1. Gateway School District General Fund Budget Preliminary Budget Information for the 2016-2017 Fiscal Year As of February 22, 2016

2. Summary of Preliminary Total Revenues for 2016-2017  Preliminary Total Revenues for the 2016-2017 fiscal year of $71,174,000.  (***Preliminary Total Revenues currently DO NOT include a real estate tax increase for the 2016-2017 fiscal year.***)  Increase of $409,000 or 0.58% over the 2015- 2016 fiscal year budgeted Total Revenues.

3. Summary of Preliminary Total Expenditures for 2016-2017  Preliminary Total Expenditures for the 2016- 2017 fiscal year of $71,711,000.  Increase of $946,000 or 1.34% over the 2015-2016 fiscal year budgeted Total Expenditures.

4. Net Preliminary Budgetary Shortfall or Deficit for 2016-2017  Increase in Revenues of $409,000 +  Increase in Expenditures of $946,000 =  Net Preliminary Total REMAINING Budget Shortfall or Deficit for 16-17 of ($537,000) WITHOUT a.2334 mill real estate tax increase.

5. State Budget for 15-16 & 16-17  An absolute mess in Harrisburg!  “Pennsylvania now faces a $2 billion budget deficit,” Governor Tom Wolf.  Governor Wolf is a supporter of K-12 school district funding in Harrisburg – through increased taxes!  The two sides in Harrisburg are supposedly further apart now then they were last Fall.

6. Partial State Budget for 15-16  8-Course Meal or A La Carte!  Governor Wolf utilized the line item veto to approve a partial State Budget.  No specific funding formula in place so the Governor utilized an alternative distribution method to distribute partial funds to the school districts.  BEF & RTLBG amount or amounts?

7. BEF & RTLBG for 15-16  BEF = Basic Education Funding.  RTLBG = Ready To Learn Block Grant.  Both are combined in the State’s Excel Spreadsheets – Why?  Governor’s Proposal of $350 million to be distributed to school districts for both line items.  GSD: 15-16 combined increase of $434,401 – ?  There are also increases of $377 million and $158 million being proposed for distribution to school districts in 15-16.  Difficult to know what we are actually receiving in 15-16!

8. Debt Service Subsidy  State PlanCon Program for school building construction and renovations.  NO funding for the program is currently in the partial 15- 16 State Budget.  $306 million in PlanCon funds currently not in the partial 15-16 State Budget.  A timing issue or the end of the Program?  $540,000 budgeted by the District in the 15-16 & 16-17 General Fund Budget.  District should continue to be reimbursed!

9. Impacts of Budget Impasse  When will we receive the balance of GSD’s State subsidies for 15-16?  Spend down Fund Balance!  Future State impact on State Budgets?  Timing of the State revenue receipts?  Borrowing in between District fiscal years until real estate tax revenues are received?

10. Proposed State Budget for 16-17  BEF, RTLBG, & SEF for 16-17 all build on the school districts receiving the full amounts as budgeted from the State for 15-16.  How realistic is this?  We need a completed State Budget for 15-16 to properly budget estimated State subsidy amounts for 16-17.

11. Prior Late State Budgets  The 1970-71 State Budget was not approved until March 6, 1971 after enactment of the first State income tax.  The all-time record goes back to the 1955-56 State Budget which was not approved until June 1,1956 – a mere 336 days after the deadline.  2015-16 State Budget approved on ????  (15-16 State Budget is 237 days late as of the close of business on 2/22/16.)

12. What do we do now?  Unfortunately, we need to continue to wait and see what happens next in Harrisburg.  Nothing is happening now in Harrisburg!  The State Senate & House of Representatives are now adjourned until March 14, 2016 – No urgency at all!  We do need to continue to develop, discuss, and adjust the District’s 16-17 Budget.

13. Two Significant Issues Impacting the Budget for 2016-2017  State Revenues are in Question primarily due to no full State Budget approved for the 15-16 fiscal year & funding questions part of a new State Budget proposed for the 16-17 fiscal year.  Net Expenditures are Increasing primarily due to an Increase in the Required Employer PSERS contribution.

14. Inclusion of Proposed State Budget Increases for 15-16 & 16-17 - ???? STATEINCREASES SUBSIDYDISTRICTGOV JANUARY PAGOV FEBRUARY PA CATEGORYBUDGET 15-16 BUDGET 16-17 BEF$151,321$14,778$289,253$271,893 RTLBG$0$145,148 $0 SEF$85,070$46,109$79,749$79,530 SUBTOTALS$236,391$206,035$514,150$351,423

15. Inclusion of 25% of Proposed State Budget Increases for 2016-2017  Proposed Total Increase of $271,893 in Basic Education Subsidy & RTLBG. (25% = $67,973)  Proposed Total Increase of $79,530 in Special Education Subsidy. (25% = $19,883)  ***District will include 25% or $87,856 of the above increases (100% = $351,423) in the16-17 Budget.  If the increases are not received from the State, the amounts will be taken from the Fund Balance.***

16. Proposed Charter School Changes  Reduction in the tuition expenditure payments paid by the District to cyber charter schools for the 2016-2017 fiscal year - ?  Implement charter school special education funding formula - ?  Change to cyber charter rate calculation with additional deductions - ?  Make pension “double-dip” permanent.  Require an annual reconciliation and audit of expenditures & require refunds of excess tuition paid back to the school districts.

17. Proposed State Tax Increases and New State Taxes Per Governor Wolf  Increase the State’s Personal Income Tax from 3.07% to 3.40%.  Sales Tax Base expansion to basic cable, movie tickets, and digital downloads.  Increase the State’s Cigarette Tax from $1.60 per pack to $2.60 per pack.  Other tobacco Products tax at 40%.  Create a New Natural Gas Severance Tax of 6.5% with Impact Fee Credit.  Increase the State’s Bank Shares Tax from.89% to.99%.  Insurance Premiums Tax surcharge for P+C and Fire of.5%.  State Gaming Promotional Play tax at 8%.

