1. Octorara Area School District
Tonight you are being asked to approve our general fund budget for the school year.
You are also being asked to pass a resolution setting mill rates for , mills for Chester County and mills for Lancaster County
as well as passing a resolution authorizing homestead and farmstead tax exclusions for participating property owners.
Budget Presentation
June 18, 2018

2. 2018-19 Final General Fund Budget Summary as of December 2017
Total Revenues
$53,279,263
General Fund Budget Document
Total Expenditures
$55,220,744
Deficit
($1,941,481)
Anticipated Budget Results
Budget Contingency
$350,000
Debt Service Savings
$337,681
Anticipated Use of Fund Balance
($1,253,800)
We started the budget process in early October preparing the first draft for Board review at the December Board meeting. At that time we showed total expenditures of $55,220,744 and revenues available to us in the amount of $53,279,263 which included a full Act 1 tax increase of 3% in tax revenues. This resulted in a deficit of $1.9 million.
We also discussed what we anticipated the actual deficit would be and the use of fund balance to balance the year. We include $350 thousand in budget contingency only to be used in emergency and we have some one time savings debt service refinancing savings so we were anticipating having a $1.25 million deficit.

3. Changes since December
Salary and benefit savings from retirements entered into the budget
Certified PSERS rate lower than budgeted in December
Inclusion of state revenue
Lower overall mainteance costs from outsourcing some services
Reduced contracted services costs for the transportation contract
Reduction of the proposed real estate tax revenue overall amount from 3.0% to 2.4%
Since December we have discussed the budget at most Board meetings, Board workshops and at many finance meetings.
We were able to make changes since December to our budget. We have included salary and benefit savings from known retirements.
Our Certified PSERS (Pennsylvania School employees Retirement System) rate ended up being lower than we had originally budgeted for.
This year we have more confidence in the amount of state revenue increase so we decided to add that amount into the budget.
We worked on out sourcing lawn care services, that will intimately reduce Maintenance costs.
A new transportation contract was approved lowing our estimated cost increase for
Also the Board of Directors directed us to reduce the tax revenue increase down to 2.4%

4. 2018-19 Final General Fund Budget Summary As of June 2018
Total Revenues
$53,260,594
General Fund Budget Document
Total Expenditures
$54,954,887
Deficit
($1,694,293)
Anticipated Budget Results
Budget Contingency
$350,000
Debt Service Savings
$337,681
Other Retirements
$146,000
Anticipated Use of Fund Balance
($860,612)
These changes bring us to our proposed final budget. In total expenditures are $266 thousand less than they were in December.
Revenue is only $19 less than in December however the total tax revenue proposal was reduced from 3% to 2.4%. We were able to reduce the tax revenue amount with the inclusion of the state revenue.
Our total deficit is now $1.64 million with an anticipated deficit, or use of fund balance, of $860,612.

5. Octorara Area School District 2018-2019 General Fund Budget
Challenges
Pennsylvania School Employee’s Retirement System Increases
Real-Estate Assessment Growth
Reduced Federal Revenues
Mandated Expenditures (PSERS/Charter School/Special Education)
Health Care
We discussed the challenges we faced this year with out budget:
Most school districts in Pennsylvania face the same challenges. For example the state mandated Pennsylvania school employee’s has been the highest increasing cost for our district in the past several years. The good news is that the annual increase in this cost is slowing however it remains a challenge.
Real-Estate Assessment growth. We will look at our real-estate assessment growth for the past 10 years and how that impacts our budgeted revenues.
Federal Revenues. Of our three classes of revenues, local, state and federal, only federal revenues have declined in the past 5 year period
Mandated expenditures, such as PSERS, Charter School and Special Education Mandates drive expenditures. We’ve already discussed PSERS however Charter school tuition and special education mandates are also a challenge for the district.
The rising cost of Health Care has also been a challenge.

