FRANKLIN REGIONAL SCHOOL DISTRICT BOARD OF SCHOOL DIRECTORS BUDGET WORKSHOP MEETING MINUTES December 12, 2012-7:00 PM Heritage Elementary School Administration Office Conference Room A. Attendance Board Members Present: Kimberly Bondi, Larry Borland, Roberta Cook, Dennis Irvine, Dennis Pavlik, Paul Scheinert, Joe Seymour, Jane Tower Board Members Absent: Herb Yingling B. Agenda Topics Dr. D Arcangelo, Superintendent, opened the meeting and noted the Board of School Directors was in Executive Session prior to the meeting to discuss personnel matters. 1. 2013-2014 Act 1 Index Mr. Perry, Director of Financial Services, reviewed the 2013-14 Act 1 Index which was calculated by the Pennsylvania Department of Education (PDE) to be 1.7%. Franklin Regional s Act 1 Index was adjusted to 2.0% due to its market value/personal income aid ratio being greater than 0.4. Both the 2013-14 Act 1 Base Index and the District s adjusted index are consistent with the prior year. The 2.0% index equates to 1.75 mills in 2013-14 and the value of a mill is approximately $335,000. Franklin Regional s market value/personal income aid ratio is the second lowest in Westmoreland County, and Dr. D Arcangelo reminded the Board this ratio is a measure of wealth for the District utilized by PDE to guide funding and noted Franklin Regional had the lowest ratio in the county in the prior year. 2. 2013-14 Budget Process Timeline Mr. Perry reviewed each item in the Budget Process Timeline included in the budget workshop packet and responded to questions from the Board. The Board will decide in January to either adopt a resolution not to raise taxes above the Act 1 Index, or authorize the administration to advertise a preliminary 2013-14 general fund budget. If a resolution is not adopted in January, the Board will approve the preliminary 2013-14 general fund budget in February, along with the 2013-14 capital reserve fund budget. In March and April the Board will approve the 2013-14 technology fund and athletic fund budgets, respectively. The proposed final 2013-14 general fund budget will be approved by the Board during its May meeting and the final 2013-14 general fund budget will be approved by
the Board at its June meeting. Several Budget Workshops/Finance Committee meetings will be scheduled in January through May to review each budget prior to adoption. Also included in the Budget Process Timeline, as indicated by bold print, are significant pending items that will impact the 2013-14 general fund budget. 3. 2013-14 Preliminary Budget Summary Mr. Perry reviewed each line item of the 2013-2014 Preliminary Budget Summary and provided commentary explaining the significant components of each line item, highlighted the significant pending items within each area of the budget, and responded to questions from the Board. The building budgets are determined using an allocation process driven by student enrollment. A per pupil cost is determined for each building and is multiplied by the projected enrollment for the building to determine the overall budget allocation. The per pupil cost used in the 2013-2014 budget is flat compared to the prior year; therefore, any changes in the budgeted amount from year to year are driven by changes in enrollment. The majority of the building budgets consist of consumable supplies, books and workbooks, and educational software licenses and technology. The Senior High School and Middle School budgets also include transportation, travel, and dues for student activities. The cost of toner for network printers was removed from the building budgets in 2013-14 as the District entered into a print management contract in the spring of 2012 and the cost of that contract is budgeted within the Data Processing line item. In exchange, the Guidance Services and a portion of the Health Services budgets were incorporated in the building allocations due to the retirement of Allan Mikach, Director of Counseling Services, who will not be replaced. The Health Services budget consists of the school physician, dentist, and Medic One services. The District s busing contract with AJ Myers and Sons accounts for the majority of the Transportation budget area. A rate increase of 3.25% is currently budgeted as that represents the maximum increase per the contract. The Transportation budget also includes diesel and gasoline which is purchased by the district through a consortium with many other school districts in Westmoreland County. The diesel and gasoline budget is flat as compared to prior year and will be updated once the consortium bid process takes place in the spring of 2013. Special Education budgeted expenditures increased approximately $116,000 (10%) as compared to prior year due to the increased cost of Westmoreland Intermediate Unit (WIU) special education services and outside placement tuitions. Approximately 45% of the Special Education budget consists of tuition and related services for students requiring outside placements, while another 45%
relates to WIU services provided to the district. These services include the staffing for two life skills classrooms, vision, hearing, and psychological services. The Human Resources budget is flat as compared to prior year and consists primarily of AESOP fees and PA Educator fees. AESOP is the software used to track employee attendance and provide substitutes when employees are absent. PA Educator is the program used for advertising open positions within the district and conducting searches to fill positions. Title grants from the federal government require a certain portion of the grant be set-aside to provide professional development for staff and conduct parent involvement events. These set-asides are included in the Title Funds budget area, whereas the remaining portions of the grants are used for salaries and benefits of the applicable staff. The Curriculum Development budget primarily consists of curricular requests by the Literacy department as part of the cyclical review process. The prior year budget included requests for the Social Studies department, whose materials have not been updated for approximately 15 years, thus creating the significant decrease in the budget line item. The ESL budget consists of English Language Liaison services required under Federal law. Tax collections/insurance includes the District s short and long term disability premiums, commissions and fees paid to the various tax collectors for the District, and the District s property, general liability, errors and omissions, and umbrella insurance policies. The Other line item includes a variety of budget items such as tuitions for charter schools, other local education agencies and court placed programs, fees/tuitions for vocational-technical programs at Northern Westmoreland Career and Technology Center and Forbes Road Career and Technology Center, the district s copier lease, tuition reimbursement per employee contracts, the School Resource Officer, legal and audit services, unemployment compensation, the District s contribution to the Westmoreland Intermediate Unit s operating budget, and a budgetary reserve as required by board policy. The increase in this budget area as compared to prior year is primarily the charter school tuition payments which are currently budgeted for $575,000. Athletics and Student Activities includes the transportation and travel, supplies and non-capital equipment, and officials and security required for athletic events. Admin Phone Lines/District Long Distance represents the fees charged by Windstream and Century Link for providing local and long distance phone
