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PredictableBudgetConcernsPresentedtotheFinanceCommittee
March18,2017DaleMageeJohnSamia
SchoolCommittee
Whatweknow
• EachyeartheSchoolCommitteeinitiallypresentsa“levelservices”budget&thetownisunabletofullyfundit,resultinginservicecuts
• ThestateChapter70aidhasbeenessentiallyflatfor8years,similarcommunitiesget~$2millionlessinaidthanwedo
• Schools(&thetown)haveaggressivelysoughtnon-tax$sources:thesearenotincreasingtomeetinflation,resultinginmorepressureonthetaxbase
Expensesideissues:
• Budgetdestabilizers:– Volatility– Inflation
• Outsideexpensescancrowdoutfundsforschools• Wewilllookat:
– Perspectivesoninflation– Overviewofteachercosts– OverviewofSPEDcosts– Heathinsurancecosts
CPIismadeupof9differentareas,eachwithuniqueinflationpattern
InflationinEducation~3-4%/yr.Shrewsbury’scostperpupilisinthelower
20%ofMA
0
2000
4000
6000
8000
10000
12000
14000
16000
2008 2009 2010 2011 2012 2013 2014 2015
PerPupilExp
Shrewsbury
State
Westborough
Shrewsburyavg annualincrease2008-15=4.8%for2008-2014:3.4%Massachusettsavg annualincrease2008-15=2.8%
Source:DESEPerPupilExpensereports
LaborIntensiveFieldshavehigherincreasesinthecostoflabor(Baumol effect)
Whileseniorteachersalariesgoupby2%/yr,juniorteachersalariesstartat50%
lowerbutgoupby~7%/yr
AvgShrewsburyAdvDegree
Sources:ShrewsburyTeachercontracts
Becauseofchangesinthemixofnew&experiencedteachers,mostnewmoneywenttohiringmoreteachersinthepast5years
5
5
5
Source:DESETeachersalaryReports
(~7%/yr)Volatility:-4%to+20%
Source:EndofYearReports,TotalTuitionoutofdistrict
SpecialEdhasmultiplesourcesofrevenue- buttownbearsthevolatility
0
5000000
10000000
15000000
20000000
25000000
2008 2009 2010 2011 2012 2013 2014 2015 2016
SPEDby$Source
FedGrants490 StateFoundation StateCircuitBreaker180 Town(SPEDbudget- above)
Locally:ShrewsburyHealthInsExp~5%/yr(andareabouttogoupby>10%)
Source:MassDORMunicipalDatabankhttps://dlsgateway.dor.state.ma.us/reports/rdPage.aspx?rdReport=ScheduleA.HealthInsurance.HealthInsExpenditures&ctHealthExp-PageNr=7&rdDataCache=3302376082&rdShowModes=&rdSort=&rdNewPageNr=True1&rdRequestForwarding=Form
4%
14%Healthcare
Education
Source:MassBudget&PolicyCenter
ForFY18StateincreasesforHealthCarewere10XmorethanEducation
Revenues:4budgetstothinkabout
includesallSPEDcosts,allfoodservice,grants,feesother
Includes>$2million“excess”paymentfromstate
Includesdebtreduction
Sources:DESE;ShrewsburySchoolsEndofYearreport2015,ShrewsburyBudgetFY15
0
20000000
40000000
60000000
80000000
100000000
120000000
140000000
TownMeetingBudget
TotalOperatingSchool
Spending
TotalCostofSchoolSystem
TotalTownBudget
Grants
CircuitBreaker
Fees
DebtReduction
LocalContrib
OtherLocal
PropertyTax
OtherStateAid
Chapter70Aid
WhataboutGrantsand
fees?
StateaidforShrewsburyisnotkeepingupwithinflation- bydesign
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
$80,000,000
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Fiscal Year
Chapter 70 Aid Actual Net School Spending
TownPop:24,000StudentPop:3700
TownPop:33,000StudentPop:5900
TownPop:34,000StudentPop:6100
Sources:TownReports,DESE
Reformformula
Similartowns,differenttaxpressures
TownA
TownBSameschoolpop Samehousingstock Differentincome Differentpropertytax
revenuesneeded
0
20000000
40000000
60000000
80000000
100000000
120000000
140000000
TotalOperatingSchoolBudget TotalTownBudget
Revenues$availableforcostincreasesarenotjustheldto2½%theyareheldto2½%ofafractionofthetotal&this
fractionmustbearthefullinflationarypressure
Inflation
Prop
Tax
Town
Budget
OperatingSchoolBudget
TownBudget
Inflation
Whatis$3.7millioninincreasedopcosts?
