1. Octorara Area School District
Budget Presentation
December 12, 2016

2. Octorara Area School District
Review Update Draft Budget
First we will review the Budget Results, then we will discuss what significant items we know about and how that will impact the Budget and finally we will take a look at the first draft of the budget.

3. Octorara Area School District
Review

4. 2015-16 Budget vs. Actual Budget Actual Variance % Revenue 48,958,802
49,218,057
259,255
100.53
Expense
50,721,802
48,569,103
2,152,699
95.76
Net
(1,763,000)
648,954
2,411,954
Total Local
33,784,692
34,287,634
502,942
Earned Income Tax
1,900,000
2,125,820
225,820
All Other Local Revenue
31,884,692
32,161,814
277,122
Total State
13,530,110
14,144,099
613,989
Rental and Sinking Fund
675,762
1,089,406
413,344
All Other State Revenue
12,854,348
13,054,692
200,645
Total Federal
1,144,000
786,324
(357,676)
Med Assist – ACCESS
200,000
13,287
(186,713)
Title I, II & III
944,000
773,037
(170,963)
Other Financial Sources
500,000
(500,000)
We ended fiscal year with an increase in the general fund balance of $648,954 as seen on Line three under the Actual column for the General Fund. The Revenue budget had a $259,255 positive variance,
Local revenue had a positive $502,942 variance mostly due to EIT revenue, at $225,820 above budget. All other local revenues combined for a total positive variance of $277,122.
State Revenues were above budget. Rental and sinking fund reimbursements were $413,344 above budget due to receiving approximately $600,000 reimbursement from prior years.
Federal Revenues were below budget Access was ($186,713) below budget. The total of Title I and II were also below budget by ($170,963)
The ($500,000) other financial sources was setup to be a wash with a corresponding transfer out to the medical internal service fund. We changed the way the medical fund works and neither this plug revenue or the corresponding transfer was needed.
The bottom line is a $259,255 variance in revenues. EIT revenue vaniance and the loss of the Federal Revenues have all been taken into consideration for the buget.

5. 2015-16 District Revenue Breakdown
This is a visual of where our revenues come from. As you can see 70%, the majority of our revenue was from local sources, 28% from State Revenues and 2% from Federal sources.

6. 2015-16 Local Revenue Breakdown
Of our local sources as you can see 87.34% came from Real Estate Taxes, 6.20% from Earned Income Taxes and a combined 6.46% comes from all other local sources

7. Selected Local Revenue History
This chart shows us the volutility of some of our local revenues.
Here we can see that our EIT tax revenue, the blue bar has grown since it’s recent low of $1.4 Million in to just over $2 Million for (we are budgeting at this higher rate that we saw in $2,150,000)
Delinquent tax revenue, shown in red, has remained fairly consistent. (We will be using the same budget number in , $750,000 as we have in the past)
Transfer tax, in green is higher than last year. We will be budgeting at this higher amount in ($290,000)
Investment income, is slightly lower in 15 – 16 than it was last year. We do anticipate investment income to be higher in with higher earning rates at the bank. (We are budgeting at our usual amount of $160,000 in 17-18)
Interim revenue was lower in than it was in We will be budgeting our usual amount in 2017 – 18 ($200,000)
All of this information is being considered in the revenue budget.

8. 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 overall spending.
We did see some minor growth in the over all Basic Education and Special Education funding over the prior year. Bond Reimbursement is much higher than in past years, due to the additional payout related to prior years. We will not be budgeting any growth for 2017 – 18 for now considering the current economic condition in Harrisburg.
We will have more information concerning State Funding next week

