BUDGET REVIEW CHESHIRE PUBLIC SCHOOLS Greg J. Florio, Ed.D. - - PowerPoint PPT Presentation

CHESHIRE PUBLIC SCHOOLS

Greg J. Florio, Ed.D. Superintendent of Schools January 8, 2015

2015-2016 BUDGET REVIEW

2015-16 Total Budget Request

$42,382,178 61% $12,348,103 18% $6,477,806 9% $4,815,770 7% $3,407,536 5%

Budget Request by Category

Salaries Employee Benefits Support Services (Includes Special Education) Instructional Expense (Includes Transportation) Maintenance and Operations 2014-15 Approved 2015-16 Request $ Change % Change $66,008,180 $69,431,393 $3,423,213 5.19%

79% of Budget is for Salaries & Benefits; 94% for Large “Fixed” Costs

“Fixed” Costs = 94% of Budget

94% of the 2015-16 Request is for large expenditures that are “Fixed”. These expenses are either:

• Contractual (Salaries & Benefits) = 79% of Budget
• Mandated (Special Ed & Trans.) = 9% of Budget
• Facility Overhead (Utilities & Maint.) = 6% of Budget

These expenditures generally can’t be reduced/eliminated without impacting core services offered by the district.

Budget Category Budget Request Cumulative $ of Total Budget Cumulative %

• f Total Budget

Salaries 42,382,178 $ 42,382,178 $ 61% Benefits 12,348,103 $ 54,730,281 $ 79% Transportation, Fuel and Insurance 3,825,217 $ 58,555,498 $ 84% Special Education Tuition and Services 3,016,034 $ 61,571,532 $ 88% Utilities, Heating & Energy Contract Payments 1,960,162 $ 63,531,694 $ 91% Facilities Cleaning, Maint., Supplies & Repairs 1,947,374 $ 65,479,068 $ 94% 2015-16 Requested = $69,431,393

“Variable” Costs = 6% of Budget

6% of the Budget Requested is for categories in which inadequate funding has negative impacts to our schools.

Budget Category 2015-16 Requested Cumulative $ Requested Cumulative %

• f Budget

Instructional Supply 636,189 $ 636,189 $ 1% Other Professional Services 564,700 $ 1,200,889 $ 2% Texbooks/Software 483,049 $ 1,683,938 $ 2% Rentals/Leases 394,930 $ 2,078,868 $ 3% New & Replacement Equipment 225,000 $ 2,303,868 $ 3% Computer Capital Equipment 275,000 $ 2,578,868 $ 4% Staff Training & Prof Development 275,738 $ 2,854,606 $ 4% Other Services 201,443 $ 3,056,049 $ 4% Library/Periodicals/Media 176,522 $ 3,232,571 $ 5% Mailings and Communications 154,768 $ 3,387,339 $ 5% Property/Liability Insurance 151,025 $ 3,538,364 $ 5% Office and Other Supply 136,348 $ 3,674,712 $ 5% Telephone/OnLine Services 135,588 $ 3,810,300 $ 5% All Other 142,025 $ 3,952,325 $ 6% 2015-16 Requested = $69,431,393

