MARCH 2018 Maine Endwell School Community: The District is in the final stages of completing the 2018-2019 school budget. We ask that you please take a moment and review this informational FAQ which provides the backdrop to our decision-making process. While the current financial condition of the District is healthy, the 2018-2019 school budget must address underlying financial issues that could impact our long-term health. This budget addresses major unexpected increases in health insurance and attempts to limit the use of reserves and fund balance to finance operational expenses both issues that plagued the Districts finances in previous years. By addressing the structural imbalance of expenditures growing faster than revenues, the District is protecting our financial integrity. We appreciate you taking the time to review this document. If you have any questions, please contact the Superintendent of Schools, Mr. Jason R. Van Fossen, at 754-1400 x2311 or via email at jvanfossen@me.stier.org. Very Sincerely, Jason R. Van Fossen, Superintendent of Schools Maine-Endwell Board of Education
Q What is the status of the 2018-2019 school budget development? A The District is currently working on finalizing the 2018-2019 budget. The budget will be finalized and adopted on April 16 th, 2018. The Board of Education has held two (2) budget workshops (January 11 th and February 8 th ) and has two more scheduled (March 8 th and April 5 th ). All workshops are streamed live and archived on the district website (me.stier.org). Q What decisions are left to be made for the 2018-2019 school budget? A The 2018-2019 budget requires the reduction of $1.5 million in recurring expenditures in order to maintain financial health and stability. Currently, based on state aid projections (will not be finalized until a successful NYS budget) and our projected tax levy limit ( Cap ), revenues are projected to be lower than current projected expenditures. Unfortunately, the District will need to reduce expenditures in all areas, including the reduction of staffing, in order to meet the $1.5 million target. Staffing: Since January, the District has been reviewing all budget lines and identifying potential reductions. As of March 1 st, the District has identified approximately eleven instructional positions that will not be filled due to retirement, resignation or through reduction. Additionally, ten non-instructional positions will not be filled through layoffs and retirements as well. The District will have a final number of reductions by mid-march once all retirements have been received. Tax Levy: Additionally, the District needs to determine what tax levy % to seek from the community. Per the Tax Levy Limit ( Cap ) law, the expected cap for the 2018-2019 budget will be 2.08%. This is the highest the District can ask voters to approve with 50.1% voter. Asking for more than 2.08% would require 60% voter approval and would result in loss of the Property Tax Freeze rebate checks. These rebate checks are distributed to each property tax payer when / if their school district stays within or under the tax levy limit. Reserves: The District also needs to finalize how much reserve and unassigned fund balance to use. Using reserves and assigned fund balance can be measures used to address the revenue shortfall. However, using reserves and assigned fund balance weakens the financial condition of the district over time especially if the District cannot replenish either one in future years. As of March 2018, our long term projections do not indicate an ability to replenish in the next few years. Q For the 2018-2019 budget, what key variables are impacting decision-making? A There are multiple variables impacting the District which are largely out of our control. The key variables include; 1. Revenue growth is extremely limited especially considering the Tax Levy Limit ( Cap ) and reliance on NYS School Aid.
