Manheim Township School District The Budget Story 2016-17

ManheimTownshipSchoolDistrict
TheBudgetStory2016-17
ActIandExceptions
InJune2006,theTaxpayerReliefAct,commonlyknownasAct1,wassignedintolaw.Theactwas
designedtocontroleducationalexpendituresbylimitingrealestatetaxincreases.Underthelaw,a
district’smillageratecannotbeincreasedbymorethantheindexasestablishedannuallybythe
PennsylvaniaDepartmentofEducation.For2016-17,theindexforManheimTownshipis2.4%.Thisis
2.4%ofthemillagerate,notofthebudget.
Adistrictmayapplyforreferendumexceptionsfromthislimitduetosignificantincreasesincostsin
specificareas,includingpension(PSERS)costsandspecialeducationcosts.TheManheimTownship
SchoolBoardchosetoapplyforboththePSERSandspecialeducationcostswhichwouldpermitthe
millageratetoincreaseabovethe2016-17index.Theseexceptionswouldhaveallowedtheschool
boardtoincreasethemillagerateby4.31%.
OnereasonthattheManheimTownshipSchoolBoardhadinitiallysoughttheexceptionsisbecausePDE
requiredtheBoardtocommittoeithergoingabovetheindex,ornotgoingabovetheindex,bymid-
December2015.However,atthattime,thedistricthadreceivednostatefundsfor2015-16,andthis
madeitimpossibletodeterminetherevenuesforthecurrentyear.Inaddition,anyideaofmoneyfrom
thestatefor2016-17wouldnotberevealeduntilFebruary–twomonthsaftertheboardneededto
makeadecision.
However,whentheGovernorreleasedsomeofthe2015-16statefundsinlateDecember,thedistrict
hadabetterideaofrevenueforthepresentyear.Wewereabletodevelopabudgetthatdidnotuse
theexceptions,andkepttheproposedincreaseatthecapof2.4%
Anincreaseof2.4%ofthemillageratewouldincreaseourmillageto19.0883.Thiscreatesatax
increaseof$72fortheaveragesinglefamilyresidentialhomeownerwithanassessedvalueof$161,400.
Developingthebudget:Revenues
Therearecertainconsiderationswhendevelopingabudget.
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First,theexpendituresmustequaltherevenues.
Second,thebudgetbeingdeveloped(inthiscase2016-17)reliesonrevenueprojectionsthat
maynotberealizedfor20-24monthsfromthebeginningoftheprocess(inthiscase,the
processofbuildingthe2016-2017budgetbeginsinAugust2015).
Third,anytrendinrevenueorexpenditurethatwerelyonforprojectionscanbeskewedby
unusualeventsinagivenyear.
Thelocalrevenuestreamsaccountforover80%ofManheimTownship’sbudget.Localrevenues
includerealestatetaxes,earnedincometaxes,realestatetransfertaxes,interimtaxes(taxpayments
madeonnewhomesthatareoccupiedafterJuly1st),andmiscellaneouspayments,suchastheSchool
DistrictofLancasterpayment,paymentsinlieuoftaxes(fromnon-profits),andfacilityrentals.
Statefunding,whichaccountsforabout18%ofthebudget,includestheBasicEducationFunding
allocation,specialeducationallocation,PlanCONfunding(partialreimbursementforconstructioncosts
ofpreviousprojects)andreimbursementforone-halfthecostofSocialSecurity/Medicaretaxesand
pension(PSERS)expenses.
Federalfundsaccountforlessthan1%ofthebudget.
2016-17BudgetedRevenue
Developingthebudget:Expenditures
Severalkeyexpendituresforthedistrictincludeemployeesalariesandbenefits(whichaccountsfor66%
ofthebudget),pension(PSERS)payments,transportation,charterschooltuition,specialeducation
services,curriculumandinstructionalmaterials,operationandmaintenanceoffacilities,utilities,costs
forotherprograms(includingtheLancasterCountyCareerandTechnologyCenter,theCTC).
