Piecing Together a New Plan 2011-2012 Board Budget Study Session #1 May 16, 2011

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Piecing Together a New Plan

2011-2012 Board Budget Study Session #1May 16, 2011

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Agenda

Legislative Update• Budget Bills• Fund Formula Bills

Annual Benchmarking Update

Preliminary General Fund Budget

• Expenditure Increases and Reductions• Education Jobs Funding

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2

1

State Budget Bill Update

3

Statewide Estimates 2010-

2011 House Senate

House/Senate

Difference

Foundation Program $36.0B $33.2B $37.0B ($3.8B)

Facility Funding 1.2B 1.6B 1.6B -0-

SSI & At-Risk Programs 4.4B 3.3B 3.6B ($0.3B)

Tech & Instruct Materials 1.2B 0.3B 0.7B ($0.4B)

Other 7.3B 7.0B 7.1B ($0.1B)

TOTALS $50.1B $45.4B $50.0B ($4.6B)

Proposed Budgets vs. 2010-2011 ($4.7B) ($0.1B)Overall, the Senate’s version of the 2012-2013 biennial budget provides $4.6B more in education funding than the House’s budget. Although it does not provide funds for enrollment growth or additional hold-harmless for declining property value, it provides nearly as much total funding as is estimated for the 2010-2011 biennium.

House & Senate Budgets

4

House & Senate Budgets

Statewide Estimates TEA

Versus House

Versus Senate

2010-2011 Budget $50.1B

New Enrollment 1.8B

Hold-Harmless for Property Value Decline 1.0B

MINIMUM FOR 2012-2013

$52.9B ($7.5B) ($2.9B)

(14.2%) (5.5%)

Difference from Minimum Need

The Texas Education Agency requested nearly $55B for the biennium. If the only changes made to the 2010-2011 budget were minimal increases for new enrollment and hold-harmless for property value decline, the minimum need for the 2012-2013 biennium would be $52.9B. The House and Senate versions of the budget fall $7.5B and $2.9B short of that mark, respectively. 5

Formula Funding BillsHouse Version

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Under current law, increases to Weighted Average Daily Attendance would increase State Funding by $7.7M. Decreases in property tax revenue would trigger an increase to State funding (via hold-harmless) of approximately $5M.

2010-2011 Revenue vs. 2011-2012

NEISD General Fund 2010-2011

2011-2012 Current

Law DifferenceProperty Tax Revenue $282.8

M$277.5M ($5.3M)

Other Local Revenue 4.4M 3.9M (0.5M)

State Revenue 188.9M 201.5M 12.6M

TRS Revenue 23.5M 23.5M 0.0M

Federal Revenue & Other 6.2M 5.6M (0.6M)Total Revenue $505.8

M$512.0

M$6.2M

Difference from Current Law Revenue Estimate

7

Under House Bill 2485’s funding formula, NEISD will see a decline in revenue of $43.4M in 2012 compared to 2011. Revenue would drop another $3M in 2013 and $2M in 2014.

2010-2011 Revenue vs. 2011-2012

NEISD General Fund 2010-

2011

2011-2012 HB

2485 DifferenceProperty Tax Revenue $282.8

M$277.5M ($5.3M)


State Revenue 188.9M 151.9M (37.0M)



M$462.4

M($43.4

M)

Based on House Bill 2485

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Compared to the current funding formula law, NEISD will lose nearly $50M in 2012, all in State revenue. The State’s share of total General Fund revenue would fall from 39% to 33%.

2011-2012 Effective Revenue Loss

NEISD General Fund

2011-2012

Current Law

2011-2012 HB

2485Differenc

eProperty Tax Revenue $277.5M $277.5M $0.0M

Other Local Revenue 3.9M 3.9M 0.0M



Federal Revenue & Other 5.6M 5.6M 0.0MTotal Revenue $512.0

M$462.4

M($49.6

M)

House Bill 2485 -- Difference from Current Law

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Formula Funding BillsSenate Version

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2010-2011 Revenue vs. 2011-2012

NEISD General Fund 2010-

2011

2011-2012 SB22 Difference

Property Tax Revenue $282.8M

$277.5M ($5.3M)





M$475.3

M($30.5

M)

Based on Senate Bill 22

Under Senate Bill 22’s funding formula, NEISD will see a decline in revenue of $30.5M in 2012 compared to 2011. Revenue would remain relatively flat thereafter.

