Economics Driving TESD’s Budget Woes . . . EIT to Be Explored

Ray Clarke attended the TESD Budget Workshop last night and provides the following commentary.  I am fascinated that the school district is bringing EIT out of hiding.   There is much misunderstanding about Earned Income Tax – we need an open and thorough airing of EIT.  I would suggest that the TESD and township partner for the discussion, have an outside expert give a presentation (like Easttown Twp did for its residents).  The presentation should be taped and then shown repeatedly on both the school district and township cable networks.  Some people hear ‘tax’ in the Earned Income and then simply shut-down. 

Whether it is the township or the school district we are talking about — we are currently facing tremendous economic hardship and all revenue sources must be explored.  Personally, I don’t want to pay more taxes and my personal household will suffer with EIT (my husband works for Unisys) however, . . .  there is also a reality to the situation.  I applaud the School Board for recognizing the need to explore Earned Income Tax and would hope that the Tredyffrin’s supervisors would be likewise motivatedit’s called exploring options.  Both the township and the school district have been faced with major deficits in their budgets that have required cuts in personnel, services, programming in an attempt to close the gap.  But to what end can we continue to make these cuts?  At what point do we weigh the quality of life that all enjoy in this community vs. increase in taxes?  I do not see how continuing to say, no new taxes  is a long-term solution to the problem.  Comments?

A quick report from the Budget workshop. Only 25 or so residents tonight, probably reflecting that there was little discussion of program changes. The occasion was used mostly to lay out a framework, stake out some board member positions, and set up the important April 12 Finance Committee meeting where the next level of expense reductions will be discussed.

However there were some really significant outcomes, worthy of full attention.

The basic parameters being positioned to balance the budget are:
– Implement the $4 million of expense reductions already discussed
– Tax to the full 2.9% cap
– Use $2 million of fund balance
– Find at least $0.7 million of 2010/11 reductions from $1.5 million of mostly non-educational strategies
Round numbers, subject to tweaking up or down.

The principal dissent came from Dr Brake, who is not thrilled with the proposed changes to the Middle School program. He seems to be the only one on the other side of this.

Dan Waters and Kevin Mahoney lost few opportunities to highlight the fact that these 2010/11 actions leave the structural problem untouched (shades of Tredyffrin’s “structural deficit”!). And they are right: 50% of the $4 million is one year only, and of course the fund balance use can’t continue for ever. The deficit for 2011/12 after the above programs would still be $7.5 million (8.2 – 0.7).

So, the administration is going to do the following:
– Deepen the study of the $2.6 million of class size, CHS period changes, etc. that – practically – can not be implemented until 2011/12. (Strategies 47-56, approximately.) If all were implemented, the deficit would be down to $4.9 million.
– Study the implementation of an income tax. Taxing to a likely 2% Act 1 property tax cap next year would still leave the district $3 million short, so this – to me – seems inescapable.

Some EIT information that’s new to me, and definitely has a major impact on the revenues for TESD: Kevin Mahoney stated that there is the potential to reclaim not only taxes paid to neighboring municipalities, but also to Philadelphia (which would apparently get reimbursed from gaming revenues).

Kevin Grewell has posted a lot of helpful EIT information here. Important features confirmed tonight appear to be that this would be implemented under Act 511, which is coordinated with the Townships. Resident tax is split between School District and the townships, non-resident money is collected by the Township (which turns out to be looking at fire department funding).

Debbie Bookstaber (from the last TSC) asked that the study include a comparison of an EIT and a PIT.

The Board took pains to emphasize that program changes must be fully vetted, particularly in the Education Committee, and subject to public input. Back to that April 12th meeting. Also, decisions will need to be made soon on the health insurance funding and bond issuance as part of the $4 million 2010/11 programs – the former in particular being highly susceptible to assumptions. I’d like to be convinced that all aspects of utilization risk have been thought through

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Further School Budget Discussion . . . How will the District fund the gap?

Tonight is an important TESD Budget Workshop — 7:30 PM, auditorium at Conestoga High School.  Yesterday, I posted the agenda and materials for review.  This is our school district and our taxpayer dollars . . . how do you want your dollars spent and how do we fund the district deficit?

