1. Octorara Area School District
Budget Presentation
December 14, 2015

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 now 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. 2014-15 Budget vs. Actual Budget Actual Variance % Revenue 47,704,757
47,146,646
(558,111)
98.83
Expense
49,210,898
47,388,620
(1,822,278)
96.30
Net
(1,506,141)
(241,974)
1,264,167
Total Local
32,885,656
33,262,674
377,018
Earned Income
1,870,000
2,093,723
223,723
All Other Local Revenue
31,015,656
31,168,951
153,295
Total State
13,150,829
12,922,293
(228,536)
Ready to Learn Grant
426,021
248,700
(177,321)
All Other State Revenue
724,000
685,804
(51,215)
Total Federal
1,168,272
961,679
(206,593)
Med Assist – ACCESS Reimb.
275,000
57,074
(217,926)
Title I, II & III
893,272
904,605
11,333
Other Financial Sources
500,000
(500,000)
We ended fiscal year General Fund with a ($241,974) deficit as seen on Line three under tha Actual column for the General Fund. The Revenue budget had a $558,000 variance, however $500,000 of that variance was from “other financial sources” a line item added to the budget that would allow the district to transfer funds into a new healthcare fund to account for medical benefit costs. This revenue item was a plug number only to balance the budget against a $500,000. As for what we actually expected to receive we are $58,000 (.12 of 1%)
Local revenue had a positive $377,018 variance mostly due to EIT revenue, at $223,723 above budget. All other local revenues combined for a total positive variance of $153,295.
State Revenues were below budget. The final ready to learn grant was $177,321 less than budgeted. The rest of the other state revenues were slightly under budget by $51 thousand.
Federal Revenues were below budget due to ACCESS.
Without the $500,000 unexpected revenue our variance was only $58,111. We will consider these variance in the Revenue Budget.

5. 2014-15 District Revenue Breakdown
This is a visual of where our revenues come from. As you can see 71%, the majority of our revenue was from local sources, 27% from State Revenues and 2% from Federal sources.

6. 2014-15 Local Revenue Breakdown
Of our local sources as you can see 87.12% came from Real Estate Taxes, 6.29% from Earned Income Taxes and a combined 6.5% from all other local taxes

7. Selected Local Revenue History
Here we can see that our EIT tax revenu, the yellow bar,e 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)
Delinquent tax revenue, shown in red, has remained fairly consistent. (We will be using the same budget number in )
Transfer tax, in blue has varied over the years so our budget amount will stay the same.
Investment income, the green line, has not grown much since the year. We do anticipate a higher earning rate in than we experience now, however our cash balance will be lower than last year so we will budget the same amount in as we did in
Also Interim Real Estate revenue has grown over last year.
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.
The rest of this chart shows that state funding has remained relatively flat over the past several years budget will be same as except for the Retirement and Social Security subsidies.

9. Expense Summary
Budget
Actual
Variance
Fav/(Unfav)
Salaries
$19,152,915
$18,649,783
503,132
Admin. $50K/Professional $250K/Aides 140K/All Other $60K
Benefits
$9,565,473
$8,782,412
783,061
Med. Pres. Dental & Vis. $560K
Ret. & SS. $220K
Outside Services
$4,322,258
$4,750,863
(428,605)
Special Education (IU Services)
Repairs/Maint. Services
$797,375
$793,160
4,215
Trans/Ins/Tuit/Charter
$6,156,606
$6,376,445
(219,839)
Transportation ($213K)
Supplies
$1,540,379
$1,384,067
156,312
Capital
$640,684
$722,054
(81,370)
Budgeted as Supplies coded as Capital
Dues/Fees/Interest
$3,109,608
$2,799,836
309,772
Contingency $250K/Debt Service Int. $95K
Fund Trans/Principal
$3,925,600
$3,130,000
795,600
Debt Service Principal $290K Transfer $500K
$49,210,898
$47,388,620
1,822,278
In total we under spent our expenditure budget by $1,822,278.
In Salaries we had a positive variance of $503,132 we had two new administrators hired during the year both for lower salaries that what was budgeted for their predecessors.
Security Salary of approximately $90K was budgeted as salary but was spent in Outside Services.
Also, retirements and temporarily unfilled positions of Professional Employees and Aides accounted for the majority of the rest of the positive variance.
In the benefits area, we experience a good year in the Medical claims. Total claims were about $600K less than in the previous year. To a lesser degree we had a positive variance in both retirement and social security expenditures from the under spent salary items. Total benefit positive variance was $783K
Outside services were overspent by $428K. This was a combination of the 1. security personnel service $90K 2. Special Ed. Srvs. $300K 3. Tax Collection (as the EIT and Delinquent taxes are higher than the budget the cost to collect is also higher)
Transportation/Insurance/Tuition was mostly due to Transportation. We had more special educaiton van runs than budgeted for
Supplies and capital combined had a positive variance of $75K. Many items are budgeted as a supply and purchased as a capital item when the purchase order is reviewed.
We also had positive variances in the contingency area, we budgeted $250K in contingence however we didn’t use it, also our refinancing of older debt saved debt service interest.
Finally in the debt principle area we had savings on the Principal of $290K and we had that $500K transfer not used that was a wash with the $500K revenue item we discussed earlier.
All of this nets to a $1,822,278 positive variance in the expenditure budget.

