Archive for the ‘Budget’ Category

Low Spending, High Achieving District

Tuesday, April 14th, 2009

The 2009 – 2010 proposed school budget was approved by the South Brunswick Board of Education at a special Public Budget Hearing conducted during the March 30 meeting.  On April 21, 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 the interests of taxpayers in containing costs.

The total proposed budget is in the amount of $139,383,922.  Voters previously approved the Debt Service (expansion and renovations of our facilities) portion of this budget that now totals $9,916,340.  On Election Day, we are requesting that you vote on the local share of the General Fund budget in the amount of $96,009,320.  It is this amount, when coupled with State aid, our local year-end fund balance (we are forced to deficit fund the 2009 – 2010 budget with $3.95 million to reduce the need for a tax increase) and a small amount of miscellaneous revenue that makes up the total proposed Operating Budget of $126,972,109. (The Operating Budget does not include Debt Service and Federal Program funds which, when added together, make up the Total Budget.)  No New Taxes will be needed to support this proposed budget.

I am often asked about the funding sources that provide dollars for our budget.  To assist in the response, Chart #1 provides an illustration of the revenue sources.

As you can see from this illustration, local sources (Local Tax Levy and Other Local Sources) provide approximately 79% of the dollars needed to fund the budget.  The good news is that, on a percentage basis, the local share of the budget has declined for the two previous budget years and will decline again in this proposed budget.  The reason for this decline is the State aid share of the budget.  State aid has increased for the second consecutive year.

While the State aid contribution to our schools is less than 20% of our total budget, increases in this area reduce the need for the local contribution to grow.  Chart #2 graphically illustrates the relationship between State and local aid.  While the relationship isn’t totally inverse, increases in State aid significantly reduce the need for local tax increases.

So that you might better understand this financial plan, let me share the most significant factor that shapes this budget.  South Brunswick School District projects an increase of 87 additional students for the 2009 – 2010 school year.  This will bring our K-12 enrollment to 9,097.  This increase is modest indeed when compared to the earlier years of this decade.  A quick review of Chart #3 illustrates enrollment history from 1995 when the K-12 total enrollment was 5,440 to the projected 2009 – 2010 total.  This period of growth provided the School District with a 67% increase in student enrollment.

As you well know, enrollment growth touches almost every other budget category.  Additional students over the years have driven our building expansion needs, increased our maintenance and operations costs, required additional staff, expanded program offerings to meet a wider continuum of needs and increased transportation costs.  While our proposed budget supports these costs, the small student enrollment growth and a moratorium on new instructional initiatives (second year of not adding new programs) are central factors in limiting budget growth and not needing an increase in taxes. 

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 14 shared services, purchasing consortiums (insurance, energy, technology, supplies, etc.), joint efforts (transportation) and re-financings (1997 School Bonds).

To be a bit more specific, we are presently engaged in an Energy Audit that has costs of about $196,000.  We successfully secured a grant that will pay almost all of the audit costs.  We fully expect the audit results will yield significant energy cost savings.  During the past three budget years, we have saved over $500,000 in the area of insurance costs because of our consortia memberships.  Likewise, transportation efficiencies have resulted in savings of $355,000.  This is not a mutually exclusive list but offered rather as an example of District efforts to be cost-effective.

In any budget construction process, and school districts are no exception, “fixed costs” must be recognized and analyzed.  These are the costs associated with such things as heat, light, water, air-conditioning, gasoline, natural gas, fuel oil, diesel fuel, transportation vehicles, pension costs, salaries, benefits, insurance costs, legal fees, etc.  Again, this is not an exhaustive list but meant to provide a clear indication of the type of costs that represent approximately 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.  The 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.  Because we are involved in the collective bargaining process with each of our eight unions, we do not have cost data to share at this time.

Continuing with some of the major factors that shape our proposed budget, we anticipate increasing energy costs to require an additional $210,000 over present funding levels.  Pension costs will require an additional $150,000 and Transportation costs will increase by $418,000.  Mandated bus replacement costs represent about 50% of the Transportation increase.  Facility capital improvement needs such as roof replacement sections, HVAC unit replacements, energy-efficient window replacements, etc. will cost approximately $1.8 million.  We will be utilizing almost $600,000 from our Capital Reserve Fund to reduce the budgetary cost of these projects to $1.2 million.

Obviously, the Expense side of this proposed budget would require a tax increase unless additional revenues and/or budget reductions were realized.  This budget reflects both.  As previously mentioned, State aid has increased.  In a year in which we anticipated no increase, this additional aid was significant in developing a budget that does not require a tax increase.  This increase alone was still not enough to forestall a tax increase.  Another action was unfortunately necessary.

This proposed budget reduces the personnel portion by 25 positions. Coupled with the position reductions of the previous four years, we have now eliminated 66 positions since 2004.  Because we are a labor-intense organization and the overwhelming cost of our budget is associated with personnel costs, the only significant way to realize slower budget growth is to reduce positions.

As part of our coordinated budget process with the State of New Jersey, we met with the Executive County Superintendent in January.  During that meeting, which provided a forum to analyze the current budget, we were directed to reduce personnel labeled as administrative, paraprofessional and operations/maintenance.  Based upon that directive, we eliminated/consolidated 13 positions coded as “administrative” (Public Information Officer, Assistant Principals at three levels, Assistant Athletic Director, South Brunswick High School Supervisor and secretarial support at all levels.)  In addition, we eliminated paraprofessional positions, custodial positions and a part-time social worker position.  A reorganization of our Basic Skills program will eliminate two positions.

Of the 25 positions, 14 were eliminated through attrition.  The remainder of the personnel were informed recently that their position was being eliminated.  In every instance, a great amount of thought and discussion was involved prior to making the decision.  The reductions were made apart from the classroom and the instructional program in every instance.  These cuts will not impact class size or instructional delivery. 

To provide an illustration of the impact of the reductions on the proposed budget, Chart #4 identifies increases/decreases by major budget categories.

All three areas of administrative costs are reduced in this financial plan as a result of the position reductions.  The Debt Service reduction is a continuation of the previously mentioned refinancing.  We are in the second year of a three-year savings that has reduced our Debt payment (think mortgage) by over $1million per year.  The 2007 – 2008 cost was slightly more than $11 million. 

South Brunswick has long enjoyed a reputation for educational excellence.  This column will not attempt to recount the abundant evidence of this fact.  A visit to our Web site, attendance at a Board of Education meeting or reading other articles and issues of this publication will provide compelling examples of student successes.  Ours is truly a high performing District.  “But at what cost?”

This Chart illustrates quite clearly that our School District is a low cost, high performance organization.  At a time when per pupil costs in New Jersey range from a low of $9,100 to a high of over $18,000, South Brunswick is $1,656 below the state average.  When viewed in consultation with our performance indicators (State testing, SAT scores, National Merit qualifiers, Bloustein Scholars and the many other student recognitions), we have much to celebrate.

I hope that every reader will view this proposed budget as an investment in our students, their future, our future and the reputation and value of our community.  I also hope that this information will assist your understanding of this proposed budget.  Should you have questions, please visit our Web site, www.sbschools.org, or call me at (732)297-7800, ext. 5104.  As always, your support is greatly appreciated.

Sincerely,
Gary P. McCartney

Fixed Costs Drive Budget

Wednesday, April 2nd, 2008

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.

Preserving Educational Excellence

Thursday, August 23rd, 2007

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