9. 2015-16 Expense Summary $19,066,458 $19,117,201 ($50,743) $10,557,957
Budget
Actual
Variance
Fav/(Unfav)
Salaries
$19,066,458
$19,117,201
($50,743)
retro salary paid in due to contract settlement ($190K) $139K savings in retirements/other
Benefits
$10,557,957
$10,150,775
$407,182
Med. $157K Prescription $126K
All other benefits $124K
Outside Services
$4,841,483
$4,540,881
$300,602
Special Education (IU Services)
Repairs/Maint. Services
$849,407
$837,635
$11,772
Trans/Ins/Tuit/Charter
$6,420,107
$6,507,126
($87,019)
Transportation
Supplies
$1,570,500
$1,266,613
$303,887
Instruction $50K SE $54K Maint $36K
Capital
$645,640
$659,679
($14,039)
Budgeted as Supplies coded as Capital
Dues/Fees/Interest
$3,023,313
$2,538,327
$484,986
Contingency $350K/Debt Service Int. $135K
Fund Trans/Principal
$3,746,937
$2,950,866
$796,071
Debt Service Principal $565K Transfer $231K
$50,721,802
$48,569,103
$2,152,699
Expenditures
In total we had a favorable variance of our expenditure budget.
Total salaries were over budget by a minimal amount however that included a retroactive salary payout that related to the school year. We also had some minor savings from the replacements of 3 employees with lower paid new employees.
Total benefits were about 4% lower than budget. The second half of the budget year included lower costs due to plan changes in Medical/prescription than budgeted.
Outside services were under spent mostly in the student services ares.
Transportation/Insurance/Tuition was mostly over budget due to Transportation. We had more special education van runs than budgeted for. We will be increasing the budget by more than the contracts 1.85% to account for this variance next year.
Supplies expenditure positive variances were seen in almost every area.
The dues and fees positive variance was from not needing to use the contingency of $350K and the decrease in the debt service interest of $135K from one time debt service savings
Finally in the debt principle area we had savings on the Principal of $565K and we had a $231K transfer not used that was a wash with the $500K revenue item we discussed earlier to be used with the benefits internal service fund. The debt service and not needing the contingency positive variances accounted for $1.3million of the $2.1million variance
In total we had a 2.1million dollar expense variance mostly due to debt service and one time savings and not needing to use the contingency.

10. Salary History
This chart shows the total salaries in comparison to the past 7 years of salaries, – 2010 still being the high point. The 2017 – 2018 salaries, as you will see are also below the high in

11. Required Health Care Premium History
July
Aug
Sept
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
June
Total Claims
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
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
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
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
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
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
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
179,727
207,470
144,268
190,019
123,943
122,495
163,562
301,443
136,640
209,614
146,308
193,101
2,118,588
Healthcare claims were a positive variance to budget in Here you can see that total claims for , the bottom row, were just a little lower than in the prior year. After the plan change and the settlement of the labor contract we have seen 18 less medical benefit contracts accounting for 71 less covered lives. (in the year we had 717 covered lives we now have 646 covered lives)
Does not include Stop Loss Premiums, Admin Fees & IBNR

12. Claims History
Here you can see that the total monthly claims since July of 2011 are trending slightly lower, however if you only look at the claims from July of 2015 you will see a gradual incline in the monthly claims.

13. Selected General Fund Expenditures
% Growth
As for our other major expenditure areas here you can see that in debt service, the yellow bar was slightly lower than it was in the past three years, due to the one time savings from refinancing we be slightly higher than due to the refinancing we completed this fall and what we will finish this winter. Over all debt service grew 28% from 08-09
The red bar, healthcare expenditures is lower than last year and fairly low compared to the last 5 years. Healthcare has grown 27% since 08-09
The Blue bar, charter school tuitions, has been fairly consistent over the past 5 years. Carter school tuition has grown 75% since 08-09
The Green Bar represents PSERS Retirement. As you can see it has been growing significantly over the past few years. Over all total retirement expense has grown by 443%

