Octorara Area School District Tonight we will review the Proposed final budget and vote to pass a resolution that will allow us to make a copy of that budget available for public inspection. 2016-2017 Proposed Final Budget Presentation April 18, 2016

2016-17 Budget Summary Display Document Total Revenues $49,434,879 Total Expenditures $52,405,602 Deficit ($2,970,723) 3% Act 1 Tax Increase $964,727 Revised Deficit ($2,005,996) Sources to balance budget Use of General Fund Balance Budget Reductions Increased State Funding As previously directed the document show revenues of $49.4 million and expenditures of $52.4 million with a additional 3% tax increase resulting in a deficit of ($2,005,996). Nothing is set in stone with the passage of the proposed final budget. The final millage rate, total revenues and total expenditures all can change right up to the passage of the final budget in June.

2016-17 Anticipated Budget Summary Total Revenues $49,434,879 Total Expenditures $52,405,602 Deficit ($2,970,723) 3% Act 1 Tax Increase $964,727 Budget Contingency $350,000 Known Debt Service Savings $340,000 Increase in State Revenue * $521,736 Proposed Budget Reductions $420,000 ($374,260) Use of General Fund Balance $374,260 $0 *Governor’s Proposed 16-17 Budget as of April 2016 While the proposed final budget does show a deficit of $2million we do not anticipate that we will end the year with that actual deficit. Our 2016-2017 proposed revenues are $49,4 million and our proposed expenditures are $52,4 million, resulting in a deficit of ($2,970,723). Our Act 1 tax increase produces approximately $965K in new revenue. Also within our deficit of ($2,970,723) we have a $350,000 contingency that we do not anticipate having to spend. We also have a known $340,000 savings in debt service. Our state revenue have been budgeted at 2014-2015 levels, so any increase in State funding will also reduce our deficit, last estimate about $500K. Finally we started out the process with proposed $420,000 in budget reduction strategy, all resulting in an anticipated deficit of ($374,260) anticipated use of fund balance. The end result is that, while the budget document we are displaying shows a deficit of approximately $2million we anticipate a deficit of around $375K.

2016-17 vs. 2015-16 Expense Summary 2016-17 Budget 2015-16 Budget Variance Salaries $19,728,841 $19,066,458 $662,383 3.47% Inc Over 2 Years (Avg. 1.74 per year) Benefits $11,363,777 $10,557,957 $805,820 Retirement Rate 25.84 % vs. 30.03% $921K Increase Outside Services $5,018,796 $4,841,483 $177,313 Special Education Repairs/Rentals/Maint. Srvs. $881,207 $849,407 $31,800 Career Training Rentals $19,500 Electricity $13,400 Trans/Ins/Tuit/Charter $6,541,792 $6,420,107 $121,685 Transportation increase 1.85%, $50K CCIU Vo-Tech $63K Supplies $1,593,223 $1,570,500 22,723 Classroom supplies $22K/Career Tech Supplies $25K/Gas and Fuel ($27K) Capital $638,430 $645,640 ($7,210) Dues/Fees/Interest $2,917,036 $3,023,313 ($106,277) Bond Interest ($200K) Contingency $100K Fund Trans/Principal $3,722,500 $3,746,939 ($24,439) Other Fnds. Tran. ($230K) Bond Princ. $205K Totals $52,405,602 $50,721,804 $1,683,798 Total Expenditures are $52,405,602 for 2016-2017. Total Salary increases are $662,383 which is a 3.47% increase(1.74% per year). If you recall the 2015-2106 salaries were budgeted at the 2014-2015 level. This budgeted amount in 16-17 represents a two year increase. Benefits in total have a $805K increase over 2015-2106. Medical benefits are budgeted with a slight increase over 2015-2016. 2015-2016 benefits were budget for the entire year with a more costly plan however the plan design changes in January and should result in lower total costs. So even though we are aan increase for 16-17 the total budget amount is staying at the 2015-2016 budget amount. Prescription budget is decreasing by approximately 16% due to plan changes. Total Retirement Expenditure is increasing by $921K. This is a net of $461K after we take into consideration the increase on the PSERS Subsidy revenue side. Outside services increases of $177K are mostly CCIU Special Education Services but also includes an increase for the tax collection expenditure that corresponds to the increase in the EIT Revenue. Repairs rentals maintenance services is increasing by approximately $32K. We are adding $19,500 for the rental of the County Career Training Center and we have an increase of 2.9% for electricity. Transportation we have a built-in escalator of 1.85% each year which is approximately $50,000, additional transportation for the career training center at the county $63K and our CCIU three year average for vo-tech is up over last year. Supplies and equipment combined is increasing by $15,513 or .7 of 1% Dues and Fees is decreasing, $200K of debt service interest goes away however we are increasing the contingency by $100K. Below that you can see that the principal increases by $205K however we are removing the $230K transfer to other funds we had in 15-16 to set up the healthcare fund. All of these increases = 1.68million or 3.32% increase.

