Ray Clarke attended T/E School District Finance Committee on Monday night and provided his notes for Community Matters readers. After reading his notes, I spoke with Ray for clarification as I could not quite believe what I was reading. The 2011/12 actual expenses of the T/E School District were $5.5 million less than the District forecasted in June 2012. The District revenues were also less than the June 2012 forecast. Factor in the reduced expenses and reduced revenues and the District has a surplus of $3.9 million in 2011/12. Wow!
How could it be that the District financial forecast was off by nearly $4 million! We knew that the change in the medical insurance would be a cost savings but it is surprising that the surplus was so significant. The District has added the $3.9 Million to the General Fund Balance.
Ray’s Finance Committee Notes:
Monday’s Finance Committee meeting was most notable for a review of the full year 2011/12 finances in conjunction with a presentation of the draft audit. It turns out that a number of things broke in favor of the district.
The table below compares the forecast for the full year 2011/12 when 2012/13 budget was approved in June with the actual outcome and with the 2012/13 budget (figures in $ million, rounded)
11/12 Forecast 11/12 Actual 12/13 Budget
Revenues 106.4 105.6 109.2
Expenditures 107.2 101.7 110.3
Budget Imbalance (0.8) 3.9 (1.1)
So, expenses for the year to June 2012 turned out to be $5.5 million less than forecast in June 2012. (And about that amount less than budget).
Administration provided detail of the major drivers of the saving versus budget:
- Lower Healthcare benefits: $1.8 million
- Fewer teachers: $0.4
- Lower tuition reimbursement: $0.3
- Less natural gas usage: $0.4
- Transportation savings: $0.3
- ”Breakage” $0.8
- Other salary savings: $0.3
“Breakage” is cost saving due to unexpected retirements, resignations, etc.; replacements are likely lower cost and there can be interim cost savings.
Clearly the final benefits accounting takes a while, but it seems quite likely that the 2012/13 budget and associated tax increase might have been predicated to at least some extent on an artificially high baseline. As Neal Colligan pointed out to me, there needs to be strict oversight to ensure that the current year expenses do not inflate by a whopping $8.6 million to the budgeted $110.3 million.
The $3.9 million surplus goes into the now ~$25 million general fund balance, with the $1.8 million benefits saving planned to be committed to medical plan rate stabilization and the remainder to the ever-open PSERS rate stabilization fund. On that score, it was announced that there’s a new GASB requirement that in 2015 districts must recognize on their balance sheet their share of the $27 billion unfunded PSERS liability. (Perhaps someone can work this out for TE, based, say, on TE’s % of teachers and a 50% share of the liability?). [Note also that in the year to June 2012 PSERS returned 3.4% compared to the 7.5% built into the system's accounting used to calculate that $27 billion].
And this continues on to the 2013/14 budget, which will be rolled out at the next Finance Committee meeting on December 10th. It looks like we need to step up efforts to ensure that votes for tax increases are based on realistic projections.
On other matters, the Board continues with plans to harass tax-exempt non-profits. An outside attorney is being used to review and identify property owners that will be sent a letter and questionnaire to confirm tax exempt property use in the light of changes in the state law. This letter and questionnaire will be discussed at the January Finance Committee. The Committee has already determined that the a large percentage of the total are parcels owned by government entities (like the district itself) and for rights of way. Also, the district is planning to extend for six years the transportation agreement with Krapf; as presented, the terms looked reasonable.