14. Octorara Area School District
Outlook

15. Projected Use of Fund Balance
Budgeted use of fund balance in approved budget is ($1,006,883) Anticipated use of fund balance (deficit) for was ($316,883) when the budget was approved Projections: Expenditures Total debt service savings: $585,738 Other expenditure savings: $633,814 Revenues Local Revenues: $198,817 State Revenues: ($168,780) Federal Revenues: ($316,319) New anticipated use of fund balance: ($73,613)
For the budget we had approved a use of $1 Million to balance the budget however we anticipated only needing $300K of fund balance by year end. However we do have some new net positive variances that will lower that use of fund balance.
Our debt service will now be $585K less than budget.
We still don’t anticipate needing our contingency of $350,000 plus some other miscellaneous expenditure projected savings (totalling $283,814)
Local revenues are projecting to be above budget by about 199K, a loss of 168K in state and $316K in federal results in a new anticipated use of fund balance of $73,613.

16. Octorara Area School District
Preliminary Budget

17. Octorara Area School District
Items to Consider:
Act 1 Index
Opt-out Resolution
Apply for Exceptions and Pass Preliminary Budget
State Funding – Budget no Increase in
Use of Fund Balance/Tax Increase/Budget Reductions
For the budget we have some major items to consider when working on the budget.
First is the Act 1 Index. For Octorara Area School district the index is 3.2%. This raises approximately $1,008,000 in new revenue. We also can apply for the retirement exception which will add an additional .6% of an increase or aproximately $189K in additional revenue. Or the Board can pass a resolution tonight stating that any millage increase approved will not exceed our Act 1 index of 3.2% If we don’t pass the resolution we will have to pass a preliminary budget.
State Funding will be budgeted at rates, at this point we do not recommend increases in this revenue.
Also, as we will see we are projecting a deficit in and we will have to decide how that deficit is funded, through the use of fund balance, a millage increase, \budget reductions or a combination of these strategies.

18. Octorara Area School District
This chart shows the Octorara Area School District adjusted Act 1 index since As you can see the index is slightly high this year than last year.
Again the 3.2% index raises approximately $1,008,000 in new revenue.
Base Index 3%

19. Millage Change 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
08-09 to 16-17
Growth
Avon Grove SD
23.82
24.72
26.18
26.75
27.50
28.16
29.04
5.22
21.91%
Coatesville Area SD
26.50
28.49
29.49
30.11
31.19
32.00
32.77
33.46
6.96
26.26%
Downingtown Area SD
24.85
25.47
26.21
26.73
27.18
2.33
9.38%
Great Valley SD
17.92
18.22
18.50
19.03
19.59
20.00
20.32
20.80
2.88
16.07%
Kennett Consolidated SD
23.14
23.95
24.78
25.73
27.45
28.14
28.60
29.24
6.10
26.36%
Octorara Area SD
31.61
32.23
35.12
35.28
36.66
37.51
38.63
7.02
22.21%
Owen J Roberts SD
24.89
25.50
26.17
26.82
27.27
27.74
28.28
28.83
29.63
4.74
19.04%
Oxford Area SD
28.68
29.55
30.05
30.23
30.54
30.84
2.16
7.53%
Phoenixville Area SD
25.89
26.39
27.06
27.78
28.24
28.64
28.89
29.16
3.27
12.63%
Tredyffrin-Easttown SD
16.97
17.47
17.97
18.65
19.26
20.22
20.96
21.74
4.77
28.11%
Unionville-Chadds Ford SD
22.53
23.58
24.26
24.53
25.18
26.79
26.92
27.69
5.16
22.90%
West Chester Area SD
16.85
17.85
18.36
18.67
19.70
19.79
20.10
3.25
19.29%
Percent Change
Avg. Change
0.0%
3.8%
5.9%
2.2%
2.8%
2.4%
3.1%
3.6%
3.5%
2.1%
2.6%
5.1%
3.3%
2.5%
2.9%
2.0%
1.7%
1.4%
1.5%
1.6%
5.4%
3.9%
2.7%
3.2%
9.0%
0.5%
2.3%
3.0%
1.9%
14.0%
0.6%
1.0%
0.9%
4.4%
3.7%
4.5%
4.7%
1.1%
4.1%
6.7%
5.5%
Here we see an 8 year Growth rate in the millage and the average annual change in the millage rate.

