PENN HILLS SCHOOL DISTRICT BUDGET & PLANNING DOCUMENT

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Norman Damon Fox
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1 BUDGET & PLANNING DOCUMENT

2 Penn Hills, Pennsylvania Fiscal Year Beginning July 1, 2016 Ending June 30, 2017 Board of Directors Denise Graham-Shealey, President Jennifer Burgess-Johnson, Vice President Pauline Calabrese Marlon Ferguson Robert S. Hudak Donald L. Kuhn Catherine Mowry Donielle Owen Eric Vecchio Dr. Nancy J. Hines, Superintendent Report Issued by the School District s Finance Office Robert F. Geletko, Business Manager

ADMINISTRATIVE OFFICES 260 Aster Street Pittsburgh, Pennsylvania 15235 412-793-7000 Telephone 412-712-1009 Fax www.phsd.k12.pa.

3 ADMINISTRATIVE OFFICES 260 Aster Street Pittsburgh, Pennsylvania Telephone Fax June 2016 To Residents of the Community: This is a summary of the final budget for the Penn Hills School District. Please read further into this document to learn more about the funding of our schools. This report will be prepared annually to project the financial condition of the District s General Fund for the future year based on historical results and trends. It is a culmination of many meetings both administratively and publicly to discuss planned programming and current issues with the schools. This document will assist the board in setting goals, spending policies and tax rates. It is anticipated the General Fund Budget will be approved at the public meeting on June 27, 2016 reflecting a financial plan totaling $82,672,804 requiring mills. This 1.5 mill increase above the prior year budget is due to many financial difficulties that have accumulated over multiple fiscal years. The District has taken steps to address these issues as well as the evaluation of the current programming model. Plans are also being developed to ensure greater financial stability and transparency. The District followed the Act 1 timeline in the budget preparation process. Under Act 1, any District that projects that it will need to raise its tax rate at a rate higher than the State of Pennsylvania s Act 1 index must approve a Preliminary Budget no later than January 27, The District did adopt a Proposed Budget and publicly declared intent to raise taxes above the assigned index. We would like to thank our staff for their efforts in compiling and revising the data in this budget. We would also like to thank the School Board whose guidance provided us direction, and whose questions and concerns helped us develop a budget that addresses our admitted challenges. A thank you is also extended to the community which supports our schools and provides input on tough decisions. Respectfully, Robert F. Geletko, Ms.Ed. PRSBA Business Manager The Penn Hills School District does not discriminate on the basis of age, race, color, national or ethnic origin, sex, or handicap in employment practices or in administration of any of its educational programs and activities in accordance with applicable federal statutes and regulations. Thomas Tano has been identified as the Title VI/Title IX/Section 504/AMD Coordinator, Penn Hills School District, 260 Aster Street, Pittsburgh, PA 15235, (412)

4 Summary Revenue Projection: The General Fund Revenue projection for the fiscal year includes a tax increase of 1.5 mills to mills. That equates to $36,101,391 in Real Estate Tax revenue an increase of $3,242,534 or 9.87% from the budget. In total the revenues have dropped to $82,672,804 or a % reduction, due the absence of the 2015 Operating Bond Issue and refinancing. Expenditure Projections: The General Fund Expenditure Budget is projected to be $82,672,804, a reduction of $5,084,576 or -5.79%. This reduction is the result of series of expenditure cuts, including: program reform, supplies, equipment, charter schools and transportation. These figures were used based on the year-to-date trends we saw during the school year. PA Section 688 Impact on the General Fund Budget: Per Pennsylvania Section 688 guidelines, a School District wishing to balance its budget with millage rates increases cannot have a projected ending unassigned fund balance greater than 8% of the subsequent year s expenditure budget. The District s June 30, 2015 unassigned fund balance (audited) was negative ($18,844,581). The projected June 30, 2016 fund balance is negative ($9,551,536). Because our projected unassigned fund balance is negative, we are permitted to increase millage in accordance with PA Section 688. The Act 1 Index impact on the General Fund Budget: The Act 1 Index for the Penn Hills School District is 3.4%. This index places a limit on the amount the District can raise millage. For this year, that rate increase is.8434 mills, a total millage of (current millage of mills mills = mills). Increases in millage above the index required the District to petition the State through a series of allowable Act 1 exceptions. Due to our extenuating circumstances, the District has applied and been approved for the retirement and special education exceptions. These allow for an additional mill increase of.6566 mills or an additional $935,513.

