Five-Year Financial Forecast Update: Projected Fund Balances and Revenue Trends

1. Five Year Forecast MAY 2014 uPDATE

2. SIMPLIFIED STATEMENT

3. PROJECTED FUND BALANCES • June 30, 2014 Projected Cash Balance $8,690,087 • June 30, 2015 Projected Cash Balance $8,038,162 • June 30, 2016 Projected Cash Balance $ 2,608,408 • June 30, 2017 Projected Cash Balance -$7,000,753 • June 30, 2018 Projected Cash Balance -$18,383,001 • FY16 Balance Barely Meets 30 Days Required Cash on Hand • WHY THE DROP IN FY16 ? (Expired Levy – Replacement Needed)

4. REVENUE TRENDS: PropertyTax Drops • Declining revenue sources from $30 M to $27 M • Driven by 12/31/14 expiration of Fixed Sum Levy • Replacement revenue required to maintain operations • Anticipate modest upward trends for income tax, state aid and miscellaneous revenue

5. REVENUE TRENDS: Public Utility Tax ? • Substantial increase probable upon completion of Vassell sub-station • Estimated completion summer 2014 • Tax assessed 2015 – Tax collected 2016 • First half taxes received FY16 • Second half taxes received FY17 • AEP estimated revenue not projected until independently confirmed • Vassell will increase district property valuation which reduces state funding and increases reliance on local property owners

6. REVENUE TRENDS: INCOME TAX • Consistent year over year improvement • Modest growth projected of 2.8% annually • Current year growth over 9% • Largest growth in employers withholding followed by tax returns • Indication of improved “personal economy”

7. Revenue Trends: State Aid Grows • State aid up 6% this year and 10% next year • Experience growth despite funding guarantee & caps • Guarantee funded at FY13 level for future years @ $4,757,849 • Growth cap creates unfunded formula revenue this year of $1,079,900 • Future funding increases as a result of enrollment growing faster than valuation and income wealth as compared to state averages • Increases reduce unfunded formula but district still not fully funded • Vassell will increase district property valuation which reduces state funding and increases reliance on local property owners

8. Summary Declining Revenue

9. Revenue Summary Graphs

10. EXPENDITURE TREND • Increasing expenditures from $29 M to $39 M in next five years • Driven by restoration of programs & reopening buildings • Reducing elementary class size now to prepare for enrollment growth • Extensive capital needs for technology, curriculum & facility maint • Healthcare cost present biggest challenge

11. EXPENDITURES: PERSONNEL • Modest 2.8% blended average base increase projected as placeholder • Staffing level increase by 28.75 positions • Up 10.25 from 18.5 projected in October • 3 - all day kindergarten teachers (Offset by tuition) • 2.5 - pre-school teachers (Reclassified from purchase service) • 4 – pre-school aides (Reclassified from purchase service) • .75 – MS Counselor

12. Summary of Additional Staff • 3 Class Size Relief Teachers @ BWI • 3 Kindergarten Teachers (Tuition) • 2.5 Pre-School Teachers (PurSvc) • 4 Pre-School Aides (PurSvc) • 1 HS Math Teacher • 1 Art Teacher • 2 Instructional Facilitators • .75 MS Counselor • 1 Intervention Specialist @ HSE • 1 Principal @ HSE • 1 Secretary @ HSE • .5 Clerical Aide @ HSE • 2 Custodians @ HSE • 4 Bus Drivers (two-tier model) • 1 Maintenance • 1 HS Asst. Princ (PurSvc)

13. EXPENDITURES: BENEFITS • Insurance premium rate increases continue to pose threat • Estimate future increases at 14% • Healthcare reform continues to impact plan costs • Rx co-payments to be included Maximum Out-of-Pocket (MOOP) • Contemplated 20% for 2015 due to MOOP • Insurance committee to examine cost containment strategies

14. Impact of Health Care Reform • Research Institute Fee – $1440/ year to support prevention treatment • Reinsurance Assessment Fee – to help stabilize premiums in market as new high cost individuals access market (CY14 $45,300, CY15 $30,200 & CY16 $18,700) • Health Insurer Fee – $116,100/ year to support cost of health care reform (2% of annual premium) • High-Cost Insurance Tax – not applicable until 2018 (40% tax on plans that exceed defined thresholds: i.e. Cadillac Tax)

15. EXPENDITURES: PURCHASE SERVICES • Increasing costs average 5% annually • Includes increases of $75K for Harrison Street utilities • Includes increases for community schools & autism scholarships • Community Schools FY13 $586,675 FY14 $628,739 • Autism Scholarships FY $172,983 FY14 $223,116 • Includes decreases of $550K for Pre-School and HS Asst. Princ.

16. EXPENDITURES: SUPPLIES & MATERIALS • Inflationary increases average 3% • $17K dedicated for materials needed to restock Harrison Street • $35K needed for additional book for larger “bubble classes” • $200K earmarked annually for new curriculum material adoptions • Current year curriculum investment $200K provided by bond funds

17. EXPENDITURES: CAPITAL OUTLAY • Inflationary increases average 2% annually • Fiscal strife delayed maintenance and replacement cycles • Beginning in FY16 additional resources dedicated to: • technology replacement at $125,000 per year until obtaining the $250,000 per year replenishment goal • facility upkeep are earmarked at $200,000 the first year additional investments of $100,000 per year until obtaining the $400,000 annual budget

18. Conclusion Summary

19. CONCLUSION • District operating demands to outpace resources • Declining revenue from expired levy • Deferred capital, maintenance and curriculum demands must be resolved • Salary increases modest but healthcare cost rising rapidly • Tax base expected to grow but not quickly enough to avoid levy • Replacement of levy revenue required to avoid disruption of instructional services of budget cuts.