6. PSERS Retirement Rate History
Fiscal Year
Rate
Actual
Actual
Actual
Actual
Actual
Actual
Actual
Actual
Actual
Actual
Actual
34.79 – Estimated
35.26 – Estimated
35.68 – Estimated
36.32 – Estimated
One of the largest line item increase that we will see in the budget is the increase in PSERS. The Health Care increase is the largest increase in the budget. PSERS was the largest increase when we reviewed the budget in December however the PSERS rate for was reduced and now the PSERS increase is second larges increase.
As of last December PSERS was projected up to 36.32% in In the past 10 years the rate as gone from 4.76% in to 33.43% in Total budgeted PSERS expenditures is $6.6 Million with $3.3M in revenue to net out at $3.3M

7. Mills Increases and PSERS
To give you an idea of what that PSERS incrase has done to our mills, this chart shows mills increases , the yellow bar and the red bar represents the PSERS annual $ increase as a portion of mills. As you can see since (The start of the PSERS large annual increases) we have added 4.37 mills however PSERS increases has used up 3.2 of those mills that leave 1.17 mills growth to cover all other increases. Or in other words 2/3 of our tax increases since have been used to cover increased PSERS costs, a mandated state expenditure.

8. Salary History
One way to mitigate the PSERS increases it to control salary and or out source positions.
This chart shows the total salaries in comparison to the past 10 years of salaries, – 2010 still being the high point. The 2018 – 2019 salaries, as you will see are also just below the level. Controlling total salary has saved us from much larger PSERS increases.
(Note: Approximately 37% of our budget is salary. Salary and benefits combined account for 60% of our budget.)

9. Total Full Time Equivalent Employees
In 2009 we had approximately 368 Full Time Equivalency Employees in we will have approximately 313 full time equivalent employees. The decrease in total FTE employees helps us mitigate the PSERS increases and health care cost exposure. The decrease is both due to outsourcing employees, mostly maintenance and custodial, as well and a decrease in positions through attrition.

10. We mentioned assessment growth as a challenge.
As you can see, from this chart, we are right in the middle of school districts as far as real estate assessment growth for Chester County Schools.
Real-estate assessment growth increases our real-estate tax revenue without increasing mills. Over the 11 year period reported our total mills have increased 7.1%. Our Lancaster assessment has increased slightly faster than Chester County in the same period. Combining the growth we have averaged about .675 of 1% growth per year. However if we compare .675 of 1% of assessment growth just to our PSERS expected growth most of our new revenue is already used up.

11. Assessment growth as a portion of PSERS Growth
For example in , if we assume .675 of 1% assessment growth, just over $200K we will be able to pay for our PSERS projected net increase in We could do the same analysis with health care and or salary increase both of each could use up all of our real-estate growth each year.
The good news is that PSERS rate increases is slowing however it is already at 34%
For our PSERS increase uses up all of our expected real-estate assessment growth.

12. Federal Revenue Decline vs Local and State Revenue
We also mentioned our Federal revenues have been a challenge. These two charts show that our local revenues, real estate taxes, EIT and other miscelaneous local taxes have increased over the past 5 years. Also our State revenues, BEF, SEF PSERS and others have increased over the 5 year period. However the chart on the next slide show that our Federal Revenues have decreased by close to $400,000 over that same time period.

13. Federal Revenue Decline vs Local and State Revenue
Decline from $1.2 Million in down to $800K or approximately $400K reduction. We anticipate a reduction in future years will see a one time bump only because of ACCESS drawdown.

14. 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
285,138
195,561
174,936
124,740
133,184
339,167
168,876
132,007
229,837
113,683
149,350
283,665
2,330,145 *
301,136
194,132
440,936
394,513
294,081
161,335
132,119
169,734
201,774
112,052
We also mentioned healthcare as a budget cahllenge.
At this point last year we had $1.5 million in medical billings, however at this point this year we have just over $2 million in billings (after stop loss reimbursement). This year is similar to and in total costs. We have also received $600K in stop loss revenue or we would have paid $2.7 Million by now. The good news is that the March bills have declined back to normal amounts. We do have $1million in the health care reserve fund to cover this overage this year and we don’t have to take a ½ million dollar hit the general fund this year.
However this activity has forced us to include a 13% in premiums for budget. (calculated by our insurance consultant)
is the first year of a new benefits plan negotiated by the School Board. This new plan should help reduce our annual cost increases. The savings are supposed to increase each year as the District’s contribution to the plan declines in the out years.
$1.5M
$2.1M
Does not include Stop Loss Premiums, Admin Fees & IBNR
* Includes $599,649 in stop loss reimbursement

