Danville Public Schools Multi-Year Financial Planning January 23, - PowerPoint PPT Presentation

Plan Summary, cont’d. • The baseline financial projection in this report shows DPS with a cumulative deficit of $41.4 million over the five-year projection period if no corrective action is taken. • However, DPS has a path to fiscal stability and continued academic improvement that will benefit the City and the schools. This report seeks to provide specific alternatives for a financial turnaround that can be accompanied by academic growth. • There are exciting aspects to this plan, including a focus on improving student engagement and expanding access to innovative programming and enhanced Career and Technical Education (CTE) offerings. • However, even with more aid from the City, DPS will have to make hard choices. The City does not have unlimited funds and the Division has a long-term budget gap. This plan seeks to phase in additional City aid, but also targets DPS spending to the most critical areas while suggesting selected reductions in others. 12

Plan Summary, cont’d. There ar are two k key ele lements to the DPS PS plan an: 1. A formal Education Compact between the City and DPS encompassing the City’s ongoing financial commitment and the School Division’s performance goals and metrics that will benefit kids and the City.  Examples of similar compacts in Virginia and other states are included in this report. 2. An intense focus on halting the decline in enrollment to preserve state funding and better serve students. The decline, recently around 100 students per year, must be limited to 50 students in 2019-20 and eliminated completely thereafter.  Enrollment stabilization has three parts: - Increasing enrollment in precision machining and other CTE programs at the high school level. - Adding a middle school IB program to provide an important option for DPS students and serve as a feeder for Galileo High School. - A plan by DPS, the City, and other stakeholders to build on recent DPS efforts to lower truancy rates, reduce suspensions, and cut the dropout rate. 13

Plan Summary, cont’d. • Moving DPS toward stable finances using the Compact for funding and performance accountability, a focus on retaining children struggling in the current system, and improving IB and career and technical education (CTE) offerings will require DPS to make some difficult financial and programmatic decisions. • The Network team has proposed one potential path to financial stability with the following elements. DPS and the City can adjust these options through the Compact to reach a solution that works for Danville. • In addition to the Compact and enrollment stabilization, the Network’s scenario includes: – Limiting future salary growth to 2.0 percent for all employees. – Modestly adjusting class sizes to 23 students in grades 4-8. – Moving and expanding the IB program; close the Galileo building. – Providing $500,000 per year in targeted spending to improve student engagement by enhancing innovative instructional programming (IB Programme, CTE, New Tech, etc.). – Phasing in additional City contributions of $2.0 million per year in 2019-20, 2020-21 and 2021-22. 14

Plan Summary, cont’d. • Halting enrollment decline, improving programing, and increasing City funding will turn around the negative budget trend, but long-term financial stability will require additional actions on the part of the City and DPS. • The Network recommends that, as part of their Compact, DPS and the City agree to additional actions, including but not limited to: – Focusing limited capital funds on ensuring that remaining DPS buildings have basic integrity, including secure roofs and reliable HVAC. • Borrowing without voter approval is capped at $6.0 million per year. • The City and the DPS should collaborate on a capital needs analysis and resulting prioritized capital plan. – Adjust the DPS budget to acknowledge an annual vacancy rate of 2.0 percent, and budget the funds needed to fill any substitute teacher positions. – Review other spending control and revenue initiatives included in this Plan to see if they may provide savings or new funds to direct to the remaining fiscal gap or any desired new programs. 15

City and Division Overview 16

City of Danville: Demographics • Total Population: – Danville: 41,911 in 2017, down 2.7 percent from 43,055 in 2010. – Pittsylvania County: 61,970 in 2017, down 2.4 percent from 63,506 in 2010. • Race and Ethnicity in Danville: – White: 20,142 (47.5 percent) in 2016; 21,620 (49.4 percent) in 2010 – African American: 21,512 (50.8 percent) in 2016; 21,177 (48.3 percent) in 2010 – Hispanic: 1,519 (3.6 percent) in 2016; 1,152 (2.6 percent) in 2010 Source: American Community Survey 17

City of Danville: Demographics, cont’d. • Population under the age of 5: – Danville: 2,630 in 2017; 2,639 in 2010. – Pittsylvania County: 2,728 in 2017; down 20 percent from 3,280 in 2010. • Family Households in Danville: – 58.1 percent in 2017; down from 60.5 percent in 2010. • Family Households with Children under 18 in Danville: – 25.0 percent in 2017; down from 28.8 percent in 2010. • Of all family households in Danville, 29.8 percent were headed by a single parent in 2017. Source: American Community Survey 18

City of Danville: Demographics, cont’d. • Population below the Poverty Level: – Danville: 21.5 percent in 2017. – Pittsylvania County: 14.7 percent in 2017. • People under the age of 18 years below the Poverty Level: – Danville: 31.1 percent in 2017. – Pittsylvania County: 22.1 percent in 2017. • Children under the age of 5 years below the Poverty Level: – Danville: 33.1 percent in 2017. – Pittsylvania County: 29.9 percent in 2017. Source: American Community Survey 19

Danville Public Schools: Demographics • Race and Ethnicity: 2017-18 Fall Membership: – Pittsylvania County Schools – Danville Public Schools: • African American: 22.8 percent • African American: 68.7 percent • White: 69.3 percent • White: 19.3 percent • Hispanic: 4.6 percent • Hispanic: 7.3 percent • English Language Learners – Danville Public Schools: 326 students – Pittsylvania County Schools: 260 Source: VA Department of Education 20

DPS: Demographics, cont’d. • Poverty: Fall 2017-18: – Danville Public Schools qualifies for the Community Eligibility Provision (CEP); 100 percent of students receive free/reduced price lunches. – Identified Student Percentage (ISP); 66.7 percent meets USDA poverty standard (April 2018). • Pittsylvania County Public Schools: 43.4 percent. Source: VA Department of Education 21

DPS: Demographics, cont’d. • Students with Disabilities: – Danville reported 901 students (December 2016) or 15.1 percent of students enrolled (State: 13.1 percent) • Danville enrollment makes up 0.46 percent of total enrollment of the State but enrolls 0.53 percent of students with disabilities (0.46 percent would be 780 students). – Disabilities by Type • Specific Learning Disability: 244 • Other Health Impairment: 210 • Speech/Language Impairment: 184 • Autism: 85 • Intellectual Disability: 54 • Developmental Delay: 48 • Emotional Disturbance: 45 • Multiple Disabilities: 11 • Orthopedic Impairment: 10 • Other Disabilities: 10 Source: VA Department of Education 22

DPS: Enrollment Trends • Average Daily Membership has declined by 16 percent from 2006-07 to 2017-18. – This represents a negative 1.6 percent CAGR (Compound Annual Growth Rate) over the period. Actual and Budgeted Average Daily Membership, 2006-07 through 2017-18 7,000 6,589 6,500 6,000 5,519 5,500 5,000 4,500 4,000 3,500 Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 23

