I attended last night’s TESD Budget Workshop for the development of 2013-14 budget. Sue Tiede, Director of Personnel presented enrollment history and trends, projected staffing needs and changes for the District.
In the review of staffing changes from 2008 to 2013, it was interesting to note that full-time teachers during this period has decreased by 48 teachers, compared to an enrollment increase of 355 students during the same period. The total enrollment in 2008-09 was 6,132 increasing to 6,487 in 2012-13, which indicates a 5.8% increase or 355 students.
An enrollment history chart dating from 1975 to 2012, indicated that in 1975 the District enrollment at 6,497 students. From that point, 37 years ago, the District’s enrollment steadily decreased for 15 years to its lowest point in 1989 of 3,990 students. Starting in 1990, the District’s enrollment began to increase yearly to 6,487 students in 2012, which marked the highest enrollment since 1975, when there were 6,497 students. We know that there are currently 48 teachers fewer than in 2008, but the chart did not indicate what the staffing was in 1975, when the enrollment was within 10 students of where it is today.
The projected requirement for 2013-14 indicates additional staffing needs of 7.6 educators. Included in the 7.6 staffing number is the addition of one special education, one technology and three mental health specialists. The special education professional is for autistic support.
The District’s Business Manager Art McDonnell presented updates on property tax revenue lost from reassessments and economic impact on other local revenues (interest income, transfer tax, delinquent tax, and interim tax) and provided a revenue variance analysis and 2013-14 budget summary. In 2006-07, the annual property tax revenue lost to the District in reassessments was $256,561.
As presented by McDonnell, annually since 2006-07, residents and commercial property owners have continued to appeal their property taxes. The annual loss to the District in property tax revenue due to reassessments is as follows: 2006-07: $256,561; 2007-08: $244,236; 2008-09: $417,041; 2009-10: $975,994; 2010-11: $826,923; 2011-12: $595,072; and 2012-13: $411,051. However, these numbers do not paint the total picture. There is a cumulative loss as the new reassessment revenue loss is compounded each year. The accurate property tax revenue lost to the District from assessment appeals based on the cumulative effect is as follows: 2006-07: $256,561; 2007-08: $512,000; 2008-09: $44,126; 2009-10: $1,947,142; 2010-11: $2,847,464; 2011-12: $3,536,508; and 2012-13: $3,946,559. The District’s budget for 2012-13 is nearly $4 Million less due to property tax revenue lost from assessment appeals. And by the way, the $4 Million may go up as Vanguard’s assessment appeal remains an open issue; scheduled court date is April.
McDonnell presented the economic impact on other local revenues (interest income, transfer tax, delinquent tax and interim tax). Although we all know that the interest income rates at the banks is nearly nonexistent these days, it is certainly evident when reviewing the District’s financials. In 2006-07, the District earned about $3 Million in interest income versus $109K in 2011-12. However, there was some encouraging news – the District’s interest income for 2012-13 is projected to nearly double from last year, $200K. The transfer tax revenue is also indicating projected growth, from approx. $1.7 Million last year to projected $1.8 Million for 2012-13. Looking at the total revenues from interest income, transfer tax, delinquent tax and interim tax, the District is projecting $3,227,647 for 2012-13, down from last year’s $3,981,314 – indicating an approx. $750K loss in revenue. However, when you look at interest income, transfer tax, delinquent tax and interim tax in 2006-07, the total revenues to the District was $7,542,466 – approximately $4.3 million more dollars than projected for 2012.13.
McDonnell was able to provide some possible good news. Under Governor Corbett’s 2013-14 proposed budget, the state subsidy revenue for TESD is basic education funding increase of $92,016 and special education funding decrease of $11,024 – providing a net increase of $80,992 in state subsidy revenue. This is cautionary news as Corbett’s budget is the preliminary stage.
The impact items included in the District’s 2013-14 budget: $200K for administrator salary increases, $250K for District safety enhancements and $125K for support staff for network upgrade. Open budget impact items under consideration including the outsourcing of TENIG staff and outsourcing of aides and paraeducators. The President of TENIG, Dave Fillippo, read a statement in regards to outsourcing, which will be presented in a separate post.
