1. Wissahickon School District Budget Update 2015-16 April 13, 2015 Budget Update, Review of Revenue & Budget Timeline 1

2. 2 Wissahickon School District Budgeted Expenses of $91.2 Million

3. 3 Wissahickon School District 2015-16 Challenges/Opportunities

4. School YearTax IncreaseHow did we do it in the face of increasing costs (inflation)? 2006-070.00%?? (pre WC & JAC) 2007-080.00%?? (same) 2008-091.80% ?? (same)— NOTE: revenue loss not nearly as large this year 2009-100.00%?? (same) 2010-110.99%Cuts/efficiencies—NOTE: revenue loss roughly half as much 2011-120.00%Cuts/efficiencies 2012-130.00%Cuts/efficiencies (incl. debt service capacity from $6M to $4M) 2013-140.00%Sold Mattison Avenue (operational savings masked revenue loss) 2014-150.00%Cut debt service capacity (from $4M to $1M) 2015-16TBDCutting benefits to part-time employees (and other cuts) 4 Wissahickon School District 2015-16 Budget Discussion

5. 5 Wissahickon School District 2015-16 Budget Discussion Here’s the problem/challenge in a nutshell: 1.Costs go up every year Salaries go up ~2.0% every year, which is about $600k MORE every year than the previous year Benefits go up much more than 2.0% every year, especially with recent PSERS rate hikes (this is about $1.0M MORE every year, until PSERS stabilizes) All other things in the budget go up in cost roughly 2.0% annually (i.e., inflation), and Major Impact items also add cost, and these effects combined require more $$ every year (an additional $1.3M MORE in 2015- 16) TOTAL COST INCREASES IN 2015-16 ALONE EQUAL ~$2.9M 2.Revenues are not keeping pace with increased ANNUAL costs

6. 6 Wissahickon School District Two mitigating factors that work in our favor: 1.Due to an increase in ratables mid-year, tax revenue for 2015-16 will be up about $500K, even without a tax RATE hike. 2.Given the stable nature of our fund balance, we are going to stop budgeting $500K every year for “budgetary reserve,” which means expenditures in 2015-16 are $500K less. The combination of both above effects helps ease the 2015-16 budget gap to the tune of $1M! 2015-16 Budget Discussion

7. 7 Wissahickon School District 2015-16 Budget Discussion Two possible tax scenarios for 2015-16… 1. Scenario I *: With a tax increase at the maximum of Act 1, which would be 1.9%, a total of $1.1M of additional revenue would be generated. 2. Scenario II **: With a tax increase of 0%, no additional revenue would be generated. *Under Scenario I, the budget “hole” we’d need to plug would be $0.8M (after the effects of new ratables and no more budgetary reserve cost are factored in, as well as the $1.1M of additional tax revenue). **Under Scenario II, the comparable budget “hole” would be $1.9M.

8. 8 Wissahickon School District 2015-16 Budget Discussion What does all this mean? If we generate $1.1M of additional tax revenue, we have to find $0.8M of cuts from the initial draft of the 2015-16 budget. If we generate no new tax revenue, we have to find $1.9M of cuts. Cutting the budget’s debt service line is no longer an option (see below)—that approach WAS used in 2014-15 to plug that year’s $3.0M gap. This budget challenge informs ongoing collective bargaining efforts. It also informs the ongoing discussion about a new high school.

9. 9 Wissahickon School District 2015-16 Budget Discussion What about a possible new high school? Roughly $70M more construction money (debt) would be needed (above and beyond the $22M of debt that we are committed to now that the pool and plant project is underway)…  $70M of debt will require ~$4.2M more debt service in the budget (above and beyond the $1.1M that is left in that account after the cuts in 2012-13 and 2014-15, all of which is needed to service the $22M pool debt).  This $4.2M has to be in the budget every single year for 25 years.  Added to the current “hole” would mean the new hole is $5.0M! The $70M could be offset somewhat by using fund balance (which would be an appropriate “one-time” use of it), but nonetheless… BOTTOM LINE : Can’t do a new high school now without a referendum vote.

10. 10 Wissahickon School District 2015-16 Budget Discussion Questions that have been asked: What happened to the $4.5M of debt service that was available prior to 2014-15? See above (used to balance budget) What happened to the $1M of cost savings achieved by moving to the consortium for health benefits? It was used to take the edge off the normal, annual increase in health benefits. What about the district’s Fund Balance—can’t we use that for something?

