As is often the case, last night’s Board of Supervisors meeting conflicted with the Finance Committee meeting of the School District. I attended the Supervisors meeting as I was particularly interested in hearing about any Chesterbrook Village Center updates.
Prior to the regular BOS meeting, the supervisors held a public hearing on the proposed amendment changes to the Town Center zoning ordinance which would affect the redevelopment of Chesterbrook. The 122,216 square foot shopping center lost its anchor store, Genuadi’s supermarket in August 2010. With the departure of the 40,000 square foot grocery store, the Center saw a significant drop in foot traffic and began a downward spiral as the empty storefronts continued. The shopping center was sold at a receiver’s sale November 1 for $8.9 million to 500 Chesterbrook Boulevard, LP. As someone who lives in the western part of the township, I regularly use travel through Chesterbrook and I look forward to seeing its redevelopment.
Lou Colagreco, attorney for the shopping center owner, offered eight suggested changes to the township’s Town Center zoning ordinance. After much discussion from the supervisors and with opinion offered from audience members, there were a couple of sticking points that could not be satisfied.
Colagreco sought to decrease the parking requirement from 2.5 parking spaces to 2.25 parking spaces per townhouse, citing various national surveys and local development trends. Although Colagreco offered neighboring municipalities have decreased their parking requirements, he found little support for this change from the supervisors and definitely not from the residents, many of which live in Chesterbrook. He also hoped to change the stormwater requirements and exclude decks as part of impervious coverage requirement. Because of the severity of stormwater issues in the township, lessening this requirement also did not meet with a favorable response, particularly since these changes would affect the entire township, not just Chesterbrook. After a couple of hours of discussion, the supervisors decided to send the suggested Town Center zoning ordinance changes back to the Planning Commission for further review and revisions rather than approving.
I am anxious for the redevelopment of Chesterbrook and look forward to seeing the preliminary draft of the plan when it is available. The Town Center ordinance combines commercial and residential usage. Last night marked the last official supervisor meeting for supervisors Michelle Kichline and Phil Donohue; we thank them their commitment to the community and their public service during the last four years. On Monday, January 6, Murph Wysocki and Mark Freed will be sworn in and join the Board of Supervisors.
Ray Clarke attended the TESD Finance Committee meeting and I thank him for providing his notes from the meeting. I note that the school board is resurrecting the Public Information Committee which is great news. If you recall, Debbie Bookstaber chaired this committee but after she left the school board, the committee was disbanded. At that time, Betsy Fadem stated the committee was not necessary, as each existing committee would provide their own public communications. But as we have seen during the last year, communication could be improved and I am grateful that Scott Dorsey is taking over this role to chair the committee. Ray also mentions that the Board intends to have public discussion on the Affordable Care Act and its requirements. The aides, paras and substitute teachers received a reprieve on this TESD jobs for one-year that runs until June 2014. To meet the ACA requirements will require the school district to offer affordable health insurance to all employees so this discussion should start soon rather than later on this topic.
Here are Ray’s notes:
A note before getting to the meat of last night’s TESD Finance Committee – some encouraging signs on the communications front. The Public Information Committee has been resurrected, now under Scott Dorsey’s leadership. The FC meeting was structured to facilitate community input (although the competing Township event limited participants). And the Committee took steps to add back historical context to the monthly financial statements, so our analysis should become easier. Time will tell on all of the above, but the intent seems real.
1. 2013/14 Forecast. The budgeted $1.7 million deficit is now projected to turn into a break-even (including the one-time TEEA bonus). This is driven by the $0.65 million benefit from the Vanguard settlement, a $1.4 million favorable variance in salaries (factoring in all retirements, resignations, leaves), a $0.2 million reduction in salary-driven benefits, a $0.2 million savings in transportation, offset by (non-salary) special education expenses that are $0.85 million over budget. So, yet again, the budget under-estimated the salary “breakage”. The special ed development is perhaps more of a surprise and although it wasn’t clear, seems to be made up of outside tuition and legal costs driven by an unexpected influx from early intervention programs. That seems like an especially large variance given a total special education budget of $16 million.
