School Board Members. Superintendent and Cabinet

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2 School Board Members Anne Becker Chair Deborah Seelinger Vice Chair Terry Throndson Clerk Richard Hinds Treasurer Dan O Neil Director Gary Smith Director Julie Workman Director Term Expires: Dec 2014 Term Expires: Dec 2016 Term Expires: Dec 2014 Term Expires: Dec 2016 Term Expires: Dec 2016 Term Expires: Dec 2014 Term Expires: Dec 2014 Superintendent and Cabinet Michael Munoz Superintendent Brenda Lewis, Ph.D. Assistant Superintendent Brooke Bass Executive Director of Human Resources Karla Bollesen Executive Director of Student Support Services Amy Eich Executive Director of Community Education Jayne Gibson Executive Director of Curriculum and Instruction Heather Nessler Executive Director of Communications, Marketing, and Technology Brian Smidt Director of Facilities Larry Smith Executive Director of Finance 2

3 Table of Contents Superintendent s Introduction 4 Budget Foreword 5 Background 6 Student Information Expenditure Budget All Funds 8 School District Budgeting Process 9 Property Taxes 10 Fund Narratives General Fund Expenditures by Program General Fund Expenditures by Object 15 Five-Year Overview General Fund Revenue by Source 17 Cumulative General Fund Initiatives 18 Frequently Asked Questions 18 3

4 Letter from the Superintendent November 2014 Dear Community Members: Rochester Public Schools recognizes that we are in tough economic times, and even with increased funding it will still be a challenge to support increasing costs and expectations placed on public education. At the same time, we recognize that we have a serious responsibility to provide the best education possible for the students in our community. The budgetary aim of Rochester Public Schools is to provide efficient and effective operations for our stakeholders, customers, and students. Due to recent measures taken by the District to maintain financial accountability, we have resources available to forego budget reductions through the fiscal year. The District has updated its five-year strategic plan. We have followed that by creating a budget process targeting the fiscal year to ensure that the expenditure plan is developed to support the strategic plan. The purpose of the budget is to support the education of students and the maintenance of District facilities. On behalf of the students and staff of Rochester Public Schools, I thank you for your continued support of our goal to provide the best education for all students to ensure their success in a global economy. Sincerely, Michael Muñoz Superintendent 4

5 Allocating Resources in Support of the District Strategic Plan The Mission of Independent School District No. 535, Rochester Public Schools, is to inspire, challenge, and empower all students with the knowledge and skills required to reach their full potential, to contribute to future generations, and to become involved members of a global community. The budget information included in this document is the result of countless hours of work by the School Board, administration, and staff of Rochester Public Schools. It represents the community s investment in public education and allocates resources in support of the District s mission. This document summarizes the programs that the School District is able to provide within the sources of funds available. For the past 18 years, the District has maintained an unappropriated General Fund reserve in an amount equivalent to or exceeding 6% of ongoing operations. Maintaining this reserve means the District has made the difficult decisions necessary, and has had the support of the community in generating the revenue necessary, to remain financially stable. The financial stability of the District has been aided by the use of long-range financial projections and periodic budget adjustments (both reductions and enhancements), coupled with the understanding of the School Board that the financial stability of the District is the basis for providing continuous and effective opportunities for students. The budget for includes planned utilization of approximately $5.2 million of accumulated unassigned fund balance in the General Fund, which will still leave an unassigned fund balance of approximately 10.44% of General Fund expenditures at the end of the fiscal year. This utilization of fund balance was recommended in order to maintain programs for students as the District continues the implementation of its Strategic Plan and prioritizes its allocation of resources in support of that plan. Because the District has taken the steps to maintain financial stability, the District has been able to maintain an Aa1 Bond Rating from Moody s investors Service and an AA+ from Standard & Poor s (S&P), the two largest rating agencies. This rating is given based on a detailed review of District finances and financial practices. Questions on the details of this budget can be directed to the Business Office at (507) It is our hope that the information in this document is helpful in providing insight into the investment this community is making in your public schools. Respectfully, Larry Smith, CPA Executive Director of Finance 5