18. PA Pension Reform Changes for 2016-2017  No direct relief projected for school districts.  At the State level, looking to create restricted accounts for PSERS obligations to remove them from the State General Fund.  Reduce investment management service fees.  Current plan management fees and associated income – “You get what you pay for.”  For $482 million in investment fees, PSERS earned an additional $1.27 billion net of the fees above the index return. A very impressive ROI!

19. PA Pension Impact Projected for 2016-2017  NO expected reduction in the projected 2016-2017 fiscal year employer contribution rate of 30.03%.  Increase of 4.19% (from 25.84% to 30.03%) in required employer retirement benefit expenditures to PSERS.  Current net effect (Increase in Expenditures of $1,519,030 Less Increase in State 50% Reimbursement Subsidy of $759,515) in the 2016-2017 fiscal year Preliminary Budget is an increase in pension expenditures of $759,515 to PSERS.

20. Projection of Ending Total Fund Balance at 6/30/16 for 2015-2016  Beginning Fund Balance as of 7/1/15 $ 9,350,720  Less: 1. Fund Balance to Balance 15-16 Budget ($ 574,000)  2. P/Y Real Estate Tax Refunds ($ 67,646)  3. C/Y Real Estate Tax Refunds ($ 272,353)  4. Pay-off Technology Loan Prior to 6/30/16 ($ 79,011)  5. Other Expenditures Greater than Budget ($To Be Determined)  Add: 1. IRS Fuel Credit for 2015 Propane Utilization $ 90,148 2. FRC&TC Refund from 14-15 $ 108,637 2. FRC&TC Refund from 14-15 $ 108,637  3. Other Revenues Greater than Budget $ To Be Determined   Net Projected Decrease for 2015-2016 Fiscal Year ($ 794,225)  (Note: It is very possible this # will actually be greater or less!)  Projected Ending Fund Balance at 6/30/16 $ 8,556,495

21. Composition of Projected Ending Fund Balance at 6/30/16 for 2015-2016  Unassigned Fund Balance $2,235,284  Nonspendable Fund Balance $ 653,697  Committed Fund Balance $5,667,514  Projected Total Fund Balance $8,556,495

22. Components of Fund Balance  Unassigned Fund Balance: Portion that is immediately available to be utilized for identified purposes such as balancing the Budget & making transfers to other funds.  Nonspendable Fund Balance: Portion that offsets the amount of Prepaid Expenditures on the District’s balance sheet & is not available for expenditure.  Committed Fund Balance: Portion that is not immediately available due to official designation by the Board for specific purposes through a formal Board resolution. Can be designated by the Board for different purposes or classified back to Unassigned Fund Balance through an additional formal Board resolution. Designations Currently Include: 1. Future employer health insurance increases; 2. Future employer pension cost increases; & 3. Future capital repair project expenditures for District school buildings.

23. Composition of Committed Fund Balance at 6/30/16 DATE DESIGNATEDCOMMITTED BY THE BOARDDESCRIPTION OF DESIGNATION AMOUNTS 12/13/2006FUTURE HEALTH CARE COST INCREASES $ 891,597.00 3/26/2008FUTURE HEALTH CARE COST INCREASES $ 1,327,578.00 3/26/2008FUTURE PENSION COST INCREASES $ 1,327,579.00 3/25/2009CSE CONSTRUCTION PROJECT $ 120,760.12 2/19/2014GHS ROOF REPAIRS $ 1,000,000.00 2/19/2014FUTURE PENSION COST INCREASES $ 1,000,000.00 TOTAL COMMITTED BALANCE AT 6/30/16 $ 5,667,514.12

24. Projection of Total Fund Balance at 6/30/16 for 2016-2017  Projected Total Fund Balance as of 7/1/16 $ 8,556,495  Less: 1. Projected Utilization to Balance the ($ 537,000)  2016-2017 fiscal year Budget.  2. Transfer of Fund Balance to Capital ($ 225,000)  Reserve Fund for Capital Projects.  Projected Total Fund Balance as of 6/30/17 $ 7,794,495  The Projected Total Ending Fund Balance Represents 10.87% of the Preliminary 2016-2017 fiscal year General Fund Budget.  (NOTE: The Unassigned Fund Balance portion of the Total Ending Fund Balance is projected to be 3.12% of the 2016-2017 fiscal year budgeted expenditures which is in compliance with 24 PS 6-688 or less than 8% in a fiscal year when the real estate tax millage rate is increased by the District.)

25. Budget Process for 2016-2017  A not to exceed Index (2.9%) resolution was previously adopted by the Board on December 7, 2015 for the 2016-2017 fiscal year.  Thus, referendum exceptions have not been requested and will not be utilized by the District for the 2016-2017 fiscal year to further increase the millage rate above the 2.9% Index rate. 2.9% Index = Maximum.5604 mills increase.  The Proposed Final 2016-2017 General Fund Budget will be adopted by the Board on May 17, 2016. The Budget will be displayed via the PDE-2028 form on the District’s website at www.gatewayk12.org www.gatewayk12.org  Various summary and detailed Excel spread sheets are also displayed on the District’s website at www.gatewayk12.org in three parts in.pdf files. www.gatewayk12.org  Thus, the Pre-Act 1 budget timeline will continue to be followed by the District through final Budget adoption by the Board scheduled on June 21, 2016.  Additional Budget & Finance Committee Meetings will be scheduled in March, April, May, and June 2016 to assist in discussing and finalizing the District’s 16-17 Budget.