2016-17 vs. 2015-16 Revenue 2016-17 Budget 2015-16 Budget Variance Local Revenue $35,164,696 $33,784,692 $1,380,004 Act 1 index $964,727 .5% Assessment Growth $144,000 EIT $200,000 Rental $30,000 All other $41,277 State Revenue $14,090,910 $13,530,110 $560,800 Retirement Subsidy $512,182 Social Security Subsidy $48,618 Federal Revenue $1,144,000 $0 Revenue From Other Sources $500,000 ($500,000) Prior year to set up benefits fund Totals $50,399,606 $48,958,802 $1,440,804 Fund Balance Appropriation Needed to balance revenues and expenditures $2,005,997 $1,763,000 $242,997 $52,405,603 $50,721,802 2016-2017 Total local revenue is $1,380,004 higher than the 2015-2016 budget. The Act 1 index produces $960K. We average about ½ of a percent of assessment growth per year, which produces approximately $144K. This year our EIT actual revenue has been much higher than budgeted, so we are increasing the budget amount by $200,000. We also are increasing rental revenue by $30,000 to account for new rentals. All other local revenues are increasing by approximately $40K. In total local revenues are increasing by $1,380,004. For now the only state revenue we are changing are the Retirement and Social Security Revenues. The retirement subsidy budget amount is increasing by $500K and social security is increasing by $48K. The Basic Education Subsidy, Special Education subsidy, and the Ready To Learn Block Grant are all budgeted at the 2014-2015 level. (The latest omnibus school code bill being debated indicates that our increase in these subsidies would be approximately $500K. No mention of Charter School funding changes as earlier discussed) No Change in budgeted Federal Funds at this time however ACCESS revenue is still being disputed and may decrease some time in the future.

Selected Local Revenue History Here we can see that our EIT tax revenue, the yellow bar, has grown since it’s recent low of $1.4 Million in 2010-2011 to just over $2 Million for 2014-2015. (we are budgeting 16-17 at this higher rate.) Delinquent tax revenue, shown in red, has remained fairly consistent. (We will be using the same budget number in 2016-2017 as we did in 15-16) Transfer tax, in blue has varied over the years so our 2016-2017 budget amount will stay the same as it is in 15-16. Investment income, the green line, has not grown much since the 2007-2008 year. We do anticipate higher earnings in 2016-2017 than we are experience now. This year, due to delayed State payments we were not able to invest larger amounts for a longer period of time thus our actual earnings will be below budget. We will budget the same amount in 16-17 as we did in 15-16. Also Interim Real Estate revenue, the purple line, will be budgeted at the same level as in 15-16.

Octorara Area School District This chart shows the Octorara Area School District adjusted Act 1 index since 2006. As you can see the index is slightly high this year than last year. (3% index raises approximately $960,000 in new revenue) Base Index 2.4% Adjusted Index 3%

State Revenues The only substantial growth we have seen over the past several years in the State funding was for the Retirement Subsidy Revenue, however that came with twice as much growth in the Retirement Expenditures side of the budget. This nets out to an increase in net expenditures. The rest of this chart shows that state funding has remained relatively flat over the past several years. In the Proposed Final Budget our Basic Ed Funding, Special Ed and RTL grants are all flat funded since 2014-15 however we now know that we will actually see an increase in these revenues by possibly as much as $500K for 16-17 As of now the actual distribution formula is the last part of the puzzle we need to know before we can be certain as to the final 2015-16 numbers and 2016-17 still needs to be part of an approved 16-17 state budget before we can be certain of the amount.

Salary History This chart shows the 2016-17 total salaries in comparison to the past 8 years of salaries, 2009 – 2010 still being the high point. The 2016 -17 salaries, as you can see are also below the high in 2009-2010. This is the budgeted amount in the proposed final budget. We do have budget reduction strategies that, if used could reduce the total salary and benefits by approximately $400,000. So our final budget may show lower total salaries.