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2011-2012 Effective Revenue Loss

NEISD General Fund

2011-2012

Current Law

2011-2012 SB22

Difference

Property Tax Revenue $277.5M $277.5M $0.0M

Other Local Revenue 3.9M 3.9M 0.0M



Federal Revenue & Other 5.6M 5.6M 0.0MTotal Revenue $512.0

M$475.3

M($36.7

M)

SB 22 -- Difference from Current Law

Compared to the current funding formula law, NEISD will lose nearly $37M in 2012, all in State revenue. The State’s share of total General Fund revenue would fall from 39% to 35%. 12

Formula Funding BillsWhat if None Passes?

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If the Legislature passes an appropriations bill but does not change the Foundation School Program’s funding formulas to distribute only the amount appropriated, the Commissioner of Education could:

• Fully fund 2011-2012, and prorate 2012-2013• Needs approval by the Governor• Legislative Budget Board would propose to the next Legislature

(January 2013) to take shortage from Rainy-Day to finish out 2012-2013

Budget Bill but No Funding Bill?

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Commissioner’s

ProrationToolkit

Sources: Legislative Budget Board; Moak, Casey & Associates

• If the 83rd Legislature denies the January 2013 Rainy-Day request, Commissioner stops payments to districts in May 2013

• From an total allocation perspective, this hurts property-rich districts since proration is based on available property tax base

• From a cash perspective, however, this disproportionally hurts property-poor districts that have their State aid payments spread evenly throughout the year

• Property-wealthy districts receive more State funds in September & October, and live off property tax revenue beginning in January

•Proration is a delay, not a reduction• Statute mandate any cut in 2013 would have to be added to

the 2014-2015 biennium budget


15Sources: Legislative Budget Board; Moak, Casey & Associates

From Texas Education Code §42.2516“The commissioner shall determine the state compression percentage for each school year based on the percentage by which a district is able to

reduce the district's maintenance and operations tax rate for that year, as compared to the district's adopted maintenance and operations tax rate for

the 2005 tax year, as a result of state funds appropriated for distribution under this section for that year from the property tax relief fund established under Section 403.109, Government Code, or from another funding source

available for school district property tax relief.”


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The Commissioner of Education has the authority to change the

“compressed tax rate.”

Quote from Robert Scott:“Please don’t put me in that spot.”Source: TASA Capital Watch Alert

Tax Rate Compression

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• When the 79th Legislature lowered property taxes, they did not lower local property tax rates to $1.00.

• The Legislature lowered each district’s rate to 66.67% of it’s 2005 rate. Almost every district in the state taxed @ $1.50 at the time, so 66.67% compression = $1.00.

• If the State fails to provide adequate funding to districts, such that the total available revenue (local & state) per Weighted Average Daily Attendance is not comparable to pre-2006 amounts, then the commissioner must adjust the compression rate.

Sources: Legislative Budget Board; Moak, Casey & Associates

Tax Rate Compression

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HYPOTHETICAL SITUATION

• Commissioner changes NEISD’s compression from 66.67% to 68%

• 68% X $1.50 = new $1.02 compression rate

• NEISD’s current tax rate is $1.04 ($1.00 compression + $0.04 enrichment pennies)

• If NEISD does raise it’s taxes by $0.02, the State will penalize NEISD by taking away approximately $4 million of Tier II State funding.

• Only 2¢ of our tax rate would be “golden pennies” instead of the 4¢ we now have (local tax rate only 2¢ above compressed rate).

General Fund Forecast

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• Reflects house version of budget and formula funding bills

• These reflect current “near-worst-case” scenario• Situation more grim if either (a) law to use Rainy-Day fund to

cover 10-11 biennial deficit or (b) law to delay August FSP payment do not pass.