15. 2017-18 vs. 2018-19 Expense Summary 2017-18 Budget 2018-19 Budget
Variance
Salaries
$19,892,187
$20,107,376
$215,189
1.08% Increase in overall salary
Reduction of 2 positions from budget
Benefits
$12,028,709
$12,769,589
$740,880
Retirement Rate inc % to 33.43% $304K (Net Change $152K) Increase in Health Care 13% in premium 10% in budget $382K
Tuition Reimbursement Title II $40K SS $15K
Outside Services
$5,003,848
$5,310,190
$306,342
Special Education $258K
All others $48K
Repairs/Rentals/Maint. Srvs.
$857,105
$494,315
($362,790)
Removed ($465K) of electricity
Lawncare $77K
All others $25K
Trans/Ins/Tuit/Charter
7,006,038
$7,360,825
$354,787
Trans increase $147K (Net Change $98K)
CCIU Vo-Tech $92K Charter School &
APS/PPRI $130K Insurance reduction ($14K)
Supplies
$1,524,552
$1,936,110
$411,558
Electricity reduced from $465K to $391K moved from Maint Srvs to Supplies
All other supplies increased by $20K (student allocation for supplies & equipment decreased)
Capital
$571,740
$517,438
($54,302)
Reduced student allocation
Dues/Fees/Interest
$2,773,487
$2,629,044
($144,443)
Debt Service Interest ($147K) Other $3K
Fund Trans/Principal
$4,357,500
$3,830,000
($527,500)
Debt Service Principal ($27.5K) Transfer ($500K)
Totals
$54,015,166
$54,954,887
$939,721
Total Expenditures are $54,954,887 for
Total Salary increases are $215K which is a 1.08% increase. The budget has been reduced by 2 positions from the budget: (3 teachers and 2 custodial/maintenance positions removed but has 3 additional aides)
Benefits are increasing by $741K. PSERS retirement employer rate is increasing to 33.43% adding $304K to the expenditure budget. (This is a net increase of $152 since the state subsidy increases by half of the expense). Health care is increasing by 13% premium but is adding 10% to the budget or $382K in total.
Outside services are increasing by $306K. This is mostly due to Special Educaiton Services
increased amount of special ed students (17%; increase over last three years from 15.6%) increased request for PCAs for student support on campus vs placement increased need for 1:1 or 2:1 bus aides: students who need supports ,increased need for special services/placement, especially placements which provide mental health supports
increased amount of
hospitalizations (providing homebound/instruction in the home)
school refusals (currently 3 students in specialized programming)
students remaining beyond 18 (until 21) because of expanded programming, especially by the CCIU 
Repairs Maint. Srvs is reducing by $363K The majority of this reduction is the removal of electricity form this budget area. It is moving to supplies however the total cost is also being reduced by $74K due to price reductions and competitive bidding of those prices by our purchasing consortium.
Transportation/Insurance/tuition is increasing $355K. Our tuition to the Technical High School Vocational program increasing by $92K. This is from an increase in the 3 year rolling average. The actual tuition cost is remaining the same. We also have an increase in the charter and approved placement tuition. The overall insurance budget is being reduced by $14K. We are not dropping any coverage or limits this is just the result of bidding these services out last year.
The supply budget is increasing by $411K however that is the result of moving $391K of electrical budget with a slight increase $20K in all other supplies. The supplies and capital or equipment reductions are a direct result of lower enrollment and allocation of supply & equipment money to the schools.
Dues and fees are declining due to a decrease in debt service Interest of $147K with a slight increase in others.
Fund transfers and Principals is also decreasing due to a $500K transfer to capital projects is being removed and debt principal is being reduced by $27.5K. In all Debt service expense is being reduced by $274K but with a $177K reduction is in state subsidy.
All of these increases = 1.4 million or 2.66% increase in expenditures.

