East Greenwich School District Independent Budget Analysis Gayle Corrigan Linda Dykeman May 15, 2017

Assignment Determine the financial status of the East Greenwich Public Schools: Estimate surplus or deficit of Fiscal Year 2017 budget Weigh in on the proposed Fiscal Year 2018 budget Recommend improvements

Methodology Review source documents Interviews school personnel Payroll report Collective bargaining agreements and other contracts Tuition and transportation invoices Interviews school personnel Dr. Mercurio, Superintendent Finance, special education, and facility personnel Discussions with school partners West Bay Community Health (self-insured health care provider) Baxter Dansereau & Associates (auditor)

Fiscal Year 2017 Estimated Budgeted Revenues Description FY17 Budget FY17 Estimate Variance +/- Local Revenue 34,018,906 State Aid 2,748,841 Reappropriated Fund Balance 525,000 Tuition 142,000 94,970 -47,030 Other Revenue Sources 386,296 414,440 28,144 Miscellaneous Revenue* - 529,603 Total Revenues 37,821,043 38,331,760 $ 510,717 *Miscellaneous Revenue includes a one-time National Grid refund ($261k) and a one-time RIDE Wireless Initiative payment ($250k).

Fiscal Year 2017 Estimated Expenses Description FY17 Budget FY17 Estimate Variance +/- Salaries 22,231,969 22,646,731 -414,762 Benefits 7,840,113 7,927,441 -87,328 Purchased Professional & Technical Services 1,575,600 1,640,785 -65,185 Purcased Property Services 660,414 601,463 58,951 Other Purchased Services 3,256,620 3,787,770 -531,150 Supplies 1,314,599 1,148,229 166,370 Property 887,473 667,479 219,994 Micellaneous Expense 54,255 54,352 -97 Total Expenses 37,821,043 38,474,251 $ -653,208 SPED

Fiscal Year 2017 Deficits Description FY17 Budget FY17 Estimate FY 17 GAAP FY 17 Structure Local Revenue 34,018,906 State Aid 2,748,841 Reappropriated Fund Balance 525,000 Tuition 142,000 94,970 Other Revenue Sources 386,296 414,440 Miscellaneous Revenue - 529,603 Total Revenues 37,821,043 38,331,760 37,806,760 37,277,157   -1,054,603  Salaries 22,231,969 22,646,731 Benefits 7,840,113 7,927,441 Purchased Prof & Tech Services 1,575,600 1,640,785 Purcased Property Services 660,414 601,463 Other Purchased Services 3,256,620 3,787,770 Supplies 1,314,599 1,148,229 Property 887,473 667,479 Micellaneous Expense 54,255 54,352 Total Expenses 38,474,251 Total Deficit -142,491 -667,491 -1,197,094

Projected Fiscal Year 2017 Results Type of Deficit Amount of Deficit Budgetary Deficit -$142,291 GAAP Deficit -$667,491 Emerging Structural Deficit -$1,197,094

Use of Fund Balances to Offset Deficit Description   Cummulative West Bay * Capital** Technology Ending Fund Balance 2016 718,264 1,549,443 959,027 134,758 Estimated 2017 GAAP Deficit -667,491 Reappropriate for 2017 -453,349 -184,142 -30,000 Ending Fund Balance 2017 264,915 104,758 Amounts Available for 2018 $ 394,673 25,000 *West Bay Community Health’s Benefits Project Agreement technically allows $513,600 withdrawal for 2018 but doing so would result in a recalculation of health care premiums to increase the reserves to a three-month recommended minimum. A fiscally prudent amount would be $25,000 from the dental fund. **The district’s capital fund is for one-time capital expenditures. To use these monies to offset a deficit would require the school to change its fund policies.

Fiscal Year 2018 Estimated Fiscal Deficits Description FY18 Budget FY18 Estimate Variance +/- FY 18 GAAP Local Revenue 35,379,970 34,018,906 -1,361,064 State Aid 2,658,616 2,649,616 -9,000 Reappropriated Fund Balance 919,955 394,673 -525,282 Tuition 137,000 94,970 -42,030 Other Revenues 550,934 Total Revenues 39,646,475 37,709,099 -1,937,376 37,314,426   -2,332,049 Salaries 23,218,118 23,367,375 -149,257 Benefits 8,191,657 Purchased Prof & Tech Services 1,823,001 Purcased Property Services 538,294 Other Purchased Services 3,725,582 Supplies 1,284,109 Property 812,832 Micellaneous Expense 52,883 Total Expenses 39,795,733 Total Deficit -2,086,634 -2,481,307

Recognizing the emerging structural deficit Relying on one-time revenue sources Raiding general fund reserve balances Creating a deferred maintenance backlog Scaling back programs such as sports and arts as one-time solutions Concluding agreements without understanding fiscal implications Taking an annual deficit approach to solving a structural problem Over-relying on declining revenue base to meet increasing needs of growing populations

Eliminating the emerging structural deficit requires implementing structural solutions School and Town considered as a whole Broad and structural solutions True consolidations of administrative services Revenue strategies (e.g., increased Medicaid billing) Service delivery model changes (e.g., special education) Expenditure controls (e.g., contract reviews) Shifts and service reductions (e.g., class and transportation scheduling) 5-year School and Town Plan

A Tale of Two Cities Central Falls, RI - circa 1987 Emerging school budget structural deficit 1992 state takeover schools and CBAs signed reducing police and fire years to serve to receive pension 8/1/2011 file for bankruptcy with a $6.2m structural deficit East Greenwich, RI – 2017 Emerging school budget structural deficit …

2006 Enrollment : 2429 2006 School Appropriation : $25,706,870 2017 Enrollment : 2504 2017 School Appropriation : $34,018,906 Change: 75 Students Change: $8,312,036 Residential and Commercial Property Tax Rate has Increased 68% since 2006 EG Property Tax Rate is: 30% Higher than Barrington, 50% Higher than Portsmouth, 53% Higher than S. Kingstown, 35% Higher than Smithfield, 219% Higher than Westerly On April 4th, School Committee Approves Budget of $35 Million. On May 15th, School Committee is Presenting a Budget of $39 Million May 15, 2014 Fiscal Impact Statement for the 2014-2016 Certified Teachers Contract States a 3 Year NET FISCAL IMPACT of $1,671,589. True Fiscal Impact of this Contract was $3,842,144 2017-2019 Teachers Contract Fiscal Impact Statement Dated April 25, 2017 states a 3 Year Fiscal Impact of $1,266,067. True Fiscal Impact of this Contract is Approximately $2.8 Million New Contract Awards over $3.4 Million in Salary and Pension Benefits, but does not include the hiring of a much needed Director of Curriculum.

Moving Forward Recommending Expansion of Providence Analytics charge to look at the Town Budget Work strategically to eliminate the School Department’s Structural Deficit, focusing on a corrective action plan