State Budget Impact on RCSD and Implications for the Future A valuable lesson from fundraising professionals: No mission? No money! No money? No mission! In my experience, successful organizations maintain balanced focus on their purpose and their financial ability to fulfill that purpose now and into the future. 4/6/2020 1
State Budget Impact on RCSD and Implications for the Future Let’s begin with some good news… As you heard, $35M in additional state aid will be provided for the current fiscal year, as spin-up aid. Spin-up aid is a loan, and RCSD will repay that loan over the next 30 years, as a $1.167M offset to Lottery aid. 4/6/2020 2
State Budget Impact on RCSD and Implications for the Future As you are also aware, our spin-up aid comes with a string attached. One independent fiscal/academic monitor will be appointed for the next three years to ensure that RCSD leadership appropriately balances its decision-making on: • Sound fiscal practices, and No mission? No money! No money? No mission! • Sound educational practices. 4/6/2020 3
State Budget Impact on RCSD and Implications for the Future Some concerns to be addressed… State aid: Public discussion about aid remaining flat from last year’s allocation. It actually declined by $707,486. And if we factor out building aid, which is tied to debt service, our aid actually declined by $2,672,716. 4/6/2020 4
State Budget Impact on RCSD and Implications for the Future From the Superintendent’s budget presentation, you are also aware that the draft budget assumed $4.5M in additional state aid, beyond the increase as proposed in the Governor’s executive budget, which has been eliminated. Due to reduced state aid alone, the draft budget immediately has a $17.5M hole. 4/6/2020 5
State Budget Impact on RCSD and Implications for the Future Beyond the immediate $17.5M hole, our lunch fund will go bust at the end of this April, and it has already been suggested that meals must continue over the summer at the same scale as provided today. The upcoming budget must cover an estimated $2.5M deficit for the lunch fund. Combined, the budget must now accommodate another $20M need. On top of the $61M deficit already addressed in the draft budget, this means a total of $81M. 4/6/2020 6
State Budget Impact on RCSD and Implications for the Future The Education Stabilization Fund and the Pandemic Adjustment… Of the $1.3B in federal aid for K-12 education, only $1.21B is being made available for school districts. The preliminary allocation to RCSD is $29.1M. However, The Governor has introduced a negative adjustment to state aid, the Pandemic Adjustment . The amount of state aid to be withheld from RCSD is equal to the amount of ESF allocated… $29.1M. 4/6/2020 7
State Budget Impact on RCSD and Implications for the Future Lastly, the draft budget as currently presented does nothing to address the District’s complete lack of fund balance in its General Fund. Current Board policy states that the district must maintain a minimum fund balance of 5% of the general fund’s operating expenses, which would be $40M. Should fund balance fall below the minimum, the policy requires the budget to recover fund balance at the rate of 1% per year, which calculates to be $8M. 4/6/2020 8
State Budget Impact on RCSD and Implications for the Future At this point, our draft budget needs to be modified to eliminate an additional $24M in expenses… • $17.5M in state aid reductions next year • $2.5M in unreimbursable lunch fund costs through summer • $4M to recover fund balance per Board policy (would require Board Policy 6500 to be suspended or amended) But there’s more… 4/6/2020 9
Additional Risk for FY20 & FY21 The Governor has outlined four “take back” windows during which the Division of Budget will assess the state’s collection of revenues, and claw back state aid if it’s revenues are short of expectations. April 1 st through April 30 th Window 1: May 1 st through June 30 th Window 2: July 1 st through December 31 st Window 3: January 1 st through March 31 st Window 4: Although still being debated, we learned from the Gap Elimination Adjustment years that we must be prepared for mid-year reductions. 4/6/2020 10
Short & Long Term Planning In summary, the District needs to plan for several outcomes: ◦ $24M immediate short-term plan for the FY2021 budget; ◦ Additional short-term plan for potential state take-backs; ◦ $36M long-term plan to restore fund balance per policy. For short- term planning, I would encourage the district’s leadership to consider the current year, the upcoming year, and the next year. For long-term planning, I would encourage the leadership to look no further out than five years. 4/6/2020 11
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