6 Public school education began in Rochester, Minnesota in 1856 when the first school was created to provide twelve weeks of education. Also, in the same year, the first school tax was levied by the county commissioners at a rate of 2.5 mills generating a sum of $2, which was to meet all costs. In 1858, the Rochester City Council became responsible for public education in the community. The council soon found that the school was badly in debt and many of the taxpayers were delinquent in their payment. Steps were taken to improve these conditions. In 1868, the school rooms were described as poorly ventilated, badly seated, and overcrowded. In addition to Rochester Public School there were over forty private schools in operation within the city. These conditions were not acceptable to city leaders such as: J.B. Clark, C.H. Chadbourn, William W. Mayo and Horace Cook who were instrumental in raising about $75,000 for the construction of a school with fourteen rooms in a community of less than five thousand people. This school, Central School, was composed of three different educational departments each with four grades; primary, grammar and high school. The value of the new school was illustrated in the comment from a local newspaper of the time. It is second to no school in the state, for which a generous and appreciative community will feel grateful. The first graduating class from Rochester Public School in 1871 had six graduates. Today, Independent School District #535 (Rochester Public Schools) has a general fund budget of $180 million for the school year. The District will begin the year with over $23 million in unassigned general fund balance carried over from the school year. District policy states that the general fund balance must be at least 6% of budgeted expenditures or at least $11 million. Rochester Public Schools received an unqualified opinion in the audit of its financial records, which was performed by CliftonLarsonAllen. Moody s Investors Service has assigned an Aa1 bond rating and Standard & Poor s has assigned an AA+ bond rating, both of which are the same as the State of Minnesota, and among the highest of all school districts in Minnesota. These reviews and ratings confirm management s systems of financial accountability. Rochester is the 7th largest district by enrollment in the State of Minnesota with nearly 17,000 students. Rochester Public Schools serves a resident population of approximately 125,000 through 37 locations within 218 square miles of boundaries. There are 16 elementary schools, 4 middle schools, 3 high schools, 1 alternative learning center, and 13 other facilities. 18,000 16,000 14,000 12,000 10,000 5-Year Enrollment History 16,312 16,384 16,395 16,734 16, Rochester Public Schools is one of the three largest employers in Rochester with nearly 3,000 employees. In addition, 2,300 volunteers provide an additional 26,000 hours of service per year. For the 2nd year in a row, Rochester Public Schools has been named to the annual AP District Honor Roll. Rochester ranks 7th in the state of Minnesota with respect to overall ACT scores. After surveying the graduating class of , 84% planned to attend post-secondary education. In , 82.7% of seniors graduated. The licensed teaching staff in the District is very highly educated with 76% of teachers possessing an advanced degree. Rochester Public Schools serves every resident who enrolls regardless of their circumstances. Some of the challenges in a large and diverse district like Rochester include serving a minority student population of 34.5%, a special education population of 14.6%, an English Learner population of 11.9%, a free and reduced lunch population of 36.9%, and a student in transition (homeless) population of 1.7%. In addition, over 80 languages are spoken in Rochester. 6

7 Total Students: 16,889 7th largest public school district in Minnesota Elementary Schools K-5: 8,307 (49.2%) Middle Schools 6-8: 3,401 (20.1%) High Schools 9-12: 4,914 (29.1%) Special Schools: 267 (1.6%) Special Education: 2, % of students qualify to receive special education services, compared to a Minnesota average of 14.9% Gifted and Talented: Year Enrollment Projection 18,000 16,984 17,063 17,199 17,278 17,377 Rochester will receive $233,000 in state aid for the Gifted and Talented program The District has budgeted expenditures of $725,000 for the Gifted and Talented program 16,000 Federal Title I Program 14,000 12,000 10,000 Nine elementary schools (Bamber Valley, Elton Hills, Franklin, Gage, Jefferson, Longfellow, Pinewood, Riverside Central, and Sunset Terrace) receive federal Title I funding to improve the achievement of educationally disadvantaged students $1.7 million of total extra federal aid goes directly to these nine elementary schools Free or Reduced-Price School Meals English Learners (EL): 2, % of all students, compared to a Minnesota average of 6.9% There are 80 languages spoken by families living in the District Rochester receives $1.1 million in state aid to support English Learners, but spends $3.7 million on English Learner programs 36.9% of Rochester students qualify to receive free or reduced price school meals, compared to 38.3% of students statewide in Sites receive $8.2 million in additional state aid due to their percentage of free and reduced lunch students Student Ethnicity American Indian 0.50% Asian 11.70% Hispanic 8.60% White 65.50% Black 13.70% 7

