1. Octorara Area School District
Budget Presentation
April 16, 2018

2. Octorara Area School District’s Funds for 2018 - 2019
The General Fund is the operating budget for the 2018 – 2019 school year
Capital Funds sufficient to provide capital resources for the next several years
Food Service Fund is self funding and solvent
Self Insurance Fund ($1 Million fund balance at year end 2017, a portion will be needed to balance the fund by year end 2018)
1. The general fund acts as the operating fund for the school district. The Board will be asked tonight to approve a proposed final version of that budget. Noting approved tonight is set in stone. Total revenues, expenditure and any tax mills can be changed before the Board votes on a final version of this budget in June
The District also uses other funds to manage resource
2. The District has two different capital funds to provide funding for capital expenditures. A Capital Projects fund, to account for funds borrowed for specific long life assets. The District also has a Capital Reserve fund, funded from transfers from the General Fund , to be used for Building deferred maintenance projects, general construction and infrastructure projects.
3. The District’s food services are run through a separate food service fund. All food service revenues and expenses, such as salaries/benefits, food costs and other miscellaneous expenditures are managed in the food service fund, not the General Fund.
4. The District also manages employee benefits through a self insurance fund. We are self insured , we pay actual bills not a premium to IBX, thus we can experience extremes in the cost variance from year to year. We have experience a few good years recently and that has allowed us to build a reserve however this year we are experiencing a high cost experience rate that will require the use of a portion of that reserve. However using this type of fund allows us to better estimate the cost to the General Fund for these expenses year to year.

3. Octorara Area School District 2018-2019 General Fund Budget Overview
Provides the funding for the education of approximately 2,586 students living in the 8 surrounding municipalities located in Lancaster and Chester Counties.
Includes tuition for 187 charter school students
Includes tuition for 98 students attending CCIU Vocational Education Program
Includes tuition for 55 alternative placement students
Provides for transportation for 144 nonpublic students not part of total enrollment
Projected enrollment of 2,345 as of October 2017
IU Placements 55 students 2018 needs to be added to the 2,345
Cyber/Charter 186 as of April 2018 needs to be added to the 2,345
98 students already included in 2,345
Total enrollment (2, )
The District’s General Fund, or operating fund, provides funding for approximately 2,600 students next year. Of those students 187 are charter school students who are not on campus here at the District however the district must provide tuition payments for these students included in the budget.
The General Fund also provides tuition for 98 students to attend the CCIU Vocational Program at the Pennocksbridge location for a portion of the day. The rest of the day these students are here on campus.
Funding is also provided for 50 plus students placed in alternative educational programs off campus.
This budget also provides transportation funds for our non public students in the district, or students enrolled in private schools however the District is responsible for transportation services. ($370,000) ($2.9 Million over all total cost) Total function including gas and our salaries $3.2 million.

4. Overview
Provides funding for adjudicated students in correctional facilities/homebound and hospitalized students
Both traditional educational programs for local students as well as Octorara ASD Career and Technical programs for students from 10 different school districts
15 Administrators 194 Professional Educators 26 Clerical Support 12 Custodial/Maintenance Support and 76 Aides (Head Count)
8 Buildings, 485,234 square feet
The operating budget also provides funding for adjudicated students, or student in the legal system and not on campus. We are required to provide educational services to these students.
The operating budget provides funding for our on campus students both a traditional educational program as well as a robust career and technical education program. Funding for the career and technical education program comes from local funds as well as both additional state funding and tuition payments made by other participating school districts, 9 other districts at last count.
The operating fund supports a work force of 15 administrators, 194 professional educators, 26 clerical support employees 12 custodial/maintenance support personnel and 76 aides. All who work in 8 different buildings operated through the general fund.

