Supr. Carvin Reviews Budget History; Gives General Outline of Plan for 2006-7

(Ed note: I have included without any editing Supr. Carvins planned remarks for tonights school board meeting. Attachments are not included. )

Superintendent’s Report

-------------------------------------------------
April 2006
A Review of Budget Process and History:

-------------------------------------------------------------
1992: State legislature initiated Revenue Caps on School Districts and the budget limiting tool of
a Qualified Economic Offer (QEO). Revenue caps limited growth in budgets to 2.3% in the per
student cost using a three year rolling average of the students in attendance on the third Friday in
September. This helped cushion enrollment fluctuations particularly in districts with declining
enrollments, but meant there would be a two year lag in revenue to support the needs of districts
with increasing enrollment. The attached enrollment history gives you some idea of how this
impacted the District. Our fluctuation has only been a few percent but has progressively limited
what we were able to do as a district and in the last 2 state budget cycles meant programs and
positions have had to be cut in order to increase classroom positions. (See 2003-04 budget cut
list and April Update for 2005-06.)
The QEO limited the growth in teacher salary/benefit packages to 3.8% per year. Later
legislation all but guaranteed that other labor groups would be tied to the teacher settlements.
Rising health care costs increasingly limited the ability to keep salaries competitive and in reality
over the lifetime of the QEO most districts have settled at a rate between 4 and 5%. The
difference in a settlement of 3.8% and 4.2% is about $40,000. Going to arbitration costs about
the same amount. Rather than paying an arbitrator, we have been able to use this difference to
keep our salaries somewhat competitive with districts in our area.
2000: Community passes a referendum that built a new high school and added on to the other
two campuses. Our square footage of space to maintain increased from 275,410 square feet to
478,280. This is almost a 60% increase in space to heat and maintain. Three large athletic fields
were also added: 2 soccer and 1 baseball. A continuing authorization to exceed the revenue cap
by $775,000 provided for the hiring of staff needed to administer and maintain the new building.
A part time librarian position was added from the regular operating budget and food service
positions for the additional kitchen were added to the food service budget. Of these positions, the
part time librarian and two custodial positions have since been cut.
Looking at the attached “8 Year History” you can see how staff increased over the last 8 years.
Comparing 2001-02 staffing to 2002-03 staffing shows how the opening of a new school initially
impacted positions. When looking at teaching positions the numbers are deceptive. As federal
funding has decreased we have shifted two elementary resource positions into classroom
positions to meet the class size limits, K-2, that are required by SAGE. In 2005-06 we revised
our at-risk program and moved newly hired staff into the teacher group from the Admin
Assist/At-Risk group. You will see that the group with the by far largest increase is our
educational support group. This is primarily a result of increased numbers of high need special
education students who have one on one teaching assistants with them most of the day. Research
on the impact of this model is leading us to examine changes in this practice.
2003-04 School Year: Due to the economic downturn the state legislature looked to ways to cut
funding for education. Final budget decisions were not made until after the school year started. A
variety of program cuts were made in anticipation of their decisions. The attachment shows the
status of those cuts today and items that were considered, but not needed. In addition, by law the
negotiation of the teacher’s union contract follows the state budget cycle. These negotiations are
often not completed until after the school year starts. The budget must be based on a projected
settlement.

------------------------------------------------------------
2004-05 School Year: The second year of a biennium is easier to budget for typically since you
know what the state limits are going to be, and typically the teacher’s union contract has been
settled as you head into the process. Continued decreases in federal funding meant we shifted an
elementary resource position into a classroom position and the District was able to pick up that
cost through increased enrollment allocations. We were also able to build our fund balance by
$126,291. A minimal fund balance should be 10% of your district budget. In 2004-05 this would
have been $1.6 million. The actual fund balance was $901,404. A 10% fund balance is a cushion
against unexpected costs and establishes the financial health of a district when borrowing is
needed and a bond rating is sought. We are well below the 10% level and rank among the bottom
10% of districts for the level of our fund balance. The Board has made it a priority to build the
fund balance gradually to the 10% level.

----------------------------------------------------------
2005-06 School Year: Again economic struggles impacted school funding. We knew shortly
after July what the impact of the state legislature would be and designed our budget accordingly.
Cuts were made to a variety of district office positions and budgets. Money was not available to
provide for increased enrollment at the high school and class sizes rose by an average of 2 per
class. Class sizes also increased 1-3 students per class K-5 due to increased enrollment. See April
Update for a recap of those decisions.
The budget was developed around state funding and district costs. In late August hurricanes
significantly impacted utility costs. Since this impact had not been accounted for in the budget
process, we made additional cuts to the District office budgets and indicated a potential need to
dip into fund balance by $153,673. We initiated a variety of additional energy savings measures
and hoped for a warm winter. We will know for sure how far we will need to dip into the fund
balance by early July, but it appears it will be significantly less than was projected due to lower
than expected increases in prices and the whole staff pulling together to conserve energy.

