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Budget Workshop

March 24, 2014. Budget 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

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Budget Workshop

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  1. March 24, 2014 Budget Workshop “Tradition of Excellence”

  2. 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 “Tradition of Excellence”

  3. 2014-15 Budget “Tradition of Excellence”

  4. 2014-15 Budget Forecast (Governor’s Proposal) 2013-142014-15 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 Fund Balance 8.8% 6.3% Per Pupil Funding $7,450 $7,554 EGRNow! Funding $280,000 $0 Cost of Step Increase $370,000 “Tradition of Excellence”

  5. 2014-15 Budget Proposals (Senate compared to Governor’s) CurrentGovernor’sSenate Foundation Increase n/a $104 $257 Foundation Allowance $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% Projected Deficit ($324,712) ($685,734) ($658,531) “Tradition of Excellence”

  6. 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 “Tradition of Excellence”

  7. 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”

  8. 2014-15 Budget Forecast (Sensitivity Analysis) “Tradition of Excellence”

  9. Structural Balance “Tradition of Excellence”

  10. 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 “Tradition of Excellence”

  11. 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 “Tradition of Excellence”

  12. 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”

  13. Is an annual increase of $150 to $300 per pupil possible? 2014-15 and 2015-16 are state estimates, 2016-17 is district estimate “Tradition of Excellence”

  14. 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”

  15. 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”

  16. 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”

  17. 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”

  18. Where have we been? Where are we now? Where are we going? “Tradition of Excellence”

  19. Bulletin 1014 – State spending comparison “Tradition of Excellence”

  20. 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 “Tradition of Excellence”

  21. 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. “Tradition of Excellence”

  22. 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 “Tradition of Excellence”

  23. Budget Process Timeline “Tradition of Excellence”

  24. 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”

  25. 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 “Tradition of Excellence”

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