March 24, 2014 Budget Workshop “Tradition of Excellence”

March 24, 2014Budget Workshop

“Tradition of Excellence”


Topics of Discussion· 2014-15 Budget

· Forecast with Governor’s Proposal· Senate budget proposal compared to Governor’s· Enrollment projection· Sensitivity analysis for 2014-15 budget

· Structural Balance· 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?

· Where have we been, where are we now, where would we go?· Historical benchmarking of our spending· History of budget reductions· Compensation · Budget reductions we have discussed, not implemented

· Budget Process: From now until June· Summary


2014-15 Budget


2014-15 Budget Forecast (Governor’s Proposal)

2013-14 2014-15Revenue $28,085,558 $27,992,573Expenses $28,410,270 $28,678,307Net Change ($324,712) ($685,734)Ending Fund Balance $2,514,444 $1,828,710Fund Balance 8.8% 6.3%

Per Pupil Funding $7,450 $7,554EGRNow! Funding $280,000 $0Cost of Step Increase $370,000


2014-15 Budget Proposals(Senate compared to Governor’s)

Current Governor’s SenateFoundation Increase n/a $104 $257Foundation Allowance $7,450 $7,554 $7,707Best Practices $52 $52 $0 Performance Funding $40 $40 $0MPSERS Credit $75 $0 $0Total Funding $7,617 $7,646 $7,707 MPSERS Liability % 20.96% 19.76% 20.96%

Projected Deficit ($324,712) ($685,734) ($658,531)


Enrollment Forecast· Current FTE Enrollment this year: 2,992· Projected Enrollment for future years: 3,000· Looking at next year

· 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


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


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

Change in Fund Bal $140,235 ($16,140) ($172,515) 10,235 ($146,140) ($302,694) ($289,765) ($602,515)

Ending Fund Bal $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

EGRNow! $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


Structural Balance


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)

· 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


What would it take to maintain structural balance?

· 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


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.


Is an annual increase of $150 to $300 per pupil possible?

(In Millions) 2013-14 2014-15 2015-16 2016-17

Revenue Growth % 3.2% 3.4% 3.0%

Revenue Estimate $11,560.0 $11,931.8 $12,337.5 $12,707.6

Increase in Revenues $371.8 $405.7 $370.1

Students 1.5 1.5 1.5

Potential Increase $248 $270 $247

2014-15 and 2015-16 are state estimates, 2016-17 is district estimate


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


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%


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


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)


Where have we been? Where are we now? Where

are we going?


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

Expenses:

- 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


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:· 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


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.


Budget Reductions we have discussed, but not implemented

· Last year’s “Below the Line” items:· 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


Budget Process Timeline


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


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

March 24, 2014 Budget Workshop “Tradition of Excellence”

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