20. Revenue & Expense History
Revenue
$ 42,785,748
$ 43,362,931
$ 45,532,886
$ 44,607,883
$ 46,117,967
$ 46,800,938
$ 47,146,646
$ 49,218,122
Expense
$ 40,737,098
$ 43,362,816
$ 44,456,385
$ 44,300,642
$ 44,276,649
$ 46,880,710
$ 47,388,620
$ 48,569,172
Surplus / (Deficit)
$ 2,048,650 $
$ 1,076,501
$ ,241
$ 1,841,318
$ (79,772)
$ (241,974)
$648,950
Mills
31.61 / 27.37
32.23 / 27.68
35.12 / 28.13
35.28 / 28.37
36.66 / 27.49
36.66 / 27.71
36.66 / 26.43
37.51 / 27.20
Here we see the results of the General Fund over the years since Here you can see that we experience surpluses from through In both and we have deficits while the millage rates stay the same. In we had a surplus of $649K however that was mostly due to debt service savings and one time revenues, without we would have had a deficit. For we are anticipating another deficit, much lower than budgeted however.

21. PSERS Retirement Rate History
Fiscal Year
Rate
4.76 – Actual
4.78 – Actual
5.64 – Actual
8.65 – Actual
12.36 – Actual
16.93 – Actual
21.40 – Actual
25.84 – Actual
30.03 – Actual
Certified
The largest line item increase that we will see in the budget is the increase in PSERS. As you can see here the employer contribution rate is increasing from 30.03% to 32.57%. This is a 8.5% increase in total PSERS Retirement expenditure dollars.

22. Claims History 2015 – 2016 & 1st Quarter 2016 - 2017
We saw earlier that claims over a period of time reaching back to 2011 have been trending lower however for budgeting we need to look at what the claims are doing in the immediate past. Since July of 2015 our claims have been rising and as you can see in the first quarter of budget we are averaging higher than last year. Our first look at benefits suggests a 9% increase. Just to note in we budgeted for no increase in medical and a decrease in prescription as of right now we are close to budget in these areas, slightly above budget in prescription but below in medical.

23. 2016-17 vs. 2017-18 Expense Summary 2016-17 Budget 2017-18 Budget
Variance
Salaries
$19,435,540
$19,928,887
$493,347
One new position $37K Waived medical benefits $75K All other salary increases $382K or 2%
Benefits
$11,182,677
$12,032,018
$849,341
Retirement Rate 30.03% vs % $627K Increase in med/presc 9% with ($75K ) moved to salary
Outside Services
$5,016,296
$5,003,848
($12,448)
Repairs/Rentals/Maint. Srvs.
$863,089
$857,105
($5,984)
Trans/Ins/Tuit/Charter
$6,582,210
$7,006,038
$423,828
Transportation increase 1.85%, $206K
CCIU Vo-Tech $62K Charter School $61K
APS/PPRI $40K all others 54K .8%
Supplies
$1,553,860
$1,574,552
$20,692
Software, fuel,
Capital
$625,230
$571,740
($53,490)
Dues/Fees/Interest
$2,912,068
$2,773,487
($138,581)
Debt Service Interest ($139K)
Fund Trans/Principal
$3,722,500
$3,857,500
$135,000
Debt Service Principal $135K
Totals
$51,893,470
$53,605,175
$1,711,705
Total Expenditures are $53,605,175 for Total Salary increases are $493,347 which is a 2.54% increase in total salaires. This does include one new secretarial position and the reclassification for $75K from benefits to salary for waived bvenefits. Salary increases on current budgeted salaries is 2%
The outside or professional technical services budgets and the repairs and maintenance services budgets are staying relatively the same.
Contracted transportation is increasing by 1.85% however to catchup the budget to actual, which has been over budget over the past two year this line item is increasing by approximately $200K. We are also budgeting for higher CCIU vocational educational tuition, charter school tuition and approved private school tuitions.
Supplies and equipment combined is decreasing by $32,798 or approximately (1.51%)
Dues and fees are declining by ($138K) however debt service is increasing by $135K This is just a swing in the amount of debt service interest truing into debt service principal.
All of these increases = 1.7million or 3.3% increase.