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I find it odd that there are no comments for this topic. Maybe because numbers don’t lie. There are no opinions about reality. But talk about ways to balance the budget…everyone has a way out.
Sometimes it’s easy to get lost in all the numbers. I can share with you some of the comments I wrote the to Board this week:
The information presented in the Workshop dealt mainly with Revenue analysis but started with an enrollment and staffing projection analysis. I was most interested in hearing the science behind the staffing levels/hiring decisions. After applying your metrics to enrollment figures; staffing levels next year are set to increase by 14 people or about 1.8% of total staffing. This will be the first increase in staffing levels over the horizon covered by your 5-year chart. I was most interested in Sue Tiede’s explanation of the Paraeducator role in decreasing costs although it is not immediately apparent from the numbers where the cost/staffing savings occur. Compare this year’s staffing level to the last two years vs. enrollment changes. Two years ago enrollment increased by 123 students and staffing decreased 24.15 FTE’s. Last year enrollment increased by 30 students and staffing levels remained the same. This cycle: enrollment increases are unknown and staffing levels are scheduled to increase by 14.18 FTE’s. Staffing levels are driven primarily by your class allocation metrics and need’s based student demands on staff (probably a better way to say that but you know what I mean). Still a human element of decision making is the final determinant…this comes from the Board level. Does this feel right to you? It’s a non-issue if we have a balanced budget but that is not yet the case as the current working model of the budget has a $1.7 MM imbalance. You’re a people business as a strong majority of expenses are allocated to salaries/benefits/deferred compensation. Additional staffing obviously increases your cost drivers. Enough said.
The primary focus of your presentation was on the revenue side of the equation and I have some reflections of that as well. The chart on Page 6 of the packet contains a schedule of Property Tax Revenue Lost from Assessment Appeal. These are large numbers but only tell a portion of the story. While assessment appeals have increased in frequency over the time horizon in the study, that doesn’t mean that the total tax base has decreased. In an environment of declining property values it is natural that appeals filings would increase. These are taxpayers that claim they are being overcharged on their property taxes and, in a great majority of recent decisions, the appeals board has agreed that they are paying more than they should. As a result, their property values are adjusted down and their overpayment is returned to them. This is not too dissimilar than what each of us do every year with our income taxes…we file individual tax returns. We know the Federal and State Government have taken taxes from us throughout the year; and our returns reconcile what we owe with what they’re taken. In many cases we’ve overpaid and we receive a refund. Tax appeals follow the same logic. The entire story as it relates to you as a taxing authority is the TOTAL value of assessed property that you levy ($4.874 Billion last year). The companion chart to Property Tax Revenue Lost is Property Tax Revenue Gained through new assessments. These occur via improvement to a property or expansion of existing facilities or new real estate developments. Certainly you see some of the shopping centers along Route 30 in Devon expanding; these are gains in the taxing base as are smaller improvements/expansions on individual homes in the District. One of the key take-away’s for me last night was that your TOTAL taxing base has actually decreased very recently. Art pointed out that this was quite unusual…I agree although I am not expert in property value assessments. But over the life of your analysis, property value assessment is up and not down…I’m pretty certain of this but stand corrected if I’m wrong. THIS is the whole story on assessed value. The sense I get from the analysis presented is that the total value of assessed property available to tax has plateaud, at least temporarily. This is the reality on the revenue side of the equation. The good news is that enrollment may be following the same pattern. It might be interesting to compare these two metrics in a chart…total assessed value and enrollment levels in the District schools. My feel here is that they move it tight correlation to each other…which is logical on many levels.
The final portion of last night concerned the budget projections for 2013-14. This is obviously of greatest interest to the community. The imbalance is still pegged at $1.744 MM. So close! This figure represents 1.5% of total anticipated spending. Really, the closest we’ve been to Balancing in a few years at this time of the cycle. A Balanced Budget is within your grasp within a tax increase defined by Act 1. My confidence is your achieving this goal is very high indeed. The community is counting on you. You have an excellent staff that can provide you with the strategies necessary to complete the task but the will to close the gap has to come from the Board level. As always, I wish you the best in your deliberations and thank you for your service. And, thanks for reading if you got this far.