REVENUE 2017-2018 ORIGINAL BUDGET 2018-2019 DRAFT BUDGET $ INCREASE BUDGET TO BUDGET % INCREASE BUDGET TO BUDGET TAX LEVY 23,443,312 23,929,914 486,602 2.08% OTHER REVENUE 1,218,935 1,280,735 61,800 5.07% STATE AID 25,606,723 26,731,748 1,125,025 4.39% APPROPRIATED FUND BALANCE 470,000 470,000-0.00% APPROPRIATED RESERVES 552,000 85,000 (467,000) 100.00% TOTAL REVENUE BUDGET 51,290,970 52,497,397 1,206,427 2.35% NOTE: (1) The Tax Levy Limit ( Cap ) for 2018-2019 is 2.08% - this is an increase of $486,602 from 2017-2018. SEE ADDENDUM. (2) The District used $1,022,000 in reserves and fund balance for balancing the budget in 2017-2018. The recommendation is to decrease the use to $555,000 for 2018-2019. 2. Additional educational needs including o Annual Professional Performance Review (APPR) or Teacher / Principal Evaluations o NYS 3-8 Learning Standards and Assessment implementation including the move to Computer Based Testing (all assessments will be taken on a computer no paper or pencil) o Student remediation and additional support including ELA (w/ Literacy) and Math o Student social and emotional needs including mental health resources and school security and safety needs o Technology integration and investment o Special Education services (legally mandated) o Enrichment and additional rigorous learning opportunities for students 3. New York State Budget outlook based on Office of State Comptroller (OSC) and Office of Management and Budget (OMB), fiscal outlook for NYS is stressed ($4.0 billion budget deficit projected for 18-19) and could be impacted significantly more based on federal budget decisions. 4. Difficult collective bargaining negotiations making accurate forecasts challenging. 5. Health insurance, and the significant cost to the district, has been the proverbial elephant in the room for several years. NOTE: The increases for the current year (17-18) are expected to be $1.1 million and the early projections for 18-19 are $900,000. If we use our 20 year historical average, we can expect an average increase of 8.8%. Chart below illustrates what the total cost of health insurance will potentially look like over the next several years.
$12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $- Annual Cost of Health Insurance and % of Total Budget Spent on Health Insurance 16.5% 17.7% $7,551,358 $7,128,660 18.7% $8,020,761 19.1% 18.9% 19.1% 20.4% 20.4% $8,183,876 $8,270,165 $9,003,161 $9,968,587 $10,457,000 21.6% 25.0% $11,398,130 20.0% 15.0% 10.0% 5.0% 0.0% Health Insurance Cost % of Total Budget Spent on Health Insurance Health Insurance Costs - Maine-Endwell CSD $20,000,000 $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 $0 $17,322,324 $15,921,254 $13,449,913 $14,633,506 $12,362,053 $11,362,181 $10,457,000 17-18 18-19 19-20 20-21 21-22 22-23 23-24 Conversely, as the District has restored positions health insurance costs have increased accordingly. Coupled with an expensive plan which cannot be changed unilaterally without negotiations several years of large claims (needing to be paid over a three year window) and low employee contribution rates, the District could not have predicted the rate of growth for health insurance. As of today, health insurance has increased $1.2 million above conservative estimates.
Staffing Levels Cost of Health Insurance Q What are the major expenditure areas within the budget? A Our school budget has little discretionary spending. The three largest major categories are: Salaries and Benefits, Debt Service, and BOCES. The illustration below highlights the breakdown of the 2018-2019 projected budget:
Based on the illustration, 93% of all expenditures, or $48.9 million are spent on staff, paying off principal and interest from past capital projects and bus purchases, and using BOCES services*. The 7% of remaining expenditures include utilities (gas / electric / water and sewer), tuition (for students with special needs), and various contractual expenses including building and grounds, transportation, and instructional. *BOCES Services includes Special Education and Alternative Education student placements, all Information Technology services, Food Service management services, Central Business Office services, professional development services and various other services. NOTE: For a full disclosure of items, go to Budget Workshop #2 on the district website or you can call the District Office (754-1400 x2311) and a copy will be provided to you. OBJECT 2018-2019 Budget % of Total Budget Instructional Salaries $ 14,487,619 27.6% HEALTH INSURANCE $ 10,912,000 20.8% Debt Service $ 7,798,038 14.8% BOCES Expenses $ 7,584,817 14.4% Non-Instructional Salaries $ 4,093,670 7.8% Contractual Expenses $ 2,344,615 4.5% TRS $ 1,564,000 3.0% SOCIAL SECURITY $ 1,469,000 2.8% Material & Supplies $ 1,060,108 2.0% ERS $ 517,000 1.0% WORKMAN'S COMP $ 230,000 0.4% Interfund Transfers $ 177,000 0.3% UNEMPLOYMENT $ 167,000 0.3% DENTAL INSURANCE $ 61,000 0.1% Equipment $ 57,000 0.1% OTHER BENEFITS $ 34,000 0.1% TOTALS $ 52,556,867 100% TOTAL SALARIES & BENEFITS 33,535,289 63.8% DEBT 7,798,038 14.8% BOCES 7,584,817 14.4% TOTALS $48,918,144 93% ALL OTHER ITEMS $ 3,638,723 7%
