budget surplus

TESD: Proposed Tax Increase of 4.3% Drops to $3.875% — School Board to leave $20 in taxpayer pockets

Tax-increaseFor the 13th year in a row, it looks like the TE School Board will vote to increase taxes to its residents.

At the District’s budget workshop last night, the public learned that the proposed 2016/17 tax increase has decreased – the tax increase has reduced from the 4.3% contained in the preliminary budget approved in January.  The proposed tax increase is now 3.875%.  This ‘decrease in the increase’ means homeowners will keep roughly $20 of the proposed tax increase in their pockets.

T/E School District has one of the largest fund balances in the state – in 1996/97, the District had a fund balance of $4,333,661 and in the last decade we saw the fund balance increase to more than $28 million.  The total fund balance as of June 2015 was $32,381,047 – that’s $32.4 million in taxpayer dollars. Continuing to grow the fund balance, the District shows a budget surplus for the fifth year in a row yet residents continue to feel the sting of an annual tax increase.

Ray Clarke and Neal Colligan were in attendance at the budget workshop and their comments from the meeting are appreciated.  Thank you both.

If residents care about the proposed ‘thirteen years in a row’ tax increase, they should plan to attend the TE School Board meeting of April 25 and voice their opinion.

Budget Workshop Notes from Ray Clarke:

Three hours of discussion at last night’s TESD Budget Workshop culminated in some good news for taxpayers – although you’d need a microscope to see it.  The Board will vote at its April 25th meeting for a “Preliminary Final Budget” that includes a tax increase of 3.875% – down from the maximum allowable by a token 0.4% (worth about $20 for the average taxpayer, who is still faced with an increase of more than $200).

Notwithstanding well-articulated positions from members Dorsey, Sweeney, Burger and Hotinski (and from the audience) for a lower rate, more considerate of the increased fees to families and the fixed, inflation-linked incomes of retirees, the outcome seemed pre-ordained, driven by the same majority that voted for the senseless VFMS fences.  That majority seems pre-occupied by risk and unable to appreciate that every number they are given by the Administration is conservative.  For example:

–  Half of the adjustments to the Preliminary Budget could arguably be higher – most notable being the use of approved rather realistic estimates to budget the impact of staff retirements.

–  There was much lamentation of the possible impact of the next union contracts (due in 2017/18), without recognition that the projections already include 7-10% increases in the benefits costs (worth 1-2% in total compensation).

–  Revenue projections are especially murky.  This year’s transfer tax is already $1 million over Budget, as are even base real estate revenues – the most predictable of all line items!  It’s not at all clear if next year’s Budget, developed months ago, considers these developments.

Years of operating outcomes favorable to Budget show that the Administration is skilled at managing its resources.  Superintendent Gusick read a scripted plea for the Board to set the District’s tax parameters and pledged to implement a process next Fall to conduct the oft-advertised “deep dive” into expense strategies that would address any apparent operating deficit that resulted.

The April 25th Board vote is not final, but is nevertheless significant.  Anyone that believes that our School District should be managed more like the County Intermediate Unit, which also last night presented its Budget and a commitment to live within the Act 1 2.4% Inflation Index, should come out in support of our Board members who are trying to hold the line here in TE

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Budget Workshop Notes from Neal Colligan:

-Current Year operating projections now show an estimated $984,000 Surplus for the District for the 2015-16 fiscal year (this year).  Current year’s budget was passed with an anticipated deficit of $1.654 MM.  It’s a miracle…a $2.5 MM swing!

-This “miracle” of Deficit Budget morphing into an Actual Surplus has now happened in EACH of the last five years.

-As a result of these Surpluses; the District has added almost $12 MM to its Fund Balance over the last 5 years…that’s a pretty profitable operation!!!

-With over $32 MM in Fund Balance (about to be over $33 MM with this year’s Surplus); at what point is that adequate?

-The growth of the Surplus is remarkable as we always seem to be “up against the wall” when it comes time to set a new tax rate.  Possibly this pattern is a result of the budget forecasting methods employed when looking at the next year’s budget.  On average (10 years); the District collects a bit over 100% of budgeted revenue and spends about 95.5% of budgeted expenses.  Perhaps this speaks more to the budget estimates used at tax setting time than actual operational changes employed during a given fiscal year.

-At 3.875%; the tax increase this year will be higher than the 3.84% increase imposed on the community for this year.  Not sure the new Board Members ran to increase taxes.

-Perhaps it is time to look at using a small amount of our Surplus (88% funded by local sources) to dampen current tax increases?  One could certainly argue that the Fund Balance is now super-adequate and it is taxpayer money that they were told would go to education….!!!???

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Budget and Affordable Care Act on TE Special Meeting agenda tonight … Is this the precursor to outsourcing?

There is a special TE School Board meeting scheduled for tonight for 7 PM at Conestoga HS. The two items for priority discussion on the agenda are (1) The Board will consider options to close the projected budget imbalance of approximately $3.1 M for the 2014/15 school year and (2) Presentation of the impact of the Affordable Care Act (ACA) on the School District.  Unfortunately, this important special school board meeting conflicts with both the Tredyffrin and Easttown Board of Supervisors organizational and regular meetings, which includes the swearing in of newly elected officials, previously scheduled for tonight.

