2009-2010 General Operating Budget

2009-2010 General Operating Budget KAUKAUNA AREA SCHOOL DISTRICT What is a general operating budget?  The general operating budget of the Kaukauna Area School District consists of:  Fund 10 – Regular education  Fund 27 – Special education  All expenditures associated with either regular or special education are counted in the general operating budget. The numbers include salaries, benefits, purchased services, noncapital and capital equipment, post retirement benefits, and insurance and judgments Revenue Limit Explained…  Wisconsin Act 16 implemented revenue limits beginning with the 1993-94 school year. A district's revenue limit is the maximum amount of revenue it may raise through state general aid and property tax for the General, NonReferendum Debt (authorized after August 12, 1993), and Capital Expansion Funds, also referred to as Funds 10, 38, and 41 respectively. (Prior to 01-02, the Community Service Fund levy was included in the revenue limit.)  The maximum limit is based upon enrollment changes, the Consumer Price Index, and each district's prior year controlled revenue. Upon application and approval by the Department, a district may increase its maximum limit by an additional amount for specific exemptions. A district then determines the maximum allowable levy for Funds 10, 38, and 41 by subtracting the Department-provided October 15 General Aid Certification and Poverty Aid estimates from the district's maximum revenue limit.  Kaukauna’s revenue limit accounts for 89.2% of the total operating revenue received by the district Projected KASD Revenue Limit 2009-2010  2008-2009 base revenue limit  State equalization aid  State computer aid (value) $38,126,356 $26,993,409 $ 93,777 $ 391,489  Non-referendum debt service  Non-referendum debt service covers district cost to pay back state retirement system for imposed start-up costs (the interest rate being charged on this is much less than what was being imposed by the Wisconsin Retirement System)  Non-referendum tax levy $10,647,681  The non-referendum tax levy of $10,647,681 is the maximum tax levy allowed by the district based on the state revenue limit Projected KASD Revenue Limit 2009-2010  2008-2009 base revenue limit $38,126,356 4,108  Three year membership average (2006-2008)  2006 = 4,065; 2007 = 4,123; 2008 = 4,137  2008-2009 base year revenue per student $9,281  = base revenue limit/membership average  For 2008-2009, KASD had it’s revenue limit based on $9,281 per FTE  2009-2010 per pupil increase $0.00  Due to the state budget shortfall KASD is using $0.00 for its per pupil increase allowed for 2009-2010. Current law states that the number could be as high as $284.00. Projected KASD Revenue Limit 2009-2010  2009-2010 base revenue per FTE  2008-2009 figure + increase allowed by state $9,281  Projected 2009-2010 membership avg  2007 = 4,123; 2008 = 4,137; 2009 = 4,162  2009 -2010 total revenue allowed  2009-2010 non-referendum debt 4,141 $38,432,621 $399,241  2009-2010 operating revenue limit $38,033,380  KASD will receive at least $306,265 more in revenue for 2009-2010 based on the revenue limit, 25 additional students, and a $0.00 per pupil increase Total Operating Revenue Summary of Operating Revenue  2008-2009 operating budget revenue $42,375,030  $0.00 per pupil increase, 2009-10 revenue  Total increase in operating revenue = $161,700 $42,536,800  $100.00 per pupil increase, 2009-10 revenue  Total increase in operating revenue = $575,870  $200.00 per pupil increase, 2009-10 revenue  Total increase in operating revenue = $989,970 $42,950,900 $43,365,000 $43,712,844  $284.00 per pupil increase, 2009-10 revenue  Total increase in operating revenue = $1,337,814  District operating revenue, based on 25 additional students for 2009-10, is projected to increase somewhere between $161,770 and $989,970 2009-2010 General Operating Budget Expenditures  100 Salaries Fixed cost  All salary projections are based on 3.8% total package contracts for unsettled groups  Salary projections include replacements for ALL retirements that the district has received notification of  200 Benefits Fixed cost  Benefits are based 3.8% total package contracts for unsettled groups  Benefit projections are based on the following:  15% health insurance increase, 3% dental insurance increase, 8% long term care increase  Wisconsin Retirement System increasing their rate from 10.4% to 11.2%  Retired employees added into the cost of post employment benefits  FICA, long term disability insurance, and life insurance costs were projected using same formulas from 2008-2009 2009-2010 General Operating Budget Expenditures  300 Purchased services Fixed cost  Cost of living increase for school bus transportation, cleaning service, etc.  Utility costs increased by 12% across the board  Maintenance costs for buildings remained constant excluding water projects at Haen and Quinney  Open enrollment budgeted at same cost as 2008-2009  400 Non-capital objects Variable cost  Classroom/office supply budgets unchanged from 2008-2009  Non-capital object budget unchanged from 2008-2009 2009-2010 General Operating Budget Expenditures  500 Capital objects  All capital object costs unchanged from 2008-2009 Variable cost  700 Insurance/judgments Fixed cost  Property insurance increased by 5% for 2009-2010  Unemployment insurance increased by $70,000 based on projected Dues & fees Variable cost  Same figures pulled forward from 2008-2009 budget  900 2009-2010 General Operating Budget Expenditures by Object Area 2009-2010 Operating Expense by Object 2009-2010 OPERATING BUDGET BY OBJECT Capital lease programs 1% Capital objects 1% Non-capital objects 3% Insurance and judgements 1% Salaries Other object/dues and fees 0% Benefits/post retirement costs Purchased services Purchased services 16% Non-capital objects Benefits/post retirement costs 26% Salaries 52% Capital objects Capital lease programs Insurance and judgements Other object/dues and fees Cost Analysis 2009-2010 Operating Budget  Fixed Costs vs. Variable Costs  Total fixed costs $42,130,731  Total variable costs $ 1,846,292  Salary/benefits vs. Other Costs  Salary/benefit cost $34,172,235  Purchased service cost $ 7,183,371  Capital/Non-capital $ 2,039,007  Remainder $ 582,410 95.80% 4.20% 77.70% 16.33% 4.64% 1.33% PROJECTED BUDGETARY SHORTFALL Level 1 Budgeting – Current Fiscal Year At $284.00 per pupil increase, which is current DPI standard, the budget shortfall is $264,179 KAUKAUNA AREA SCHOOL DISTRICT LEVEL 2 BUDGET DEFINITION  In the past district budgets were produced using Level 1 costs which basically are those expenses the district will encounter during that budget year.  