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 2016 – 2017 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
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
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
Healthcare claims were a positive variance to budget in Here you can see that total claims for , the bottom row, were almost $600K lower than in the previous year.
Does not include Stop Loss Premiums, Admin Fees & IBNR

12. Claims History
As you can see here the lower claims in was a combination of low claim in July of 2014, no spikes during the year like we saw in October of 2013.
Currently we are trending about 10% lower than last year ($803K vs $721K through October)

13. Selected General Fund Expenditures
% Growth
As for our 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 will be much lower, we be slightly lower than but the level will go back up in the year.
The red bar, healthcare expenditures is lower than last year and fairly low compared to the last 5 years.
The Blue bar, charter school tuitions, has been fairly consistent over the past 5 years was actually lower than in We are budgeting at this lower level for
The Green Bar represents PSERS Retirement. As you can see it has been growing significantly over the past few years. As much as 27% increase in In we are looking at about a 13% increase.

14. Octorara Area School District
Outlook

15. Projected Variances from Approved Budget
Revenue
Budget
Estimate
Variance
Local - EIT
$1,900,000
$2,100,000
$200,000
State - Basic Ed & Special Ed
$7,016,381 ?
Federal - ACCESS
$50,000
$(150,000)
Expense
Debt Service
Bond Refinancing–Total Savings $763K
$6,154,058
$5,391,121
$762,937
Contingency
$250,000
For the budget we approved a use of $1.76 Million to balance the budget. However we do have some significant positive variances that will lower that use of fund balance. In our local revenues we are projecting to be about $200,000 over budget netted against ACCESS where we expect to be below budget.
Our debt service will be $763K less than budget.
If we don’t need to use the contingency of $250K that will reduce the need for fund balance. These items combined may reduce our needed use of fund balance by over $1Milliion, we may only need $760,000K of fund balance
We also do not know how much the final state subsidy may be. Any amount over the subsidy will reduce the need for fund balance to close out (The most current proposal of Basic Ed funding and Special Ed funding is an increase of approximately $485K for Octorara)

16. Octorara Area School District
Preliminary Budget

17. Octorara Area School District
Items to Consider:
Act 1 Index
Opt-out Resolution
Act 1 Time-line – Apply for Exceptions
State Funding – &
Retirement Rates
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 3.0%. This raises approximately $960,000 in new revenue.
Act 1 Exceptions. We have estimated that we are eligible for both the retirement exception and to a much lesser degree the special education exception. Combined both of these exceptions would raise approximately $242,000 or .99 of 1% index. (combined the rate increase would be approximately 3.99%)
Also, for now we still do not know what our state subsidy total is. BEF, SEF and all other state grants are unknown (last estimate showed that would could expect an additional $485K)
The largest one budget line item increase this year is the PSERS Expenditure. The Employer contribution rate is increasing from 25.84% to 29.2% which is an approximately 13% increase in the Retirement Rate.

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.
(3% index raises approximately $960,000 in new revenue)
Base Index 2.4%

19. This chart shows the rebalancing of the tax rate for 2016-2017
This chart shows the rebalancing of the tax rate for The Lancaster rate rises and the Chester County rate remains the same.

