Superintendent’s Corner

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.

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 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.

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 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 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.

The 2007 - 2008 proposed school budget was approved by the South Brunswick Board of Education at a special Budget Hearing conducted during the regular March 26 meeting. On April 17, 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.

The proposed budget is in the amount of $131,544,937. Voters previously approved the Debt Service (expansion and renovations of our facilities) portion of this budget that now totals $11,024,927. On April 17, we are requesting that you vote on the local share of the General Fund Budget in the amount of $94,583,348. It is this amount, when coupled with the State contribution of $20,160,884 (16.9% of Operating Budget) as referenced in Chart #1, our local fund balance from 2006 - 2007 and some miscellaneous revenue that makes up the total proposed Operating Budget of $118,851,732.00. The cost increase necessary to support this budget is 11.8 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 2007 - 2008 budget. First of all, education is a labor-intense endeavor. As student enrollment rows, 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 221 students for the 2007 - 2008 school year.

A review of our student enrollment chart (Chart #2) reveals a significant and sustained pattern of growth over the previous ten years. With an anticipated enrollment of 9,011 students in September, we will have witnessed a ten-year increase of 2,729 students. The result of this continual enrollment has created an ongoing need for more staff and expanded facilities.

As you already know from past correspondence, the District has renovated and expanded Brunswick Acres, Greenbrook, Constable, Cambridge and Monmouth Junction elementary schools in conjunction with the 2003 Referendum Bond Issue. Presently, from that referendum, we are constructing an addition on Crossroads North Middle School. The final work will be completed as air conditioning projects in the gym areas of both middle schools. Obviously, this construction activity was carried out as a response to our growing student enrollment and has been a major impact on our budget in the areas of personnel and facilities.

The process that was utilized to shape this proposed budget was different than past efforts. Made abundantly clear to all by our State government officials was the fact that property tax reform would create new budget constraints for schools. In this instance, the legislature has passed a bill on to the Governor that places a four percent cap on each school district’s tax levy. The tax levy cap provides for a few exceptions that ultimately yielded a 4.8% growth ceiling for our budget planning.

Knowing the financial limitations of the tax cap, as well as the financial burden on our community, we began to examine our existing circumstance. We calculated the cost of advancing our existing staff into the 2007 - 2008 budget year. This process involves calculating the salary and fringe benefit costs based upon negotiated agreements with teachers, maintenance staff, custodians, paraprofessionals, bus drivers, secretaries, supervisors, and administrators. This represents approximately eighty percent of the total cost of our operating budget.

Our next step was to calculate the cost associated with our fixed cost areas. These costs are associated with such things as heat, light, water, air conditioning, gasoline, fuel oil, diesel fuel, buses, postage, increased pension costs for support staff, insurance and legal fees. While this is not offered as a mutually exclusive list, it does represent about twelve/thirteen percent of our operating budget.

The final area of cost calculation represents all that remains that we traditionally call the “instructional costs.” All curriculum materials, supplies, textbooks, instructional support items and equipment and professional development for staff are funded from this portion of the budget.

When we added the costs associated with maintaining our existing staff, funding our fixed costs and supporting our instructional costs, the total exceeded the amount allowed under the tax levy cap.

As we analyzed the key factors that have caused the budget to expand, enrollment growth of 221 additional students played a major role. Related directly to this enrollment growth are the costs associated with the expansion of Crossroads North (10,900 sq. ft.). Continuing our existing staffing patterns for our projected 9,011 students represents the centerpiece of this budget. As mentioned earlier, we are a labor-intense organization and the School District’s exceptional results are directly related to the quality of our staff.

Rising energy costs will add approximately $225,000 additional dollars to this proposed budget. Likewise, we anticipate our increased transportation costs to be $760,000. The State of New Jersey bills South Brunswick for a portion of the pension costs of support staff members (custodial, maintenance, secretarial, etc.). With an increase of $243,000 in this category, the District will be paying approximately $900,000 for this line item.

Given these rising costs and the limits of tax levy cap, approximately one million dollars of cost reductions were made to the budget. This is particularly significant in that no new initiatives or cost categories were included in this budget. New requests were neither solicited nor accepted. The areas of budget reduction included personnel, transportation, professional development, memberships, supplies, related programs and travel. The personnel reductions will occur through attrition, reorganization and non-renewal. It is important to note that classroom instruction was not affected directly by these cost reductions and class sizes will continue at present levels.

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 special programs and clubs and athletics reflect the commitment of the District to fund student needs. Transportation growth is a direct student service and the rising cost is associated with bus replacement (12-year State requirement), fuel costs and salaries/benefits. Cost reductions in General Administration and Business/Technology Administration as well as the almost flat funding of the School Administration category demonstrate the District’s commitment to contain administrative costs.

Among the other issues that impact our budget, three stand out as worthy of mention. The first of these is Township ratables. As you know, every taxable property (business, industrial, residential) in the Township is assessed (valued) in relationship to its market value (sale price). The total amount of all of the property-assessed values has come to be known as the “ratables.” Annually, the ratables are totaled to determine the tax base (Chart #4). It is this tax base that is utilized to calculate the budget revenue from local sources. A two percent ratable growth has been assigned for this proposed budget. Keep in mind that growth in the ratable base creates revenue that helps to offset tax increases.

The second issue is State funding. South Brunswick received, after five years of relatively flat funding, a five percent increase from the State. The existing State-created funding formula has been ignored and the promise of a new funding formula remains unfulfilled. All of this means that local sources of revenue must fund an even greater share of the budget.

The third issue of note impacting our budget is the continuing negative outcome of a New Jersey Legislative action (Act 73/S-1701). This legislation has created the need for “deficit funding” of our budget on an annual basis. In a nutshell, each year the District must conclude its financial operations with $3,860,000 left in the budget. In other words, our District budget can never be fully spent. The $3.86 million dollars is needed to fund the next budget. The General Fund budget is funded by recurring taxes except for this amount.

As we endeavor to make our budget proposals lean, we must always remember that the budget must yield this $3.86 million dollars of non-recurring revenue. Obviously, this ongoing exercise becomes more difficult each year. If we were to experience a situation where this balance was not available, we would need to reduce program and personnel costs to balance the budget.

Again, 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 2006) 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 2007 - 2008 school budget. As always, your support is greatly appreciated.

Sincerely,
Gary P. McCartney