Q What have been / are the District s financial objectives? A The District has identified several critical objectives since the major reductions made in the 2013-2014 budget including; (1) Replenish reserves (2) Keep unassigned fund balance at or near 4% (legal limit) (3) Make strategic restorations based on affordability (4) Review five year financial outlook annually making adjustments as needed. (5) Negotiate sustainable contracts Q Has the District met its objectives? A Objective 1 & 2 Replenishing Reserves & Fund Balance. Yes, the District has met this objective, however, continued use of reserves and assigning fund balance to meet yearly expenses rather than make reductions to expenses will return the District to dangerous levels. The information below helps illustrate the status of objectives being met. Fund balance represents moneys accumulated from prior years. The amount of fund balance retained at year end serves as a financial cushion for unexpected events and maintaining cash flow. The District can choose to assign (or use) fund balance for paying expenditures or place it in a specified account (reserve) for use in the future. Reserves are essentially savings accounts that have rules regarding what they can be used for. The District s largest reserve is the Employee Benefit Accrued Liability Reserve (EBALR), which has approximately $2.24 million saved. EBALR moneys can only be used to make cash payments to employees for accrued leave time due to them upon separation from school district employment. These cash payments are for employees unused and unpaid sick leave, personal leave, holiday leave, vacation time, time allowances granted in lieu of overtime compensation and any other payments due to them, as authorized by law or collective bargaining agreement (CBA). Unassigned fund balance is money that has neither been assigned to pay expenses nor placed in a reserve. By law, a school district is restricted in how much unassigned it can keep to 4% of its annual budget. Per BOE Policy #3910, The Board of Education recognizes that good fiscal management comprises the foundational support of the entire District. To make that support as effective as possible, the Board intends to maintain a minimum fund balance of 4% of the District s general fund annual operating expenditures.
UNASSIGNED FUND BALANCE & RESERVES NOTE: At the conclusion of 2016-2017, the District achieved healthy reserve and fund balance levels. It was not until the current budget year (2017-2018) that reserve and fund balance levels began to decrease as a result of using these funds to balance the budget. Heading into the 2018-2019 budget, continued use of reserves and fund balance will (a) continue the negative trend (use) and (b) be nearly impossible to replenish unless expenditures decrease at the same rate. Objective 3 Restoring Positions. Since 2013-2014, the District has invested in staff as a result of two critical accomplishments: (1) District replenished reserves and fund balance to healthy levels creating the ability to invest in additional staff. (2) District desired to meet the needs of students. Each year, the Board of Education accepts recommendations based on our (a) current financial condition and (b) future projections looking out three to five years. Recommendations to add staffing occurred in the following school budgets: THREE YEAR RESTORATION: # of Positions 2014-2015 2015-2016 2016-2017 Teachers 5 $385,078 Teachers 6 $448,488 Teachers 7 $456,460 Librarian - MM 1 $38,248* Assistant Principal - HS 1 $97,907 THREE YEAR TOTAL 20 $385,078 $682,550 $456,460 *Net Cost did not fill Library Clerk position $1,524,088