DPS: Economically Disadvantaged Trends A student is considered to be Economically Disadvantaged if s/he meets any one • of the following criteria: Eligible for free/reduced price meals. – Receives TANF. – Eligible for Medicaid. – Identified as either migrant or experiencing homelessness. – • Between 2011 and 2014, about three-quarters of DPS students were considered Economically Disadvantaged. • In Fall 2018, 55.6 percent of students are considered Economically Disadvantaged. Fall M ll Membe bership 7,000 6,000 1, 1,640 40 1,542 1, 542 1,732 1, 732 1,695 1, 695 2,125 125 5,000 3,206 206 2,525 525 3,1 ,145 3,381 81 4,000 3,000 4,77 773 4,690 690 4,630 630 4,61 619 4,291 91 2,000 3,161 61 3,043 043 2,81 811 2,44 2, 447 1,000 0 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 Economically Disadvantaged Not Economically Disadvantaged Source: VA Department of Education 24

DPS: Performance Trends - Assessments • Academics: Pass Rates – Reading/English Language Arts: Grades 3-8 and High School Reading/English EOC. – Writing: 8 th Grade and High School EOC. – Math: Grades 3-8 and Algebra I, Algebra II, and Geometry EOC. Pass R ss Rates - All G l Grad ade L Levels T Tested 100 75 50 25 0 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 Reading/ELA Writing Math Source: VA Department of Education 25

DPS: Performance Trends – Econ. Disadv. • All Students: DPS performs below the State average in all subjects. • Economically Disadvantaged students: DPS performs below the State average in all subjects. Reading 2015-16 2016-17 2017-18 DPS State DPS State DPS State All Students 64 80 58 80 56 79 Economically Disadvantaged 56 66 51 67 49 66 Writing 2015-16 2016-17 2017-18 DPS State DPS State DPS State All Students 64 79 64 79 61 78 Economically Disadvantaged 55 63 52 64 54 64 Math 2015-16 2016-17 2017-18 DPS State DPS State DPS State All Students 63 80 54 79 48 77 Economically Disadvantaged 55 69 47 68 42 66 Source: VA Department of Education 26

DPS: Performance Trends – AP and IB • Advanced program participation and outcomes: – Senior IB enrollment peaked with the Class of 2012. – The number of students in Dual Enrollment peaked during the 2013-14 school year. Senior ors Stud udent nts t taking ng Stud udent nts t taking ng Stu tudents ta taking 1 1 Senior IB IB Awarded IB 1 or or m mor ore AP 1 or or m mor ore AP or more Dua Dual Enrollm llment Diploma mas Co Cour urses Exams ams Enr nrollment Co Cour urses 2010-11 0 0 107 37 323 2011-12 0 14 120 99 333 2012-13 7 18 266 105 271 2013-14 3 11 187 64 512 2014-15 1 1 140 69 369 2015-16 5 5 80 37 389 2016-17 0 0 42 26 364 2017-18 2 2 38 25 309 Source: VA Department of Education 27

DPS: Performance Trends - CTE • Career and Technical Education (CTE): – Virginia offers 16 career clusters; each career cluster has multiple pathways that represent academic, technical, and employability skills and can lead to industry-recognized credentials. – DPS offers nine CTE opportunities: • Auto Body Technology. • Automotive Technology. • Business and Information Technology. • Criminal Justice. • Family and Consumer Sciences. • Health Careers Academy. • Precision Machining Technology. • Technology. • Welding. 28

DPS: Performance Trends – CTE cont’d. • Career and Technical Education outcomes: – Percentage of CTE students who pass CTE competency test is steady and high (over 95%). – Percentage of CTE students earning industry-recognized credential has grown (90% in 2016-17 compared to 40% in 2010-11). – Percentage of students earning credential and advanced diploma has grown (46% in 2016-17 compared to 15% in 2010-11). 201 010-11 11 201 011-12 12 20 2012 12-13 13 201 013-14 14 201 014-15 15 201 015-16 2016 016-17 Number of CTE Students 116 136 173 146 151 160 145 Passed Competency Test 111 134 170 143 150 155 141 Credentialed 50 55 93 95 125 135 131 Credentialed Advanced Diploma 21 21 40 50 37 54 66 Source: VA Department of Education 29

DPS: Performance Trends – Graduation Rates 4-year cohort graduation rates: • Class of 2018: 449 students (375 completers)* – Advanced Diploma: 125 – Standard Diploma: 214 – Special Diploma: 22 – Other (Modified, General, GED, Certificate of Completion): 14 Grad aduat ation Rates ( s (% % of of 4 4-year co r cohort) 201 014 201 015 201 016 2017 17 201 018 Roanoke City 83.4 85.6 87.5 89.7 90.0 Hopewell 79.5 81.9 85.1 85.2 90.9 Harrisonburg 86.7 89.5 89.4 87.4 88.2 Lynchburg 81.2 82.3 85.5 86.4 86.4 Pittsylvania County 90.6 91.1 93.1 91.9 91.3 Danv nville 75.7 75.7 79. 79.1 81.0 81 77. 7.2 80.6 80.6 * Completers include students who graduated, as well as students who received a GED or Certificate of Completion Source: VA Department of Education 30

DPS: Performance – College Enrollment Of students graduating from high school within four years and enrolling in a post-secondary institution within 16 months of their graduation date: DPS Class of 2016 four-year cohort: 360 graduates: – 74 (20.5 percent) enrolled in four-year public institutions. – 32 (8.9 percent) enrolled in four-year private institutions. – 108 (30 percent) enrolled in two-year institutions. Colle llege Enrollme lment nt Rate tes 2012 20 12 201 013 201 014 201 015 201 016 Roanoke City 60% 65% 61% 56% 56% Pittsylvania County 70% 65% 67% 67% 62% Lynchburg 66% 63% 65% 66% 65% Harrisonburg 65% 68% 69% 68% 57% Hopewell 51% 50% 47% 57% 41% Danv nville 72% 72% 70% 70% 71 71% 69% 69% 59% 59% Source: VA Department of Education 31

DPS Strategic Plan • Vision: – Empower and engage families and encourage the larger community to value and invest in education and lifelong learning. – Develop curriculum that meets the evolving needs of the community and employers and continues the tradition of excellence. – Aggressively recruit and retain teachers and staff members who are innovative, engaged, and passionate. 32

DPS Strategic Focus Areas • Student Achievement – Develop and implement aggressive curriculum that challenges and inspires every student. • Community Engagement – Engage the community to embrace their role in a comprehensive approach that realizes each child’s potential. • Operations and Infrastructure – Create and maintain infrastructure and operation s essential to dynamic 21 st Century learning. • Personnel Development – Attract and Invest in employees and their professional development . • Environmental Factors – Identify and address the physical, emotional, and social needs of each child. 33

Budget Overview 34

Starting Year: 2018-19 Budget • The charts below show the major categories of DPS’s 2018-19 budgeted total revenues and total expenditures ($65.77 million). – State sources account for 64 percent of revenue, while the City’s contribution provides an additional 34 percent. – Salaries and employee benefits make up 86 percent of DPS spending. Budg udgeted E d Expend pendit itur ures es Budgeted R Revenues 2018 2018-19 19 2018-19 Supplies Other Expenditures 4% Other Funds Purchased 7% 2% Services 4% Other Benefits 3% City Contribution 34% Social Salaries Security 61% 5% State Funds Health 64% Insurance 7% VRS Benefits 9% 35

Historical Revenues • State funds and City funds have accounted for an average of 64 and 34 percent of annual revenue, respectively, from 2014-15 through 2018-19. Historic ical R l Rev evenu nues es 2014 2014-15 15 to 2018 2018-19 19 $70 $60 $50 Millions $40 $30 $20 $10 $0 Actual Actual Actual Adopted Budget Adopted Budget 2014-15 2015-16 2016-17 2017-18 2018-19 State Funds City Funds Other 36