Manyoftheseexpenditureswecannotcontrol.Pensionpaymentsandcharterschooltuitionratesare
dictatedtousbythestate.Specialeducationservicesandrelatedcostsaremandatedbystateand
federallaws.Utilitiesandtransportationcostsareimpactedbyfactorsbeyondourcontrol.
However,wedoneedtoattempttopredictthedistrictexpensesandensurewehaveenoughrevenue
tocoverthem.
DebtService
14%
OtherExpenditures
9%
Tra ns portation
4%
Pl a ntSvc/Utilities
4%
SpecialEducation
3%
Salaries,Sub/TempSvc&Benefits
SpecialEducation
PlantSvc/Utilities
Transportation
DebtService
Sa l aries,Sub/Temp
Svc&Benefits
66%
2016-17BudgetedExpenditures
Developingthebudget:Lookingattrends
Therehasbeenaslowincreaseintotaltaxableassessmentvaluesinthedistrictoverthelastfouryears.
Weareanticipatingthatthegrowthwillcontinuealongthesametrendline,buttherearefactorsthat
affecttheseprojections.First,thetimingofanyfuturerealestatedevelopment,whetherresidentialor
commercial,isuncertain.Althoughwemayknowdevelopmentshavebeenapproved,untiltheyare
completedandinhabited,wecannotcountonthemasrevenuesources.Inaddition,commercialand
residentialtaxappealshaveanimpactonourtotaltaxableassessments.In2013-14,forexample,Alcoa
settledataxappealthatresultedinareductionintheirappraisal.
Acounty-widere-assessmentisscheduledforthe2018-19schoolyear,andthiscreatesagreatdealof
uncertaintyregardingprojectionsforpropertytaxrevenues.
TotalTaxableAssessmentValues(2016-17isprojected)
Thedistrictreceives½of1%ofearnedincometaxesforresidentsoftheschooldistrict.Ascouldbe
expected,thetrendoverthelasttenyearsshowsasharpdecline,thenasharpgrowth,followedbya
levelingoff.Thisisapositivetrendthathasbeenreflectedinbudgetdevelopmentandrevenue
projection.
TrendofEarnedIncomeTax(2015-16and2016-17areprojections)
Whilerealestatetransfertaxesandinterimtaxesarealsopartofthelocalrevenues,thesearealmost
impossibletopredict.Thesetaxesareonlycollectedwitheitherthesaleof,oroccupancyof,the
property.Wecertainlycanestimatebasedonpasttrends,buttheactualrevenuecouldbesignificantly
lessormore.That,ofcourse,willimpactthefinaloutcomeofthebudget,possiblyresultinginasurplus
ordeficit.
ManheimTownshipSchoolDistricthasbeenreceivingapaymentfromtheSchoolDistrictofLancaster
forpropertythatwasrealignedfromourdistricttotheirdistrict.Thislastpaymentinthisarrangement
($434,384)willoccurin2017-18.Asaresult,thisparticularlocalrevenuesourceof$434,384,willnotbe
availableinbudgetsdevelopedbeyondthattime.
WhenGovernorWolfrecentlyapprovedtheBasicEducationFundingfor2015-16,wereceived
$4,778,039,whichwasanadditional$33,000overtheamountalreadyfactoredintotheprojected201516revenue.Thisincreasewasoffset,however,bytheGovernor’sdecisionnottoapprovetheFiscal
Code,whichcontained,amongotherthings,thefundsforconstructioncostreimbursements(knownas
PlanCON).Thisresultedinthestatenotreleasingtheapproximately$600,000inpaymentswewere
scheduledtoreceiveduringthecurrentyear,andputsinquestionthe$700,000inpaymentswewere
scheduledtoreceivein2016-17.Our2016-17budgetisbuiltwiththeexpectationthatthesefundswill
bedispersed,but,ifnot,thedeficitwillbecoveredbyuseoffundbalance.
Employees’salariesandbenefitsandcontractedtemporaryservicesaccountfor66%ofthedistrict’s
expenditures.Salariesarelittleeasiertotrendaswepredictexpensesfromoneyeartothenext.
