Fixed Costs Drive Budget

The 2008 – 2009 proposed school budget was approved by the South Brunswick Board of Education at a special Budget Hearing conducted during the March 19 meeting. On April 15, the annual school election will provide our community members with an opportunity to vote on this financial plan.

So that our residents can cast the most knowledgeable vote, I will attempt to provide an overview of our budget. Keep in mind that this budget was designed through an intensive process that sought to balance the interests of education and interests of taxpayers in containing costs.

2008 Budget Chart 1

The proposed budget is in the amount of $135,953,172. Voters previously approved the Debt Service (expansion and renovations of our facilities) portion of this budget that now totals $10,067,390.00. We are requesting that you vote on the local share of the General Fund Budget in the amount of $94,949,620. It is this amount, when coupled with the State contribution of $24,485,493 (19% of Operating Budget as referenced in Chart #1), our local fund balance for 2007 – 2008 (we deficit fund the 08-09 budget with $3.78 million to reduce the need for a higher tax increase), and some miscellaneous revenue that makes up the total proposed Operating Budget of $123,696,844. The cost increase necessary to support this budget is 5.8 cents per $100 of assessment.

Obviously, no one wants to pay higher taxes. Unfortunately, public schools in New Jersey have only State-prescribed methods to fund their operations. Because of this, property tax represents the funding strategy that must bear the weight of the public schools.

So that you might better-understand this financial plan, let me share some insights and identify the issues that served to shape the proposed 08-09 budget. First of all, education is a labor-intense endeavor. As student enrollment grows, the staff necessary to meet student needs expands, as well. While we experienced a welcomed slow-down in our enrollment growth this year, our projections anticipate an increase of an additional 134 students for the 08-09 school year.

2008 Budget Chart 2

2008 Budget Chart 2A review of our student enrollment (Chart #2) reveals a significant and sustained pattern of growth over the previous 10 years. With an anticipated enrollment of 8,957 students in September, we will have witnessed a 10-year increase of 2,286 students. The result of this continual enrollment has created an ongoing need for more staff and expanded facilities.

I am pleased to report that all of the renovations and expansions to our facilities that were financed through the 2003 Referendum Bond Issue have been completed. While we have a never-ending list of maintenance issues given the number of facilities that we operate, there are no current plans under consideration for a future referendum related to our buildings.

The process that was utilized to shape this proposed budget involved analyzing every area of current spending. This review process allows the administration to ask the questions, “Why do we do this?” and, “Just because we have done this before, do we still need to?” This analysis has revealed, over the years, some time-honored practices that were no longer necessary. In response to the question, “Are there more cost-effective and cost-efficient ways to do what must be done,” we have identified at least fourteen shared services, purchasing consortiums (insurance, energy, technology, supplies, etc.), joint efforts (transportation), and re-financings (School Bonds). In each of these undertakings, the savings have resulted in direct budgetary reductions.

Upon completing the budget analysis, our next step was to calculate the costs associated with our “fixed cost” areas. These are the costs associated with such things as heat, light, water, air conditioning, gasoline, fuel oil, diesel fuel, transportation vehicles, postage, pension costs, salaries, benefits, insurance and legal fees. While this is not offered as a mutually exclusive list, it does represent over 90% of our Operating Budget.

After our students, the District’s most valued and important resource is our staff. Quite frankly, schools are labor-intense organizations that develop reputations based upon the competence and caring nature of the staff. South Brunswick School District’s reputation for excellence is a direct reflection of the commitment and quality of the staff. With all things of quality, there are attendant costs. The cost to keep our existing staff for the 08-09 school year will be $3.4 million.

Continuing with some of the major impacts that shape our budget, energy costs are increasing by $578,000. Anyone who is tracking home heating costs understands the incredible growth in this category. In a related category, our transportation costs will grow by $125,000. This increase is directly related to the spiraling cost of fuel.

Pension costs for support staff are billed, in part, to school districts. There is no way to anticipate this cost locally because it is a reflection of the financial contribution by the State to its pension system and the independent actuarial assessment that is performed periodically. Based upon the State’s financial condition, we anticipate paying an additional $628,000 in this category.

Another area of cost growth involves the 134 additional students that were previously mentioned. To adequately staff this growth, we will need to add 4.67 full-time equivalent staff. The total cost for this need is being budgeted at $301,000.

Two other areas of budgetary growth include social security costs and tuition. As you know, social security costs are associated with salary and we anticipate spending an additional $105,000. Likewise, placement needs of our students that require programming that the District cannot provide will increase by $78,000.