8 The original budget adopted by the School Board each spring is the official authorization for expenditures for the upcoming school year, which begins on July 1st each year. The budget is initially put together by the Superintendent and the administration. Study sessions are conducted with the School Board to understand the budget line items and staffing in detail. The School Board is required by MN State Statute to adopt a budget by July 1st each year Expenditure Budget All Funds Building Construction $4,566,705 2% Debt Service $26,261,269 10% Internal Service Funds $27,470,151 11% Community Services $9,539,923 4% Student Nutrition Services $8,595,782 3% General Fund $179,868,231 70% 8

9 School District budgeting is a continuous four-step process The School District budget cycle is a continuous four-step process that is mandated by state law. Each step outlined below requires School Board approval and is open for public inspection and comment. Since the process spans multiple school and calendar years, the District can be in multiple phases of the process at any given time. 1. Property Tax Levy The budget process begins with submission of estimated property tax levy information to the Minnesota Department of Education (MDE) by the end of August. MDE sets the maximum amount each district may levy based on current legislation. The School Board certifies the levy before the end of the calendar year. 2. Original Budget The School Board must approve an original budget before the start of the school year on July 1st. This process includes completion of enrollment projections and a five-year financial forecast. The financial forecast includes assumptions for inflation, staffing costs, and projected revenues. 3. Budget Revisions Quarterly, the School Board approves budget adjustments to account primarily for unspent carry-over allocations from previous years, grant dollars the District may have received during the year, and any other major mid-year adjustments recommended by the administration. 4. Annual Financial Report and Audit The final step in the budgeting process is closing the books and preparing financial statements for the year. During this step the District undergoes an independent audit as required by law. The School Board typically reviews the audited financial report in November. 9

10 School district property tax levies are limited by state law. The Minnesota Department of Education computes the levy limitation for each school district based on current legislation and formulas. The school district then certifies the levy to the county auditor, the county sends out tax statements to individual property owners, collects the taxes and makes payments to the school district. Property taxes are determined by the taxable market value of the property (determined by the county assessor), class rate percentages set in law for each category of property (such as residential homestead, residential non-homestead, apartments, etc.) and state-paid property tax aids and credits. These state-paid property tax aids and credits reduce the actual amount of tax paid by property owners. The two types of property tax levies are: Voter-approved levies these include building bond and operating levy referendum votes. Non-voter approved levies these levy limitations are calculated by the Minnesota Department of Education based on current legislation and formulas. The School Board can approve levy amounts up to but not exceeding the limits established by the state. Examples include the safe schools levy, alternative facilities levy, health and safety levy, etc. For , the voter-approved levies for the District s general fund total $11,570,834 before state aids and credits; levies based on non-voter approved decisions total $25,577,304 before state aids and credits. The chart below shows school taxes payable for the District on an average home valued at $200,000 from calendar year 2007 to calendar year School Taxes Payable on $200,000 Home Value $1,000 $950 $900 $850 $800 $750 $700 $642 $650 $630 $613 $614 $626 $646 $636 $614 $600 $550 $