State Funding Trends • State funding per pupil increased from 2014-15 to 2018-19, driven mostly by increases in Basic Aid and Lottery Funding. • DPS received two on one-tim ime funding sources in the State’s adopted budget for the 2018-2020 biennium for the 2018-19 and 2019-20 school years. State F e Funds unds p per er P Pupi pil 2014 2014-15 to 2018 2018-19 19 $9,000 $7,789 789 $7,432 432 $8,000 $7,064 064 $6,752 752 $6,827 827 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 2014-15 2015-16 2016-17 2017-18 2018-19 Basic Aid All Other SOQ Sales Tax Lottery Funding Incentive Programs Categorical Programs 37

City Contribution Trends • The City’s contribution has increased while enrollment has declined, resulting in higher levels of per pupil funding from the City. Total City Funds per Pupil 2014-15 to 2018-19 $4,500 $4,171 $4,000 $3,734 $3,500 $2,860 $3,000 $2,573 $2,445 $2,500 $2,000 $1,500 $1,000 $500 $0 2014-15 2015-16 2016-17 2017-18 2018-19 Cit ity’s C Con ontribution a as a Percent of of Total C Cit ity B Budget FY13 13 FY14 FY15 15 FY16 FY17 FY18 18 FY19 19 17.8% 19.1% 16.5% 16.0% 14.9% 19.0% 18.8% *FY2018-19 Includes $2 million of carryover 38

Historical Expenditures • Personnel costs (salaries and wages, and employee benefits) account for 86 percent of budgeted DPS general fund expenditures for 2018-19. Historic ical E l Expen pendit ditures 2014-15 2014 15 to 2018 2018-19 19 $70 $60 $50 Millions $40 $30 $20 $10 $0 Actual Actual Actual Adopted Budget Adopted Budget 2014-15 2015-16 2016-17 2017-18 2018-19 Salaries and Wages Employee Benefits Purchased Services Utilities and Other Charges Materials and Supplies Other 39

Personnel Cost Trends • Personnel costs have increased on a per pupil basis from 2014-15 to 2018-19. • Salaries and benefits per pupil increased by about 2.9 percent per year while enrollment has declined by 2.4 percent per year over the five-year period. Salaries and Benefits per Pupil 2014-15 to 2018-19 $8,000 $7,445 $6,765 $7,000 $6,211 $6,014 $5,935 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 2014-15 2015-16 2016-17 2017-18 2018-19 40

Significant Historical Budget Drivers • Increases in revenue have been driven by the City’s contribution. • Although Basic Aid from the State increased on a per pupil basis, total revenues for this source declined because of declines in enrollment. • Salaries and healthcare are major drivers of expenditure growth over the period. Annual Revenue & Expense Growth 2014-15 to 2018-19 12.0% 10.1% 10.0% 8.5% 8.0% 6.0% 3.7% 3.7% 4.0% 2.9% 2.0% 0.9% 0.0% (0.1%) (0.5%) (2.0%) City Contribution All Other State Basic Aid Total revenues Total expenditures Pension Salaries Healthcare 41

Baseline Financial Projection 42

Developing a Baseline Projection • The process of creating the five-year budget model started with analyzing DPS’s historical budget data. • Line-item detail was organized into categories representing DPS’s major revenues and expenses. • Growth rates were applied to these categories to project revenues and expenses in future years. • The project team worked with DPS to understand the drivers of revenues and expenses in order to select growth rates. • For the baseline forecast, growth rates reflect inflation, known or assumed growth in revenues and expenditures, and other known events. • The projection model uses the 2018-19 adopted budget in its baseline forecast and applies growth rates to those amounts to project future years. • The baseline forecast is intended to show what DPS’s financial results could be with no correctiv ive ac actio ion. 43

Revenue Growth Rate Assumptions • State Direct Aid Payments account for 64 percent of total revenue in the 2018-19 adopted budget. • The baseline financial projection makes the following assumptions for factors impacting total state funds received: – Enrollment • The baseline financial projection assumes a 1.6 percent per year decline in enrollment, based on the historical 10-year enrollment compound annual growth rate (CAGR). – Composite Index • The DPS composite index is held flat at 0.2546, which is the amount included in the state’s Adopted 2018-20 biennial budget. – Sales Tax Allocation • DPS’s sales tax allocation increases by 0.4 percent in 2019-20 based on the 2018-20 biennial budget. • In each subsequent year, DPS’s sales tax allocation increases by 2.1 percent based on the five-year CAGR for statewide taxable sales from 2012 to 2017. 44 Note: Projections are based on the adopted 2018-19 General Fund budget.

Revenue Growth Rate Assumptions, cont’d. • Funding received from the City of Danville accounts for 34 percent of 2018-19 revenue. – The baseline financial projection assumes the City’s contribution remains flat at the 2018-19 level of $20.6 million. – No carryover of City contributions are assumed during the projected period. • All other revenue sources are held flat at 2018-19 levels for the projected period. 45 Note: Projections are based on the adopted 2018-19 General Fund budget.

Expenditure Growth Rate Assumptions • Instructional Salaries and Wages – Account for 43.5 percent of total expenditures in the 2018-19 adopted budget. – Growth of 2.75 percent per year is assumed in financial projection. • Other Salaries – All other salaries are assumed to increase by inflation (2.3 percent) per year. • Medical Plan Benefits – Account for 7.4 percent of total 2018-19 budgeted expenditures. – Growth of 10.0 percent is projected in first projected year based on expected increase due to higher utilization. – Growth rate is reduced by 1 percent per year to 7.0 percent in 2022- 23 and held flat in 2023-24. • Retirement Benefits – Accounts for 6.9 percent of total 2018-19 budgeted expenditures. – Growth rate assumed to match weighted growth in salaries of employees enrolled in VRS (2.6 percent). 46

Unaligned Revenues and Expenditures • Making these assumptions, without corrective action, DPS is projected to experience annual deficits in each of the next five years. General Fund Budget Projections, FY 2019 – FY 2023 Revenues Expenditures $90.0 $80.0 $70.0 Millions $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 Adopted Budget Projected Projected Projected Projected Projected 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 47

Key Future Budget Drivers • Total expenditures are projected to grow by 3.1 percent per year over the five-year period while revenues are projected to decline by 0.5 percent per year. – Carryover funds are removed after 2018-19, which results in a decrease in the City’s contribution over the projection period. – Basic Aid funding decreases overall because enrollment decline offsets the projected increases in per pupil funding. – Consistent growth in salaries, pension, and healthcare expenses contribute to the growth of total expenditures. Annual Revenue & Expense Growth: General Fund Projection, SY 2019 to SY 2024 10.0% 8.2% 8.0% 6.0% 3.1% 4.0% 2.6% 2.6% 2.0% 0.8% 0.0% (0.4%) (0.6%) -2.0% (1.8%) -4.0% City Contribution All Other State Basic Aid Total revenues Total expenditures Pension Salaries Healthcare 48