Mandates…

• Adult Education
• English Language Learners – ELL
• Excess Costs and Agency Placement Fees
• ADA accommodations
• Alternate Ed for Expelled Students
• Indoor Air Quality – Tools for Schools
• Asbestos Management
• Background Checks, Finger Printing, etc.
• Blood Borne Pathogens
• Safe School Climate Requirements
• Child Abuse Reporting
• Professional Development Committee
• In-Service Training for Certified Staff
• CPR/First Aid and Heimlich Training
• Student Physicals and Immunizations
• Drug Education (health staff)
• ED-001 End of Year School Report
• All Other ED-XXX Reporting
• Family and Medical Leave Act
• HIPAA
• Internet Protection Act for Children
• Integrated Pest Management
• Public/Non-Public School Transportation
• Transportation to Regional Vo-Ag/Tech
• Special Education Transportation
• Sexual Harassment Training
• Special Education
• Strategic School Profiles
• Vision, Hearing, Scoliosis Screenings
• Summer School
• Three Year Technology Plan
• Truancy Reporting
• Tuition to Regional Vo-Ag schools
• 504 Accommodations
• Student Wellness Policy and Committee
• DEEP Requirements for Water & Septic
• Elevator Service/Inspections
• Sprinkler Inspections/Reports
• Hood Suppression Systems
• Fire Alarm System
• Radon Testing
• Green Cleaning
• Biohazard Waste Disposal (+Fluorescents)
• Homeless Student Accommodation
• Open Choice
• NCLB – No Child Left Behind
• PPACA
• TEAM and TCC

(Team Coordinating Committee)

• SEED
• Common Core

State Standards

• Uniform Chart of

Accts

• More PPACA
• Masters Degree

for Teachers

• SMARTER

Balanced Assessment (SBAC)

• CT Plan for

Secondary School Reform (2020)

• Reading Survey

for K-3 Teachers

2015-16 Budget Increase - Details

$1,054,744 31% $2,016,136 59% $186,898 5% $165,435 5%

Budget Increase Request by Category

Salaries $42,382,178 (2.55% Increase = $1,054,744) Benefits $12,348,103 (19.51% Increase = $2,016,136) Support Svcs + Facilities Costs $9,885,342 (1.9% Increase = $186,898) Instructional Exp $4,815,770 (3.56% Increase = $165,435) 2014-15 Requested 2014-15 Approved 2015-16 Requested 2015-16 Approved $3,182,441 $2,300,000 (72.3%) $3,423,213 TBD

EMPLOYEE SALARIES

Section Review

Certified Salaries

$29,935,131 87.8% $2,205,237 6.5% 1.8% 1.6% 1.5% 0.5% 0.3%

Certified Salaries by Employee Group

400.72 Total Employees Teachers Administrators Directors & Supervisors Substitutes Student Activites Homebound Tutors Adult Education 2014-15 Approved 2015-16 Request $ Change % Change $33,339,329 $34,100,374 $761,045 2.28%

49.1% of Budget (50.7% in 2014-15)

Non-Certified Salaries

$2,164,566 26% $1,938,552 23% $1,656,756 20% $1,484,508 18% $485,425 6% $289,860 4% $262,137 3%

Non-Certified Salaries by Employee Group

232.67 Total Employees Instructional Assistants Secretarial & Clerical Maintenance Employees Support Personnel Nurses Managers & Supervisors BOE Bus Drivers 2014-15 Approved 2015-16 Request $ Change % Change $7,988,105 $8,281,804 $293,699 3.68%

11.9% of Budget (12.1% in 2014-15)

Union Contract Wage Increases

Employee groups have been cooperative in negotiating reasonable wage increases in line with economic conditions. Contracts for three of the employee groups covered by collective bargaining agreements expire on 6/30/2015 and will be negotiated.

Employee Group 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 Cheshire Ed. Secretaries 3.25% 3.25% 1.50% 1.75% 2.00% 2.25% TBD TBD Cheshire Instructional Assts 0.00% 1.50% 0.75% 2.25% 2.50% 3.00% TBD TBD Cheshire Facilities Group 3.50% 2.00% 0.00% 2.00% 2.25% 2.25% TBD TBD Education Assoc. of Cheshire 4.40% 4.40% 2.20% 2.20% 1.00% 2.69% 2.69% 2.55% Cheshire Admin. Personnel 3.50% 3.50% 0.50% 1.00% 2.15% 2.00% 2.00% 2.25% Average (non-weighted) 2.93% 2.93% 0.99% 1.84% 1.98% 2.44% %TBD %TBD