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
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 4.72 mills however PSERS increases has used up 3.2 of those mills that leave 1.52 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 8 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 the large PSERS increases.
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
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 / 2 Retirements
Reduction of 2 positions from budget
Benefits
$12,028,709
$12,769,589
$740,880
Retirement Rate 32.57% vs % $304K (Net Change $152K) Increase in Health Care 13% in premium 10% in budget $377K
Tuition Reimbursement Title II $40K
SS $14K Others $5K
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 / added Lawn Care $77K 2.9% increase in other
Trans/Ins/Tuit/Charter
7,006,038
$7,395,825
$389,787
Trans increase $182K (Net Change $92K)
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
Equipment
$571,740
$517,438
($54,302)
Reduced student allocation for combined supplies and equipment
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
$54,989,887
$974,721
Total Expenditures are $54,989,887 for
Total Salary increases are $216K which is a 1.08% increase in total salaries. The budget has been reduced by 2 positions from the budget: (3 teachers and 2 custodial/maintenance positions removed but has 3 additional aides. The custodial positions were outsourced)
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% but is adding 10% to the budget or $377K in total. The difference in % increase is due to enrollment
Outside services are increasing by $306K. 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 amountt s: 1. hospitalizations (providing homebound/instruction in the home) 2. school refusals (currently 3 students in specialized programming) 3. 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. We are adding the $77K lawn care to this budget, 2K for snow removal and additional for tennis court annual repairs $2,500 plus others.
Transportation/Insurance/tuition is increasing $389K. 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. Transportation inc $49,000 for the 1.85% contract increase. This is based o the prior year’s contract. Also added vehicles from the piror not in the budget.
The supply budget is increasing by $412K however that is the result of moving $391K of electrical budget with a $21K increase all other supplies. The supplies and capital equipment combined reductions are a direct result of lower enrollment projection for next year resulting in a lower total allocation of supply and 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 $127.5K. In all Debt service expense is being reduced by $274K but with a $177K reduction is in state subsidy.
All of these increases = $1,474,721 or 2.68% increase ($974,721 increase +$500,000 transfer taken out of budget)

16. 2017-18 vs. 2018-19 Revenue 2017-18 Budget 2018-19 Budget Variance
Local Revenue
$36,383,692
$37,446,356
$1,062,664
Act 1 index approximately $900+K
Assessment Growth $118K
Other local revenue 1% + Tuition for CTE
State Revenue
$14,824,583
$15,197,332
$372,749
Retirement & SS Subsidy $158K Social
Debt Service Reimbursement ($177K)
BEF/SEF/Vocational and other $392K
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
$53,393,594
$1,317,219
Fund Balance Appropriation
Needed to balance revenues and expenditures
$1,938,791
$1,596,293
$54,015,166
$54,989,887
Total local revenue is $1,062,664 higher than the budget. The Act 1 index produces $992K. We average about .675 of a percent of assessment growth per year. However this year we are just under that mount. We are also increasing tuition to account for more Homeland Security students and most other local revenues by 1%
State revenue is increasing by $373K from increases in PSERS, SS and transportation subsidies with a decrease in Debt Service. These are subsidies that are based on corresponding expenditures and will change as the expenditure amounts change. Our basic education/special education and other state grants are also increasing.
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 $1,596,296 to balance the budget.

17. 2018-19 Final General Fund Budget Summary As of April 2018
Total Revenues
$53,393,594
General Fund Budget Document
Total Expenditures
$54,989,887
Deficit
($1,596,293)
Anticipated Budget Results
Budget Contingency
$350,000
Debt Service Savings
$337,681
Anticipated Use of Fund Balance
($908,612)
As of this week, after accounting for two retirements (Donna Edwards and Sandy Federici) our proposed final budget showed total revenues of $53,393,594 and total expenditures of $54,989,897 with a deficit of $1,596,293. Anticipated actual results of the budget results in a deficit of $908,612 when we back out of our expenditures the debt service savings from refinancing and the contingency portion of the expenditure budget. These numbers also include a full tax increase of 2.8% (Our index is 3% however due to the Lancaster reassessment our total increase is limited to a 3.2% increase in Lancaster’s tax levy, and that come at a point of a 2.8% increase in total tax revenue.)
Next week you will be asked to approve a proposed final budget that matches these totals, with the full 2.8% increase included. We will then display the PDE form 2028, the state approved budget document. Nothing in that budget will be set in stone. You can change everything from total expenditures to the tax rate. You will basically be authorizing me to publically display a proposed final budget.

18. Questions