11. 11 Wissahickon School District 2015-16 Budget Discussion FUND BALANCE PRIMER What exactly IS it? How much of it do we actually have? What CAN it be used for? What SHOULD it be used for?

12. 12 Wissahickon School District

13. 13 Wissahickon School District 2015-16 Budget Discussion What are the COMPONENTS of the total $21,143,945 of Fund Balance? $1,908,031 (reserved for future liability of compensated absences) $12,085,914 (reserved for future retirement rate—PSERS—increases) $750,000 (reserved for future special education unanticipated costs) $6,400,000 (“Unassigned”—this is basically our emergency fund) THOSE FOUR COMPONENTS ADD UP TO $21,143,945 (as of 6/30/14) NOTE : We also have a total of $7.3M in the “Capital Reserve Fund” for future capital projects.

14. 14 Wissahickon School District 2015-16 Budget Discussion Fund Balance—POSSIBLE USES “Committed” Fund Balance components may be used for any cost related to the component’s restriction (e.g., if money is being kept for compensated absences, it must be used for that unless the restriction is changed by board resolution). “Unassigned” Fund Balance can be used for just about anything…BUT… Fund Balance should NEVER be used to “plug the gap” or offset a recurring cost. Doing so simply kicks the “need to cut costs and/or raise revenues” can down the road. Rather, Fund Balance should be for ONE TIME costs (e.g., a capital project, boiler replacement, litigation, etc.).

15. 15 Wissahickon School District 2015-16 Budget Discussion Fund Balance—The Recommended Plan 1.It is wise and fiscally prudent to have a healthy, stable Fund Balance. 2.When Fund Balance amounts get out of proportion, making adjustments here and there is a sensible idea. 3.We propose moving the $12M currently “committed” to future PSERS rate increases to the Capital Reserve Fund, thereby committing it to future capital projects instead. That would result in a Capital Reserve Fund of ~$20M, to be used for future projects such as a Middle School Auditorium, water penetration remediation projects (including roofs), etc. It would still leave us with $9M of Fund Balance.

16. Wissahickon School District Revenue Summary Historical Total Revenue 16

17. 17 Wissahickon School District

18. 18 Wissahickon School District

19. 19 Wissahickon School District Revenue Summary 2014/15 vs 2015/16 State Revenue – Overall increase of $1M (PSERS) Federal Revenue – Overall increase of $43K (Title 1) Local Revenue – Overall increase of $1.5M

20. Wissahickon School District Revenue Summary The Governor’s proposed 2015-16 budget. 20

21. Wissahickon School District Revenue Summary Governor’s Proposed Budget – Potential Impact on Wissahickon: 21 2015-16 Per Increase/ SubsidyBudgetGovernor(Decrease) Basic Education2,355,1982,606,833251,635* Special Education1,924,9211,983,38458,463 Total4,280,1194,590,217310,098 Ready to Learn Grant120,512 Restore PA Accountability Grant84,954 Add Charter School Funding42,711 Additional BEF3,458 251,635*

22. Wissahickon School District Revenue Summary Governor’s Proposed Budget – Potential Impact on Wissahickon: 22 2016-17 Governor Proposal 2015-16 Per BudgetIncrease Property Tax Relief9,189,4922,869,2236,320,269

23. Wissahickon School District Revenue Summary Governor’s Proposed Budget – How to Fund the Proposals: In order to fund the budget proposal the Governor is recommending: an increase in the State’s Personal Income Tax rate from 3.07% to 3.70%. an increase in the State Sales Tax from 6.0% to 6.6% and an expansion of taxable items. a 5% severance tax on natural gas production. changing the funding formula for Cyber Charter Schools 23

24. Wissahickon School District Budget Timeline April 27, 2015 – Adopt Proposed Final Budget May 1, 2015 – PDE Notifies School District of Funds Available for Property Tax Relief – Montgomery Coup Assessor Provides a Certified Report on the Number of Farmstead/Homestead Properties in the District May – District Communicates Impact of Property Tax Relief to Homestead/Farmstead – Budget Meeting(s) June 8, 2015 – Final Budget Adoption & Resolution Implementing Homestead/Farmstead Exclusion June 12, 2015 – Submit Final PDE 2028 24

25. Questions 25