2. Preliminary 2014/14 budget. The FC voted to approve for discussion at the January 6th Board meeting a draft that calls for a 3.2% property tax increase: the 2.1% Index and 1.1% PSERS exception. This looks to me like a budget with enough leeway to absorb costs of a TEEA agreement and AHA solution, both of which are left as “status quo” in the first pass. The ~$3 million expense increase is a result of a $1 million net PSERS increase, and a $2 million increase in “other” expenditures. The breakdown of the “other” number was not quantified, although Special Ed and Maintenance cost increases were cited. Interestingly healthcare costs are expected to be flat. The salary line is level also, but results from a number of puts and takes: absence of the $1 million plus bonus and savings from the new TENIG agreement, offset (completely?) by nine additional teachers, six due to enrollment, two due to special ed, one for mental health. No sign of the (in) famous breakage in this calculation, though!
1. The Board needs to be persistent in seeking a full accounting of the projections, as the high level numbers net out and obscure many different trends (more detail was requested). Also, it’s too easy, as was done last night, to place the blame on Harrisburg/PSERS, when in fact that’s only one third of the expense increase. Everyone last night quickly accepted that all cost savings opportunities have been implemented after the efforts of recent years. It may be helpful to the community to recap what possible next steps would be (eg are we really down to major and unlikely options like class size, arts programs, transportation, facilities capital spending**, etc., and what would be the magnitude for those?). [**Capital spending is paid for by tax payers, too].
2. The size of the Special Education program in total, the “miss” this year and continuing above-index increases are clearly a budget concern. The district has taken steps to control costs, but those are being overwhelmed. I think it would be helpful to the community to have an exposition of the program, perhaps at an Education Committee meeting? A description of the services offered, the utilization and price trends, steps we have taken and plan to take, comparison with other districts and so on.
3. There is no sign yet of any increase in the real estate assessed base value, which is budgeted flat, but signs of development suggest that any change will be to the upside. On the other hand, residential development will increase enrollment, and as Dr Motel is quick to remind us, that’s a net negative for the school district. So the pressure on real estate taxes to increase above the rate of inflation will continue. (Although PSERS will be more or less leveled out by 2018/19, even with the just-released slight increase in planned contribution rates). I continue to believe that it makes sense to share the tax burden between property and income via an EIT, although of course implementation would be a huge problem.
4. The community needs to pay attention, starting with the January 6th Board meeting. Although the budget evolves as more data comes in, and exceptions advertised may not be requested or indeed taken, early numbers have a way of being sticky.
A final note: President Buraks informed us that the district is putting together a full analysis of the options associated with the requirements of the Affordable Healthcare Act. This would be presented for community discussion rather than as a Board recommendation. The idea seems to be to do this soon, although no specific timing was given.
11 CommentsAdd a Comment
A couple of comments,
Yay Scott Dorsy and the the creation of the Public Information Committee. I have just returned from the Conestoga High School Basketball Game where I saw Scott, shook his hand and witnessed a delightful game, where his son and the rest of the team won an exciting game ending in a 3 point buzzer beater basket by a talented senior headed off to a prestigious college next year to pursue his studies while also continuing his love of the sport. Please come out and catch a game. It’s fun, exciting and a great way to get to know people in the district.
Thanks for the report Ray. I think it would be helpful to have an exposition of the special education program at an education committee too. Tom Corbett signed legislation recently creating a 15 member commission to develop a special education funding formula. The formula is supposed to pay districts closer to the actual costs they incur in providing services to students with special needs. The current formula assumes that 16% of district enrollments comprise students needing special education services.
The average cost to provide extra learning or physical support to special ed students in PA is $13,028, but costs can easily exceed $25,000 per individual depending on the severity of need.
Under the commissions plan, special education money would be based on a 3 tiered formula tied to individual student needs.
I attended an education committee meeting last November where Dr. Chipego gave a detailed report on special education in our school system. 80% of special education students attend regular ed classes so clearly the funds for special ed and regular ed are co mingled. This is mentioned alot when reading about the funding formula developed by Corbett’s 15 member commission. Hopefully, Dr. Chipego will give another exposition of the special education program so we can begin to demystify and make clear exactly how much this program costs tax payers.
I’m sorry I missed the Special Ed report – perhaps awareness of topics like that is something for Rev Dorsey’s committee to work on. I know he understands how much work gets done in the committees and he’s eager to increase community participation. One small idea: perhaps the district e-newsletter could flag important upcoming committee agenda topics in the main body of the document in addition to the links to the agendas? That requires the district to be well-tuned in to topics of concern, of course.
It may not be too soon to revisit special education at the committee and maybe Board level. There’s clearly a lot going on, at the state as well as locally, and the Board should definitely be on top of all of it.