• Does not yet reflect Education Jobs Fund• This will be addressed later in the presentation

• Significant Assumptions• Approximately 1,050 new students• Start-up costs for two new schools opening in August

2012• General Fund absorbs significant costs from State-killed

programs, such as Technology Allotment, Student Success Initiative, Adult Ed and shared service arrangement for Regional Day School for the Deaf

General Fund Forecast

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(in millions)

2010-2011

Forecast

1st Year Chan

ge

2011–2012

Forecast

2nd Year

Change

2012–2013

Forecast

3rd Year Chan

ge

2013–2014

Forecast

Revenue $505.8($43.4

) $462.4 ($3.1) $459.3 ($2.0) $457.3Expenditures 485.8 (16.8) 469.0 10.3 479.3 5.5 484.9Increase (Decrease) to Fund Balance $20.0 ($6.6) ($20.0) ($27.5)Beginning Fund Balance 71.9 91.9 85.3 65.3Ending Fund Balance $91.9 $85.3 $65.3 $37.8Months of Operating Fund Balance 2.4 2.3 1.7 1.0

Revenue/Student $7,606 ($760) $6,846 ($155) $6,691 ($134) $6,557Expenditures/Student $7,305 ($361) $6,944 $39 $6,983 ($31) $6,952

General Fund ForecastBased on HB 2485

The revenue reductions based on HB2485 continue past the next biennium (into at least 2013-2014). Almost $27M in fund balance will be eroded over 2 years, and dramatically more in 2014 if the 2013 Legislature doesn’t increase funding. 2

1

Expenditure Increases for 2011-2012

Costs to Absorb Educational Programs Losing Grant Funding $3,000,000Set-aside for Repayment of QSCBs 1,700,000Increased District Share of Health Insurance 1,795,000Other Increases for New Schools, Inflation, Infrastructure 2,813,000Contingency Allowance 2,500,000

Total Expenditure Increases $11,808,000

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Expenditure Reductions for 2011-2012

Central Office Positions Frozen/Eliminated (~52 FTEs, 6.2%) ($2,550,000)Eliminate Retention Supplement (6,140,000)Utility Savings (450,000)Reduce Contract Days for Teachers > 187 days (250,000)Central Office Department Budget Reductions (350,000)Reduce Contract Days by 2 for Admin & Paras >190 days (577,000)

Total Before Campus Reductions ($10,337,000)Campus Reduction Goals

Elementary School Teachers(130 FTEs, 6.4%) ($7,865,000)Middle School Teachers(37 FTEs,3.8%) (2,173,000)High School Teachers(59 FTEs, 4.6%) (3,551,000)General Assistants & Clerical Admin – All levels(90 FTEs, 5.4%)

(2,716,000)

Campus Admin & Other Professionals – All Levels (25 FTEs, 3.7%)

(1,879,000)

Total Potential Campus Reductions ($18,184,000)Grand Total Reductions ($28,521,000)23

Reductions to Teacher Staffing Levels

Current Allocatio

nReduction Goal

Resignees/

RetireesTo-Date Difference

Elementary School Teachers 2,030.7 130 100 (30)Middle School Teachers 953.6 37 38 1High School Teachers 1,284.5 59 63 1

Total 4,268.8 226 201 (28)% of Current Allocation 5.3% 4.7%

Teacher Turnover Rate: 2005-2006

10.1%

2006-2007 11.7%2007-2008 11.2%2008-2009 10.4%2009-2010 8.2%

If 2010-2011’s turnover rate is 8%, total teacher turnover would be 341.If 2010-2011’s turnover rate is 6%, total teacher turnover would be 255. 2

4

Cost Avoidances for 2011-2012Eliminate Pay Raise $9,280,000Not Adding Teaching Staff to Accommodate Enrollment Growth 4,060,000Reduce Contingency Allowance & AARs 2,000,000

Total Cost Avoidance $15,340,000

Total Reductions from 2010-2011 Actual $28,521,000Total Cost Avoidances for 2011-2012 15,340,000

Net Change Compared to Planned 2011-2012 Cost Structure $43,861,000

An earlier example showed that HB2485 revenue compared to current law revenue for 2012 was nearly $50M lower. Similarly, in addition to expenditure reductions of $28.5M resulting from this legislation, NEISD is planning $15.3M in cost avoidances. This represents planned expenditure growth that will no longer occur. The total change to NEISD’s anticipated cost structure due to the under-funding of education is $43.9M.

