5 Year Budget Forecast

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Kory Simpson
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1 School District of Lancaster 5 Year Budget Forecast

2 5 Year Budget Forecast We have used estimates based on the best available information to date to create a 5 year forecast of both expenditure and revenue data: Revenue Assumptions Economic recovery is moving slowly (7 years from 2008 recession) Local revenues are maintained at status quo with NO ASSUMPTION for real estate tax revenues on current ACT 1 index State subsidies do not increase FICA/PSERS Subsidies correlate with Payroll expenses Expected decrease from 2016 budget ~ $2.5MM Federal subsidies do not increase for entitlement grants Assume no new grant funding Expenditure Assumptions Payrolls move at a rate of 2.5% annually PSERS increases are based on current published rates Healthcare increases are based on historical trend of 3% annually (reduction from 6% in prior year estimates) Debt Service is based on actual payment schedule (need for future projects) Other expenditures are increased at 2% annually

3 5 Year Budget Forecast We have used estimates based on the best available information to date to create a 5 year forecast of both expenditure and revenue data: Fund Balance Utilization Fund Balance is assumed to be utilized to balance the Actual Budget Shortfall in our Fund Balance Summary Slide. Deficits Deficits are shown in 2 categories: Budget Shortfall Represents the cumulative budget or structural deficit for each year assuming the District did not rebalance or utilize fund balance in any given year. Actual Budget Shortfall Represents the annual deficit provided the District has utilized fund balance or provided a reduction in expenditures.

4 5 Year Budget Forecast Major Considerations for the Forecast: PLANCON Reimbursement Currently budgeted at $1 MM annually $3.9 MM in arrears that arrived in July 2014 (Phase 1 Projects) Included in the 2016 forecast $1.2 MM in arrears (Phase 2 Projects) PPACA Cadillac Tax Impact in Year 2019 Current estimate is $2.0 MM Included in the forecast Building Projects Current debt service load is paying for current and completed projects New debt service would be required to complete remaining phases of construction 2016 Target year for new financing of General Obligation Bonds No new debt service is included in the forecast numbers Debt Service Remains level at 2015 Actuals Long-term financing strategy to incorporate new bond issues while maintaining current tax millage Collective Bargaining Agreements AFSCME Expires June 2016 LEA Expired June 2015 No information is known about Salary/Benefit data to be included in the forecast numbers

5 Balancing the Budget Revenues Local (Taxes) State (Subsidies) Federal (Grants) Expenditures Programmatic Mandated Non-Mandated Operational Fund Balance

6 5 Year Forecast Budget Year 2016 % 2017 % 2018 % 2019 % 2020 % 2021 % EXPENDITURES Salary Projections $ 77,060, % $ 78,987, % $ 80,961, % $ 82,985, % $ 85,060, % $ 87,186, % Benefit Projections Medical 21,381, % 22,022, % 22,683, % 23,363, % 24,064, % 24,786, % PSERS 19,912, % 23,119, % 24,490, % 25,957, % 27,287, % 27,917, % Other Payroll Expenses 7,520, % 7,708, % 7,900, % 8,098, % 8,300, % 8,508, % Other Local/State Expenses 49,446, % 50,435, % 51,444, % 52,473, % 53,522, % 54,593, % Debt Service 15,197, % 15,150, % 15,150, % 15,150, % 15,150, % 15,150, % Cadillac Tax - 0.0% - 0.0% - 0.0% 2,000, % 2,000, % 2,000, % Total Expenses $ 190,518,304 $ 197,423,135 $ 202,631,323 $ 208,029,303 $ 213,386,222 $ 220,142,524 REVENUE Local R/E Taxes $ 61,588, % $ 61,588, % $ 61,588, % $ 61,588, % $ 61,588, % $ 61,588, % Other Local Funding 13,658, % 14,158, % 14,158, % 14,158, % 14,158, % 14,158, % State Basic Education 58,733, % 56,233, % 56,233, % 56,233, % 56,233, % 56,233, % Other State Funding 36,653, % 38,416, % 39,357, % 40,360, % 41,281, % 41,774, % Federal 16,235, % 16,235, % 16,235, % 16,235, % 16,235, % 16,235, % Other Financing Sources 3,000, % 3,000, % 3,000, % 2,900, % 2,900, % 2,900, % Total Revenue $ 189,869,350 $ 189,632,014 $ 190,573,624 $ 191,476,491 $ 192,397,254 $ 192,890,366 Budget Shortfall (Structural) $ (648,954) $ (7,791,121) $ (12,057,699) $ (18,552,812) $ (22,988,968) $ (27,252,158) Actual Budget Shortfall $ (648,954) $ (7,791,121) $ (4,266,578) $ (6,495,114) $ (4,436,156) $ (4,263,190)