16. 2017-18 vs. 2018-19 Revenue 2017-18 Budget 2018-19 Budget Variance
Local Revenue
$36,383,692
$37,313,356
$929,664
Act 1 index $793K
Assessment Growth $118K
Most other local 1%
State Revenue
$14,824,583
$15,197,332
$372,749
Retirement Subsidy $152K Social Transportation $100K
Debt Srvs Reimb ($177K)
All Others $298K
Federal Revenue
Title I ($114K) Title II ($17K) Title III ($4K) Title IV $15K ACCESS $2K
$868,100
$749,906
($118,194)
Totals
$52,076,375
$53,260,594
$1,184,219
Fund Balance Appropriation
Needed to balance revenues and expenditures
$1,938,791
$1,694,293
$54,015,166
$54,954,887
Total local revenue is $1,155,483 higher than the budget. The Act 1 index produces $793K. We average about ½ of a percent of assessment growth per year. We are also increasing tuition to account for more Homeland Security students and most other local revenues by 1%
State revenue is increasing by $165K from increases in PSERS, SS and transportation subsidies with a decrease in Debt Service. Our basic education/special education and other state grants are increasing slightly
Federal Revenues are being reduced by $118K to account for the decline in the Title I, II and III program grants with a slight increase in the ACCESS revenue and a new title IV grant.
Use of fund balance including these revenues is $1,694,293

17. Homestead/Farmstead Reduction 2018-2019
Assessment Reduction
Tax Reduction
Chester County
6,727
$269
Lancaster County
10,593
Total Amount of State Property Tax Reduction Allocation for Octorara Area School District : $1,129,425 or $269 Per Property
The district will receive $1,129,425 or $269 per property for all eligible homestead farmstead properties. This is approximately $1 more than per property last year.
Assumes 2.8% Increase

18. Questions

19. Octorara Area School District
Budget Presentation
June 11, 2018

20. Proposed Tax Increase for Median Homestead Property
Chester County Octorara Median Homestead Property Assessment
$123,550
Tax Mills
39.49
Tax Face Value
$4,879
Tax Mills
39.94
Tax Face Value
$4,935
Increase
$56
This chart compares the face tax bill to the max tax bill using the Median Homestead Property value reported by both the Chester County and Lancaster County Assessment Offices. This chart will give you an idea of what the $ increase is for the Median Homestead Property at the full 2.8% increase.

21. Proposed Tax Increase for Median Homestead Property
Lancaster County Octorara Median Homestead Property Assessment
$153,000
Tax Mills
29.45
Tax Face Value
$4,505
Lancaster County Octorara Median Homestead Property Assessment
$190,000
Tax Mills
25.35
Tax Face Value
$4,817
Increase
$312
Lancaster Mills Estimated
23.84
Amount of increase due to rebalancing
1.05
Amount of increase due to tax increase
.46
This chart compares the face tax bill to the max tax bill using the Median Homestead Property value reported by both the Chester County and Lancaster County Assessment Offices. This chart will give you an idea of what the $ increase is for the Median Homestead Property at the full 2.8% increase.

22. Multi-County Rebalancing Since 2010 Mills and $ Changes
Last month we looked at this graph that puts that rebalancing into perspective. As you can see here in Lancaster’s mills actually decreased when we had an overall tax increase and Chester County mills increased. Then in Lancaster’s mills again decreased while Chester County mills stayed the same, there was no tax increase in that year. This year is a rebalancing that increases Lancaster's mills by a higher % than Chester County. Also Lancasters mills will overall be lower than in due to the reassessment.
This chart was updated from last month to include the max increase for the median properties as reported by Chester County and Lancaster County Assessment Offices. The piror year increases were all based off the Medial Property Values and prior year’s mills.
Using Median Homestead assessment values from through and the updated Homestead value for