DPS: Baseline Projection • The chart and table below show the Division’s baseline financial projection beginning with the proposed 2018-19 budget. • This is a status quo projection, assuming no corrective action is taken. • Under the baseline forecast the projected cumulative deficit over the next five years is approximately $41.4 million. General al F Fund B Budget P t Proj ojecti tions ($0.0) $1.0 Millions ($1.0) ($3.0) ($5.0) ($4.2) ($7.0) ($6.5) ($9.0) ($8.5) ($11.0) ($10.0) ($13.0) ($12.2) ($15.0) 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Budget Projected Projected Projected Projected Projected Surplus / (Deficit) 201 018-19 19 201 019-20 20 2020 020-21 21 2021 21-22 22 2022 022-23 23 2023 023-24 24 Budget get Pr Proje jected Pr Proje jected Proje Pr jected Pr Proje jected Pr Proje jected Total Revenues $65,774,613 $63,811,539 $63,629,779 $63,688,799 $64,284,016 $64,347,943 Total Expenditures $65,774,613 $68,006,244 $70,089,618 $72,194,850 $74,323,248 $76,521,524 Surp rplus / / (Defi ficit) $0 $0 ($4,194, 94,70 705) 5) ($6,459 459,839 839) ($8,506 506,05 051) 1) ($10, 0,03 039, 9,23 231) 1) ($12, 2,173, 73,582) 82) 49

Key Projection Factor: Declining Enrollment • Enrollment levels directly impact the amount of payments from the State. • Between 2007-08 and 2017-18, enrollment declined by 952 students, or an annual rate of 1.6 percent. • As shown in the table below, budgeting can be a significant challenge with a declining student population. Enrollment has fluctuated significantly in recent years and must be estimated for the following year in the budget process. Daily enrollment and ADM are calculated differently. March 31 Budgeted Difference Difference School Year ADM ADM (#) (%) 2007-08 6,471 6,450 21 0.3% 2008-09 6,203 6,375 (172) (2.7%) 2009-10 6,145 5,974 171 2.9% 2010-11 6,092 6,104 (12) (0.2%) 2011-12 6,016 6,040 (24) (0.4%) 2012-13 6,030 5,929 101 1.7% 2013-14 5,957 6,025 (68) (1.1%) 2014-15 5,976 5,897 79 1.3% 2015-16 5,935 5,961 (26) (0.4%) 2016-17 5,631 5,871 (239) (4.1%) 2017-18 5,519 5,569 (50) (0.9%) 50

Enrollment Projections • The baseline projection assumes a 1.6 percent long-term decline (10 year CAGR) in enrollment, using the Division’s 2018-19 adopted budget as the starting point, offset in part by an average 1.9 percent per year increase in State aid. • This assumption results in a decrease of 80 to 86 students per year over the five-year projection period. • In the State’s 2018-20 biennial budget, a change of 25 students results in a change of $460,000 in revenues for the 2018-19 school year. Danville Public Schools ADM Projections 5,600 State Budget 5,500 DPS Adopted Budget, 2018-19, 5,420 5,367 5,400 5,300 State Budget 2019-20, 5,200 5,212 5,100 5,000 4,900 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Actual DPS Budget Projected Projected Projected Projected Projected Baseline 51

Enrollment Projections, cont’d. • Three enrollment scenarios were also examined: – An Optimistic s scenario in which enrollment declines by 50 students in 2019- 20, and then is held constant through 2023-24. – The Baseline ine s scenar nario with a 1.6 percent annual decline in enrollment. – The State b e budget t tren end scenario which reflects the state’s expected rate of enrollment decline, 150 students per year. 7,000 Danville Public Schools Enrollment Scenarios 6,500 2018-19 Budget 6,000 5,420 5,500 5,370 5,000 5,005 4,670 4,500 4,000 3,500 Baseline Optimistic Scenario State Budget Trend 52

Alternate Enrollment Scenarios • Enrollment affects the amount of state aid received relatively rapidly, while spending cannot be adjusted at the same rate. Cumula lative Defi ficit T Thr hrou ough Enrollment nt S Scena nario io 2023 2023-24 Optimistic Scenario ($35.0 million) Baseline Scenario ($41.4 million) State Budget Trend ($47.6 million) 53

Key Projection Factor: Capital Plans • In December 2017, RRMM Architects presented estimated costs for new construction and renovations for DPS buildings. – Improvements at Johnson, Woodberry Hills, Langston, and George Washington were estimated to be $119 million. – Improvements at the remaining Pre-Kindergarten to Grade 8 schools were estimated to be $97 million under the proposed grade alignment (PK, K-3, 4-6, 7-8, 9-12) and $105 million in the current configuration. • These estimates significantly exceed the current level of investment available for DPS facilities. – The City of Danville covers the costs of existing debt service for DPS, which will be $2 million in 2018-19. – The City eliminated its further contribution to the DPS capital improvement plan in the 2018-19 budget after the DPS received approximately $2 million per year since 2015-16. • The need for facility improvements will be influenced by enrollment levels, the needs of DPS students, and the condition of facilities. – However, financial capacity will ultimately determine the level of investment that DPS can make in its facilities. 54

Key Projection Factor: Staffing Levels • Academic initiatives, enrollment levels, class size targets, and the number and configuration of the Division’s buildings all have an impact on staffing levels. • If enrollment levels continue to decline based on historical trends, DPS could achieve some savings with reduced staffing. – Lower enrollment may allow DPS to reduce staff by consolidating classroom space. – Depending on the magnitude of the enrollment decline, DPS may also be able to reduce the number of buildings in operation. • Since the DPS would have to lose 15-25 students in a single grade in order to consider the elimination of a classroom teacher, the reduction in enrollment and the potential for reducing staff are not precisely aligned. • Building reductions could also lead to reductions in administrators and building maintenance and operations staff. • Not resizing staffing if enrollment declines over time will increase fiscal pressures on DPS. 55

Key Projection Factor: Staff Retention • DPS has identified attracting and retaining high-quality staff as a key goal to improve academic performance and operational efficiency. – The Division’s salary study produced a recommended salary schedule for instructional staff that was adopted as part of the 2018-19 budget. – Further needs have been identified for classified staff, and the classification study may provide recommendations for compensation adjustments. – DPS staff have identified challenges in retaining enough bus drivers to operate its transportation routes, specifically noting the lack of benefits as a hindrance to recruitment and retention of bus drivers. – The City Plan targeted 2.0 percent overall annual salary increases for City employees, basing individual amounts on performance. 56

Key Projection Factor: Staff Retention, cont’d . • The 2018-19 adopted budget includes $2.0 million in carryover funding from the City to pay the costs of the teacher salary adjustment and other initiatives, but this only covers the 2018-19 year. – Step movement on the new teacher salary schedule is nearly 1.3 percent per year, and the estimated annual cost to maintain this adjustment is $370,000. – The annual adjustment for classified staff will be determined by the results of the classification study; however, these positions received a 4 percent increase in 2018-19. • The potential adjustments for classified staff and increase in bus driver costs would require additional resources for implementation. 57

Developing a Plan for Fiscal Sustainability 58

Baseline Forecast in Context • There are no easy solutions to close DPS’s cumulative deficit. Declining enrollment leads to decreased 6,100 State funding… 5,600 5,100 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 35.0% Increasing dependence on City allocation…. 30.0% 25.0% 20.0% 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 Salaries and benefits comprise the majority 90.0% of the Division’s expenditures and increase 85.0% at a rate greater than revenues…. 80.0% 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 Competition for highly effective teachers…. 1 1: Crane, John. “Kaine’s bill aims to combat teacher shortage in rural areas.” Danville Register & Bee, August 2018. 59

