Value of 1 mil (current Real Estate Tax)

Value of 1 mil (current Real Estate Tax)

Expiration of Stimulus Funds

2006‐07 2007‐08 2008‐09 2009‐10 2010‐11 2011‐12 YTDFederal Revenues 251,431 231,699 464,511 1,239,700 1,765,015 77,405

 ‐

 200,000

 400,000

 600,000

 800,000

 1,000,000

 1,200,000

 1,400,000

 1,600,000

 1,800,000

 2,000,000

Dollars

Federal Revenues

Expenditure Status and Outlook 

Rapidly Increasing Expenses

Salary and Benefit Costs

Energy Costs

Special Education Costs

Transportation Costs

Charter School Costs (New charter)

Cyber Charter School Costs

Unfunded Mandates

Potential for School Choice/Vouchers

The PSERS Pension CrisisYear Pension Rate Estimated Annual 

Pension Cost (All District Employees)

Est. Pension Cost over Previous Year

2010‐2011 5.64% $1,247,447* $207,748

2011‐2012 8.65% $1,850,430** $602,983

2012‐2013 12.36% $2,721,217 $870,787

2013‐2014 16.75% $3,724,611 $1,003,394

2014‐2015 21.25% $4,772,505 $1,047,894

2015‐2016 25.56% $5,797,886 $1,025,381

TOTAL INCREASE from 2011‐2016 =  $4,550,439 – Millage equivalent of 22 mils

*2010‐11 Actual; **2011‐2012 Budget                                           1 mil = approximately $206,754Future projections assume a 1% growth in wages each year over base year 2011‐2012 Total Budgeted Salaries of  $21,798,337

PSERS RATE & Millage

‐Act 1 index = 1.7%‐50% Reimbursement from state is factored in to these projections.

 23,000,000

 23,500,000

 24,000,000

 24,500,000

 25,000,000

 25,500,000

 26,000,000

2012‐13 2013‐14 2014‐15 2015‐16

Total Real Estate Taxesif Raised to Act 1 LimitEach Year

Real Estate Tax IncreaseNecessary to Pay ONLYPSERS Increases

Future Pension Costs & Fund Balance

‐Projections assume a 1% wage growth in total salaries.50% Reimbursement from state is included in this calculation.

‐Pension fund balance at 7/1/11 is $6,888,558‐Pension would run out of funds in 2015 in this example

($2,000,000)

($1,000,000)

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

2010‐11 2011‐12 2012‐13 2013‐14 2014‐15 2015‐16 2016‐17

Dollars

Fund Balance Designatedfor Future PSERS Costs

Cumulative Increases InPension Cost Paid Out ofPension Fund Only

Medical Insurance Costs

• Health Care Costs are expected to rise by 11% in 2012‐2013 and each year for the next 5 years

• Cost per employee will be $1,214 more in 2012‐2013 with no plan design change

Medical Insurance Costs

2008‐09 2009‐10 2010‐11 2011‐12 YTD 2012‐2013Projected

2013‐2014Projected

2014‐2015Projected

2015‐2016Projected

Actual Cost $4,778,831 $4,976,598 $4,966,927 $5,338,693 $5,978,884 $6,636,561 $7,366,583 $8,176,907

 $‐

 $1,000,000

 $2,000,000

 $3,000,000

 $4,000,000

 $5,000,000

 $6,000,000

 $7,000,000

 $8,000,000

 $9,000,000

 $10,000,000

Total Cost p

er Con

tract P

eriod

Abington Heights ‐ Actual & Projected Costs

Medical Insurance Costs

2008‐09 2009‐10 2010‐11 2011‐12 YTD 2012‐2013Projected

2013‐2014Projected

2014‐2015Projected

2015‐2016Projected

Per Employee Per Year $10,060.68 $10,328.52 $10,551.12 $11,824.32 $13,242.24 $14,698.89 $16,315.76 $18,110.50

 $‐

 $5,000

 $10,000

 $15,000

 $20,000

 $25,000

Employee

 Cost p

er Year

Abington Heights ‐ Employee Cost Per Year

Future Healthcare Costs & Fund Balance

‐Projections assume a 11% Premium Increase each year.‐

‐Health Insurance fund balance at 7/1/11 is $7,360,631‐Health Fund would run out of funds in 2015 in this example

($8,000,000)

($6,000,000)

($4,000,000)

($2,000,000)

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

Dollars

Fund Balance Designated forFuture PSERS Costs**

Cumulative Increases InHealth Care Costs Paid Outof Health Care Fund Only

COMBINED Future Pension and Healthcare Costs & Fund Balances

This graph combines the previous 2 graphs depicting fund balances and Increases in Pension and Healthcare costs

‐Combined fund balances at 7/1/11 are $14,249,189‐Both funds would run out of funds in 2015 in this example

($20,000,000)

($15,000,000)

($10,000,000)

($5,000,000)

$0

$5,000,000

$10,000,000

$15,000,000

Dollars

Total Pension and HealthcareFund Balances**

Cumulative Increases InPension and HealthcareCosts Paid Out of Healthcareand Pension Funds Only

Charter/Cyber Charter School Costs

• Cyber charter school bills continue to rise• Howard Gardner Charter School expected to be approved, costing the district an estimated $300,000

• Any savings achieved through efficiency will be essentially negated by this single budget item

Expense vs. Revenue Trend/Projection

 $‐

 $10,000,000

 $20,000,000

 $30,000,000

 $40,000,000

 $50,000,000

 $60,000,000

RevenuesExpenditures

Projections assume 1% revenue growth, 1% salary growth, 8%‐10% benefit growth, 3% inflationary increases, and 0% debt service payment growth

New Fiscal Reality• Do more with less• Old system is unsustainable• Uncontrollable PSERS costs• Rapidly Rising Medical Insurance Costs• Act 1 index limitations

Preliminary Budget Overview2012‐2013

2012‐2013 Draft Budget Summary

Revenues ‐ $42,265,085

Expenses ‐ $44,427,889

Deficit ‐ $(2,162,804)

Budgeted Revenues2012‐2013

Governor’s Proposed 2012‐2013 Budget

• Flat or reduced revenues• Likely that moving away from formula driven reimbursements will lead to more costs being driven to the local level

• No Accountability Block Grant (KG – extra programs)

• Is 50% reimbursement on FICA and Retirement guaranteed?