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Education Jobs Bill

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• North East ISD was allocated $10,594,000

• Funds must be used for compensation and benefits of school-level employees for the following allowable purposes:

• To retain, recall, or rehire employees• To restore reductions in salaries, including furlough days

• Funds were intended to be distributed for use in 2010-2011

• All Federal guidance refers to 2010-2011• Currently reviewing TEA guidance for proper use in 2011-2012• Update will be provided to Board of Trustees on May 23, 2011

Education Jobs Bill

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Benchmarking Update

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Instructi

on

Library S

vcs

Staff D

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Instr Ldrsh

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Schl L

drshp

Counselin

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Social W

ork

Health

Svcs

Transp

ortatio

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Extrac

urricular

Genera

l Admin

Mainten

ance

Security

Data Prcs

gTotal

-

10

20

30

40

50

60

70

80

90

100

Rank

wit

hin

Top

100

NEISD vs. 100 Largest Texas ISDsGeneral Fund Expenditures per Student

North East ISD ranked 75th out

of the 100 largest Texas ISDs for per

Student spending for

2009-2010. (25 districts spent more

per student) NEISD spent

$250 per student more

than the weighted

average of the group, a

difference of 3.5%.

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State Peer Group2009-2010 Selected Demographics

District Enrollment

Wealth/ WADA EDS % Target

RevenueArlington 63,385 $267,494 59.8% $5,003Conroe 49,323 $337,689 35.6% $5,463Fort Bend 69,066 $288,134 35.2% $5,228Garland 57,654 $193,456 57.2% $4,999Katy 58,444 $284,551 29.1% $5,602Klein 44,695 $241,173 36.2% $5,160Lewisville 50,664 $391,246 25.6% $5,842Northside 91,464 $292,113 50.3% $5,382Round Rock 42,777 $424,603 28.7% $5,981Peer Group Average 58,608 $297,224 41.2% $5,380

North East 65,217 $357,700 42.8% $5,704

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NEISD vs. State Peer GroupGeneral Fund Expenditures per Student

$414$202North East ISD spent $414

more than the average of our

peer group, mainly in the

areas Instruction,

Staff Development,

School Leadership and Maintenance.

$(80)

$(60)

$(40)

$(20)

$-

$20

$40

$60

$80

$100 $202

$20

$48

$0

$46

($12)

$27 $25 $21 $10

$25

$59

$2

($59)

$414 Dollars Spent per Student Variance

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Instructi

on

Library S

vcs

Staff D

ev

Instr Ldrsh

p

Schl L

drshp

Counselin

g

Social W

ork

Health

Svcs

Transp

ortatio

n

Extrac

urricular

Genera

l Admin

Mainten

ance

Security

Data Prcs

gTotal

(60%)

(50%)

(40%)

(30%)

(20%)

(10%)

(0%)

10%

20%

30%

40%

50%

60%

5%

18%

54%

0%

10%

(4%)

209%

32%

9% 7%

17%

8%3%

(52%)

6%

% Difference in Student Spending

NEISD vs. State Peer GroupGeneral Fund Expenditures per Student

Although North East ISD spent $202 more for

instruction than our peer group average, that

represents only a 5% difference.

Alternatively, NEISD spent

209% more than our peer

average on Social Work

Services, but that represents

only $27 per student.

209%

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NEISD vs. State Peer GroupFunction 11 - Instruction

General Fund Only NEISD State Peers Difference %

DifferenceFunction 11 per Student $4,665.7 $4,463.5 $202.2 4.5%

Payroll as a % of Total 96.3% 96.9%Payroll makes up

almost all Function 11 costs!

Student / Professional FTE 15.43 15.36 (0.07) (0.4%)

Student / Para FTE 103.88 103.60 (0.28) (0.3%)Salary / FTE – Professional $55,422 $52,951 $2,471 4.7%

Salary / FTE – Para $18,239 $18,509 ($270) (1.5%)Compared to our peers, NEISD has similar student-to-staff ratios, and similar costs for instructional assistants. NEISD pays 4.7% higher salaries for professional instructional staff.