EMPLOYEE BENEFITS

Section Review

Employee Benefits

$9,757,455 79% $1,165,000 10% $910,548 7% $408,000 3% $107,100 1%

Employee Benefits by Type

Medical/Dental (22.4% Increase = $1,784,314) Social Security (non-certified) (2.2% Increase = $25,000) Pension Plan (non-certified) (23.2% Increase = $171,642) Workers Comp & Unemployment (9.4% Increase = $35,180 ) Life and Disability Insurance (No increase)

2014-15 Approved 2015-16 Request $ Change % Change $10,331,967 $12,348,103 $2,016,136 19.51%

17.8 % of Budget (15.0% in 2014-15)

Employee Benefits – Pension

Noteworthy Factors and Initiatives

• Town Pension Plan (Defined Benefit) contribution up $171,642

for 2015-16 has been increased since 2012 at recommendation

• f our actuaries due to 2007-2009 economic & market declines.

Employee Benefits – Pension

Noteworthy Factors and Initiatives

• Town Pension Plan (Defined Benefit) contribution up $171,642

for 2015-16 has been increased since 2012 at recommendation

• f our actuaries due to 2007-2009 economic & market declines.

Employee Benefits – Pension

Noteworthy Factors and Initiatives

• Town Pension Plan (Defined Benefit) contribution up $171,642

for 2015-16 has been increased since 2012 at recommendation

• f our actuaries due to 2007-2009 economic & market declines.

Employee Benefits – Pension

Noteworthy Factors and Initiatives

• Actuaries recommended reducing return assumptions from

8.25% to 7.5%, resulting in an increase in funding requirements:

Year Pension Contribution $ Change % Change 2004 $135,315 $30,354 28.9% 2005 $166,215 $30,900 22.8% 2006 $84,620

• $81,595
• 49.1%

2007 $193,930 $109,310 129.2% 2008 $219,957 $26,027 13.4% 2009 $268,608 $48,651 22.1% 2010 $256,346

• $12,262
• 4.6%

2011 $231,292

• $25,054
• 9.8%

2012 $425,044 $193,752 83.8% 2013 $519,578 $94,534 22.2% 2014 $635,581 $116,003 22.3% 2015 $788,906 $153,325 24.1% Budget - 2016 $910,548 $121,642 15.4%

Annual pension contribution level has grown by $641,940, a 239% increase, since the financial markets bottomed in 2009

Pension Revaluation

(as of 7-1-2012)

Markets Bottom

(Dow 6,726 3-3-09)

Record-High Markets

(Dow 17,823 12-31-14)

Markets Rising

(Dow 14,093 10-12-07)

Markets Decline

Employee Benefits - Pension

$26,451 $268,608 $425,044 $635,581 $910,548

10,646 13,178 15,010 17,823

7,500 9,500 11,500 13,500 15,500 17,500 19,500 $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,000 2001 2003 2005 2007 2009 2011 2013 2015

Annual Pension Contribution Dow Jones Avg

Market recovery may reduce future funding requirements Pension Plan Revaluation as of 7-1-2014 underway

Employee Benefits - Pension

Noteworthy Factors and Initiatives

• Town Pension Plan (Defined Benefit) contribution up $171,642

for 2015-16 has been increased since 2012 at recommendation

• f our actuaries due to 2007-2009 economic & market declines.
• Actuaries recommended reducing return assumptions from

8.25% to 7.5%, resulting in an increase in funding requirements

• Effective 7-1-2012 the Town Pension Fund is no longer available

for any new hires of the Cheshire Public Schools

• New, non-certified employees are eligible for the Cheshire Public

Schools Defined Contribution Retirement Plan

– BOE Contributes 5% of wages, plus 1% match option, 5 Year Vesting – 403(b) Plan from Met Life; No fees; Mutual Fund Investment Options

• 160 active employees in Pension Plan and 77 in Defined Contribution

– 2014 - 174 employees in Pension Plan and 41 in Defined Contribution Plan

Medical Plan Types - Overview

Fully Insured Anthem Plan:

• HMO Plan (Network Plan)

– Blue Care; Rx is managed by PBIRx

Self Insured Anthem Plans:

• PPO/POS Plan (Co-pay Plan)

– Century Preferred; Rx is managed by PBIRx

• HSA Plan (High Deductible Plan)

– Luminos HSA; Rx is integrated into plan and managed by Anthem

• Rx portion of Fully Insured HMO Plan
• Dental Plan

– Employee cost share – up to 70% of premium; dependents until age 19

Employee cost sharing of premium, co-pay amounts, HSA deductibles and BOE contribution to HSA varies by union contract

Employee Benefits - Medical

Employee Benefits - Medical

Noteworthy Factors and Initiatives

• Increase of $1,784,314 needed to fund claim level run rate and

hopefully rebuild Reserve Fund to healthy balance (2+ months claims)

• Initiatives to manage our health care costs continue:

– HSA Plan enrollment has grown to 52% of participating employees – Rx initiatives…stop loss; step therapy, international fulfillment – Employees are paying more toward their coverage:

• Higher co-shares of allocated premiums, all co-share caps were eliminated
• EAC contract since 7/2013 requires buy-up for PPO and HMO from HSA Plan

rates with higher HSA deductibles and higher PPO co-pays

– Annual cost increases of 4.3% are lower than the 5%+ national average

• But…upward cost pressures including direct fees & expenses

related to the Affordable Care Act will continue thru 2018

– We are/will continue to work to mitigate associated costs as necessary

HSA Participant Plan Growth

341 72% 110 23% 26 5%

2010-11 Employee Participants

PPO HMO HSA

HSA

PPO HMO

80 17% 243 52% 143 31%

2015-16 Employee Participants

HMO HSA PPO

HSA PPO HMO 466 Total Active Employee Participants

HSA Plan enrollment increased by 835% since 2010-11

477 Total Active Employee Participants

HSA Participants by Employee Group

44.5% of employees were enrolled in the HSA as of 1-1-2013 52.1% of employees are enrolled in the HSA as of 1-1-2015

Active Employees # of Participants in HSA Plan # of Participants in All Plans % in HSA Administrators 11 15 73.3% Teachers 201 317 63.4% Secretaries 23 45 51.1% Non-Union/Other 6 16 37.5% Custodians 1 23 4.3% IA's 1 50 2.0% Total 243 466 52.1% Retirees # in HSA Plan # in All Plans % in HSA 2010-11 2 75 2.7% 2015-16 11 54 20.4%

Rx Management

Rx Management

Rx Management

Employee Cost Sharing

Our employees and their respective unions have been cooperative in absorbing a greater part of the ever increasing cost of medical benefits.

Bargaining Group HMO PPO HSA HSA Deductible BOE's HSA Contribution Secretaries (35 hours/week) 13%, 13.5%, 14%, 15% 13%, 13.5%, 14%, 15% 5%, 5%, 5%,5% $1,500/$3,000 $1,000/$2,000 Cheshire IA's - Category 1 (30+ hours/week) 40%, 39%, 38%,37% 40%, 39%, 38%,37% 40%, 39%, 38%,37% $1,500/$3,000 $500/$1,000 Cheshire IA's - Category 2 (20-30 hours/week) 75% 75% 75% $1,500/$3,000 $500/$1,000 Cheshire IA's - Category 3 (<20 hours/week) 100% 100% 100% $1,500/$3,000 $500/$1,000 Cheshire Facilities Group (40 hours/week) 4%, 5%, 6%, 8% 11%, 12%, 13.5%, 14% 6%,6%, 7%, 8% $1,500/$3,000 $1,000/$2,000 Teachers (36.5 hours/week) 12%, 15%,18%, HSA Indexed 16%, 17%,18%, HSA Indexed 6%, 7%, 8%, 9% $2,000/$4,000 as of 1-1-2014 $1,000/$2,000 Administrators 16%,17%, 17%,17% 16%,17%, 17%,17% 3%, 4%, 5%,5% $1,500/$3,000 $1,000/$2,000