The Challenge • With a structural deficit of $4.2 million growing by $2.0-$3.0 million annually to a cumulative deficit of $41.4 million, DPS will need to make tough choices to balance the budget and identify resources to invest in programs and facilities. • The Multi-Year Financial Plan for DPS is designed as a blueprint to provide leadership with options to curb spending growth and implement targeted increases in revenue to create a structurally balanced budget. – The Plan contains alternatives for program restructuring and service level changes. To the extent possible, the initiatives are data-driven and based on benchmark research, best practices, and DPS’s unique circumstances. – Many initiatives would bring DPS’s service delivery and structure in line with those of peer Virginia school divisions. – The Plan does not just identify recommendations that would only bring the budget into structural balance in the short-term. The overarching goal of the Plan is to allow the Division to make the changes necessary to begin to invest in its future and increase the quality of education programs in a sustainable way. 60

Benchmarking Analysis • In order to create the best plan for DPS, the Network team researched comparable public school divisions and examined their demographic conditions as well as their operating practices. • The team considered K-12 divisions similar in size and student demographics and poverty rates in order to make appropriate comparisons. The benchmark divisions are regional urban school systems in Virginia. • In addition to the four benchmark divisions, the team included adjacent Pittsylvania County in the benchmarking analysis. • Data were collected and analyzed to provide comparative information in developing the Plan. Marc rch A Ave verage English h Econ onom omically ally School ol Division on Total R al Revenues Scho hools ( s (#) Daily ly M Membership Lear arner Disad advan antag aged Danville lle City y 5,51 519 5. 5.8% 8% 55. 55.6% $72,239,791 11 11 Hopewell City 3,977 4.7% 54.1% $53,052,529 5 Harrisonburg City 5,887 43.3% 68.9% $79,318,238 9 Lynchburg City 7,979 3.2% 51.7% $112,973,408 16 Pittsylvania County 8,620 3.0% 53.3% $89,341,887 18 Roanoke City 12,823 12.7% 51.5% $199,114,932 24 Source: VA Department of Education 61

A Plan for Fiscal Sustainability To achieve fiscal sustainability and invest in improving academic outcomes, the DPS Plan focuses on the following areas: 1. Reducing Costs – Controlling Personnel Cost Growth – Right-Sizing Staff – Increasing Operational Efficiencies – Facilities – Capital Planning 2. Generating Revenue – Enrollment Preservation – Revenues Alternatives • The options put forth in this plan will allow DPS leadership to make informed decisions to ensure sufficient resources to invest in DPS’s future. • Because DPS will not be able to fund all of its desired priorities, it must balance priorities with available funding, using potential areas of savings and operational change to maximize resources directed to top priority areas. DP DPS S will have e to make c e choices es a about wher ere e to comm mmit l limited d resources es. 62

Controlling Personnel Cost Growth 63

Salary Cost Containment • DPS spends most of its General Fund budget on salaries and benefits for its instructional and support positions – 86 percent of the 2018-19 budget. • The Administration and the Board have recognized the importance of providing a competitive compensation package to attract and retain high quality employees. • In 2018-19, DPS adopted a new salary schedule for instructional staff and included funding to complete a compensation study for classified staff. However, these efforts will be unaffordable if DPS cannot identify new revenues or operational savings in other areas to support the increase in costs. DPS will need to balance its available resources with its ability to support increased personnel costs. 64

Salary Cost Containment, cont’d. • The baseline scenario assumes 2.75 percent annual growth in instructional salaries, which could include both step movement and an annual cost of living adjustment for teachers. • The most straightforward way for DPS to achieve savings for salary costs would be to offer increases that are lower than the baseline assumption. • To provide a sense of the scale of the impact of such changes, three alternative salary growth scenarios are shown below. – Step M Movement O Only: teachers receive an annual salary increase from step movement, but receive no cost of living adjustments. – 1.5 P Percent t Sala lary G Growth C th Cap: teacher salary growth is limited to 1.5 percent per year. – 2.0 P Percent S t Sala lary G Growth th Cap: teacher salary growth is limited to 2.0 percent per year. Salary Cost Containment: Salary Growth Scenarios 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Cumulative Budget Projected Projected Projected Projected Projected Impact Step Movement Only $0 $235,406 $702,898 $1,189,285 $1,695,167 $2,221,158 $6,043,913 1.5 Percent Salary Growth Cap $0 $235,406 $642,069 $1,065,918 $1,507,516 $1,967,442 $5,418,351 2.0 Percent Salary Growth Cap $0 $235,406 $481,993 $740,164 $1,010,333 $1,292,927 $3,760,823 • Part of a strategy for structural balance will require an evaluation of the long-term impact of personnel costs and in particular how to manage the number of positions and the competitiveness of teacher pay. 65

Healthcare Cost Containment • DPS has already taken steps to reduce healthcare costs and limit the risk of significant healthcare cost increases in the future. – In 2017-18, the Division participated in the State’s Local Choice health benefits program, resulting in cost savings. – In 2018-19, DPS increased the monthly employee contribution for single coverage to reduce the impact of the projected increase in premium costs. • Over time the Division has also increased the employee portion of healthcare premium costs. – Employees contribute an average of 12 percent of the premium costs for single coverage and over 88 percent of the costs of family coverage. – Nearly 91 percent of employees are enrolled in single coverage and over 75 percent of employees are enrolled in the plan with a higher annual deductible. • These factors limit the applicability of some of the recommendations included in the City’s multi-year financial plan. 66

Healthcare Cost Containment, cont’d. • DPS should continue to seek additional areas to control the growth of healthcare costs. • These options may include conducting a dependent eligibility audit, establishing wellness programs, or moving to a high deductible health plan. • To illustrate the potential impact of these changes, the table below shows the financial impact of an additional percentage point reduction in the growth rate assumption compared to the baseline projections. Healthcare Cost Containment: Reduce Growth Rate by 1 Percentage Point 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Cumulative Budget Projected Projected Projected Projected Projected Impact Annual Impact $0 $48,593 $105,933 $171,611 $244,831 $326,850 $897,818 ― ― Growth Rate 9% 8% 7% 6% 6% 67

Summary • The Network team recommends that DPS pursue options to control personnel cost growth: – Cap salary growth at 2 percent annually. – Control the growth of healthcare costs. • Savings from these initiatives could be used to reduce the projected deficit in the baseline scenario or to increase resources for other priorities. • The table below summarizes the total potential savings from the initiatives discussed in previous slides. Potent ntial ial O Optio ions ns Cumula lative Impa mpact Cap teacher salary growth to 2.0 percent $3,760,823 Reducing healthcare cost growth $897,818 68

Right-Size Staffing 69

Administrative, Attendance & Health Expenditures • DPS spends 8 percent of its budget on administrative expenses. The median of the comparison group is 6 percent. • Administration, Attendance, and Health includes: – Administration: the Superintendent’s Office, Board Services, Chief Operations Office, Business Engagement Office, HR, and Finance. – Attendance: Truancy Office and Student Intervention Services. – Health: Nurses, Physical Therapists, and Psychologists. • This equates to $933 per pupil, with DPS ranking highest among the comparison group. SY 2 201 018-19 Admin inistrat ation ion, A Attendan ance and H Health Expendit itures per P Pupil $933 $933 $1,000 $890 $900 $754 $800 $702 $700 $600 $436 $500 $400 $300 $200 $100 $0 Pittsylvania Hopewell Harrisonburg Lynchburg Roanoke City Danville The t team r m recommen mmends DPS S eval aluat uate i its staf affing ing config igur urat ation f n for these f functio ions i in order er t to e examine the po e possible rea easons for t the d e differences fr from om peer peers. 70