11 General Fund budgeted amount: $179,868,231 (70.18%) The general fund is divided into three sections. They are: General Fund Unassigned budgeted amount: $164,814,961 This is the District s main operating budget. This area pays for the instructional programs, daily operations of schools and general functions of the District. General Fund Restricted budgeted amount: $13,274,991 Restricted funds include: Achievement & Integration Area Learning Center Health & Safety Operating Capital Safe Schools Staff Development Uses of funds for these areas are restricted and must be used for the purpose in the specific statute. In addition, Achievement & Integration and Health & Safety must have an approved plan in place prior to spending the funds. General Fund Committed/Assigned budgeted amount: $1,778,279 The District can commit or assign net resources for a specific purpose. The School Board committed fund balances for Memorials, Other Post-Employment Benefits (OPEB), Post- Secondary Enrollment Options (PSEO) Joint Ventures, RPSF Grants and Site Carry-Overs. The administration assigned fund balances for certain unspent allocations, which include the Facilities Service Center, Refuse Equipment, Special Education 50% Rule, 3rd Party Billing and Vehicle Replacements. Food Service Fund (Student Nutrition Services) budgeted amount: $8,595,782 (3.35%) This fund is used to record financial activities of the District s food service program. Student nutrition services include activities for the purpose of preparation and service of milk, meals and snacks in connection with school and community service activities. Community Service Fund budgeted amount: $9,539,923 (3.72%) This fund is comprised of five components, each with its own fund balance. The five components are community service, community education, early childhood family education, school readiness and adult basic education. Building Construction Fund (Alternative Facilities) budgeted amount: $4,566,705 (1.78%) The alternative facilities bonding and levy program requires that a district develop and maintain a rolling 10- year plan listing in detail all the major maintenance needs of a building in the District. Upon filing this plan with the Minnesota Department of Education, Rochester Public Schools is then able to do a direct levy or issue bonds to implement this plan. New construction of facilities (voter approved) would also be tracked in this fund. Debt Service Fund budgeted amount: $26,261,269 (10.25%) When the District sells bonds to finance voter-approved construction of new facilities or major renovation of existing facilities, the District also receives authority to levy a direct general tax upon the property of the District for the repayment of principal and interest of the bonds as due. Internal Service Funds budgeted amount: $27,470,151 (10.72%) Internal service funds are used to account for the financing of goods or services provided by one department to another within the school district. The District maintains four internal service funds to report activities related to: self-insured workers compensation, self-insured dental plan, self-insured health plan and inhouse printing services (Paper Tiger). 11

12 General Fund Expenditures by Program Sites and Buildings $14,958,768 District Support 8.32% Services $5,529, % Administration $7,501, % General Fund Debt and Insurance $3,496, % Instructional and Pupil Support Services $29,978, % Student Instruction $118,403, % The majority of general fund expenditures are for student instruction and support services. The general fund is the District s main operating budget and is the fund over which our School Board has the most discretion. 12

13 The general fund budget was developed to support the mission of the District to inspire, challenge, and empower all students with the knowledge and skills required to reach their full potential, to contribute to future generations, and to become involved members of a global community. Budgets are developed by program which designates the programmatic use for which financial activity is taking place. The programs encompass all aspects of school district operations, including instructional, administrative and support activities. Student Instruction $118,403,318 (65.83%) All costs associated with the teaching of students, the interaction between teachers and students in the classroom and cocurricular activities at the kindergarten, elementary and secondary levels. It also includes services for alternative education, vocational education, special education, bilingual and other compensatory instructional programs. Instructional and Pupil Support Services $29,978,399 (16.67%) This includes all costs associated with operating a school including student transportation, guidance, counseling, nursing services, library media, assistant principals, curriculum consultant and development and staff development activities. District Support Services $5,529,705 (3.07%) This includes expenses for services provided centrally by the District, such as human resources, business services, communication, purchasing, technology support and legal services. Sites and Buildings $14,958,768 (8.32%) This includes all costs for the acquisition, operation, maintenance, repair and remodeling of all facilities and grounds of the school district. It also includes salary and benefits of the District s groundskeepers, custodial staff, utilities and supervisors. Administration $7,501,441 (4.17%) This includes the costs for general district administration. General district administration includes the School Board, Superintendent, instructional administration for Assistant Superintendent and school administration including one principal. General Fund Debt and Insurance $3,496,600 (1.94%) This includes payments of interest and principal for current nonbonded obligations and insurance activities relating to property and liability (excluding transportation), surety, and fidelity bond insurance programs. 13