There have been many budget-related comments today on Community Matters — several of which were focused on EIT.  For further discussion, below is a commentary received from Ray Clarke.  In the past, Ray has offered his opinion on EIT but has updated his remarks based on TESD’s  current 2010-11 budget information.  Here are Ray’s comments — let’s use this as a starting point for discussion:

I’d like to get away from history (except as a guide to the future) and ponder what needs to be done to secure our kids’ education going forward. I think much of the evidence supports John’s advocacy of an EIT. I’ve posted it here before but here goes again, starting with updated budget numbers:

1. After one round of proposed program changes that have been vehemently opposed by many in the community, plus a 2.9% property tax increase, the school district will still be in the hole by $3 million in 2010/11, $8 million in 2011/12. (Note that it is relatively easy to squeeze expenses for just one year…..). No official word from Tredyffrin yet, but the township will need to fund contracted compensation increases next year, too.

2. A 1% EIT would raise $9 million for both Tredyffrin township and school district, of which $2.7 million is already paid by residents and $2 million would be paid by non-residents. (Easttown would also have to implement the tax.)

3. Perhaps a 2010 Tax Study Commission would ask a question like: “Would you prefer that property taxes increase 15% for all, or that the township residents not now paying a 1% EIT do so and the township gets a 1 for 1 match, worth $4.7 million a year now and increasing with inflation?” Might there be a different answer than to 2007’s question, which referenced only shifting taxes from property to income?

4. There will be in 2011 a county-wide mechanism to collect an EIT at low cost for all the other townships with this tax.

5. An EIT diversifies the tax base among all income earners and wealth holders.

6. The TSC stated that: “Had we been presented with compelling funding needs by the school board that could not be satisfied by the present system we may well have endorsed a change in the manner in which our schools are funded.”

So, given that …

 – There is no willingness by the TEEA to consider deferring accelerating teacher salary increases (6.9% in 2009/10 over 2008/9, and more contracted each year until 2011/12) and sharing health benefit cost increases

 – We need to fund $4 million a year in replacement capital and the capital fund is running dry

– There is no willingness to unlock capital tied up in unproductive properties (note: enrollment is projected to decline in the short and medium term)

 – $2 million of the $4 million proposed expense savings have only a one time impact

 …it seems to me that the need is indeed compelling. Whatever views one might have of past School Boards, it seems to me that the current one has to operate in a very different economic environment and that their actions should reflect that.

Monday, March 15 — 2010-11 School Budget Workshop

Budget Development Workshop
Monday, March 15
7:30 PM
Auditorium, Conestoga High School

Budget strategies for the 2010-11 school district have been discussed at the February and March Finance Committee meetings.  Those budget strategies are reflected in a draft budget which will be discussed in greater detail at the Budget Development Workshop tomorrow night. There will be slide presentation; click here for meeting’s agenda and a review of the slides.  There is much information included on the slides and I would encourage everyone to review.  One slide that caught my eye was the following:

Professional Staff (TEEA)
2009-2010
Teachers, Guidance, Media Specialists, Nurses

• Average years of service in T/E is 10.3 years (10.5 for 2008-09)
• 77% hold advanced degrees (74% for 2008-09)
• Average salary $74,581 ($69,788 for 2008-09)

How does the District intend to close the remaining gap in the 2010-11 budget?  We know that there will be a $2.9% tax increase and the suggested budget cuts total approximately $4 million.  There remains a $2.7 million gap . . . how will that deficit be funded?  floating a bond?  more programming cuts?

In the review of the Looking Ahead slide (pg. 26) we note that the 2011-12 school year budget indicates a deficit of $8.2 million (most of which is not attributed to PSERS increase). When the PSERS increase fully kicks-in for the 2012-13 school year, the deficit sky-rockets to $18.5 million! It continues to climb from that point — seriously, have a look at pg. 26, the numbers are staggering!

The draft budget includes budget strategies from the February and March Finance Committee meetings.  These strategies include:

• Contribution from Food/Nutrition Service Fund to General Fund
• Education Service Center Disposition
• Outsource Print Shop
• Restructure 7th and 8th Grade Program Delivery
• Eliminate Elementary FLES Program
• Restructure Middle School Special Area Classes
• Reduce Number of Regular Education Aides/Paraprofessionals
• Eliminate all Conestoga High School Classes with Fewer than 15 Students
• Eliminate Supervisor of Special Education Position
• Reduce Number of Extra Duty Responsibility Positions and Club Sport Contribution
• Reduce 2010-2011 Budget Requests to 2008-2009 Levels
• Issue Debt for Capital Expenditures/Long Lived Assets
• Explore Self-Insurance for District Medical Coverage
• Hire an E-Rate Consultant
• Reduce Information Technology Budget by 10%
• Reduce Use of IT Contracted Services by 20%

Although I previously provided the budget strategy information, I think it is important to re-post that link for your review.  These informational materials were used for the March 8 Finance Committee Meeting.  The consensus reached by the School Board and Administration was to tentatively use budget strategies #1-12, 14, 31, 39 and 40 for a savings of approximately 4$ million.   What budget strategies would you suggest to fund the remaining $2.7 million budget gap? 