20. This chart shows the millage rate for both Chester and Lancaster County at the 3.0% index.

21. Millage Change 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
08-09 to 14-15
Growth
Avon Grove SD
23.82
24.72
26.18
26.75
27.50
28.16
3.68
15.4%
Coatesville Area SD
26.50
28.49
29.49
30.11
31.19
32.00
33.64
6.30
24.5%
Downingtown Area SD
24.85
25.47
26.21
26.73
27.18
3.13
13.0%
Great Valley SD
17.92
18.22
18.50
19.03
19.59
20.00
20.32
2.56
14.7%
Kennett Consolidated SD
23.14
23.95
24.78
25.73
27.45
28.14
28.60
6.19
28.2%
Octorara Area SD
31.61
32.23
35.12
35.28
36.66
37.51
5.05
16.0%
Owen J Roberts SD
24.89
25.50
26.17
26.82
27.27
27.74
28.28
28.83
4.32
18.0%
Oxford Area SD
28.68
29.55
30.05
30.23
30.54
5.07
20.2%
Phoenixville Area SD
25.89
26.39
27.06
27.78
28.24
28.64
28.89
4.45
18.2%
Tredyffrin-Easttown SD
16.97
17.47
17.97
18.65
19.26
20.22
20.96
3.96
24.3%
Unionville-Chadds Ford SD
22.53
23.58
24.26
24.53
25.18
26.79
26.92
5.22
24.2%
West Chester Area SD
16.85
17.85
18.36
18.67
19.70
19.79
3.91
24.8%
Percent Change
Avg. Change
0.0%
3.8%
5.9%
2.2%
2.8%
2.4%
2.1%
3.1%
3.6%
3.5%
2.6%
5.1%
3.4%
3.3%
2.5%
2.9%
2.0%
1.7%
1.6%
1.5%
1.9%
5.4%
3.9%
2.7%
9.0%
0.5%
2.3%
14.0%
3.0%
0.6%
1.0%
1.4%
0.9%
4.4%
3.2%
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.

22. 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
Expense
$ 40,737,098
$ 43,362,816
$ 44,456,385
$ 44,300,642
$ 44,276,649
$ 46,880,710
$ 47,388,620
Surplus / (Deficit)
$ 2,048,650 $
$ 1,076,501
$ ,241
$ 1,841,318
$ (79,772)
$ (241,974)
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
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. For we are expecting another deficit, much lower than budgeted but most likely higher than in ($1,760,000 use of fund balance $760,000 debt service savings, $250,000 contingency $50,000 in revenue = $700,000)(Fund balance as of June 30th 2015 is $8,014,324

23. PSERS Retirement Rate History & Projections
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
29.20 – Projected
30.62 – Projected
The largest line item increase in the budget is the increase in PSERS. As you can see here the employer contribution rate is increasing from 25.84% to 29.20%. This is a 13% increase in total PSERS Retirement expenditure dollars.

24. 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 per year)
Benefits
$11,363,777
$10,557,957
$805,820
Retirement Rate % vs. 29.2% $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 Total Salary increases are $662,383 which is a 3.47% increase. If you recall the salaries were budgeted at the level. This budgeted amount in represents a two year increase.
Benefits in total have a $805K increase over Medical benefits are budgeted with a 6% increase over 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 using an overall 6% increase for the total budget amount is staying at the 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 $19,500 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 to set up the healthcare fund.
All of these increases = 1.68million or 3.32% increase.

25. 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
Total local revenue is $1,380,004 higher than the budget. The Act 1 index produces $960K. We average about ½ of a percent of assessment growth per year, which produces approximately $144K. As we saw earlier tonight our EIT actual revenue has been much higher than budgeted. 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 level. (The latest omnibus school code bill being debated indicates that our increase in these subsidies would be approximately $485K. 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.
(Use of fund balance = $2,005,997 however that includes $380K debt service we will not have to pay this year, $350K in contingency we hope to not need and approximately $485K in state subsidy assuming the latest numbers work out. That brings us down to a use of fund balance of $800K

26. 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% 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. Or 3. do nothing tonight, have a special meeting on January 4th and if you authorize us to display a proposed preliminary budget you will need to vote on that budget by January 27th, the deadline School Boards must adopt their preliminary budgets which means that you will have to have another special meeting before on the 25th. (because of the 20 day display requirement)