Rockwood Area School District Budget Shortfall Act 1 and Voter Referendum

1
Rockwood Area School District Budget Shortfall
Act 1 and Voter Referendum

• Voting for a higher tax rate
• April 22, 2008

2
Operating under Act 1

• Reduces property taxes by
• Shifting property taxes to income taxes
  (referendum failed May 2007)
• Proceeds from gambling money (the first
  reductions are expected this year)
• Created property tax installment plans
• Increased the amount of Senior Citizens Property
  Tax and Rent Rebate Programs
• 650 for income up to 8,000
• 500 for income up to 15,000
• 300 for income up to 18,000
• 250 for income up to 35,000
• ½ of Social Security Income can be excluded

3
Operating under Act 1 (cont.)

• Limits future property tax increases
• School districts limited in raising taxes to an
  index set by the state each year (currently 5.3
  for Rockwood)
• Only two possibilities for raising property taxes
  above the index
• Exceptions from the Department of Education or
  Court of Common Pleas
• Voter Referendum

4
How did this financial crisis occur at Rockwood?

• The District has spent on average 230,000 more
  per year than it has taken in since the 2001-2002
  school year. (In the past 3 years, the average
  has increased to over 300,000 per year)
• The District used its fund balance (savings
  account) to balance the budget each year.
• This pattern of spending caused the fund balance
  to decrease from over 1,000,000 in 2001 to what
  would have been a balance of negative 315,000 at
  the end of last school year, if it were not for a
  500,000 emergency loan.
• For each of the past 5 years the District has
  obtained a Tax Revenue Anticipation Note (TRAN)
  to cover cash flow problems throughout the year.

5
Revenue and Expenditure History
6
Revenue and Expenditure Historywithout TRAN and
Emergency Loan
7
Recent Additional Expenditures

• Under-projected cost of the Collective Bargaining
  Agreement
• Approximately 3 times the original projected cost
  presented to the board by the former
  superintendent
• New Elementary Music Program and Marching Band
• Additional Athletic Programs (Rifle and Football)
• 360,000 Roofing Maintenance Project
• Cyber School Mandates
• Other Inflationary Costs

8
Why didnt the district raise taxes sooner?

• The board acted upon information and a 5-year
  Financial Plan presented to them by the previous
  administration.
• The 5-year plan included projections of
• A fund balance of 2,500,000 after 5 years
• 2 tax cuts during the 5 year period
• The plan was based upon grossly over-inflated tax
  revenue from the expansion at Seven Springs
  Mountain Resort

9
How does Rockwoods tax rate compare to other
county schools?
10
How does Rockwoods expenditure per student
compare to other county schools?
11
What will it take to balance the budget and
restore programs?

• 5.36 mill tax increase
• 0.9799 mill allowed by Act 1 index
• 0.7801 mill permitted by PDE exceptions
• 3.6 mills if voters approve referendum on April
  22nd

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What will the tax increase fund?

• Elimination of deficit spending
• Rebuild the fund balance to levels required to
  handle emergency situations
• Textbooks and classroom supplies
• Restore technology
• Restore custodian and administrative staff
• Maintenance of current indoor and outdoor
  facilities
• Inflationary increases in operating expenses

13
What will tax increase cost average taxpayer?

• 3.6 mill increase on the median homestead value
  (23,970) would cost 86.29.
• 5.36 mill increase on the median homestead value
  would cost 128.48.
• 3.6 mill increase on the average assessed
  property value (32,080) would cost 115.49.
• 5.36 mill increase on the average assessed
  property value would cost 171.94.
• Individual assessed values can be found at
  www.co.somerset.pa.us or recent tax statement
• Multiply assessed value by 0.00536 to determine
  increase

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Understanding the 2008-09 BudgetRevenue

• Beginning Fund Balance 184,064
• Includes 500,000 Emergency Loan
• Local Sources 5,622,763 (49.28)
• State Sources 4,846,614 (42.47)
• Federal Sources 341,500 (2.99)
• Other Financing 600,000 (5.26)
• Total 11,410,877