Tomorrow’s Budget Workshop represents one of the few remaining opportunities to let your voice be heard in regards to the 2010-11 budget.  Whether you are a teacher, parent or taxpayer . . . do your homework by reviewing the materials and come to the meeting prepared.  Offer your opinion to the Administration and School Board; speaking up could make a difference in programming and jobs for next year.

TESD Finance Committee Meeting . . . Notes from Ray Clarke

I was unable to attend the Finance Committee meeting as it was the monthly Board Meeting for DuPortail House, www.duportailhouse.com and as the Board Secretary it would create a problem if I did not attend.

All I can say is that I am really lucky to have my friend Ray Clarke!  Not only does Ray attend school district meetings, he stays up late so that he can provide detailed meeting notes for Community Matters. When Ray sent his notes he cautioned that the information contained a lot of  ‘numbers’ and the subject matter is complicated.   As Ray explains, two topics that received the most attention last night was the insurance and bond options.  I don’t know about you, but I have always found the subject of  bonds, a complicated and often misunderstood issue.  Maybe through dialogue on Community Matters, we can delve in to the subject matter and get a better understanding.

The majority of last night’s Finance Committee was devoted to two presentations by Board advisors: on self-funding the health insurance plan and on bond issuance options.  These were sufficiently persuasive that the Board was comfortable in agreeing to include the assumptions in a preliminary budget to form the basis of discussion at next Monday’s Budget Workshop.  This budget will also include the strategies discussed at the February meeting and the 2.9% Act 1 maximum tax increase.  The cost savings (including #12, see below) total $4 million ($2 million “one time”), the tax increase would raise $2.4 million, leaving a $2.8 million deficit to be funded from fund balance or further expense reductions.  (Note that the cost savings mentioned at the meeting was $3.7 million – maybe not including #12?).

That fully half of the savings are “one time” shows how important it is to consider a longer term perspective, and Committee Chair Mahoney has been consistent in asking for this to be done.  Those one time reductions will come back in 2011/12 and be compounded by the next round of contracted compensation increases.

Below are key features of the financial strategies, which seem to me to be quite complex and with many assumptions and consequences not fully spelled out.  If your eyes glaze over, sorry! – but take heed of the important role of the Facilities Committee – as discussed here on Community Matters and spelled out below!
 
The $300,000 health insurance savings depend on the actual claims experience being less than the premiums proposed by Blue Cross.  The district is relying on estimates provided by the consultants, who stand to get a fee if the plan goes through.  The basis for the estimates was not convincing, and depends entirely on the trajectory of per person claims costs, which increased 23% (excluding large cases now closed) for the latest available 12 months.  Since there seems to be no understanding of why claims increased so much (it’s not single/family mix, for example – just “an increase in claims of $40,000 to $60,000” – why?), how are we to gauge the future costs?  The assumed savings is entirely speculative: could be more, could be less, or negative.  Do we in fact know more about the health of our insured population than Blue Cross?  Maybe we do.  It seems that most other school districts in the region are also considering a move to self insurance.  Smart schools or convincing consultants?

The bond strategies discussed were also interesting and perhaps with ramifications that deserve more discussion.   There is one straightforward opportunity – to refinance one bond issue at a lower rate, which would save $40,000 a year over each of 13 years, or $170,000, $100,000, $100,000 if front-loaded to the next three years.  Secondly, we were told that the market would be very receptive to a new $20 million issue, which could be issued at historically low interest rates.  Even so, those interest costs would total $700,000 a year for the next ten years (this was not emphasized).

So, why issue the bonds?  That brings us back to the Facilities Committee.  We were told that there is a three year capital budget in the Infrastructure Plan of $14 million, essentially to maintain the status quo.  There was mention of another $1.5 million a year of routine capital – bringing the three year total to $18.5 million – almost all the new bond issue.  Doubtless the Facilities Committee has discussed the Plan, but I did not find it on a quick look on the TESD web site.  Perhaps the details of the capital needs and any opportunities to offset them with capital sales could be provided in Friday’s meeting.