Those are my comments for what they’re worth. Sometimes what’s not presented is as important as what is presented. Various portrayal’s of financial performance can produce different conclusions in the reader’s mind.
I like your well thought-out comments CA. Whether I agree with you 100% of the time or not, I appreciate that you have some institutional knowledge and fact-based historical experience…it’s worth a lot.
Thank you Neal for sharing these comments from the Budget Workshop. Your analysis of the budget, given the numbers that we have available, helps greatly in its understanding.
This brings up another point — wouldn’t it be possible that the assessed property may ‘go up’ if the District is successful in going after the nonprofits. BTW, I am not a fan of this approach, but given that the Board made this decision, do we have any idea of the revenue this may produce? I don’t recall hearing any potential revenue number re the nonprofit property, do you?
The assessed value will not “go up” unless the county does a reassessment. That’s the catch 22 of the whole victimization thing when it comes to school districts. They need referenda to increase taxes beyond a state mandated level, they need a vote to implement any income based tax, and they do not fare well (and therefore never spend the money) to try to increase property assessments. It is almost a myth that a renovation increases assessed values…which is why a county wide reassessment should be more regular, but is not.
My understanding of the “non profits” is that the district is investigating whether they truly qualify for the tax exempt status, and if they do, that they consider “contributing” something to the district since they occupy the land, use the services of the schools in some cases, and are free of any financial obligation associated with being located in TESD. I don’t think there is much there. But again, “balancing” the budget is based on reducing expenses, because there is no other way to increase revenue. And reducing expenses means cuts of people, programs or services. Personally, I stil stand behind the notion of assessing fees to program users, and looking to charitable giving to supplement those who cannot pay the fees. There are 6,000 people whose program quality depends on 40,000 residents. The residents are tapped out legally….so the best way to improve revenue (absent a major new construction project or sale of a major site for transfer bounty) is to charge for some of the services. Does that make me happy? No. But our parents are directly affected by the decision to cut something — so giving them an opportunity to fundraise or supplement is one way to protect the program.
Mind you, I am totally opposed to donating to the school district. They need to operate on revenues that are reliably predicted. They are a taxing authority and don’t have any use for “windfall” donations regardless of their requests to the contrary.
Make your donations to your PTOs, ARCH or FLITE or REACT or booster clubs or CAPCO or TEMPO…those groups fill the gaps.
Neal — if you want a sense of a different way to approach compensation, I highly recommend you read the Central Bucks professional contract, 2010-2014. They miss the mark on benefits, but they are much closer to making compensation manageable and present a useful way for all employees to evaluate their potential “career” earnings.
If you are okay with it, Pattye can send me your email and I’ll send it along.
I am interested and will read it if you get it to me…thanks. I agree that looking into tax-exempt properties for taxable uses is probably not worth much in terms of finding new rateables–property that could be taxed. I “think” the number attached to the tax-exempt potential impact was like $2.5 MM in tax revenue…obviously this assumes that every tax exempt parcel becomes taxable. My point above was that assessments do go up in the normal course of a community’s growth albeit incrementally. New development or property expansions/renovations are the major sources of this assessment value increase. Over the period of study presented at the workshop; this growth was over-looked…it should not have been if a full picture of total assessment values was to be presented. As I see more commercial properties in the District going through expansion/redevelopment; I’m encouraged knowing our tax base will be increasing.
CA-your idea of fee assessment for programming would be a sustainable approach and, as such, would represent a long-term budgetary solution. I still believe that the District’s velocity of expense inflation needs to be part of the solution. Spending increases recently are still on a pace that exceeds enrollment increases and any analysis of “normal” economic growth rates. We’ll see how the Board presents that portion of their budget at the next Budget Workshop.
Easy for a non tax paying ex resident with no kids in the district to stand behind the notion of assessing fees to program users. Please do not present ideas that spend my money, especially when you do not live here or pay taxes here.
You weren’t gone long, that’s for sure.