Thereisanimportantaspectofthistrend,though,thatisworthnoting.In2010-11and2011-12,
administratorsandspecialiststookapayfreezeand,in2011-12and2012-13,teachersofthedistrict
tookapayfreeze,bothduetotheeconomicconditionsofthetime.Thedistricthadtwoyearswhere
theend-of-yeardeficitreducedthedistrictfundbalancetobelow$7million.Thereductioninsalaries,in
additiontosomeothercost-cuttingmeasures,hadasignificantimpactonthedistrict’sexpenditures
thatyear.Withsomeunexpectedrevenueandreductionsinspending,thedistrictwasabletoshowa
surplusin2011-12thatenabledittoplanforandbegintobuildfundbalancesinareasthedistrict
recognizeditwouldincurlargeexpendituresinthefuture.
Salariesfrom2009-2016schoolyears
$37,000,000
$36,000,000
$35,000,000
$34,000,000
$33,000,000
$32,000,000
$31,000,000
$30,000,000
$29,000,000
$28,000,000
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Duringthissameperiod,thestate-mandatedpaymentsforPSERScontinuedtogrow
significantly.By2013-14,theannualincreaseinPSERSpaymentsexceededwhatthedistrict
couldraiseinrevenuebyincreasingthepropertytaxtotheallowableActImaximum.This
paymentincreasewillcontinuetorisethrough2019-20,atwhichpointitwillleveloutat
approximately34%ofpayrollforthenext15years.
Toaddressthisanticipatedrateofincrease,theSchoolBoardmadethedecisiontoputmoney
inacommittedfundspecificallytohelpcoverthecostsofthesteepincreaseuntilthereis
sufficientlocalrevenuetosustainthepayments.
For2016-17,theincreaseinPSERScontributionsis$1.9million,foratotalbudgetedpayment
toPSERSforthisyearof$10,921,645.The2.4%increaseinpropertytaxwillgenerate$1.4
million,whichwillnotcovertheincreaseinPSERScontributions.Thedistrictdoesreceive
reimbursementonhalfofthispaymentfromthestatehoweverthatmoneyisconsideredpart
oftheStateAppropriationsforEducation,whichisalsousedtosupportinstruction.
Anotherexpenditureoverwhichthedistricthasnocontrolisthetuitionrateforcharterandcyber
charterschools.Forthelastreconciledyear(2014-15),ManheimTownship’stuitionratewas$8,763.16
foraregulareducationstudent,and$15,296.57foraspecialeducationstudentattendingacharteror
cybercharterschool.Thedistrictpaidatotalof$1,112,234intuitioncostsfor113students.Thetuition
ratesfor2015-16havenotyetbeenannounced,butareexpectedtobehigherthanthepreviousyear.
ManheimTownshipSchoolDistrictprovidesservicesinthedistrictformostofourspecialeducation
students.Somespecializedservicesareprovidedinsmallerclasssettings,forexamplewith8students
perclassroomwithadditionalsupportprovided.SomeservicesareprovidedbytheLancaster-Lebanon
IntermediateUnit#13(IU13),andsomeofourstudentsrequireservicesandprogramsthatneitherwe,
norIU13,areabletoprovide.Thisresultsinoutsideplacementinotherfacilitiesandhighercosts.
Duringthe2014-15schoolyear,thecostsfor41studentswhoreceivedspecializedinstructionranged
from$25,000to$370,000perstudent.Thetotalcostforthese41studentsin2014-15was$2,261,000.
Aportionoftheunassignedfundbalanceprovidesuswiththefinancialflexibilityweneedtocoverthe
costsofservicesforastudentwhomightmoveintothedistrictwithanindividualeducationplan
requiringoutside-the-districtplacement.Sincewecannotplanaheadforthis,wereserveaportionof
theunassignedfundbalancefortheseunexpectedcosts.
Beyondtuitionandclassroomexpenses,transportationisasignificantbudgetitem.Althoughthereare
nineschoolsintheManheimTownshipSchoolDistrict,wetransporttoanadditional32non-public
schoolslocatedwithinthedistrictorwithinaten-mileradiusofthedistrict.Thistransportationisa
staterequirement.Approximately680,000milesaretraveledannuallybythebusesforregularschool
tohomeandhometoschooltransportation.Additionalmilesarealsodrivenforfieldtrips,tutoring
programs,athletictripsandactivityruns.