Below is the taxable assessed value for the last two years: Date Taxable Assessed Value January 2015 $1,500,088,790

5 Assessed Value s imp act on the General Fund Budget: Since the 2013 County-wide reassessment, the assessed values of the properties in Penn Hills have increased. Below is the taxable assessed value for the last two years: Date Taxable Assessed Value January 2015 $1,500,088,790 January 2016 $1,603,780,819 Revenue Summary Revenue amounts from local, state and federal sources are as follows: Federal 5%, $4,460,139 Other 0%, $265,000 State 39%, $31,835,753 Local 56%, $46,111,192

6 Local Revenues Real Estate Tax: Year Collections Millage Collection % $ Value of Mill (Budgeted) $36,101, % $1,453, (Projected) $33,728, % $1,359, $32,525, % $1,482, $31,060, % $1,486, $31,016, % $1,486,375 The District has increased millage, to the index, the last three fiscal years. In the District is raising above the index. The value of a mill has increased accordingly with a higher assessed value and collection percentage. The assessed value is up in 2016 and the collection percentage made a recovery with the addition of Keystone Collections as the collector. State Gaming Distribution for Property Tax Relief: It is expected that there will be a state distribution of gaming funds for property tax relief for the school year. The projected allocation is $2,359,794. This amount will be divided evenly among the 11,939 approved homesteads and will provide each approved Penn Hills property owner a $ decrease on his or her School District property taxes. Homeowners must apply for the Homestead/Farmstead exemption through Allegheny County (Act 50 Program) to be eligible for the District s program. The District notifies homeowners who are not listed as approved for the program each December of the application process. Earned Income Tax: Earned Income Tax Revenues have stayed level over the last four years. The collections increased 25.87% due to the Act 32 tax collection system. The new system has increased overall collections; however, the collections were artificially high due to the changeover to the Act 32 model in January Taxes from both the and years were recognized in the school year. The Earned Income Tax Collections for budget is down to align it with the actual collection received in 2013 to 2016.

7 The District s earned income tax collection history is as follows: Year Earned Income Tax Collected % Increase or (Decrease) (Budget) $3,700,000 (.29%) (Projected) $3,710,904.19% $3,703,668 (.73%) $3,730,704 (3.85%) $3,874, % Delinquent Taxes: Delinquent Tax collection presents a huge variable in most school District budgets. However, with the sale of our delinquent real estate taxes to a third party and the stability of Keystone Collections acting as our current and delinquent earned income tax collector. The benefit of this process is its positive effect on cash flow, which was desired. We have steadied the process here and the budget has remained virtually unchanged and in total bringing in over $3,700,000 per year. Real Estate Transfer Tax: Real Estate Transfer Tax has exceeded its budget for the last two years and the budget for and reflect that accordingly. This is a direct reflection of the housing market rebounding and the highest real estate transfers of any community in Allegheny County. Interest Earnings: The District s interest earnings have been virtually non-existent since the lack of cash that started with the school year. In addition, the budget has not reflected that change until the budget year. The District has no outside investments over the actual cash-on-hand at PNC Bank. In total, we expect no more than $2,000 in earning in and. State Revenues: The State Budget Impasse challenged the Penn Hills Schools District, the lack of appropriations for and the uncertainty of has left us guessing what the new Governor and Congress actually have in store for us. We had budgeted for the promised increases in Basic Education subsidy, which we received through the addition of the Ready to Learn Block Grant. Though the appropriations are more than the previous year we just now have surpassed the subsidy levels. In total we average only at 1.3% increase in State funding annually.

Our rental subsidy in 2015-2016 will not be received until the fall of 2016. Plan Con modifications are coming with the State issuing debt to cover the back-log of participants.

8 Our rental subsidy in will not be received until the fall of Plan Con modifications are coming with the State issuing debt to cover the back-log of participants. We do expect to be made whole once again in. We will be receiving our share of PSERS and Medicare subsidies; however, these are based on our pension and payroll tax liability which is reflected accordingly. State Revenues $18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $- Basic Education Special Transportation Charter School Education $15,163,446 $3,134,833 $2,465,383 $ $15,493,316 $3,083,266 $2,613,495 $ $15,493,325 $3,061,775 $2,490,325 $ $16,516,192 $3,059,876 $2,631,877 $- $17,192,914 $3,170,374 $2,631,877 $- Federal Revenues: The District s Federal revenue category has been relatively level since Where we saw drop offs in Medical Access monies and ARRA Funding, we made it up with the receipt of Build America Bond reimbursements on our two new buildings. Title I monies saw a little over a $280,000 increase for the first time in five years. In total, these revenues only make up 5.10% of our total receipts.