(Note that having bond proceeds floating around could help capitalize the risk of self-insuring the medical plan).

Budget strategy #12 lists a saving of $300,000, based apparently on not expensing certain items of capital expenditure.  I don’t understand enough to know if there are any old bond proceeds left to fund this, or if the new issue is required.  Just as interest rates to borrow are low, so interest rates on our fund balances are even lower.  And, there are accounting rules that let you capitalize interest during construction.  How could capital needs be funded without a bond issue?  All in all there seems to me to be an opportunity for a clear exposition to taxpayers of the actual P&L impact of all the maneuverings – a chance for the Administration to show its worth?

So, on to the Facilities Committee and next week’s workshop.  It’s noteworthy that current year expenses will have to be cut by $1.5 million versus budget to balance expected revenues.  I don’t know how that will roll forward into 2010/11 – hopefully the workshop materials will have a detailed line item comparison of 2009/10 actual forecast with the 2010/11 preliminary budget (and with out years, too), including all the strategies discussed so far.  Then it will be time to take a look at all those other strategies #15 – 60 – and other ideas that all stakeholders might bring to the table.

TESD Budget Process Continues at Finance Committee Meeting on Monday, March 8, 7:30 PM

The TESD 2010-11 budget process will continue with further discussion at the Finance Committee Meeting on Monday, March 8.  Due to the expected turnout, the meeting has been moved to Conestoga High School and will begin at 7:30 PM.  Here is the Agenda for tomorrow’s meeting.  The agenda includes goals for the Finance Committee.

Finance Committee Goals:

1. Review and update the 5 year plan incorporating the new known factors (i.e. new contracts, PSERS, determine level and use of fund balance) impacting the plan.  

2.  Formulate the 2009-2010 budget identifying expense cut opportunities with an eye toward protecting the education program.  

3. Continue to explore opportunities for co-op with other local districts for non-public school transportation.    

4.  Study implications and impact of converting TE school district to a charter school district.    

In attempt to make it easier for the public to understand the process, the TESD Finance Committee has put together background materials for the March 8 Finance Committee Meeting.  The document details the proposed budget strategies and includes lists of those strategies that were reviewed and recommended as well as ideas that were reviewed and rejected.  

The School Board will adopt the 2010-11 Preliminary Budget at the May 10 TESD Meeting and the final adoption of the 2010-11 Budget occurs at the June TESD Meeting.  I’d like to applaud whichever school board member(s) responsible for making these details available online for the public.  The information is well-organized, color-coded and easy to follow.  For planning purposes, the future dates of the Finance Committee are: March 8, April 12, May 3, and June 7.  There is a Budget Workshop scheduled for March 15.    

We understand that the school district is facing a looming deficit in the 2010-11 budget. There are miles to go between now and when the preliminary budget gets approval in May.  I encourage parents, teachers and residents to attend tomorrow’s Finance Committee.  This is an opportunity to voice your support and/or concern about programs that may be headed for the cutting block.  Discussion and exchange of information can be useful to the school board as they may critical decisions for the school district.  There will be discussion on the update of the 5-year plan which includes contracts.  I know that Dr. Waters, the district superintendent, recently renewed his current contract for 5 additional years (at his current salary).  When do the district teacher contracts expire?

Views from the High School, Part I: Conestoga Students Support Their Teachers During TESD Budget Discussion

Members of Conestoga High School editorial staff weighed in on the District’s 2010-11 budget deficit in a recent issue of The Spoke. There were a couple of editorials that I found of particular interest and will post them separately.  This Op/Ed piece indicates student support for their teachers; attributing their educational successes to the faculty.  Based on past TESD budget and teacher union commentary on this site, views from our high school students present another interesting angle.  Do you think that the views of these specific students are representative of the student body?  Do you think that the teachers influence the students; in hopes that the students will help influence their parents (the taxpayers)?  Comments, anyone?

With early dismissal of school today, maybe local teachers and students can offer their opinions.  I will provide Views from the High School, Part II in a separate post.

Printed originally on p. 7 of The Spoke’s Feb. 23, 2010 edition.

Unsigned editorials represent the views of The Spoke editorial board, and not necessarily those of the administration, student body, community or advertisers.

      Defining our education

The recent economic downturn is affecting all corners of the country, causing numerous financial problems and leading to the loss of millions of dollars and jobs, both at the national and the local level.