Proposed 2012‐13 vs 2011‐122012‐2013 Governor’s Proposal

2011‐2012 State Aid In Similar Categories

Increase (Decrease)

Basic Education Funding

$5,875,375 $5,875,375 $0

Social Security Subsidy

$834,057 $834,057 $0

Transportation Subsidies

$1,076,464 $1,076,464 $0

Special Education Funding

$1,632,884 $1,632,884 $0

Accountability Block Grant

$0 $103,120 $(103,120)

Totals $9,418,780 $9,521,900 $(103,120)

NOTE: PASBO’s interpretation of Block Grant is that districts will receive at least what they Received last year.  If any funds remain at the end of the year, more funds will be distributed.

Real Estate Taxes

0

20

40

60

80

100

120

140

19961997

19971998

19981999

19992000

20002001

20012002

20022003

20032004

20042005

20052006

20072008

20082009

20092010

20102011

20112012

Real Estate Tax Millage Rate

Millage Rate

Budgeted Expenses2012‐2013

Historical Budgeted Expenses

 36,000,000

 37,000,000

 38,000,000

 39,000,000

 40,000,000

 41,000,000

 42,000,000

 43,000,000

 44,000,000

 45,000,000

 46,000,000

2006‐072007‐08

2008‐092009‐10

2010‐112011‐12

2012‐13

Budgeted Expenses

Spending Efficiently• Abington Heights is ranked in the top 10% of all PA schools based on PSSA scores

• Of the Top 50 scoring PSSA schools, AH spends less per pupil than 70% of those schools

• AH spends less per pupil than 62% of PA districts state‐wide (314 of 500)

• AH is ranked 375 of 500 on spending per pupil on Administration (25th percentile)

Sources: http://www.bizjournals.com/pittsburgh/news/2011/04/08/Upper‐St‐Clair‐tops‐school‐list.htmlhttp://www.portal.state.pa.us/portal/server.pt/community/summaries_of_annual_financial_report_data/7673/afr_excel_data_files/509047

Joint State GovernmentCommission

• The Pennsylvania Joint State Government identified Abington Heights with 25 other districts as a “lower spending” district deemed “high performing”. The commission is studying these 25 districts as a basis for future Senate deliberations on public school funding.

‐September, 2011

Where do we spend?

Salaries & Benefits, $31,950,620 , 72%

Purchase Prof & Tech 

Serv., $1,493,681 , 

3%

Purch Prop Services, 

$1,169,866 , 3%

Other Purchased Services, $3,648,944 , 8%

Supplies, $2,226,925 , 5%

Property, $30,000 , 0%

Other Objects, (Interest, etc), $104,580 , 0% Principal Payments on 

Debt, $3,803,271 , 9%

2012‐2013 Budget

2012‐2013 Expense Increases

PSERS Retirement Contributions

+$694,000

Health Insurance Expenses

+$675,000

Howard Gardner Charter School

+$300,000

2012‐2013 Attritional Staffing Changes

• 3 Teaching Positions• 3 Maintenance/Custodial Positions• 3 Admin./Clerical Positions• Approximate savings = $500,000

• (All non‐replacements are tentative)

How to balance budget…

Reduce expenses

Increase Revenues

Utilize Fund 

Balance

The Importance of Maintaining a Healthy Fund Balance

Flexibility in bad budget years to TEMPORARILY offset rising expenses

Balance of Fund Balance is 

largely assigned to employees for Pension and Healthcare

Contingency for emergencies i.e. 

Fires, Large Equipment Breakdowns, Lawsuits, etc.

Boosts credit rating to provide lower borrowing 

costs

Fund Balances

 $‐

 $5,000,000

 $10,000,000

 $15,000,000

 $20,000,000

 $25,000,000

2002‐2003 2003‐2004 2004‐2005 2005‐2006 2006‐2007 2007‐2008 2008‐2009 2009‐2010 2010‐2011

Total of General Fund, Capital Reserve Fund, and Health Insurance Fund

Total Fund Balances

2012‐2013 Budget Timeline

4/18/12 ‐Budget 

Presentation and 

Discussion

5/2/12 ‐Further Budget 

Discussions

5/16/12 –Preliminary Budget Passage

6/6/12 –Budget 

Discussions

6/27/12 –Final Budget Passage

Summary• Abington Heights has been fiscally conservative over the years and is better prepared than many districts to weather the financial storm

• We are continuing to feel the nagging effects of the great recession

• The state is cutting/flat‐funding education and shifting expenses to the local level

Summary (Continued)• Rapidly rising expenses such as PSERS retirement, healthcare costs, and charter school tuition add to the budget crunch

• A healthy blend of revenue increases, expenditure decreases, and fund balance utilization is necessary to balance budget