Central Office Staffing • DPS should explore additional areas where administrative and clerical responsibilities may be combined. – Management roles may need to be consolidated under other positions. – Analytical positions may be combined into a general “Data Analyst” role that can be assigned across offices. – Clerical staff may be able to be cross trained so that they can be assigned to other offices or tasks as workloads fluctuate throughout the school year. • This reorganization would require careful analysis of workloads and the ability to consolidate roles and responsibilities for staff. • The 2018-19 DPS budget includes 15 Central Office clerical positions. As of October 18, there was one vacancy. • The following initiative shows the impact of a scenario where DPS is able to reduce its central office staff by position type. Reduce Central Office Staff 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Cumulative Budget Projected Projected Projected Projected Projected Impact $0 $59,520 $61,400 $63,287 $65,165 $67,116 $316,488 Clerical Staff $0 $98,520 $101,298 $104,102 $106,919 $109,830 $520,669 Coordinator $0 $133,912 $137,504 $141,141 $144,809 $148,592 $705,958 Administrator 71

Instructional Expenditures • DPS spends 72 percent of its budget on instructional expenses, matching the comparison group median. • Instruction includes the activities and interaction between teachers, aides, or classroom assistants and students. • This equates to $8,785 per pupil, with DPS ranking fourth among the comparison group. SY 2 201 018-19 I Instruct ction ion Expendit itures per P Pupil $12,000 $9,975 $9,751 $10,000 $8,903 $8,785 785 $8,467 $8,000 $6,639 $6,000 $4,000 $2,000 $0 Pittsylvania Roanoke Danville Lynchburg Harrisonburg Hopewell 72

Teachers & Instructional Staffing • DPS authorized positions for 2018-19: 1,024.1 FTEs* • 67.4 percent are teachers or paraprofessionals – Teachers: 543.25 FTEs (Note: teacher subsets below overlap; will not total) • 60 are Special Education • 17 are Guidance Counselors • 530.25 are based in schools • 13 serve district-wide – Content Specialists – Reading Specialists – Social Worker and Student Support – Special Education – Paraprofessionals: 147 FTEs • 84 are Special Education *Data includes Instructional staff at Grove Park and Northside Preschools and WW Moore Detention Center 73

Teachers & Instructional Support Staff • Virginia’s K-3 Primary Class • Current Average Class Size Size Reduction program class for 2018-19 for DPS size requirements and (excluding classes of 10 schoolwide teacher-to-student students or less): ratios: – Kindergarten: 14.6 students – Grade 1: 16.6 students – Forest Hills: 23 and 1-18 – Grade 2: 15.3 students – Gibson: 19 and 1-14 – Grade 3: 14.1 students – Johnson: 19 and 1-14 – Grade 4: 21.0 students – Park Avenue: 20 and 1-15 – Grade 5: 21.9 students – Schoolfield: 19 and 1-14 – Grade 6: 19.3 students – Woodberry Hills: 19 and 1-14 – Grade 7: 21.1 students – Grade 8: 20.0 students In FY2018, DPS received approximately $2.2 million from the State to participate in the K-3 Primary Class Size Reduction program. 74

Teachers & Instructional Support Staff, cont’d. • It is important to recognize the relationship between small class size and student achievement: – Smaller class size in grades K-3 can increase student engagement and boost achievement. – VA K-3 Primary Class Size Reduction program provides participating divisions with funding to maintain small class size in early grades. – Minority and low-income students show greater gains when placed in small classes in the primary grades. – Reducing class size will have little effect without well-qualified teachers. • However, given the need to address its significant budget gap, DPS must consider all options, including minimal increases to class size, particularly in grades 4-8. Source: Project STAR (1985-1989); Jeremy Finn, Gina Pannozzo, and Charles Achilles (2003) 75

Teachers & Instructional Support Staff, cont’d. • For Grades K-3, based on K-3 Primary Class Size Reduction program standards, DPS could reduce the number of classes without shifting current enrollment patterns by: – 3 classes • For Grades 4-8, DPS could reduce the number of classes without shifting current enrollment patterns by: – Option 1: Class size of up to 25 students: 13 classes – Option 2: Class size of up to 23 students: 5 classes – Option 3: Class size at least equal to current averages: 0 classes • This would result in a potential adjustment of teaching positions in Kindergarten through Grade 8. Teachers and Instructional Staff: Reduce Staff through Adjusting Class Size 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Cumulative Budget Projected Projected Projected Projected Projected Impact VA K-3 standard and class size $0 $1,172,941 $1,212,738 $1,252,994 $1,293,489 $1,335,519 $6,267,681 of up to 25 (grades 4-8) VA K-3 standard and class size $0 $586,470 $606,369 $626,497 $646,744 $667,760 $3,133,841 of up to 23 (grades 4-8) VA K-3 standard and class size $0 $219,926 $227,388 $234,936 $242,529 $250,410 $1,175,190 of up to average (grades 4-8) 76

Operations and Maintenance • Danville Public Schools spends 12 percent of its budget on operations and maintenance. The median of the comparison group is 9 percent. • Operation and maintenance expenditures include activities related to keeping the physical plant open, comfortable, and safe for use, and keeping the grounds, buildings, and equipment in effective working condition. This includes maintaining safety in buildings, on the grounds, and in the vicinity of schools. • This equates to $1,427 per pupil, with DPS ranking second highest among the comparison group. SY 2 201 018-19 Operatio ion an and Main aintenance E Expenditures p per Pupil il $1,681 $1,800 $1,600 $1,427 427 $1,342 $1,400 $1,190 $1,200 $1,005 $948 $1,000 $800 $600 $400 $200 $0 Pittsylvania Harrisonburg Hopewell Lynchburg Danville Roanoke City 77

Operations and Maintenance, cont’d. • Operations and maintenance includes total spending on Building Services (custodial services and building maintenance) and equipment maintenance, grounds, and security. • DPS costs per pupil for operations and maintenance costs are above the median of the benchmark divisions. • DPS costs per pupil for Building Services are significantly above the median of benchmark school divisions. Costs per Pupil (2018-19) Operation and Building Maintenance Services Roanoke City $1,681 Hopewell $1,090 Danville $1,427 Danville $1,088 Lynchburg $1,342 Pittsylvania $882 Hopewell $1,190 Roanoke City $815 Harrisonburg $1,005 Harrisonburg $791 Pittsylvania $948 Lynchburg N/A Median (excluding DPS) $1,190 Median (excluding DPS) $849 Difference (DPS vs. median) $238 Difference (DPS vs. median) $239 DPS Rank 2 of 6 DPS Rank 2 of 5 If DP DPS re redu duced d it its Buil ilding S Servic ices s spending t to t o the m media dian amount, t this is c cou ould d ge gene nerate ne nearly $1 $1.3 mi million i in s n saving ngs o on an n an an annual bas asis. 78