Co-Share Rate Trends

• In 2015, health care premium increases will be 5.5% after plan design changes and vendor negotiations
• Companies are implementing high deductible plans, requiring health screenings, reducing subsidies for

dependents, exploring private health exchanges and other approaches to try and stay ahead of increases…

• In 2015, average health care costs are projected to increase to $11,304 per employee and employees will

be asked to contribute 23.6% which equates to $2,664 plus their out-of-pocket costs of $2,487.

• Over the last five years, employee’s share of health care costs, including co-share contributions and out-of-

pocket costs, will have increased more than 52% from $3,389 in 2010 to $5,151 in 2015.

According to Aon Hewitt, a global corporate health and benefits consulting firm:

National Health Care Cost Trend

Source: Aon Hewitt - http://www.insurancejournal.com/news/national/2014/11/13/346957.htm

2% 3% 4% 5% 6% 7% 8% 9% 10%

'09-'10 '10-'11 '11-'12 '12-'13 '13-14 '15-16 - Proj.

6.2% 8.5% 4.9% 3.3% 4.4% 5.5%

Annual Health Care Plan Cost Increases – National National increase exceeds 5% per year

Cheshire’s Medical Cost Trend

$5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000 $10,000,000 $11,000,000 2010 2011 2012 2013 2014 $9,101,864 $8,683,853 9,632,181 $10,170,807 $10,679,196 Self Insured Claims Blue Care Premiums Admin Fees & Stop Loss HSA Contributions

(Excludes Employee Co-share payments)

Cheshire’s trend reflects average increase of 4.3% per year

Medical Benefits Reserve – Review

Medical Benefits Reserve Fund

Are charged to the

• perating budget and

“deposited” to the Medical Benefits Reserve Fund which increases the balance in the Fund each month

Contributions

Controllable

Medical claims each month are paid from the Medical Benefits Reserve Fund which decreases the balance in the Fund

Claims

Not Controllable

$3,225,094 on 7-1-2011 $2,606,121 on 7-1-2012 $2,005,901 on 7-1-2013 $643,165 on 7-1-2014 $333,730 on 11-1-2014

Healthy reserve covers 2+ months claims; we’re down to ½ month

Medical Trust Fund Balance Trend

$300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,000 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14

Contributions averaged $582,640 - 7/2010 to 12/2014

Contributions

Monthly Data - Trust Fund Contributions

Medical Trust Fund Balance Trend

Monthly Data - Trust Fund Contributions

$7,472,600 $7,140,000 $6,650,000 $6,475,000 $7,475,000 $300,000 $1,300,000 $2,300,000 $3,300,000 $4,300,000 $5,300,000 $6,300,000 $7,300,000 $8,300,000 2010-11 2011-12 2012-13 2013-14 2014-15

Annual Contribution Increased $1M for 2014-15

Contributions

4% annual increase = run rate of $8,741,885 in 2014-15

Medical Trust Fund Balance Trend

$300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,000 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14

Contributions averaged $582,640 - 7/2010 to 12/2014

Contributions Linear (Contributions)

Monthly Data - Trust Fund Contributions

Medical Trust Fund Balance Trend

$740,719 $384,650 $848,311 $472,724 $796,589 $1,014,941 $917,857 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,000 $1,100,000 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14

Claims averaged $645,133 from 7/2010 to 12/2014

Claims

Monthly Data - Medical Claims for PPO and HSA Plans

Medical Trust Fund Balance Trend

$740,719 $384,650 $848,311 $472,724 $796,589 $1,014,941 $917,857 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,000 $1,100,000 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14