In the District’s draft budget (included in the agenda), the base model for the 2014/15 school year indicates a $3.1M budget deficit – this model assumes no tax increase from the Act 1 Index or  referendum exception (PSERS, Special Ed).  In the projection model that includes the Act 1 index (2.1% tax increase) the District’s budget deficit is reduced to $1.2M.  A third project model shows the budget deficit reduced to $141K if the District takes the referendum exception (1.1% tax increase) and the Act 1 index (2.1%).  The $141K deficit project model would still requires the District to find other cost savings in addition to the 3.2% tax increase to the residents.

If the District imposes the 3.2% tax increase for 2014/15 school year, I think that would make the third year in a row they have imposed the maximum tax increase allowed by state law without a voter referendum.  But here’s the disconnect for me – on one hand, the Board has voted to take the maximum tax increase but … for the last several years, the District has come up with multi-million dollar budget surpluses.  As examples, the 2011/12 year saw the District in a surplus position of $3.9M and for the 2012/13 year, the surplus was nearly $5M.  The budget surplus is not reflected in the District’s draft budget nor indicated in the next year’s budget.  The multi-million budget surplus is added to the District’s fund balance and the taxes continue to rise.

Since the multi-million dollar budget surplus is taxpayer dollars, wouldn’t it be great if the taxpayers had a say regarding the surplus?  Here’s an idea — Rather than adding additional millions of taxpayer dollars to the fund balance, what about using some of the budget surplus dollars for health insurance benefits to that all TESD employees as covered as required by the Affordable Care Act.  Afterall, the District lists ACA and the TEEA teacher contract as the two items to impact the 2014/15 budget.

Following the District’s 2014/15 budget discussion tonight, is an ACA overview by attorney Rhonda Grubbs.  Her presentation will discuss how the federal law will affect TESD and its employees. Grubbs is an associate at Wisler Pearlstine, the law firm of Ken Roos, the District’s solicitor.  You may recall that Grubbs offered her legal opinion on the ACA at a TE school board meeting last spring in response to the District’s aide, para and substitute teacher outsourcing debate.  Don’t get me wrong; I think a legal presentation on the ACA and how it will affect the District and its employees is important.  However, in my opinion, residents and employees would have been better served by a third-party legal expert versus a representative from the District’s contracted law firm.  And what about an insurance expert – I’m certain that there is any number of local insurance consultants/experts who would make a presentation to the District (and I’m guessing would do so, free of charge).

Under the ACA, employers will be required to provide employees who work more than 30 hours per week with health care benefits.  The federal mandate will go into effect for school districts in the 2014/15 school year.  Currently T/E aides, paras and substitute teachers do not receive health coverage.  For the record, T/E is the only school district in the area that does not provide health insurance for their employees – Great Valley, Radnor and Lower Merion school districts all offer healthcare coverage to all their employees.

The District lists the following ACA compliance options:

1.  Health Benefits:

  • Provide health coverage for employees working 30 hours/week or 130 hours/month

2.  Contracted Services:

  • Outsource the jobs of aides, paras and substitute teachers

3.  Reduce Hours:

  • Reduce hours of aides/paras to 27.5 hours/week and hire additional aides/paras to cover the reduced hours
  • Limit substitute teachers to 3.5 days/week
  • Reduce hours of aides/paras to 27.5 hours/week while increasing the hourly rate to make the reduction in hours neutral to the employee income
  • Reduce hours of aides/paras to 27.5 hours/week while increasing the hourly rate to all aides/paras

4.  Incur IRS Penalty

After much debate, the Board decided not to outsource the aides, paras and substitute teachers for the 2013/14 school year.  It is my understanding that 40% of the District’s aides/paras did not return for the current school year.  Although neither the school board nor the administration has confirmed it – I was told that the positions of non-returning aides/paras who worked 30 hours or more were outsourced.  If this is true, than the number of District employees that need to be covered by the ACA has dropped since this issue was debated last year.

As follow-up, how has the outsourcing of the aides/paras worked out for the District?  For the record, several parents, aides and paras have told me that the result has been less than satisfactory — it would be interesting to know if the administration and Board are pleased with the job performance of these contracted employees.

I cannot help but think that the administration and the school board may have already made up their minds about the ACA situation.  Were it not for the pushback they received last year, I believe that the administration would have already outsourced the jobs of aides, paras and substitute teachers working 30 or more hours per week.  Clearly, the handwriting was on the wall in 2013 for the District’s aides, paras and substitute teachers and the 2013/14 school year may prove to be only a one-year reprieve for these employees.

Some have described tonight’s planned Affordable Care Act presentation by the District’s law firm representative as nothing more than a PR move but …  I remain hopeful that some of our school board members will show their support of the District’s aides, paras and substitute teachers and fight for them to keep their jobs (and their hours).

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