Building Services Expenditures • Danville Public Schools spends 9 percent of its budget on building services, which is higher than the comparison group median of 7 percent. • Building Services includes activities related to keeping the physical plant clean and ready for daily use such as operating the heating, lighting, and ventilating systems; repairing and replacing facilities and equipment; and property insurance. • This equates to $1,088 per pupil, with DPS ranking second highest among the comparison group. SY 2 201 018-19 Buil ilding S Services Ex Expendit itures per P Pupil il $1,200 $1,088 088 $1,090 $1,000 $882 $815 $791 $800 $600 $400 $200 $0 Harrisonburg Roanoke City Pittsylvania Danville Hopewell 79

Custodial and Building Maintenance • Building Services includes custodial services and building maintenance. • Compared to the benchmark school divisions: – DPS custodial staffing per building is slightly above the median of the benchmark school divisions. – DPS maintenance staffing is significantly above the median of the benchmark school divisions. Maintenance Custodians Maintenance Buildings Custodians Employees Per Building Employees Per Building Hopewell 8 34.5 4.3 Lynchburg 35 2.9 Roanoke City 33 135.5 4.1 Danville 13.0 1.6 Danville 15 59.0 3.9 Roanoke City 24 0.9 Harrisonburg 12 42.0 3.5 Pittsylvania 17 0.8 Lynchburg 21 72.0 3.4 Hopewell 3.5 0.2 Pittsylvania 27 70.0 2.6 Harrisonburg 7 0.2 Median (excluding DPS) 3.7 Median (excluding DPS) 0.8 Difference (DPS vs. median) 0.2 Difference (DPS vs. median) 0.8 DPS Rank 3 of 6 DPS Rank 2 of 6 80

Custodial Staffing • DPS budgeted for 63.8 FTEs in Custodial Services; as of October 2018, there were 7.3 FTE vacancies. • DPS should consider maintaining current vacancies in Custodial Services until a comprehensive review of its staffing and costs is completed. – Upon completion of the review, DPS should evaluate whether additional savings could be achieved through competitive contracting. • Leaving current Custodial Service vacancies unfilled as of October 2018 would lead to some savings compared to the baseline projections. Custodial Services: Leave Vacancies Unfilled 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Cumulative Budget Projected Projected Projected Projected Projected Impact Annual Impact $0 $259,769 $268,003 $276,262 $284,482 $293,021 $1,381,538 81

Pupil Transportation Expenditures • DPS spends 4 percent of its budget on pupil transportation, which is lower than the comparison group median of 6 percent. • Pupil transportation includes activities related to transporting students to and from school (as provided by state and federal law) and includes trips between home and school, and trips to and from school activities. • This equates to $433 per pupil, with DPS ranking fifth among the comparison group. SY 2 201 018-19 Pupil il T Transpor ortat ation ion E Expendit itures p per Pupil il $1,000 $881 $900 $773 $765 $800 $720 $700 $600 $500 $433 $371 $400 $300 $200 $100 $0 Hopewell Danville Harrisonburg Lynchburg Pittsylvania Roanoke City 82

Technology Expenditures • DPS spends 4 percent of its budget on technology, while the comparison group median is 3 percent. • Technology includes activities related to any services (i.e., distance learning) involving technology for instructional, public information, administration, or any other use. • This equates to $440 per pupil, with DPS ranking third among the comparison group. SY 2 201 018-19 T Tech chnology Ex Expenditures p per P Pupil $700 $616 $607 $600 $500 $440 $409 $412 $400 $300 $244 $200 $100 $0 Pittsylvania Roanoke City Lynchburg Danville Hopewell Harrisonburg 83

Safety and Security Expenditures • DPS spends 1 percent of its budget on safety and security. The October 2018 position database includes 13.1 FTE (school security). • Safety and Security activities are related to maintaining order and safety in school buildings, on the grounds, and in the vicinity of schools at all times and includes policing for school functions, traffic control on the grounds, building alarm systems, hall monitoring services, and School Resource Officers (SROs) paid directly by DPS. • This equates to $124 per pupil, with DPS ranking second highest among the comparison group. SY 2 201 018-19 Saf afety an and S Secu curit ity Expendit iture p per P Pupil il $400 $348 $350 $300 $250 $200 $124 $150 $100 $36 $50 $0 $2 $0 Pittsylvania Harrisonburg Hopewell Danville Roanoke City 84

Reduce Turnover • Studies have shown the negative impacts of high levels of teacher turnover on student achievement. • A three-year trend shows an average teacher turnover rate of 16.8 percent at DPS. • Recent actions by the Administration and School Board are targeted to decrease turnover rates and increase the retention of high quality teachers. • By October 1 of the current school year (2018-19), DPS had filled 97.2 percent of the budgeted teacher positions – In comparison, by October 1 of 2017-18, DPS had filled 89 percent of budgeted teacher positions. • Total cost of substitute teachers in 2017-18 was $1,076,763. 85

Reduce Turnover, cont’d. • Reduced staff turnover will have a notable impact of the ability of DPS to achieve student achievement targets outlined in the strategic plan. • The financial impact of reduced staff turnover will likely be minimal for administrative costs and negative for total personnel costs, however. – Administrative functions such as the Human Resources do not appear to have been backfilled with temporary staff, so decreased vacancy and turnover will grow total costs. – Personnel costs would most likely rise as teachers remain with DPS for longer periods of time. – Increased costs of salaries and benefits would most likely be greater than savings from lower spending on substitute teachers and budgetary savings from high levels of staff turnover. • However, the instructional benefits from reduced turnover will likely exceed the financial costs of higher levels of staff retention. 86

Summary • The Network team recommends that DPS pursue options to right-size staffing, evaluating options including: – Reduce Central Office staffing. – Reduce instructional staff by increasing class size to the Division average. – Reduce staffing in custodial services by maintaining current vacancies. • Savings from these initiatives could be used to reduce the projected deficit in the baseline scenario, or to increase resources for other priorities. • The table below summarizes the total potential savings from the initiatives discussed in previous slides. Potent ntial ial O Optio ions ns Cumula lative Impa mpact $316,488 to Central Office staff reduction $705,958 $1,175,190 to Instructional staff reduction $6,267,681 Leave custodial vacancies unfilled $1,381,538 87

Increasing Operational Efficiencies 88

Operational Savings • The team has explored alternative models of service provision, and the initiatives in this section focus on operational areas where DPS exceeded the comparison to its peers or may be able to streamline its services. • These options are categorized into two areas: – Shared ed s services es partnerships within DPS or with the City or other related entities to streamline operations of services provided by both organizations. – Man Manag aged competit itio ion to determine if services should be provided with DPS personnel or contractors. • The team contacted benchmark school divisions to determine if they use a shared services model or managed competition for transportation, operations and maintenance, back office administration, or health and social services. • The team also contacted Albemarle County because that government shares administrative functions between the municipal government and the school division. 89

Operational Savings, cont’d. • The following slides provide: – A summary of shared services examples and information on those services in other divisions. – Potential options for DPS to consider in regards to shared services or managed competition. – A list of pros and cons of those models for DPS. • These slides are intended to outline the range of options available to DPS rather than advocating a particular approach to staffing or structuring operations. • The Network team developed initial cost estimates for some options to show the relative impact of these decisions. However, the team does not recommend cuts to specific offices or functions without further analysis, given the limited information available for this report. 90