14 Student Instruction $118,403, % Instructional and Pupil Support Services $29,978, % Sites and Buildings $14,958, % District Support Services $5,529, % Administration $7,501, % Insurance/Debt $3,496, % Middle and High School Instruction $38,364,780 Special Education $33,997,419 Elementary Instruction $33,797,217 English Language Learners $3,677,165 Cocurricular and Extra Curricular Activities $3,145,125 Title Programs $2,545,946 Career and Technical Programs $2,151,007 Gifted and Talented Program $724,659 Student Transportation $10,331,692 Other Student Support (Attendance & Social Work Services) $3,665,622 Staff Development $3,633,859 Instructional Administration/Assistant Principals $3,407,011 Guidance and Counseling Services $2,409,292 Media Services $2,155,999 Instructional Technology $2,004,318 Curriculum Development $1,220,699 Health Services $1,149,907 Operations and Maintenance $9,214,818 Utilities $4,830,804 Health and Safety $913,146 Business Services $2,333,530 Technology Support $1,150,870 Human Resources $1,069,235 Communications and Marketing $399,713 Research and Assessments $308,404 Registration and Records $267,953 Site Principals $6,204,260 Office of Assistant Superintendent $689,345 Office of Superintendent $454,304 School Board $153,532 General Fund Debt $3,072,800 Property and Other Insurance $423,800 $179,868,231 14

15 The categories of general fund expenditure are salaries, benefits, purchased services, supplies and materials, capital and other expenditures. As shown in the graph below, more than 80% of the general fund budget pays for people (salaries and benefits), and the majority of those people are teachers and instructional staff who work with students in the classroom. Salaries $107,699,040 (59.88%) Includes salaries for District administrators, principals, teachers, clerical employees, paraprofessionals, building chiefs, custodians, transportation and other staff. Benefits $39,262,150 (21.83%) Includes the District s contribution for employee retirement (FICA/Medicare, TRA and PERA), health, dental and life insurance premiums, and tax-shelter annuities for eligible employees Purchased Services $19,486,832 (10.83%) Includes utilities, legal services, contracted work and other services that must be purchased from outside sources. The District s purchased transportation services is $8,376,691 of this amount. Supplies and Materials $8,274,724 (4.60%) Includes general supplies such as copier paper, instructional supplies for classrooms, textbooks and workbooks, standardized tests and media resources. Capital Expenditures $1,802,377 (1.00%) Includes major building repairs and site improvements, technology equipment such as computers for classrooms, printers, copiers, and other classroom equipment. Other $3,343,108 (1.86%) Includes miscellaneous expenditures that are not categorized elsewhere such as membership dues for professional organizations, taxes, special assessments, permanent transfer to other funds and bond refunding payments. Supplies and Materials $8,274, % General Fund Expenditures by Object Capital Expenditures $1,802, % Other $3,343, % Purchased Services $19,486, % Benefits $39,262, % Salaries $107,699, % 15

16 The general fund is the District s main operating fund. The graph below shows that over 80 percent of the District s general fund resources are used for student instruction and instructional and pupil support services. In , the District refunded the Series 2004B debt issuance for $9,116,095, which is reflected in Other expenditures below. Also, in , the District entered into a lease purchase agreement with U.S. Bank, N.A. in the amount of $2,600,000 to finance the acquisition of the Facilities Service Center. Repayments of principal and interest for the lease purchase agreement will be recorded in Other expenditures through fiscal year Five-Year Overview $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $0 Admin. District Support Services Student Instruction Instructional and Pupil Support Services Maintenance Other Fiscal Year Admin. % of General Fund District Support Services % of General Fund Student Instruction % of General Fund Instructional and Pupil Support Services % of General Fund Maintenance $7,942, % $4,273, % $95,368, % $19,960, % $12,685, % $1,798, % $142,028,740 % of General Fund Other % of General Fund Total $8,176, % $4,239, % $98,816, % $20,722, % $12,896, % $1,804, % $146,656, $8,425, % $3,636, % $105,778, % $22,951, % $15,570, % $11,133, % $167,495, $7,885, % $3,796, % $113,835, % $25,545, % $14,578, % $2,984, % $168,626, Budget $7,501, % $5,529, % $118,403, % $29,978, % $14,958, % $3,496, % $179,868,231 16

