January 28th Property and Finance Committee Meeting
In attendance: Committee Chair Sean Carpenter and members Ed Coyle, Karen Miller, and Maureen Snook (newly placed on this committee as of the December Organization Meeting). Also in attendance were Board President Vince Murphy, Linda Raileanu, Sue Tiernan, and Heidi Adsett. Maria Pimley did not attend.
The meeting was relatively short, one of the shortest that I can recall in a while, and will likely be remembered more for what was not said than for what was. Discussion centered around the 13/14 Budget and related matters. Also covered were the awarding of bids for the East Bradford Elementary renovations, a resolution related to the collection of taxes for the district, and a proposal for civil engineering services to develop the Rustin excess land prior to its sale. All of these items passed via a 4-0 vote.
Regarding the Rustin land, apparently the board has been discussing its sale for some time in executive session, and this was the first time we were hearing of the plan to develop it prior to sale. Mr. Campbell explained the belief that the land would be more profitable if they first developed it since they anticipate their prospective buyers to be home developers; they estimate the additional profit after all costs to be an additional $400k. Therefore, the board voted to spend approximately $148k for this process. Whether this project includes all of the excess Rustin land or only part of it was not discussed and was not clear from the materials provided.
Dr. Moore reviewed the key changes to the current and future year financial projections. For 12/13 our expense projection decreased $200k and our revenues increased by $1037k; the increase in revenue was predominantly due to transfer taxes (home sales) and transportation subsidy from the state. The impact of these positive changes increases our fund balance which has been designated to offset any needed 13/14 tax increase. We also experienced a $109k decrease in debt service due to refinancing that has been moved to our capital reserve. The 13/14 forecast has been adjusted as well due to the impact of the settlement of 2 labor contracts and the fact that model projections for next year (based on standard %s) have been replaced with actual budget projections from the various cost centers. These resulted in $661k lower expenses and $752k higher revenues.
Following the financial highlights, there was a resolution requiring board approval. This is the Resolution of Act One Inflation Index Budget Limit which is an official commitment by the Board to not increase taxes for the 13/14 year above the Act 1 Index of 1.7%. The Act 1 Index is the highest amount the state allows districts to raise taxes, however there are certain exceptions which some districts qualify for that would allow them to raise taxes higher. For the 13/14 school year WCASD qualifies for ~$2.5M in exceptions, predominantly due to drastically increasing PSERS (retirement) costs. The committee voted 4-0 to not take the exceptions.
Currently there are designated funds that will partially address the deficits forecasted for the next several years as the PSERS cost grows and the tax base remains flat. The current projected shortfall for the 13/14 school year is $4.3M. A tax increase in the amount of the 1.7% Act 1 limit would eliminate $2.5M of that deficit, however there has been no discussion of passing a tax increase so reliance on one to partially offset the shortfall is premature. Overall, there are several things which bothered me about this vote and the associated "discussion":
- there was no dialogue among the committee members prior to this vote, not a single word by any member explaining why they were in support of this resolution
- the following potential issues were raised to the committee by members of the public:
- the largest expense in our budget is teacher salaries, and as everyone knows we have not reached an agreement with the teacher's union; the current forecast does not include any salary increase, and given the outcome of negotiations is unknown, that could be an area of risk
- the Governor has cut funding to public schools (if you exclude increases to PSERS which is a pass through cost and does not allow for any additional spending) for the last 2 years and we do not know what next year's budget will bring (although a preliminary budget was since presented, Governor Corbett predicated it on the state legislature passing pension reform)
- even with a tax increase, we will still need to make some cuts to balance the budget, yet no current program changes are up for discussion at any committee level (even though numerous items remain from the Budget Task Forces that could be considered); given the budget calendar calls for preliminary adoption of the budget at the April Board Meeting and final adoption in May
- reserving the Act 1 exceptions in no way commits the board to actually using them, so the board could always defer including those exceptions in any future millage increase; therefore, there is really no downside to taking them, and by doing so the district has some "insurance" to fall back on given all the uncertainties it is facing
- while the 13/14 projected budget shortfall is manageable at $4.3M, the following 3 years are currently projecting cumulative budget shortfalls over $40M (excluding any tax increase) which is well beyond our current fund balances
The response from the committee to these issues did not instill a sense that the district's risks are being actively planned for and that a long term strategy exists. Regarding the remaining Budget Task Force items, the response was that all committees are aware of the remaining items and are free to pursue any that fall within their area of responsibility; translation: nothing is being considered either as a budget balancing measure or simply as a cost cutting exercise, and none of the committee chairs present cared to comment on any of them. To the issue of risk to state funding if pension reform does not occur, we were told that if there is no pension reform we will not be the only district in trouble. Other concerns were met with "we'll have to wait and see what happens".
And so, I left this meeting feeling that one or both of two things are happening: 1)the board is not sharing their long term plan with the public and/or 2)the board is not giving adequate attention to long term planning given possible risks. Neither of these make me feel comfortable as either a parent or a taxpayer, and I can only hope that we learn more in February. The board may very well be planning to offset any 13/14 budget shortfall with fund balance rather than increasing millage or pursuing any cost cutting measures. That will certainly make people happy as we enter the next school board election cycle, but is it sound long term financial planning?
The following articles provide more information on Act 1 exceptions for WCASD as well as other districts:
Although this was not discussed at the P&F meeting, the district had its second hearing with Whole Life Charter which is looking to set up a school for special needs children in the area and needs approval from a school district to do so. It appears that there is strong parent support for the school, however concerns on the part of WCASD administrators that the school may not be poised for success. You can read more about that here:
Additionally, as noted above, Governor Corbett released the first draft of the state budget earlier this month. While we were happy not to see any additional cuts, the Basic Education and Special Education line items were flat funded at the same level received last year. Since many of the costs in those areas have since increased, the Governor is leaving the responsibility for covering theose on the shoulders of the local taxpayer. We will be reporting more on the state budget in the coming months as we learn how it will impact WCASD.
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