Continue our series of shorter budget topics this evening The topic this evening is revenue – state, federal and local 1
Historically, about 24 -26% of total district revenues come from state sources There is a lot of conversation going on as the state budget process moves forward, with the governor’s proposal vs. the expectations of the legislators; this is the first budget process in four years with different parties represented between the governor’s office and the majority in both bodies of the legislature 2
Discussion of timelines – the timing of our local school district budget process and the state budget process does not align well By law, the district must adopt a budget by June 30 th each year; technically the state has that same deadline. While the district meets this deadline each year, that has not been the track record of the state every year, especially in years with different political parties between the governor’s office and legislative bodies Even if the state meets the 6/30 deadline, there is typically no clarity for the district in early May when we bring forward the Proposed Final Budget, or by the Final Budget adoption the second week of June What this means is that we incorporate the best estimates we can develop on state revenues, but there are sometimes differences between what the state does and those estimates we have included (certainly not a perfect system!) 3
Look at some perspective from 2008-09 till 2014-15: Most of the state funding we receive relates to Basic Education / Special Education / program-related grants; this total is down slightly Reimbursements that come to the district for transportation, Plancon subsidies for construction costs, and FICA tax subsidies have been relatively stable; some Plancon money was backlogged for a couple of years and most was caught up in this 2014- 15 year (makes this year’s number artificially high by about $300 thousand) Property Tax Relief funds passed through as Homestead/Farmstead credits has remained at $1.6 million since inception As a result of the “great recession” there were Federal Stimulus funds passed through from the state to school districts as “state fiscal stabilization funds” but there was no other funding to backfill when the stimulus program ended after 2 years; you can see the decrease in funding in 2011-12 The top blue section of the graph represents the PSERS related subsidy, which assists with 50% of the escalating PSERS expense; if you look at total state funding without PSERS, and without the catch-up Plancon funds this year, state funding is about $100,000 less this year than in 2008-09 In perspective – state funding in 2008-09 was 25.75% overall, with about 1% from PSERS and almost 25% from other areas; in 2014-15, the PSERS subsidy amount is about 5% and all other categories are only 21% of the total revenue budget 4
Federal funding generally provides 1 – 1.8% of overall district funding Many specific requirements on how to spend these funds; these grants are the focus of audit procedures, a great deal of time goes into managing these funds to ensure compliance Programs include Title I, II, III and KtO, as shown on the slide 5
In the overall picture of the 2014-15 Budget, local revenues make up about 73%; state about 26% and Federal about 1% As this graph makes clear, the bulk of local funding comes from current real estate taxes at 62%; earned income taxes add another 6%; all other local sources make up about 5% 6
Finance Committee met last week, continued discussions about the budget process Preliminary Budget showed a shortfall of about $3.3 million; we have worked to incorporate savings from collective bargaining and other cost reductions; shortfall stands at $1.9 million at this point; we are still working on cost reductions as we continue budget discussions. All projections have assumed use of $600k from Debt Service (due to higher principal/interest payments this year), and $500k from retirement reserve Assessment of staffing levels has revealed needs to fill some positions in special education areas as we move forward to ensure compliance with case loads; we are considering the Therapeutic classroom to reduce costs and provide potential revenues in the future; need to open an Autistic classroom at high school as students served with district staff age up to the high school level; there are some areas where we need to repurpose some teaching contracts to address some class size issues. Bottom line is that we cannot eliminate any positions this year, without further reductions of student programs, but we have incorporated attritional savings to these latest numbers 7
Earlier in the presentation, we looked at revenues from 2008- 09, so let’s take a look at that year on the expense side, and compare with our projected expenses for next year; it is easy to see in these graphs that there is compression in other budget categories because of key benefit pieces Through savings strategies on medical and dental benefits through collective bargaining, we have succeeded in restricting that portion of the budget, growing only slightly from 9% to 10% in this analysis; we believe recently negotiated changes moving forward will further restrict that portion of the budget Wages are up in real dollars, but have declined from 47% to 46% overall; other categories of spending, including our supply and equipment purchases, contract services, and other critical areas have been reduced from 26% to only 18% of the total, and debt service decreased as a percentage from 10% to 9% The elephant in the room continues to be PSERS, a number over which we have no control but do have legal obligations to pay, growing from 2% to 12% of budget over this time period; the earlier slide reflects how the state supports half that cost, but has forced other expenses onto local revenue sources 8
To close the remaining budget gap, there are alternatives for consideration; three primary alternatives include cutting expenses further which would involve consideration of cutting programs; further use of fund balance/reserves; consideration of a tax increase (or some combination of these) Committee looked at data on alternatives and long-term implications There is no compelling reason to raise taxes beyond the Index; a 2.2% Index-based increase would provide an additional $1.5 million in local funding, and that would be similar to current budget, planning to use reserves/fund balance if needed Could consider smaller levels of cost reductions and a somewhat lower tax increase / some use of reserves 9
Finance Committee had lively discussion about all of this – wanted to bring back to the full board for discussion and input 10
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