FundBalances:Planningforthefuture
Whendevelopingabudget,thedistrictnotonlymustprojectthecostofexpendituresthatoccureach
year,butitmustalsoplanfor“bigticket”expensesthatthedistrictwillface.These“bigticket”
expensesincludetheannualbumpinPSERScontribution,buildingtechnologyinfrastructureand
replacingorupgradingtechnologyequipment,buildingrepair,buildingconstructionorrenovation,and
largehealthcareclaims.
Thecostsfortheseitemscouldbeanywherefromseveralhundredthousanddollarstomillionsof
dollars.Topreparefortheseexpenses,thedistrictcreatessavingsaccountsspecifictoeachneed.
Thesesavingsaccountsarecalledcommittedandassignedfundbalances.
Presently,ManheimTownshipSchoolDistricthasthefollowingcommitted/assignedfundbalances:
PSERS/Medical($6million),Technology($1.5million),andDebtService($3.9million).Inaddition,funds
aresetasideinaseparateCapitalReserveFundwhichtotaled$7.6millionatJune30,2015.
Thedistrict’stwolargestfundbalancesanticipatethelargestexpensesinthecomingyears.The
PSERS/HealthCarefundwillprovidesupporttothedistricttoaddressthenearly$2millionannual
increaseinPSERSoverthenextthreeyears.Ourdistrictisself-insuredforhealthcare.Thisisacosteffectivedecisionforstandardhealthissues,butasignificantmedicalclaimwouldhaveatremendous
impactonthedistrict’sbudgetifwedidnothaveafundtocoverthatcost.
TheCapitalReservefundisusedtocovermajorcapitalorbuildingrepairs.Aswelookatourmiddle
schoolanddeterminehowtoaddressthatfacility,wewillneedfundsavailableforpreliminarystudiesof
anyrenovationorconstruction.Inaddition,thisfundprovidesmoneyforanysignificantbuilding
repairs,whethertheyareonesweplaninadvanceoronesthatoccurunexpectedly.
Inaddition,thedistrictmaintainsasavingsaccountthatisanunassignedfund.Itistheunassigned
fundthatisusedforunexpectedemergencyexpendituresinanyareanotcoveredbyacommittedor
assignedfund.
Anexampleofanemergencyexpensethatoccurredwithinthelasttwomonthswastheneedtocreate
atemporaryteachingpositiontoaccommodateagrowingnumberofspecialeducationstudentsina
particularprogram.Whileanewpositionisincludedinthe2016-17budget,theneedbecamemore
urgentduringthecurrentyear.Tosupportthebesteducationforthestudents,theresponseneededto
beimmediate,soweusedfundsfromtheunassignedfundtofulfillthispositionfortheremainderofthe
year.
Anotherexamplethatmanyschooldistrictshavedealtwithduring2015-16wascoveringthebillsthat
wouldhavebeenpaidthoughthestate’sBasicEducationFunds.ThebudgetimpasseinHarrisburg
createdsituationswheredistrictsacrosstheCommonwealthweredrawingfromtheirunassignedfund
balancetocoverstandardexpenses.
Generally,ManheimTownshipstrivestomaintainthisbudgetat4-8%ofbudget.Thegeneralruleis
thatthisfundshouldbeabletocoveronemonthofnormalexpensesforadistrict.Ourpresent
unassignedfundbalanceis$5.8million,whichis7%ofbudget.
Thedistricthasbeenfortunatetobeabletobuildthesefundbalanceswithsurplusfundseachyear.
Thisapproachhasputthedistrictinamuchbetterfinancialsituationthanitwasin2009-10or2010-11.
Butitwasthedecisionsatthattime,andthesacrificesthatpeoplemade,whichenabledManheim
TownshipSchoolDistricttorebound.Wearealsonowatapointwherewecanre-growsomeofthe
programs,andwecanexplorenewonesthatwillenableustocontinuetheprogresswehavemadein
academicachievement,andprovideourstudentswithadditionalopportunities.