As evidenced by the Tredyffrin/Easttown School District’s budget proposal for next year, the school board is also experiencing economic pressures as it tries to overcome a $9.25 million deficit without sacrificing the quality of the district’s educational program.

Nevertheless, to the consternation of many students and parents, the school board is making an age-old mistake. When tackling budget issues, all businesses naturally target areas with large expenditures. For schools, this leads to the reduction of some very important individuals: the teachers.

In a draft of budget reduction proposals discussed on Feb. 8, the school board’s finance committee acknowledged that “change is particularly challenging in schools where success has become the norm.” While this may be true, the board must also recognize that any success of the students is directly attributable to the high caliber teaching staff we have in the district today.

Still, several proposals in the budget draft will undoubtedly affect some of the most commendable employees in the field. Part of the proposal states that 19 teachers, including those who plan to retire or resign, will no longer be part of the school district next year. An increase in the number of instructional periods for Conestoga teachers is also recommended in the draft.

If this latter suggestion becomes a mandate, high school teachers will have to bear the brunt of extra pressure. An integral part of the school community, teachers serve as accomplished role models for students both inside and outside the classroom. Always available during school, teachers nurture individual student growth and help create learned citizens of the world—all this in a day’s work.

In fairness to the board, we in T/E are facing trying times, and difficult decisions must be made. However, teachers are invaluable resources that cannot be removed simply to alleviate economic woes. They are the most important and influential members of the school community and sacrificing them—though it may offer temporary economic relief—will only have a detrimental effect on the overall growth of students.

The suggestions made in the budget draft are not set in stone, though, and any ideas presented in the proposal can be changed. We, the Conestoga student body, need to step up. If you don’t like certain aspects of the proposal, then make your voice heard. Instead of showing your displeasure through Facebook posts, go to a school board meeting and directly address those who are involved in the decision-making process. It is, after all, your education. It’s your future.

T/E School Board Meeting, 2/22/10 . . . Meeting Highlights from Malvern Resident Ray Clarke

In addition to the Board of Supervisors Meeting last night, at the same time there was a T/E School Board Meeting at Conestoga HS.  As usual, my friend Ray Clarke kindly attended the School Board meeting and took notes.  Here are the notes . . . thank you Ray!

Selected highlights from the School Board meeting, chaired last night with a light hand by Jim Bruce:

1.  The extension of Dr Waters’ contract for a further 5 years.  The last item on the Agenda, but given ample discussion.  Strong support from the Board, led by Kevin Mahoney, and from community members.  There is no salary increase for the full term, and it was emphasized that there are no “side deals” and that effort was made to ensure that this is a “clean contract”  It will be available on the district web site soon.

This support seems to me well-deserved (taking the administration’s response ot the budget deficit elimination challenge as one recent example) and it says much about the Board’s commitment to transparency (a word much used last night) and to fiscal restraint, with its benchmark for future contracts of all types.  One downside to leadership longevity (Dr Waters will have been the Superintendent for 16 years in 2015) is that you might miss the fresh ideas that an outsider can bring.  That perspective can come in part from the Board, and it’s encouraging that we continue to see probing questions from Rich Brake. 

2.  Bill DeHaven reminded us of the times he climbed the fence at Teamer Field to play football, but more significantly spoke of the Citizen Soldier project that has compiled into a book the names of all T/E residents who served in all the nation’s conflicts up to World War II.  The book, available at the CHS and township libraries, is dedicated to its prime mover and my good friend and open space visionary, the late Neil McAloon.

3.  Nothing new on the budget, except that – per the Finance Committee discussion – the strategies are being regrouped to link related items, and this list will be available on the web site likely late this week.  I had hoped we might hear about substantive discussions of the TEEA offers alluded to at the Finance Committee meeting, but it seems there is nothing to report.  Kevin Mahoney emphasized that the Board is taking a 3-5 year perspective on the finances – clearly critical when one element of the near term solution is to use the fund balance, which can only go so far.  The Board has recently met with local legislators about the PSERS problem

4.  Three items related to our district going digital:  a) On line course options will be increased for 2010/11 to 25 courses not currently offered at CHS; b) acknowledgment of the role of blogs like Community Matters as well as all community input (a long list of correspondence to the Board); and c) next year CHS will submit its part of the college application materials electronically – should be a big time-saver, quality improvement and stress-reducer!