Required Health Care Premium History July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June Total Claims 2007-08 125,662 155,158 136,697 72,382 314,496 142,374 154,855 156,865 191,785 153,187 105,242 100,415 1,809,118 2008-09 138,017 154,536 179,266 197,349 112,362 171,333 163,946 127,176 130,016 157,056 149,241 249,891 1,930,189 2009-10 210,312 199,979 387,660 269,845 233,779 327,650 173,159 166,326 177,709 173,201 183,685 214,261 2,717,566 2010-11 295,022 207,814 172,910 172,384 177,774 212,662 156,411 240,869 233,482 167,544 216,282 405,977 2,659,130 2011-12 159,715 353,869 173,042 181,337 188,531 185,511 179,597 190,868 202,832 171,487 132,966 240,458 2,360,212 2012-13 163,938 144,581 187,274 129,059 178,849 181,508 267,891 144,066 171,179 207,599 257,640 178,721 2,212,305 2013-14 205,665 179,340 154,368 505,937 174,481 332,976 296,403 280,773 222,406 211,312 177,848 106,350 2,848,040 2014-15 93,162 294,940 200,054 215,333 185,131 205,851 179,237 245,440 111,756 205,497 181,343 133,306 2,251,050 2015-16 179,727 207,470 144,268 190,019 123,943 122,495 163,562 301,443 136,640 Healthcare claims were a positive variance to budget in 2014-2015. Here you can see that total claims for 2014-2015, the second bottom row, were almost $600K lower than in the previous year. 2015-16 is trending below that high year of 13-14 also. The 2016-17 proposed final budget includes no increase in budgeted total Medical Benefits and a decrease in prescription budgeted amounts. (The most recent labor agreement includes cost savings in both of these budget items) Does not include Stop Loss Premiums, Admin Fees & IBNR

Claims History As you can see here the lower claims in 2014-2015 was a combination of low claim in July of 2014, no spikes during the year like we saw in October of 2013. We did have a small spike in total costs in February of 2016, show that we do have risk of self insurance.

Selected General Fund Expenditures % Growth As for our major expenditure areas here you can see that in 2014-2015 debt service, the yellow bar was slightly lower than it was in the past three years, due to the one time savings from refinancing. 2015-2016 actual will be much lower to 2014-2015 due to two different one time savings and 16-17 actual will be slightly lower than 13-14 due to one time savings but the level will go back up in the 17-18 year. The red bar, healthcare expenditures fairly close in size to the 14-15 actuals and 15-16 budget, however as you have already seen our actual expenditures in those years are below budget. The Blue bar, charter school tuitions, has been fairly consistent over the past 5 years. 2014-2015 was actually lower than in 2013-2014. We are budgeting at this lower level for 2016-2017. The Green Bar represents PSERS Retirement. As you can see it has been growing significantly over the past few years. In 2016-2017 we are looking at about a 16% increase.

PSERS Retirement Rate History & Projections Fiscal Year Rate 2008-09 4.76 – Actual 2009-10 4.78 – Actual 2010-11 5.64 – Actual 2011-12 8.65 –Actual 2012-13 12.36 – Actual 2013-14 16.93 – Actual 2014-15 21.40 – Actual 2015-16 25.84 – Actual 2016-17 30.03 – Actual 2017-18 32.04 – Projected The largest line item increase in the 2016-2017 budget is the increase in PSERS. As you can see here the employer contribution rate is increasing from 25.84% to 30.03%. This is a 16% increase in total PSERS Retirement expenditure dollars.

General Fund Budget Trends

Octorara Area School District Items to Consider: Tax Increase, 0% - 3% (3% in Proposed Final Budget) Budget Reduction Strategies $0 – $637,800 ($0 Reduction in Proposed Final Budget) State Funding Possible Increase of Approximately$500,000 (0% increase in Proposed Final Budget) What Do We Budget? So for next month, and ultimately for the final budget voted on in June, we need to consider the following items. First is the Act 1 Index. We passed a resolution last December to stay at or below the adjusted Act 1 Index. Octorara Area School District’s Act 1 index is 3.0%. This raises approximately $960,000 in new revenue. The final millage rate and any tax increase will need to be finalized. Second, we have been debating several budget reduction strategies. The Administration first provided a list of budget reductions totaling $5,390,000, we are now considering a list of budget reductions totaling $637,800. Also a final consideration is what to budget for State Funding (BEF, SEF and RTL) The proposed final budget has a 0% increase in the State funding however there is always the chance that a state budget will be passed before we finalize our budget and we can budget an increase.

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