TE School Budget 2010-11

Understanding the Tredyffrin Easttown School District Budget Process

I attended last night’s Board of Supervisor Meeting and the Public Hearing for the Patriots Path Plan — more about that later today.  However, as a result I was unable to attend the TESD’s Finance Committee meeting held at the same time. Local Malvern resident Ray Clarke attended the Finance Committee meeting and provided his notes and personal observations from last nights meeting.  I appreciate Ray’s attendance at the Finance Committee and his remarks are provided following this posting. 

I admit to not fully understanding the school district’s budget process and unfortunately, the information available on the TESD website is limited.  With a potential of a 7.2% tax increase, I think that we need to all do our homework and get involved in this process.  I have been doing a bit of research about the actual school district budget process. I thought that the following questions and answers would benefit us to better understand the Tredyffrin Easttown School District school board budget.  I was able to find this information on PA state websites; if any of the details are incorrect, I would appreciate clarification.

Q. Is there a difference between the preliminary and final budget?
A . The preliminary and final budgets are distinct documents since the passage of Act 1 of 2006. The preliminary budget is the document that is adopted in January and the final budget is adopted not later than June 30th . Both Budgets may reflect the same amounts but the provisions of Act 1 of 2006 require the district to adopt either a preliminary budget or a resolution which binds the district to a tax increase of no more than the index.

Q. What is the proposed budget?
A . The proposed budget applies to both the preliminary and final budgets. The proposed budget is the budget that is put on public display prior to the board taking action on either the preliminary or final budget.

Q. What happens if the district does not adopt its budget by June 30th?
A . The budget is the district’s authority to incur expenditures. If the district does not adopt its budget on time then it may not make any expenditure for the new school year until a budget is passed. The district may however, continue to issue payment for items that were part of the prior year expenditures.

Q. The district is considering action on the proposed final budget but it does not contain a major expenditure item. Is the district permitted to increase its budget after it introduces the proposed final budget?
A . Yes. The district may increase the amount of spending during the public review and comment period. The limitation of the increase is to the index plus any approved exceptions.

Q. The district is considering action on the proposed final budget but it does not contain a major expenditure item. Is the district permitted to increase its budget beyond the adopted preliminary budget?
A . Yes. The district may increase the amount of spending during the public review and comment period for the final budget. However, the limitation of the increase is to the index plus any approved exceptions.

Q. May the real property tax mill rate be increased after the proposed preliminary budget is introduced?
A . Yes. The increase is subject to the index plus any exceptions that the district may qualify for, or proposed referendum question.

Q. May we introduce any of the budgets more than 30 days before adoption?
A . Yes. Act 1 of 2006 establishes a minimum time requirement. The district may introduce the preliminary and final budgets earlier if they choose.

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The Following notes are from 4 January 2010 TESD Finance Committee Meeting as provided by Malvern resident Ray Clarke  

The Finance Committee took the next step in the process to get state approval for a potential tax increase in excess of the Act 1 index, requesting approval for exceptions that – if implemented – would lead to a property tax increase of 6.63% – 1.16 mills – half the township total millage!  Without the increase, the deficit would be $9.2 million.  Even with the increase there would be a $3.9 million deficit.  

There was no change in the administration cost reduction proposals presented at the last Committee meeting, which would reduce costs by $2.35 million, leaving the deficit still at $1.5 million. 

The Committee asked the Administration to come to the next Finance Committee on February 8th with a list of potential expenditure cuts that would erase the entire $9.2 million deficit, thus setting up the discussion in the other TESD Committees and the community to find a tradeoff between tax increases and program cuts.

Any tax increase for 2010/11 would have to be funded from property owners.  If the School district wanted to implement an EIT for 2011/12 it would have to give notice to the Township by November 2010 and would share the revenues with the Township.

The discussion suggested some emerging Board strategies:

  • Expect the state to come up with some kind of fix to the $7 million increase in pension contributions that contribute to the growth in deficit from the baseline $9.2 million in 2010/11 (above) to $25 million in 2012/13 (and beyond).  (Note: $11.5 million of the $29 million General Fund Balance is designated for PSERS Rate Stabilization.)
  • There are no overarching principles (tax increase caps, expense reduction goals) for dealing with the remaining $7-8 million a year increase in the deficit, beyond the general commitment to maintaining the quality of the district’s education program.
  • One target is for significant reduction is benefits costs in employee contracts beyond 2011/12.  (One commentator thought current benefits might be subject to Obamacare’s excise tax on rich programs!).  In the meantime, the Board would consider dipping into reserves to fund short term increases that are contracted. 
  • The idea of fees received a lot of traction.  For example $5-10 per day parking fee for CHS students.