----------------------------------------------------------------
Planning for 2006-07 School Year: When fund balance is used for unanticipated costs, it is
important to make budget adjustments the next year. This prevents the fund balance from
eventually going to $0 and the District becoming bankrupt. The struggle to build the fund
balance back up also continues. While the second year of the state budget is usually easier, the
unanticipated energy costs have made this a very challenging process. There were a number of
unknown items that made any significant planning before April very difficult. 1) We needed to
get through the winter heating season to see what the actual impact of utility costs was going to
be. 2) Kindergarten registration takes place in early April. We use the current year number as a
rough projection and then compare the March registrations with previous years’ to estimate how
many students are likely to be enrolled in fall. 3) Federal Allocations for the various Title
programs. Estimated numbers were just posted this week. As expected our federal funding
decreased again. The attached ESEA history shows how despite the promise of funding No Child
Left Behind, our federal funds are now over $45,000 less than before NCLB was implemented.
4) Health Insurance costs: We have been working with an agent since last year to have a
proposal for reducing health insurance costs. Meetings are being held with staff and each
bargaining unit will vote separately. We will know the results by mid-May. Since most of the
initial savings are part of negotiated package settlements and will go directly to salaries, the short
term savings will come in hiring new staff. The long term savings will be in reduced health care
costs. The projected savings are $4261 for a family plan which is taken by the majority of our
staff and $1881 on a single plan. We believe this HMO plan directly through DEAN actually
improves benefits. 5) High School course enrollments are not known until Spring Break. While
we had projected the need for a full time Social Studies position, it now appears that a part time
position will be sufficient and will provide for a part time addition in Spanish. Spanish is needed
because the increase in elementary English Language Learners (ELL) means we will not be able
to share the ELL teacher with the high school in 2006-07 as we have done this year.
While some of these factors are still unknown, we began a process in February with the
administrative team to identify areas for cost savings. It was estimated that we would need to cut
$210,000 in order to add a position at the high school. For the first time we looked at programs
that could significantly increase revenues as well. This led to the consideration of eliminating
half day kindergarten as a stand alone option. Kindergartners enrolled for the same length of day
as first graders increase our enrollment count for Revenue Cap allocations. However, due to the
three year rolling average, the revenue the first year just covers the additional staff costs with
only a slight increase in the budget. The real savings come the second and third year and will
eventually be about $70,000 a year. Because class sizes have been rising, we are at the point
where in 2007-08 we will have many class sizes over 25 in grades 3-12 if we cannot add
positions.
After the administrative team finalized and ranked the list, each principal shared it with their
staff and site council for their input. Additional ideas were solicited from staff, evaluated and
costed. These ideas added $17,819 in possible savings. The entire list of ideas is attached with
responses to each for my recommendations. The Board should let me know if they disagree with
my recommendations or have other items they would like explored. Since the last board meeting
Ms. Olsen and I have also been able to look at another month of utility costs and compare the
usage and percent of budget compared to next year. We believe that we can reduce the amount of
cuts by $60,000 and still allow for a 5% increase in utility costs over what is projected this year.
In addition potential savings in health and liability insurance would conservatively save $20,000.
These items have been added to the list of items the staff considered and ranked. At this time it
appears we may not need to eliminate the K-2 GT/Reading position although depending on how
other factors turn out, it may need to be reduced. This is a decision that can wait as late as June
when all other unknowns have been taken into consideration.
I understand that the Board may not feel comfortable endorsing the recommendations without
time for further study and answers to your questions. If we have a budget retreat following the
Board Reorganization Meeting on April 24, I believe we will be able to reach a consensus at the
May board meeting which will still provide time to attract quality candidates. However, in the
meantime, I would like permission to post the positions with the caveat that they are pending
Board approval so that we may begin to review resumes and select candidates to interview as
soon as possible in May. Posting positions does not obligate the District to actually fill the
position.
Human Resource and Middle School Principal Positions: I intend to post these positions
following the Board’s acceptance of the resignations. These will both be challenging positions to
fill. We need to begin soliciting staff participation in the process of hiring a new principal and
attract the best candidates as soon as possible while they are still available.
recommendation. We hope to have this recommendation to the school board by their June 2006 meeting.