Service Evaluation • For each initiative, DPS will need to work with administrative staff and counterparts in the City to conduct more thorough review of: – Current staff capacity and workload, and the potential savings from combining jobs; – Job descriptions and assigned roles to determine what classification of position should be used for new roles; and – Differences in pay equity or benefit levels. • Evaluations of services should include the direct cost impacts as well as indirect impacts to DPS or other organizations. – If the proposal generates minimal savings, the additional costs of oversight or administration may offset any benefit provided. – Functions should be evaluated for core similarities that can easily be combined or scaled without significant alterations to roles or skill levels. – Ancillary effects such as creating full time positions qualifying for health care. 91

Service Evaluation, cont’d. • Some guiding questions to use throughout this process would include: – What meaningful measures can we use to evaluate service needs? – What processes will change, and how will we design new processes? – Will the change require investment in other areas, such as staff skills or new equipment and tools? – Who will manage the planning and implementation of the change, including communicating the changes to staff, the School Board, the City, residents, and other stakeholders? 92

Shared Services in Albemarle County • Albema emarle e County has several shared administrative and operational functions between the county government and the school division. • Main areas of collaboration include finance, human resources, and some grounds maintenance tasks at school buildings. • Previously the County and School Division also shared legal and information technology functions. However, the County has moved away from these arrangements because of differences in needs. • In addition, the County has a joint capital planning process involving stakeholders from both the county government and school division. • Across all shared functions, employees and related costs are allocated to either the county government or the school division. – Service agreements outline the scope of shared services if all costs are allocated to one component and services are provided to both entities. • County and School Division administrative offices are located in the same building, which provides additional opportunities for efficiencies and collaboration across functions. 93

Shared Services Examples from Peers • Hopewell City provides maintenance for the Hopewell C City y Sc Schools ools bus fleet. • Harrisonburg City’s public transit system provides transportation for students in Harri risonburg rg Cit City y Sc Schools ools. • Lynch chbu burg Cit City S y Scho hools s information technology departments for the city and the school division share office space. • None of the other peer school divisions reported shared services arrangements in the benchmark survey. 94

Shared Grounds Keeping • Albemarle County provides some services to the School Division with County parks staff, which supplement School Division staff. • DPS may be able to share grounds keeping responsibilities with the City’s Parks Maintenance Department. • The e team m suggests sts that at D DPS PS an and the City y eval aluate this o opportunity in in t the context of ap appar arently ly limited join int s savings. • The table below estimates the financial impact of shifting the grounds keeping function from DPS to the City. – Initiative assumes that all six positions are shifted to the City. – Additional savings may be achieved by reducing the number of positions and sharing workload and equipment with the City’s existing staff . Grounds Keeping Consolidation Shared Savings: Shift to City Staff 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Cumulative Budget Projected Projected Projected Projected Projected Impact DPS Impact $0 $396,463 $413,267 $430,695 $448,721 $467,897 $2,157,043 City Impact $0 ($334,668) ($341,006) ($347,472) ($354,070) ($360,801) ($1,738,017) Total Impact $0 $61,795 $72,261 $83,223 $94,651 $107,096 $419,026 95

Shared Information Technology • None of the benchmark school divisions reported full consolidation of information technology with other entities: – Albemar arle C Count nty y previously shared some functions across the County and school division, though each component has become more independent in recent years. – Lynchburg C Cit ity Sc Schools reported that the information technology departments for the City and the school division share office space. • Shifting technology demands in the school environment limits the ability to consolidate information technology resources across the City and DPS. • However, t the team am suggests tha hat D DPS PS explo plore t the o he oppo pportunity to combine e som ome a adm dminis istrative I IT s support rol oles w wit ith C Cit ity s staff. • The following initiative assumes that the staff re-structuring allows DPS to reduce its IT staff by one administrative support position. City staff are assumed to be able to accommodate the support functions with current staffing levels. IT Consolidation Shared Savings: Reduce Support Staff by One Position 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Cumulative Budget Projected Projected Projected Projected Projected Impact Annual Impact $0 $72,037 $74,205 $76,386 $78,565 $80,824 $382,018 96

Shared Human Resources and Finance • As noted previously, Albema emarle e County shares human resources and some finance functions with the county government and the school division. – Most human resources staff are School Division employees, while most finance staff are County government employees. – The School Division also retains some finance and budget staff to prepare the annual budget and report data to the State. • DP DPS s S should explo lore t the f feasib ibili lity y of sharing hum uman n reso sources an and finan ancial al m management f functions wit ith t the City. – Human resources staff, offices, contracted services, software, and other operating costs could be shared across the City and DPS. – Some financial management functions may also be able to be combined with the City, however, these opportunities may be limited. • DPS administration should work with the City Manager and other City stakeholders to evaluate the functions performed by these offices and determine if efficiencies could be gained from consolidation. 97

Shared Vehicle Maintenance • As noted previously, Ho Hopewell ll C Cit ity Pu Public lic Schools reported that the City provided maintenance for the School Division’s bus fleet. • DPS previously used this model, however, this practice was abandoned because of the levels of maintenance required by State regulations for school buses. • It is unclear if DPS would be able to realize savings by sharing vehicle maintenance functions with the City. – DPS currently employees 2 service technicians and 2 fuel attendants. – Savings would only be generated if staffing levels can be reduced by combining workloads for efficiencies across DPS and City operations. – DPS may encounter other operational complications due to current staffing levels for bus drivers. – Staff reported that mechanics and transportation administrators sometimes drive school buses due to a lack of drivers. • Sharing vehicle le main aintenance w with the Cit ity would be w worth explo lorin ing if effic icie iencies f from c combin ined w worklo load ads would r result in savings and a allow DPS PS to contin inue to meet S Stat ate regulat ations. 98

Other Shared Service Options Considered It does n not ap appear ar that at s shar aring cust ustodial l se services a and bui uilding ng mainten enance e wit ith the Cit ity would l lead ad t to mean aningful savings. • Shared Custodial Services Sharing custodial services staff between the City and DPS would most likely prove to be – logistically challenging and deliver limited savings. Staff scheduling and building usage would limit the ability to share staff between the – City and DPS. • Custodial staff would need to remain on-site for the day shift. • Shared time would most likely occur during the second or third shifts. • Any efficiencies gained would most likely be offset by travel time between buildings and scheduling staff to ensure cleaning is completed. • Further complications would arise when school buildings are used for special events after hours or over weekends. • Building Maintenance Consolidation of building maintenance functions between the City and DPS would – present challenges due to the operational needs of school buildings. • General maintenance functions would continue to require a regular on-site presence, and there would be limited opportunities for savings from combined workloads. Specialized maintenance functions for trades such as carpentry, electrical work, and – plumbing are performed differently in the City and DPS. • The City currently uses contracted services to provide many of these functions such as HVAC repair, painting, and electrical maintenance. • These services are provided by school division staff in DPS. 99

Managed Competition • DPS maintains the right to subcontract work and to set standards of service to be offered to citizens. • Outsourcing decisions can be subject to a “managed competition” process where DPS staff bids against private service providers to compete on cost. – The Government Finance Officers Association considers managed competition a best practice and recommends that governments identify and evaluate service level, cost, efficiency, effectiveness, quality, customer service, and the ability to monitor the service provider’s work. – Well-prepared internal bids in managed competition are often provide savings while services stay in house. • A managed competition process would allow DPS to explore alternative models without committing to a particular course of action. • The competitive process associated with managed competition helps to ensure that costs remain low. Research indicates that a price differential of less than 10 percent between government in-house costs and private sector contract costs can help achieve cost savings. 100