7 3 Year Forecast Budget Year 2016 % 2017 % 2018 % 2019 % EXPENDITURES Salary Projections $ 77,060, % $ 78,987, % $ 80,961, % $ 82,985, % Benefit Projections Medical 21,381, % 22,022, % 22,683, % 23,363, % PSERS 19,912, % 23,119, % 24,490, % 25,957, % Other Payroll Expenses 7,520, % 7,708, % 7,900, % 8,098, % Other Local/State Expenses 49,446, % 50,435, % 51,444, % 52,473, % Debt Service 15,197, % 15,150, % 15,150, % 15,150, % Cadillac Tax - 0.0% - 0.0% - 0.0% 2,000, % Total Expenses $ 190,518,304 $ 197,423,135 $ 202,631,323 $ 208,029,303 REVENUE Local R/E Taxes $ 61,588, % $ 61,588, % $ 61,588, % $ 61,588, % Other Local Funding 13,658, % 14,158, % 14,158, % 14,158, % State Basic Education 58,733, % 56,233, % 56,233, % 56,233, % Other State Funding 36,653, % 38,416, % 39,357, % 40,360, % Federal 16,235, % 16,235, % 16,235, % 16,235, % Other Financing Sources 3,000, % 3,000, % 3,000, % 2,900, % Total Revenue $ 189,869,350 $ 189,632,014 $ 190,573,624 $ 191,476,491 Budget Shortfall (Structural) $ (648,954) $ (7,791,121) $ (12,057,699) $ (18,552,812) Actual Budget Shortfall $ (648,954) $ (7,791,121) $ (4,266,578) $ (6,495,114)

8 Gap Analysis Total Revenues Total Expenditures $230,000,000 $210,000,000 $190,000,000 $170,000,000 $150,000, Expenditures are trending at 2.9% increase per year or $5.9 MM Revenues are trending at.3% increase per year or $570K

9 Fund Balance Trend $80,000,000 $60,000,000 $40,000,000 $20,000,000 $- $(20,000,000) $(40,000,000) $(60,000,000) $(80,000,000)

Employee Costs $100,000,000 $90,000,000 $80,000,000 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $- Salary Benefits 2016 2017 2018 2019 2020 2021 2016 Employee

10 Employee Costs $100,000,000 $90,000,000 $80,000,000 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $- Salary Benefits Employee Costs represent 66% of Budget Benefit Costs ~ 25% As a % of Salary ~ 62% 2021 Employee Costs represent 68% of Budget Benefit Costs ~ 27% As a % of Salary ~ 70% 2009 Employee Costs Benefit Costs ~ 27% As a % of Salary ~ 38% $12.5MM for PSERS

11 PSERS 35.00% 30.00% 25.00% 20.00% 15.00% Rate in 5 Years 32.02% $27.9 MM 40% Increase $1.6 MM/Year $8MM 16.93% 21.40% 25.84% 29.27% 30.25% 32.08% 32.43% 10.00% 5.00% 7.13% 7.13% 4.76% 4.78% 5.64% 8.65% 12.36% Current Rate 25.84% $19.9 MM 0.00%

12 PSERS Increase vs. New Tax Revenue $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- Limited ability to increase taxes just to pay for increased PSERS cost. Increase Tax Revenue

13 ACT 1 Index Base Index = 2.4% $1,700,800 New Revenue Adjusted Index = 3.5% $2,480,400 New Revenue

14 Key Takeaways Projected Starting Deficit $7.7 MM Act 1 Index 3.5% or $2.4 MM (Adjusted) 2.4% or $1.7 MM (Base) STATE BUDGET ~ FIGURES ARE SUBJECT TO CHANGE

5 Year Budget Forecast October 10, October 10,

5 Year Budget Forecast October 10, 2017 October 10, 2017 1 October Budget Process Administration provides 5-year financial projection including budget deficits (immediate and 5-year), health care costs,