Re the township: I am very pleased to see that our officials are taking seriously the issue of impervious coverage. Even though stormwater is required to be managed on site at new developments, it’s been demonstrated that it’s tough to design facilities to deal with recent storm levels. So holding the line on ordinance changes and the many requests for variances is important.
seems like there is not enough desperation in chesterbrook community to enact changes. My bet it sits and rots for a year or more.
Thanks so much for the report Ray. I was glad to see the Committee is using year-to-date numbers as a comparison to the budget adopted in June as a tool for next year’s analysis. Again, this year as in past years; projected deficits have not come to pass. Before the Committee answers another projected deficit with revenue enhancement (new taxes), I hope they really look at their projections of large income and expenses drivers. These numbers in recent history have been proven to be incorrect when used to project these deficit budgets. Less we forget, in two of the last three years, the District has passed that maximum tax increases allowed in the Commonwealth. In each year they took this approach,they ran large surpluses as the increased taxes were not needed to fund educational programs in the year collected. The total: $8.85 MM is surplus in the last two years. I’m hopeful some new members of the committee, Mr. Carlson and Mrs, Lastner, will use their financial backgrounds and take a hard look at some of the projections for major revenue and expense categories before accepting another max tax increase.
I did make some of these comments in a letter to the Board:
Really liked the format change this year to Budget 2013-14 and Est Actual 2013-14…with almost half of the fiscal year behind; this is good information to understand when looking at next year. What we see is that we have again underestimated tax revenues (+$650,000 pick-up). Salaries are projected to be 2.5% under budget which I assume is related to employee mix (retirement salaries vs. new hire rates). Interestingly, projected expense on Benefits is only impacted 0.8% which would indicate cost increases in this general cost category (otherwise it would decrease by the above mentioned 2.5%). This is a key metric for both this year and next year’s budget. Over the last two years major cost savings in this category in year-end adjustments added to surplus results. I know that the District is part of a self-insurance fund and, as you get more experience as part of this group, you’ll better be able to project accurate expenses. Budget estimates in the health care cost category have been over-estimated in each of the last two years. Because of its size, this will be a key area to understand the cost assumptions before budget adoption….as will Local Tax Collections for the same reason…we’ve missed on these assumptions in the budget last year and this year. As it is your biggest revenue driver…the assumptions used to determine this total we be key.
It seems that the first default position on an unbalanced preliminary budget is revenue enhancement (Act 1 + Referendum Exceptions). This approach says that the budget is totally accurate and there is no other way to balance other than new revenues. No surprise here but I disagree. I would certainly like to see the model that builds Local Sources revenue (historically understated) and Benefits costs (historically overstated). Even if we came to a consensus on these numbers; certainly one could find $1.15 MM in cost savings if one were so motivated. It’s only 1.0% of the budget….
I wish you well in your deliberations. For a good synopsis of historical operating results; I think you’ve seen Ray Clarke’s line item analysis. I thought this was excellent and gives the reader a pretty easy comparison of budgets to actual and actual to actual over the last couple of years. This could be particularly valuable to the new members as a starting point for your work.
The other big part of the financial statements that is a bit of a mystery to me is Capital Funding. The Capital Fund has $10.4 MM as a current cash balance and the Fund Balance has an additional allocation to Capital. From the minutes:
• Mr. McDonnell led the Committee on a discussion of the June 30, 2013 fund balance commitments. The
commitments and their rationale were as follows: the subsequent year’s budget, which is part of the Board
approved 2013-2014 budget; capital projects, which represents the total amount needed to fund the
District’s first year of capital projects after all of the current capital funds are expended; ……
I’m not sure how to read this. Is Capital now going to be funded as a normal course out of Fund Balance? Is the Fund Balance allocation for this year and the Capital Fund Balance for the future; or is it the reverse? I’m sure there’s an answer but some of you may have the same question
Self insured health care costs are difficult to budget accurately. There can be large cost swings year to year typically caused by the presence or absence of a few claimants experiencing major medical treatments. As an example of the variability, the average medical claim per month per employee for the 2011-12 year was $585 at UCFSD. The average claim for the 2012-13 year was $800. That’s a 35% jump. A surplus or deficit is typical in most years.
The good news here is that TE has a $4.5 million “commitment” for employee healthcare costs in the Fund Balance, which it can – and should – use to even out the variability rather than budgeting a worst case. Note that the assumption for benefits costs for 2014/15 is that they stay flat. It would be good for the Board to know (and test) the numbers underlying this result, eg: % of cost covered, employee cost share, utilization, price.