Level 2 budgeting, for lack of a better term, includes funds in the current year budget that will be used to pay for fixed costs in the future. The main idea behind Level 2 budgeting is costs are being incurred during the current budget year that need to be expensed in order to have the funds to pay those bills in the future. KAUKAUNA AREA SCHOOL DISTRICT Level 2 Budget Examples  Examples of Level 2 expenditures include:  Post employment retirement benefits generated by current staff  Depreciation of computer hardware and infrastructure  Building maintenance and construction  Roof projects and roof repairs  Carpet/tile replacement  Hard surface repair and replacement including playgrounds and parking lots KAUKAUNA AREA SCHOOL DISTRICT Level 2 Expense – Post Retirement Benefits  2009-2010 post retirement benefit cost for the district is $1,049,776. This figure includes:  Current year health, dental, and life insurance costs for all covered retired employees  Current year stipend payments to retired administrators per individual contract  The 2009-2010 post retirement benefit cost should also include funds set aside to cover benefits earned in the past that will be paid in the future  The true Post Retirement liability for KASD is $35 million based on current and past employees and benefit packages earned while employed by the district  The actuarial company states the district should include $1.2 million in each budget to help offset the cost of the true OPEB  From a practical standpoint the district Level 2 budget for 2009-2010 will include $500,000 for future post retirement benefits  This budgetary amount should be a permanent part of the district budget KAUKAUNA AREA SCHOOL DISTRICT Level 2 Expense – Computer Infrastructure  Each year the district falls further behind with computers and     equipment Computers should be turned over every four or five years – KASD is currently on a seven to eight year rotation More importantly the district’s computer infrastructure – from servers to networking – is aging and not able to handle new software technology To bring KASD back to where it should be the computer equipment Level 2 budget will be increased $300,000 The budget increase will have to remain in subsequent costing for at least seven years KAUKAUNA AREA SCHOOL DISTRICT Level 2 Expense – Building Maintenance  Utilizing studies done within the past four years the district should be budgeting $954,000 per year for building maintenance. A cost breakdown per building is shown below:  Tanner  Park  Haen  Quinney  River View  High School  Nicolet $78,642 $30,435 $101,791 $171,603 $237,121 $316,275 $17,857 Roofs, playground, and parking lot Playground, parking area, ventilation Roofs, parking lot, playground, windows Roofs, parking lot, playground, windows Roofs, parking lot, intercom, tennis courts Parking lot, roofs (20+ yrs), track upgrade Playground repairs, roof  Per year budget figures shown above include money set aside to do roofing projects, parking areas, playgrounds, windows, and other items  While projects may be five to 10 years out the cost in the budget figures is amortized over that time to aid in budgeting and cash flow KAUKAUNA AREA SCHOOL DISTRICT Level 2 Expense – Total Budget Costs  Post retirement benefit  Computer infrastructure  Building maintenance  Total Budget Costs – Level 2 $500,000.00 $300,000.00 $953,727.00 $1,753,727.00 PROJECTED BUDGETARY SHORTFALL Level 2 (Present Costs & Future Obligations) Budgeting Why not budget as in the past regarding future costs?  Numerous public and private sector organizations have faced bankruptcy due to not budgeting for future costs  Costs discussed in the Level 2 budget model are real and will not go away – in some cases the costs will only multiply if nothing is done to plan for them  A school district referendum to exceed revenue caps – if that form of school financing is still in place – is not guaranteed to pass Can the state help?  Several proposals on the table for changing state funding formula for schools but the bottom line is no matter what formula is used it is still from the same pot of money  Some proposals include sales tax increases to generate more funds but with current economic condition of the state this is unlikely to pass  Time frame on implementation of new funding formula will not fall into the budgetary cycle of the district thus making it impossible to wait for the state to adjust possible revenues districts will receive Is the fund balance an option?  The ending fund balance for the district on June 30, 2008, was $3,250,000 which is 7.3% of the 2009-2010 standard operating budget or 7.1% of the level two budget  DPI had recommended a fund balance of approximately 15% for public school districts  DPI has backed off on this knowing the financial restraints school districts must operate under  Drawing down the fund balance to cover operating costs will cause the district to:  Have a higher interest rate for borrowing  Negate a cushion should a major maintenance issue develop  Push the district toward the breaking point of solvency What is the district going to do?  The 2009-2010 budget will be developed using the following criteria:  $0.00 per pupil increase per student from state toward the revenue limit  25 additional full time students for 2009-2010  Settled contracts budgeted as they are; contracts being negotiated are budgeted at 3.8% total package (per current state law)  Budget reductions totaling $3.2 million dollars will be pursued to help balance projected shortfall