Our ongoing costs for facilities and operating systems of the building will increase by slightly over $400,000 due to rising costs associated with manufactured parts, service, paint, and consultant fees.

While this is not meant to serve as an exhaustive list, it is meant to provide you with a “flavor” of some of the major impact areas that increase our cost of operation. This short list alone totals increases of $5.6 million.

On the instructional front, we utilize a curriculum review cycle that allows for a regular, periodic study of each curriculum. Accompanying this review is an assessment of our textbooks and instructional materials. New and replacement textbooks will cost approximately $450,000.

A review of the Budget Appropriations – Major Categories Chart (Chart #3) reveals the areas of growth and reduction in this proposed budget. Increases in Regular and Special Education, tuition for students in need of out-of-district programs, costs associated with student activities and athletics reflect the commitment of the District to fund student needs. Costs associated with Transportation and Maintenance/Facilities are support services that provide our students with access to school and a safe learning environment. These are certainly the areas of the budget where our money should be spent.

2008 Budget Chart 3

The three administrative areas of the budget, as illustrated, reveal either reductions or in the instance of “school administration,” a less than 1% growth. This chart (Chart # 3) illustrates the commitment of the District to spend budget dollars in support of students while reducing or containing administrative costs.

South Brunswick School District is a member of the New Jersey State Health Benefits Plan for medical and hospitalization coverage for employees. As a result of a reorganization of this plan by the State, South Brunswick will realize a savings in this expenditure category of $1.1 million. This entire savings has been utilized to reduce the growth of the budget.

On the Revenue side of the proposed budget, State Aid is being increased by 20 percent. Previously (2007 – 2008), South Brunswick School District received approximately $20 million from the State. This State contribution has been static for over five years and has changed very little over the past seven years. The increased State Aid will be $4.3 million. For the sake of perspective, 19% (approximately $24 million) of our $135.9 million budget will come from State sources. While this amount will not balance the budget, it is welcomed relief and long overdue.

During this past year and in consultation with professional financial advisors, the District was able to refinance the 1997 Bonds (bonds sold to build the High School) at a net savings of $3.3 million. The savings have been spread over three budget years (08-09; 09-10; 10-11) and are being utilized to reduce the Debt Service portion of the budget. This year’s savings is approximately $1 million.

Two other important actions have been taken to fund this proposed budget. The first involves advancing $3.78 million dollars of unspent revenue from the 07-08 budget to fund the 08 – 09 budget. I have written previously about this State-imposed “deficit funding” model and the inherent danger that it presents, but suffice it to say these dollars offset the need to generate about six pennies of tax. That’s the good news. The bad news is that if a future budget is unable to produce such a year-end balance, significant program and personnel cuts would need to be made.

The second important action being taken involves the use of our Capital Reserve account for major maintenance needs. Approximately $500,000 will be taken from the Capital Reserve account to complete several projects such as replacing the HVAC system (first phase) at Crossroads South Middle School. By utilizing this account, the proposed budget is unencumbered with additional spending, but the needed repairs can completed.

As is done annually, every line item of the budget has been analyzed. The requests for budget additions have been limited to inflationary increases with no new programs being funded. Reductions have been made in areas of general supplies, hourly work, overtime and an administrative position has been eliminated.

2008 Budget Chart 4

2008 Budget Chart 4Problematic for the District is the fact that the Ratable Base (Chart #4) has decreased for the second time in the past four years. As you know, growth in the Ratable Base serves to reduce the need for new taxes. The Township has informed the District that Ratables have dropped $10 million. In simple terms, this means that the current operating budget (07-08) without any changes at all could not be supported in 08-09 without a 7/10 of a penny increase. In effect, .7 cents of this proposed budget tax increase is associated with the drop in ratables.

2008 Budget Chart 5

2008 Budget Chart 5Again, nobody wants to pay additional taxes. Here in South Brunswick, we have endeavored to build a first-class education system that meets the State mandate for a “thorough and efficient” approach. A glance at Chart #5 (NJ Cost Comparison Guide for 2007) reveals the status of South Brunswick’s per pupil spending when compared to the New Jersey averages. Perhaps more notable is the fact that our students are performing at historic levels. By every indicator, including State testing, SAT scores, National Merit qualifiers and Bloustein Scholars, South Brunswick students have never done better. We have much to be proud of in our students’ performance. While this performance doesn’t offset the need for a tax increase, I hope that every reader will view this budget as an investment in our students, our future and our community. I hope this information will assist your understanding of the proposed 08 – 09 school budget. As always, your support is greatly appreciated.

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