Restorations Where? Teachers / Librarian 95% Administration 5% TOTALS 100% The District was able to restore these positions AFTER the restoration of reserves and fund balance to healthy levels had occurred. NOTE Additional positions that are not included in the chart above include a custodian, a senior typist, and teacher aides assigned to elementary classrooms per our Special Education integrated co-teaching model and student need. Additionally, not included above, is a second ELL (English Language Learner) teacher added in 2015-2016 based on student enrollment. Objective 4: Annual review of financial outlook. The Board of Education reviews the financial outlook annually and directs the Superintendent to make recommendations regarding how to best provide an educational program that our community can afford and will support. For the current budget (2017-2018), the following recommendations were made: No restorations or additional positions added for 2017-2018. o Follow 2017-2018 budget development process and recommend not filling two (2) open positions. o No layoffs are planned at this time. Source: May 8, 2017 Budget Hearing For the proposed 2018-2019 budget, we are proposing reductions to staffing: Address structural deficit via reductions of recurring expenses in the amount of $1.5 million. o Make reductions to staffing via not filling retirements and layoffs. Source: February 8, 2018 Budget Workshop #2 Objective 5: Sustainable contracts (health insurance contributions). This has been the District s objective for the past four years in addition to looking at ways to reduce the cost of our health insurance plan currently offered to actives and retirees. o The District has negotiated three new contracts (Food Service, Transportation, and Maintenance / Custodial) which have moved employees from paying a flat dollar to a percentage of the cost of the health insurance plan. o The District is currently negotiating with the Administrative unit and expects to have a tentative agreement in place prior to the end of the school year. NOTE:
This contract expires June 30, 2018. This group pays a percentage for their health insurance. o The District is currently negotiating with the Support Staff unit. This contract expired June 30 th, 2016. The group currently pays a flat dollar amount for their health insurance. o The District is currently negotiating with the Teacher s unit. As has been well documented, this process is currently in mediation with the Public Employee Relations Board (PERB). The contract expired on June 30 th, 2016. The group currently pays a flat dollar amount for their health insurance. Q What is meant by a sustainable contract? A Sustainable contracts are those which do not knowingly place a significant burden on the financial condition of the district, and, that include provisions that help address cost increases. Essentially, contracts which attempt to recognize the importance of organizational health for long-term continuation of programs and staffing. Q What is left for completing the 2018-2019 budget? A The Board of Education will adopt the final draft of the 2018-2019 budget on April 16 th. The District is currently finalizing plans for addressing the $1.5 million reduction and will be informing the Board at the next two scheduled Budget Workshops. Q If I want to find out more about budget development who can I reach out to? A If you have any questions or want more information, please contact the Superintendent of Schools Mr. Jason R. Van Fossen at (607) 754-1400 x2311 or via email at jvanfossen@me.stier.org If you wish to contact a Board of Education member, contact information can be found on the District s website http://www.me.stier.org by selecting District Information and Board of Education.
ADDENDUM Tax Levy Limit ( Cap ) 11 Year Tax Levy 7.00% 6.00% 5.94% 5.00% 4.00% 3.00% 2.00% 1.00% 0.48% 0.93% 1.50% 2.50% 2.49% 2.15% 1.75% 1.28% 0.89% 2.08% 0.00% 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 Since 2012-2013 school year, the Maine-Endwell CSD has stayed at or below the tax levy limit. As of March 1, 2018, if the District chooses to go over the tax levy limit of 2.08% it will require voter authorization of 60% or higher. If the District chooses to stay at or below the levy limit of 2.08%, voter authorization is 50.1% or greater. The Tax Levy Limit ( Cap ) law requires a district seeking an override of their limit which for Maine-Endwell is 2.08% - to inform voters of this request. If the May vote is defeated (less than 60% voter approval), the District has two options, (1) ask voters to approve the same budget or (2) amend (reduce) the budget. If a second school budget is defeated, the District must go to a contingency budget which, by law, requires the tax levy to revert to the previous year s amount. This produces a $0 increase on the tax levy, which for the District, at 2.08%, equates to $486,000. A defeated budget would require additional reductions of this amount.