• TownAppropriatedSchoolBudget:6.09%
• OperatingSchoolBudget(~$85million):~4.3%
• PortionofTownAppropriatedbudgetfrompropertytax:~11.5%
SourceforRevenues:MADORTownExpendituresReport2015
$-
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
LevelServicevs.FinalBudgetAvg Gap:$1.7million,3.5%
InitialReq$$ Final$$
5-YearFiscalProjection
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FiscalProjectionSubcommitteeGoals
• Toprovideahigh-levelfiscalmanagementtoolthatprojectsfutureschooldepartmentfinancialinformationbasedonhistorical,currentandassumedfuturefinancialconditions.
• Toidentifynear- andlonger-termtrendsthatwillimpacttheShrewsburyPublicSchools.
• TofacilitatediscussionamongallstakeholdersinthecommunityregardingthefutureofpubliceducationinShrewsbury.
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ForecastingApproach
DevelopHigh-Level5-YearFinancialProjectionBy…
– FollowingFY2017SchoolCommitteeGuidelines• Sustainingtheexistingeducationprogram• Meetingmandatesincosteffectiveways
– CarryingForwardtheExistingProgram• DoesnotincludeneedsidentifiedforFY2018orbeyond• Doesnotincludeanychangesinoutyearsthatmayresult
fromtheBealSchoolBuildingProject– IncorporatingTermsofCollectiveBargainingAgreements– ProjectingOtherCostsBasedOnActualFY2017RunRateand
BestGuestEstimates
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FY2018– FY2022FiscalProjection
22
$62.8
$65.7
$68.3
$71.2
$74.1
$61.6
$63.1
$64.7
$66.3
$68.0
$60
$62
$64
$66
$68
$70
$72
$74
$76
Fiscal2018 Fiscal2019 Fiscal2020 Fiscal2021 Fiscal2022
ProjectedSchoolAppropriationRequest ProjectedTownManagerAppropriation
$(1.2)
$(3.7)
$(7.4)
$(12.2)
$(18.4)
$(1.2) $(2.5) $(3.6)$(4.9)
$(6.2)
$(20)
$(15)
$(10)
$(5)
$-
ProjectedCumulativeSurplus/(Deficit) ProjectedAnnualSurplus/(Deficit)
$inm
illions
$inm
illions
FY2018– FY2022FiscalProjection
ShrewsburyPublicSchoolswillfacewideningstructuraldeficitsoverthenext5years.
$62.8
$65.7
$68.3
$71.2
$74.1
$61.6
$63.1
$64.7
$66.3
$68.0
$60
$62
$64
$66
$68
$70
$72
$74
$76
Fiscal2018 Fiscal2019 Fiscal2020 Fiscal2021 Fiscal2022
ProjectedSchoolAppropriationRequest ProjectedTownManagerAppropriation
$inm
illions
23
FY2018– FY2022FiscalProjection
Withpersonnelcostscomprisingapproximately80%oftheschooldepartmentbudget,significantheadcountreductionswouldneedtooccurtoclosethestructuraldeficit. 24
$(1.2)
$(3.7)
$(7.4)
$(12.2)
$(18.4)
$(1.2) $(2.5) $(3.6)$(4.9)
$(6.2)
$(20)
$(15)
$(10)
$(5)
$-
ProjectedCumulativeSurplus/(Deficit) ProjectedAnnualSurplus/(Deficit)
$inm
illions
Fiscal2018Fiscal2019 Fiscal2020 Fiscal2021 Fiscal2022
Translatingthenumbers…IfShrewsburyweretoclosethestructuraldeficitthroughheadcountreductionsonly,thenShrewsburywillneedtoreduce:• FY2018=($1.2M)/$55,000perFTE= (-22FTEs)• FY2019=($1.3M)/$55,000perFTE= (-24FTEs)(-46TotalFTEs)• FY2020=($1.1M)/$55,000perFTE= (-20FTEs) (-66TotalFTEs)• FY2021=($1.2M)/$55,000perFTE= (-22FTEs)(-88TotalFTEs)• FY2022=($1.3M)/$55,000perFTE= (-24FTEs)(-112TotalFTEs)
Headcountreductionsofthismagnitudewillresultinmuchlargerclasssizesandaseverelycompromisededucationprogram.
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KeyPoints
• Shrewsburywillcontinuetofacesignificantdeficitsoverthenext5years.
• WeshouldnotexpectStateandFederalrevenuestohelpclosethisstructuraldeficit.
• Withoutadditionalresources,theschooldepartmentcannotprovidethehighqualitypubliceducationthattheShrewsburycommunityexpects.
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TheEssentialQuestion
“Whatwillourcommunitydotosolvethestructuralfundingdilemmathatjeopardizesthefuturequalityofpubliceducationin
Shrewsbury?”Dr.JosephSawyer,January25,2017BudgetRecommendationPresentationtotheSchoolCommittee
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