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NEISD vs. State Peer GroupFunction 13 – Curriculum & Staff Development


Difference

Function 13 per Student $137.4 $89.2 $48.2 54.0%

Payroll as a % of Total 82.1% 80.2% 1.9%Student / Professional FTE 835.0 2,128.9 1,293.9 60.8%

Student / Para FTE 5,176.0 10,468.9 5,292.9 50.5%Salary/ FTE – Professional $67,912 $80,921 ($13,009) (16.1%)

Salary / FTE – Para $32,632 $31,161 $1,471 4.72%Compared to our peers, NEISD has significantly lower ratios for staff devoted to curriculum and staff development. TEA data reporting standards do not allow for a comparison of what positions each district codes to this function. For NEISD, it comprises mostly deans.

35

NEISD vs. State Peer GroupFunction 23 – School Leadership


Difference




Student / Professional FTE 315.4 309.5 (5.9) (1.9%)

Student / Para FTE 214.2 212.0 (2.2) (1.0%)Salary / FTE – Professional $83,736 $77,054 $6,682 8.7%

Salary / FTE – Para $25,410 $23,675 $1,735 7.3%Compared to our peers, NEISD has similar student-to-staff ratios in school administrative positions. NEISD pays 8.7% higher salaries for professional administrative staff and 7.3% more in paraprofessional staff.

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NEISD vs. State Peer GroupFunction 33 – Health Services


Difference




Student / Professional FTE 875.4 902.4 27.0 3.0%

Student / Para FTE 1,015.8 3,885.5 2,869.7 73.9%Salary / FTE – Professional $55,380 $51,534 $3,846 7.5%

Salary / FTE – Para $18,816 $21,244 ($2,428) (11.4%)Compared to our peers, NEISD has a similar student-to-staff ratio for professional health staff (i.e., nurses). NEISD has a significantly lower ratio for paraprofessional health staff. TEA reporting standards do not allow for detail of the types of paraprofessional positions at our peers; for NEISD this is mainly clinic assistants.

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NEISD vs. State Peer GroupFunction 51 – Facilities Maintenance & Operations


Difference


Payroll as % of Budget 57.8% 48.4% 9.4%

Utilities as a % of Budget 25.6% 33.8% (7.2%)

Payroll Cost per Student $433.7 $324.3 $109.3 33.7%

Student / Auxiliary FTE 93.5 138.7 45.2 32.6%

Salary / FTE – Auxiliary $29,450 $27,792 $1,658 6.0%

Utilities Cost per Student $195.3 $237.8 ($42.4) (17.8%)

Compared to our peers, NEISD has a lower student-to-staff ratio in custodial and maintenance positions. NEISD pays 6.0% higher salaries for auxiliary staff. NEISD has a significant savings in utilities compared to our peers.

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State Peer GroupSpending vs. Target Revenue

DistrictTarget

Revenue/WADA

Operating Costs/WADA

Ratio of Costs to Target

M&O Tax Rate

Arlington $5,003 $5,661 113.1% $1.0400Conroe $5,463 $5,524 101.1% $1.0400Fort Bend $5,228 $6,012 115.0% $1.0400Garland $4,999 $5,444 108.9% $1.0400Katy $5,602 $6,185 110.4% $1.1266Klein $5,160 $5,556 107.7% $1.0400Lewisville $5,842 $6,458 110.5% $1.0400Northside $5,382 $5,957 110.7% $1.0400Round Rock $5,981 $6,256 104.6% $1.0400Peer Group Average $5,380 $5,896 109.6% $1.0496

North East $5,704 $6,227 109.2% $1.0400

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June 13 – Call for Public Hearing

Upcoming Meetings

May 23

June 27 – Public Hearing

1

2

3

Questions?

Piecing Together a New Plan 2011-2012 Board Budget Study Session #1 May 16, 2011

Documents

mtotal revenue

b short

mfederal revenue other6

mfederal revenue other5

total general fund revenue

state funding

current funding formula

education funding