15
Understanding the 2008-09 BudgetExpenses

• Payroll 6,620,625 (58.79)
• Pro/Tech Services 578,450 (5.14)
• Property Services 379,775 (3.37)
• Other Services 1,647,916 (14.63)
• Supplies 371,750 (3.30)
• Property 40,375 (0.36)
• Other Objects 302,911 (2.69)
• Debt Service 1,319,740 (11.72)
• Total 11,261,542

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Understanding the 2008-09 BudgetExpenses

• Payroll 6,620,625 (58.79)
• Teachers Contract
• Salaries and benefits in effect through 2008-2009
  school year
• Administrative and Support Staff
• Salary increases tabled until July 08
• Administrative staff restructured through this
  year and possibly into future
• Custodial staff operating with fewer employees
  until July 08

17
Understanding the 2008-09 BudgetExpenses

• Pro/Tech Services 578,450 (5.14)
• Computer Services
• Rytek, Edunet, Study Island, Advanced Management
• IU Services
• Learning Support, Hearing Support, Speech
  Support, Emotional Support, Autistic Support
• Tax Collection Services
• Legal Services
• Auditing Services

18
Understanding the 2008-09 BudgetExpenses

• Property Services 379,775 (3.37)
• Maintenance Agreements
• Boilers, Phones, General Maintenance
• Disposal Services
• Electricity
• Propane
• Sewage/Water
• Equipment Rental
• Xerox

19
Understanding the 2008-09 BudgetExpenses

• Other Services 1,647,916 (14.63)
• Tuition
• Technology Center, Cyber Schools
• Communications
• Insurance
• Advertising
• Travel
• Field Trips, Band/Chorus Festivals, Speech and
  Reading Competitions

20
Understanding the 2008-09 BudgetExpenses

• Supplies 371,750 (3.30)
• General Supplies
• Textbooks and Periodicals
• Gasoline
• Coal
• Property 40,375 (0.36)
• Technology Equipment
• Maintenance Equipment

21
Understanding the 2008-09 BudgetExpenses

• Other Objects 302,911 (2.69)
• Dues Fees
• PSBA, Bond Paying Agent, Rural and Small Schools
  Membership
• Interest Payment
• Bond Issue
• TRAN
• Emergency Loan

22
Understanding the 2008-09 BudgetExpenses

• Debt Service 1,319,740 (11.72)
• Including Fund Transfers and Athletic Programs
• Principal Payment
• Bond Issue
• TRAN
• Athletic Programs

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What will happen if the referendum is
unsuccessful?

• The District will be forced to cut over 700,000
  from the budget
• Guaranteed future tax increases
• Cuts in student programs and activities
• Field trips, Drivers Education, Athletics,
  Band/Chorus Festivals, Speech and Reading
  Competitions
• Students will be forced to pay to participate in
  activities that have typically been funded by the
  school
• Increase in class sizes
• Cuts in other non-mandatory programs
• Deterioration of facilities
• (pending retirements)

24
Other options that have been considered?

• The board and administration continue to examine
  areas of possible cost savings
• Software contracts, service contracts, supplies
• Participation in a Management Assistance Team
• (Pending approval at the March board meeting)
• Establishment of a committee to establish best
  business practices to ensure this can never
  happen again
• Allow the state to take over the school district
• Close Kingwood? (Not an option at this time)
• Long-term savings, with short-term expenses
  (renovation of red-wing or other classrooms)
• Long-term process to close a school
• Public hearings and approval process through PDE
• Delay funding for textbooks, supplies and
  technology (Detrimental to educational program)

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Future Tax Increases?

• Future tax increases will depend on several
  variables including revenue and expenditures
• Future Revenue
• State funding allocations
• Growth in local property values (Continued
  expansion projects at 7Springs)
• Future Expenses
• Increases in healthcare and retirement
  contributions
• Contractual agreements
• Repayment of the emergency loan
• Other inflationary costs