A good general principle for the Finance Committee: delve at least one (two?) layer below the numbers presented.
One would like to not budget for the worst case each year. Rather, it would be nice to over some years, under on others and in the long term be even. Unfortunately, Act 1 causes many boards to budget for the worst case. If there is a deficit in one year, Act 1 makes it hard to adjust in the subsequent year.
Right on Keith, and you’re the perfect guy to shed some light on this. I’m under the impression that all Districts in Chester County share this self-insurance plan. So we do have a somewhat deep population of insureds. As we become more experienced in this plan (it’s only a few years old), it should become easier to estimate future costs. The “understanding” of this thing is pretty key is setting budget expectations. In the past, our District has made year-end adjustments (always cost savings) in the $1 MM range. This is a pretty big miss on the total costs. Now, it could self-correct in future years with cost swings going the other way. BUT, I hope we’re doing our best to understand this insurance model. When we made a $1.5 MM adjustment in prior years based on the actual results, it was clear to anyone at that meeting that we (the collective We as in the District Business Manager responding to Board member questioning) did not understand the reasoning behind the annual cost decrease. I’m sure it’s crazy complicated but that just means it takes some time to understand the program. As a member organization, someone should take the time to become the expert…
Benefits/Health Care, this cost category, I believe is the key to contract negotiations and a win-win outcome. We’re still locked into pricing our employee benefits plans on specific Blue Cross plan pricing models with only one or two options per employee. This is certainly easier to understand but probably locks the District into higher cost structures with future increases out of our control and not necessarily germane to the actual plan results. Since we’re truly self-insured (with purchased overage insurance I assume), I always thought the concept of pegging a member’s benefits package to a certain dollar amount and giving the employee enhanced choices to tailor a plan to their individual needs made a lot of sense. Too crazy hard to implement?
A few comments –
1. Being self insured means that districts do not share the same plan and are in no way connected to any other employer. UCFSD covers only our 600 employees. TESD, I believe only covers their employees.
2. At one time several CC districts were in a consortium and bought insurance from Blue Cross/Blue Shield. UCFSD pulled out of that consortium to lower the district’s costs. Why? The other districts had higher utilization due to either an older teacher population or due to retiree coverage. (UCFSD does not offer insurance to retirees, other districts like WC do) The upside to a consortium is that rates are set by BC/BS and are predictable year to year since the population is large. The downside is that your district’s rates are influenced by other districts’ utilization. There are other cost advantages to being self insured that you can discover by doing a web search.
3. UCFSD uses Reschini to manage our claims. I believe TESD also uses Reschini. They would be happy to do a seminar on any aspect of healthcare.
4. The TEEA would, most likely, object to “pegging a member’s benefits package to a certain dollar amount”. During bargaining, the TEEA would have to bargain to increase that amount to cover inflation and during staus quo the amount stays fixed. With the current two or so healthcare options, the district has to bargain for increased employee premium share (e.g. go from 7.5% to 10%) to cover inflationary increases and coverage stays the same during status quo.
Thanks Keith…always trying to think “outside the box” but there’s a box for a reason usually. Maybe we could get Reschini to do a local seminar on this…I thought they did every CC District so I assumed they handled the “self-insurance” administrative function. The District promised an ACA update so maybe could become a Health Care educational piece. I’ll talk to my buddy Scott.
Any kind of presentation would be worthwhile I’m sure, as I would bet that few understand the plan as it is. This was a plan that came from the expertise of Kevin M, former board member and coincidentally a CFO (or some major title)!with Penn Health Systems. I have always objected to self-insurance because e district holds so much risk, but Kevin explained the economies and how the district can insure against extraordinary losses…and it made sense.
having the sitting board up to speed can only be a win for the district.
having said that, the notion of a defined benefit Instead of a defined contribution will always have the district behind the curve. Only younger teachers can see the benefits of that as they have such a lower risk profile, In fact, unless the employee accepts that PSERS and Health care are components of compensation, and doesn’t moan about wage freezes when their compensation costs dramatically increase,,it will never be about clean negotiating, But every side has to understand that–not just parrot PSEA talking points. Dig out the costs of these benefits annually for each member of the negotiating team…and fast forward with a wage freeze. The costs are likely to ride in double digits for those at the bottom of the schedule.,,