Expenditure Summary Expenditures by Object Code are as follows: 600 & 700 - Supplies & Equipment, $2,945,834 800 & 900 - Debt Service, $12,744,531 500 - Other

District Salaries have decreased at an average of 2.02% annually over the last five years.

9 Expenditure Summary Expenditures by Object Code are as follows: 600 & Supplies & Equipment, $2,945, & Debt Service, $12,744, Other Purchased Services, $17,160, & Salaries & Benefits, $45,794, & Professional, Technical & Purchased Services, $4,027,713 Salaries: District Salaries have decreased at an average of 2.02% annually over the last five years. The salaries presented for the budget include all current reform efforts, retirements and contractual information. The District established an Early Retirement Incentive to encourage retirements at the end of the year.

10 The District s salary expenditure history is as follows: Year Districtwide Salary % Increase from prior Enrollment year (Budgeted) $26,035, % 3, (Projected) $29,230, % 3, $29,259, % 3, $30,264, % 3, $30,035, % 3,903 Benefits: The District s Benefits changes are materially affected by the cost of healthcare and the cost of pension contributions to the Pennsylvania Public School Employees Retirement System (PSERS). Healthcare premiums for the fiscal year were finalized with a 2.75% increase. The PSERS employer contribution rate is set at 30.03%, half of which is returned in Pension Subsidy from the Department of Education. Healthcare Premiums: The 2.75% rise in healthcare rates was very minimal compared to other industries. The District s participation in the Allegheny County Health Insurance Consortium helps control the rates as our exposure is shared with the other 41 Allegheny County Schools. Historical Healthcare Costs are as follows: Year Monthly Premium (Family) Rate % Increase (Budgeted) $1, % (Projected) $1, % $1, % $1, % $1, %

11 Pennsylvania School Employees Retirement System (PSERS) Contributions: The PSERS employer contribution rate is 30.03%. This is an increase of 14% from the rate of 25.84%. The PSERS rate has increased 451% over the previous 10 years. A 5-year summary of where the rates are expected to go is as follows: Year Contribution Rate Rate Increase (Decrease) 30.03% 14.0% % 2.0% % 3.0% % 2.1% % -1.0% Purchased Professional, Property and Technical Services: The budget figure for is $4,027,713 a reduction of $341,853 from These object codes include the following items: Administrative Services Professional Development Technical Services Safety & Security Disposal Services Utilities Repairs & Maintenance Equipment Rental Construction Transportation: The Penn Hills School District Transportation budget is $4,467,433, this is a $1,535,616 reduction from the school year. The reduction is a result of a new request for proposal for a contracted carrier calculated from State formula as recommended by the Auditor General. It also includes a $750,000 reduction in fuel which will now be the responsibility of the new contracted carrier.

12 Charter Schools: The Charter School figures for the school year includes a one million dollar reduction in budget. This is based on current year trends and enrollments. The revitalization Penn Hills CHIEFS Academy has played a major factor in this with its blended approach. Supplies and Equipment: The reduction in supplies and equipment is a direct result of the freeze on unnecessary spending. The shutting down of all District credit cards and scrutinizing spending through a hierarchy of approval processes has allowed us to achieve this. In total the supplies and equipment budget is down 28% over the budget. Debt Service: The District s debt service payments for its (8) outstanding bond issues total $12,717,965. It is important to note there were no refinancing or additional issues for the year, this is the first time since this has not occurred. The debt schedules are as follows: Series Principal Interest Total Due in Series B of $6,457,545 $6,457,545 Series A of Series B of 2012 $45,000 $41,963 $86,963 Series C of $894,200 $894,200 Series of 2013 $160,000 $68,651 $228,651 Series of 2014 $3,325,000 $734,325 $4,059,325 Series of 2015 $5,000 $899,725 $904,725 Series A of 2015 $5,000 $81,556 $86,556 Total Due in $3,540,000 $9,177,965 $12,717,965 Other Budgetary Items: At this time the District has no additional expenditures or transfers to other funds scheduled. It is a goal of the District to implement replacement/repair schedules for all necessary infrastructure, supplies and equipment.

13 REVENUE DETAIL

14 EXPENDITURE DETAIL

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