services to the district. Fees charged for District internet services are included in the Data Processing budget. Debt Service includes scheduled payments on the District s four outstanding general obligation bonds, as well as fees to the paying agents. Board Services/Central Administration includes the Districts membership to the Pennsylvania School Boards Association (PSBA), the Superintendent s memberships to professional organizations, travel, and supplies for central administration. Data Processing includes support service agreements with vendors, technical repairs and maintenance with outsider contractors, license agreements for the various software products used throughout the district, the District s print management agreement, and general technology supplies. Additionally, in 2013-14 the District plans to move to a new website hosted by a 3 rd party. The Community Relations budget consists primarily of the production of the school calendar/parent handbook, and the District s participation in InMurrysville magazine. The Maintenance Services budget incorporates the costs to maintain the District s facilities. These costs include utilities (gas, electricity, water, garbage), supplies and non-capital equipment, equipment rental, professional services and contractor repairs, and the district s security contract with Capital Assets Security. The Staff Development budget includes the District s participation in eacademy, the cost of non-district employees presenting on Act 48 days, and induction costs for new teachers. The Salaries and Benefits section of the Budget Summary was reviewed. The salary figures included are reflective of current staffing levels and known retirements. The deadline for notification of intent to retire for members of the Franklin Regional Education Association (FREA) is January 15. The FICA line item represents the District s required contribution to Social Security and Medicare. The Retirement line item represents the gross required employer contribution to the Pennsylvania State Employee Retirement System (PSERS), of which 50% is reimbursed by the state and is reflected in the State revenues section of the Budget Summary. The PSERS rate of 16.93% was approved by the PSERS Board of Trustees on December 6, 2012. Workers Compensation insurance is budgeted as.53% of salaries. Budgeted insurance costs reflect a 10% increase in premiums for medical coverage. The Westmoreland County Public School Healthcare Consortium, of which the district is a member, is currently experiencing claims at similar expense levels to that of 2011-12; however, that is based on only four months of data and
can change quickly with one or two months of high claims. The consortium typically sets rates for the upcoming year in April or May. The general fund budget includes transfers to the Technology Fund and Capital Fund of $425,000 and $514,224, respectively. Total expenditures for the 2013-2014 Preliminary Budget are $50,104,701, a 4.76% increase over the 2012-2013 Budget. The Revenue portion of the Budget Summary was reviewed. Local revenues increased $243,541 as compared to the prior year due to assessed values of all taxable property increasing by.75% and 3% budgeted growth in earned income tax collections. Those two sources of revenue are the major components of local revenue. The increase in State revenue is due to PSERS reimbursements. The budget amounts for Basic Education Funding subsidy is flat compared to 2012-13, and the preliminary budget does not include an allocation for the Accountability Block Grant. The Governor will present his preliminary State budget in early March. Federal Revenue consists of the Title I and Title II grants and reflects a 20% decrease from the current year funding levels based on the possibility of sequestration of Federal funds. The Other line item budgets for the sale of fixed assets, and the transfer from the Food Service Fund of $50,000 is to cover the costs of custodial time spent in the cafeterias during the school day. It was noted that the transfer from the Food Service Fund will need to be monitored in future years given the plan to utilize funds from this account for the Heritage cafeteria/kitchen renovation. Total revenues for the 2013-2014 Preliminary Budget are $48,187,127, a 1.84% increase over the 2012-2013 Budget. The preliminary exception calculations were discussed. Based on preliminary calculations the district could apply to the PDE for PSERS exceptions of 1.48 mills, which would generate revenue of approximately $495,800. However, the preliminary calculations indicate the District will not be eligible for the Special Education exception, as related expenses from 2010-11 to 2011-12 did not increase by a percentage greater than the Act 1 Index. The multi-year budget projection and fund balance projection document and the assumptions utilized within the document were reviewed, and it was noted that this document is a long-term analysis tool; therefore, assumptions remain more consistent as compared to the Budget Summary document which focuses on the current budget year.
The PSERS analysis schedule was also reviewed. It was noted that even with the use of the PSERS committed fund balance, a 1.5 mill tax increase would be necessary each year over the next five years to meet the currently projected required employer contributions. The State Legislature and Governor have begun discussions on pension reform; however, those discussions are in infancy stages. 4. Other Considerations General Obligation Bonds restructuring Mr. Perry presented the Board with a Debt Analysis report and explained that one of the District s general obligation bonds is callable on May 15, 2013. The Series of 2008 has two remaining principal and interest payments in November 2013 and November 2014 that total approximately $2.5 million. Given the short term remaining, a straight refinancing to a lower rate does not appear to make sense; however, the Board may be interested in investigating restructuring the debt for a longer term at a lower rate. Mr. Perry has initiated conversations with Public Financial Management, Inc. (PFM), who serves as a financial advisor to the District for debt issuances, and will begin developing scenarios for the Board to consider. The meeting adjourned at 8:20PM and the Board returned to Executive Session to discuss personnel matters.