Claims averaged $645,133 from 7/2010 to 12/2014

Claims Linear (Claims)

Monthly Data - Medical Claims for PPO and HSA Plans

Medical Trust Fund Balance Trend

$500,000 $550,000 $600,000 $650,000 $700,000 $750,000 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Claims Contributions Linear (Claims) Linear (Contributions)

Monthly Data - Trust Fund Contributions vs. Medical Claims

Claims have been exceeding contributions since 2011 by $62,493 per month…

2014-15 Medical Trust Fund Trend

$17,576

• $169,721
• $83,633

$26,570

• $74,123
• $50,000
• $400,000
• $200,000

$0 $200,000 $400,000 $600,000 $800,000 $1,000,000

Jul Aug Sep Oct Nov Dec -Est

Contributions Claims Net Change

Monthly Data - Trust Fund Contributions vs. Medical Claims

YTD 2014-15 claims have exceeded contributions by $47,192 per month

Medical Trust Fund Balance Trend

$3,225,094 $158,730

$0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15

Monthly Data – Trust Fund Balance

2011-2015 Funding Shortfall Result = Trust Fund Balance Decline Replenishing the Medical Trust Fund is necessary to ensure our ability to meet future claims without adversely affecting our operating budget, especially in light of the potential future costs related to the PPACA

• Patient Protection & Affordable Care Act (PPACA) of 2010

– 2013 Key Provisions

• W-2 Reporting must include value of group coverage
• Patient Centered Outcomes Research Fee begins ($)
• Transitional Reinsurance Contribution Program Contribution begins ($$)
• Health Insurer Fee begins ($$$)

– 2014 Key Provisions

• CT Health Insurance Exchange operational on 1/1/2014
• Delayed to 2015 - Employer Shared Responsibility – a.k.a. “Pay or Play”

– Must offer “adequate” and “affordable” plans to 30 hour employees or pay $3,000 penalty per employee who receives benefits from exchange – 70% of eligible employees must be offered “adequate” and “affordable” plans or pay $2,000 penalty x all eligible employees . In 2016, it’s 95%!

– 2018 Provisions

• High Cost Health Plan Excise Tax – a.k.a. “Cadillac Tax” ($$$$++++)

Health Care Reform Provisions

PPACA Component # of Lives 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 Explanation Patient Centered Outcomes Research Fee 1362 $1,362 $2,724 $2,833 $2,860 $2,724 $2,724 $1 per covered person per year in 2013, $2+ thereafter; sunsets in 2019 Transitional Reinsurance Program Fee 1362 $42,903 $85,806 $85,806 $42,903 None None $63 per covered person per year in 2014; sunsets in2016 Health Insurer Fee (HMO Only) 198 $21,384 $21,384 $42,000 $48,000 $54,000 $60,000 2-2.5% of premiums in 2014; rises to 3-4% of premiums in 2015; then indexes up; no sunset Medicare Payroll Tax $0 $0 $0 $0 $0 $0 Tax increases from 1.45% to 2.35% (.9% increase) on wages above $200k/$250k Cadillac Excise Tax 1362 None None None None TBD $175K to $500K TBD $350K to $1M+ 40% of Benefit Cost above $10,200 for Single and $27,500 for Family Coverage Totals $65,649 $109,914 $130,639 $93,763 TBD TBD

Health Care Reform – Fees & Taxes

Health Care Reform – Other Costs

• Indirect impacts - Can result in upward cost pressure:

– Pre-existing coverage limits are prohibited – Lifetime limits are prohibited – Dependent coverage must be provided to age 26 – Medical Device Excise Tax – Preventive care coverage with no co-pay or deductible for all plans – No co-pay or deductible for aspirin, fluoride, folic acid, contraceptives, etc.

Health Care Reform – Other Costs

Thank You for Attending Budget Review Meeting #2 7:00 PM on 1/13/2015 at Dodd Middle School 2015-2016 BUDGET REVIEW