24. 2016-17 vs. 2017-18 Revenue 2016-17 Budget 2017-18 Budget Variance
Local Revenue
$35,228,076
$36,678,206
$1,450,130
Act 1 index $1,008,000
.48% Assessment Growth $149,098
Rentals $45K
Tuition $50K
All other $198K
State Revenue
$14,514,511
$14,824,584
$310,073
Retirement Subsidy $213K Social Security Subsidy $20K Transportation $100K Special Ed ($50K) Vocational Ed 24K
Federal Revenue
Title I ($163K) Title II ($11K) Title III $3K ACCESS ($105K)
$1,144,000
$868,100
($275,900)
Totals
$50,886,587
$52,370,890
$1,484,303
Fund Balance Appropriation
Needed to balance revenues and expenditures
$1,006,883
$1,234,285
$51,893,470
$53,605,175
Total local revenue is $1,450,130 higher than the budget. The Act 1 index produces $1,008,000. We average about ½ of a percent of assessment growth per year, which produces approximately $149K. As we saw earlier tonight our EIT actual revenue has been higher than budgeted so we are increasing the budget amount by $50K. We also are increasing rental revenue by $45K and tuition by $50K for the CTE programs. All other local revenues are increasing by approximately $198K. In total local revenues are increasing by $1,450,130.
For now the only state revenue we are changing are the Retirement and Social Security Revenues. The retirement subsidy budget amount is increasing by $213K and social security is increasing by $20K. The Basic Education Subsidy, and the Ready To Learn Block Grant are all budgeted at the level. Special Education subsidy is being lowered to estimated amount. We are waiting for more information concerning these revenues. (State projections indicate a major variance in state budgeted revenues vs. year to date actuals and may impact these revenues in the future.)
Federal Revenues are being reduced by $275K to account for the decline in the Title I and II program grants and the reimbursement rates in ACCESS.
Use of fund balance including these revenues is $1,234,285.

25. 2017-18 Final General Fund Budget Summary
Total Revenues
$52,370,890
General Fund Budget Document
Total Expenditures
$53,605,175
Deficit
($1,234,285)
Anticipated Budget Results
Budget Contingency
$350,000
Debt Service Savings
$307,000
Anticipated Use of Fund Balance
($577,285)
With a 3.2% increase our General Fund budget will show total revenues of $52.4 Million in revenues and $53.6 Million in expenditures with a budgeted deficit of $1,234,285. However we do not anticipate having a $1.2 million deficit since we know that we will have approximately $307K in one time debt service savings and we do not anticipate using the budget contingency resulting in a deficit of $577,285.

26. Tax Revenue
This chart shows us the effect of a 0% to 3.2% increase in the millage rate. Our 2017 – 2018 budget includes an additional $149,098 in local real estate tax revenue from the estimated annual growth of approximately .5 of 1% thus even with a 0% increase we should see an additional $149,098 in tax revenue. A 1.6% increase raises an additional $653,098 in revenue and the full 3.2% raises approximately $1,157,098. The far right column shows the amount of fund balance needed to balance the budget that corresponds to the 0% increase in the millage rate. For example, if we have a 0% millage rate increase we will have to budget $2,242,258 of fund balance to balance. If we have a 3.2% increase then we will have to budget $1,234,285 of fund balance to balance the budget.

27. Questions
That brings us to what we have to do tonight. We do have the options of 1. Passing a resolution to stay at or below the Act 1 index, 3.2% max increase Pass a resolution to authorize the Administration to display a proposed preliminary budget and then vote on that budget at a January Board meeting.