17 The District receives revenue on a per pupil basis from state aids and credits, property taxes, federal aids and other sources. State aids and property taxes make up more than 94% of total district revenues, while federal aids and other sources account for less than 6% of revenues, as shown in the graph below General Fund Revenue by Source Federal Aids $6,120, % Other Local $3,846, % Property Taxes $19,974, % State Aid and Credits $145,049, % State Aids and Credits $145,049,724 (82.89%) These include per pupil basic general education aid; special education regular and excess cost aid; Basic Skills aid, including compensatory education aid, English Learners aid and Literacy Incentive aid; operating capital state aid for equipment and facilities maintenance, and aid for gifted and talented education. The Minnesota Legislature determines the level of funding provided by the state. Property Taxes $19,974,067 (11.41%) These are local taxes the District collects from property owners. The Minnesota Legislature determines the maximum amount the District can levy each year. The District also has authority to seek additional property taxes (up to a maximum amount per pupil established by the Legislature) to support special programs or basic operations through a voter-approved levy referendum. Federal Aids $6,120,433 (3.50%) These include federal grants for Title programs such as Title I, which focuses on improving the achievement of educationally disadvantaged students, and aids to support special education services for students with special needs. Other $3,846,815 (2.20%) These revenues include miscellaneous School Board-approved fees for cocurricular activities, student parking, and admission to athletic and fine arts performances. It also includes interest income from the District s short-term investments, gifts to the District and permanent transfers from other funds. 17

18 Budget Reduction/Enhancements Annually, the School Board and the Superintendent work together to enact budget adjustments which may result in either enhancements or reductions from the prior year. The chart below documents the net approved budget adjustments in terms of staffing and total dollars adjusted over the last several years. For , the Superintendent reduced spending by over $1 million through a variety of budget adjustments without impacting classroom staffing levels. FTE Staffing Classroom Support Dollars Fiscal Year Net Budget Adjustments (36.800) ( ) ($9,962,508) Fiscal Year Net Budget Adjustments ,082, Fiscal Year Net Budget Adjustments ($294,189) Fiscal Year Net Budget Adjustments (10.250) ($974,000) Fiscal Year Net Budget Adjustments (5.000) ($1,791,621) Fiscal Year Net Budget Adjustments $298, Fiscal Year Net Budget Adjustments $457, Fiscal Year Net Budget Adjustments $451, Fiscal Year Net Budget Adjustments (44.460) (40.610) ($9,106,855) Fiscal Year Net Budget Adjustments (13.150) (24.140) ($4,500,000) Fiscal Year Net Budget Adjustments ($927,300) Fiscal Year Net Budget Adjustments $565, Fiscal Year Net Budget Adjustments ($63,466) Fiscal Year Net Budget Adjustments ($1,004,202) Frequently Asked Questions What is the District s average spending per student for instruction and how is it calculated? While there is no universally agreed upon definition of what should be included in instructional spending, a reasonable approach is to divide the total general fund (operating) budget by the average daily membership in the District, which is close to but not the same as the total number of students in the District. $ 179,868, general fund budget (/) 16,472 Divided by average daily memberships $ 10,919 Equals average spending per student What is an ending fund balance? An ending fund balance is money remaining at the end of the school year. There are three main factors that impact the ending fund balance positively and negatively: 1) Schools and departments underspend their budgets. 2) Aid payments from the state may be less than anticipated based on economic conditions. 3) Budget assumptions may have changed. 18