Other new ideas (with no $ assigned) included: 

  • Outsourcing maintenance and janitorial and special education (to the IU)
  • Reducing legal costs (how?) 
  • Eliminating non-contract employee salary increases (4.5% in the preliminary budget)
  • Considering more actively the Teacher Early Retirement proposal (perhaps applicable to 6-7 staff with the right combination of age and longevity, worth $30-50,000 per retiree -but the net impact of course loaded with assumptions) 

The critical point was made that while small savings are indeed important and must be pursued, the district’s expenses are driven by compensation.  Since the rate is contracted, that can only be impacted by FTE reduction.  It is indeed possible that some reductions can be implemented with no reduction to quality (eg FLES, the Middle School curriculum changes already proposed, perhaps a 7 period day at CHS and the outsourcing programs), but we may be past much of the “low hanging fruit”, and reduced FTE will translate to a reduction in many prized programs.

So back to the ultimate question: what programs/class sizes does the community want and how are we prepared to pay for them?  There is an opportunity to get engaged as this process unfolds, and indeed to vote!

Note that, although our property tax millage may be low compared to some adjacent jurisdictions, the amount we pay is a combination of the rate and the assessed value, so just looking at the rate alone does not tell the whole story.  Our neighbors also differ greatly in residential/commercial mix.

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Further Comments from Ray Clarke re Finance Committee Meeting

I have received further comments from Ray Clarke concerning the TESD Finance Committee Meeting last night which I’m glad to post.  Again, thank you Ray for keeping us in the loop!

Further Comments from Ray Clarke re TESD Finance Committee Meeting:

  • Much discussion of appealing assessments. Maybe they miss the point that the reason property owners are getting their assessments lowered is that “they are fed up and can’t take it any more”? 53% increase in school tax rate in the last 10 years – way above inflation.
  • In the last month, the 2010/11 “gap” increased from <$8 million to the current $9.2 million. A teacher benefit switch (next point) was one reason. The other was a realization of the impact of the teachers moving across (more longevity) and down (more credits) the salary matrix. (I may have switched Across and Down)
  • Big drivers of the current year benefit cost increase: Bad claims experience elsewhere in the group (that was lauded as such a great deal last year), and teachers switching from cheaper to more expensive plans. Note: Cost to TESD for a family plan $15,000, of which the employee pays $960.
  • There seemed to be little detail on ideas to close this year’s deficit – Overall the financial reporting is well-intentioned, but it sure is difficult to follow. The big problem, from what a business would be used to, is that there is no cycling of the budget by month, so it’s really hard to know how they are doing by looking at the reports. What’s presented depends on how much they decide to “encumber” (set aside for the remainder of the year). I’m sure that is driven by municipal accounting rules, but they could make it easier for us to know what’s going on!
  • Teachers did offer an early retirement deal: pay off senior teachers with $30,000 so that the schools can hire cheaper newer teachers. The admin thinks that would be a saving – but not in Year 1, I’d think, and at what cost to the program? Didn’t work for Circuit City, did it?
  • Eliminating FLES saves $378,000/year.
  • Example of flawed thinking: Claimed saving of $84,000 from closing the print shop, but this is just salary etc. savings, not net of the replacement cost for contracted printing!
  • Let’s not under-estimate the fights there will be over some proposed cuts – 7th and 8th grade program changes, athletic programs, club sports, ….
  • Another note: the request for exceptions to Act 1 to get the additional 3.7% increase is just that – a request, and based on very specific costs. May not be approved by the state (but I can’t imagine it won’t be)
  • And here’s something: if the exceptions are approved or denied, by March 19th the district has to submit a referendum question seeking voter approval, for inclusion on the primary ballot on May 18. So, an opportunity for debate!

In general, if citizens are interested, there is an opportunity to weigh in – will anyone take the trouble? You can help!

There’s much more to be understood with the Bond issue question – possibly financial engineering can provide some short term help?

The next Finance Committee meeting has the bond issue on the agenda (no time to discuss last night …..) and is set for 1/4/2010 (same as BOS), just before a special TESD board meeting to discuss the budget.

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Thanks again Ray for your comments.  Mike (of Berwyn) you sent in a comment which I posted.  As another person who attended last night’s meeting, what is your take on the meeting?  Any further comments in regards to Ray’s assessment of last night?

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