1. Solanco School District Preliminary Budget Work For 2013-14 FY 2011-12 Close out FY 2012-13 in Process FY 2013-14 Preparation and Planning November 5, 2012 Board Session

2. Multi-Year Planning and Perspective 2011-12 Fiscal year End and Audit completion...finalization December / January Board meeting....end point = starting point Current 2012-13 Fiscal year up and running; new CBA, optional QHDHC program, student testing changes, Keystones, virtual and on-line programs, charter reforms, athletic reporting, February Governor’s budget address for 2013- 14 –What’s next?

3. Multi-Year Planning and Perspective (2) Budget formation already started with staff for 2013-14; Board extended session Nov. 5, 2012 2014-15 and beyond: Health Care, Pension, State funding and education policy, local revenues, general economy.... Deliver Services to the Community.

4. Fiscal Year Financial Results: Preliminary 2011-12 Audit Highlights Fund Balances: – Total – Deficit for the FY was $76,610 Revenues = $44,420,679 Expenditures = $44,497,289 Deficit = $76,610 Budgetary Structure for 2011-12 was $1.8M Budgetary Structure for 2012-13 is $2.02M

5. Fiscal Year Financial Results: Selected 2011-12 Audit Highlights Expenditures: – Total - Reduced year over year by $211,400 – Salaries - Reduced year over year by $307,700 – Benefits – Reduced year over year by $350,000 – Other Purchased Services - (e.g. Tuition for Special Education and Charters) Increased year over year by $277,500

6. Fiscal Year Financial Results: Selected 2011-12 Audit Highlights Revenues: – Total - Increased year over year by $23,294 – Earned Income Tax: Increased year over year by $884,000 [approx. $300K was a one time prior years distribution] [From $4.9M to $5.4M ] – Transfer taxes: Increased year over year by $30,000 [total is above 2008-09 FY level] – Interest Earnings: Decreased year over year by $20,000 [Down from $594,000 in 2008]

7. 2013-14 Preliminary Budget Work: Keeping the Main things in front.... Solanco’s Act 1 Base property tax increase cap is 2.0% Pension Rate grows by 4.31% of payroll, the largest increase to date...2014-15 is 4.51% Solanco’s 2013-14 Act 1 cap does not cover the pension increase...Exceptions Salaries, Benefits, Special Education Assuming Zero from the State in additional revenue......Except for State share of the pension increase Cost Pressures expected due to additional & continued mandates Federal funds; Sequestration & Jan 1 2103 tax code Revenue overall trend...

8. Déjà vu PENSION---PSERS

9. Last Year’s Slide ------Expenditures: Budget Assumptions Salaries in total remain flat from 11-12 to 12-13 State mandated Pension Employer Cost Rate (ECR) grows from 8.65% to 12.36% of payroll [+3.71% of pyrl]

10. This Year ------Expenditures: Budget Assumptions Salaries in total remain flat from 12-13 to 13-14 State mandated Pension Employer Cost Rate (ECR) grows from 12.36% to 16.67% of payroll [+4.31%] State Share remains intact

11. Pension

12. Above the line and below the line: Act 120 Collars are in Play up to 2014-15 Pension Rates --- Years from 2015-16 and beyond... Unknown.... – Most likely understated....revisions (by the Actuaries) will be made in December 2012.

13. Pension: Rate times Salary

14. Solanco SD: Budget Impact $458,767 NET

15. PROPERTY TAX

16. So far, Good Trend

17. Pension v. Property Tax Pension Increase Net 458,767 1% Property tax yields 196,650 Equivalent % Property tax to cover Pension Increase2.33 Assumes $1,825 B assessment

18. Building the 2013-14 Budget: Two Years out from Completion

19. Earned Income Tax

20. So far, Better than Good trend... Approx. $300K One time funds in 11-12 Approx. $600K one time funds in 12-13

21. HEALTH CARE

22. Multiple Plans and Issues Results from efforts--Health Care Cost Growth Trend Reduced – 2.78% actuarial rate increase for 2012-13...prior years were at double digit. – Optimistic, but cautious of rebound Near Term & Forward Planning – In Process – QHDHCP implementation January 2013 – January 2014 increase deductible; adjust co-pays – January 2015 additional Co-pay adjustments Future -- PPACA – Excise Tax 2018; 30 hour staff; Exchanges ??? ( $’s from Early Ret?)

23. Additionally, On the Watch List...

24. Special Education costs and contracts – Recent Senate bill passed to revise Special Education funding – prospective only as written Continued State tinkering on funding shares (i.e. district state revenue) of long embedded programs (Transportation, Social Security, Pension, Plan Con debt reimbursement, BEF) Federal Programs and Fiscal shut down threat – IDEA [Special Education] – Title I – Other....economy in general, and payroll tax Property Tax; Act 1, Assessments, appeals, County Re-assessment....

25. Awareness.... Continued mandate driven cost increases Continued state policy efforts to constrict Board of Education funding authority Continued policy efforts to increase student accountability measures Increasingly complex / conflicting / costly reporting requirements...all dependent on IT processes and systems PDE restricted exception approval process

26. Bottom Line 2011-12 FY end is in good shape...provides improved base to manage 2012-13 2012-13 issues one year closer, improvement for operational needs in planning 2013-14. A lot of work----Prior actions & efforts, solid implementations have had positive impact --- student side and fiscal side ---good results Clearly, many things in motion and cost pressures remain in the forefront

27. NEXT STEPS 2012-13 Estimate work – ongoing through June 2013-14 December 4 -Department and Building budget sessions are held 2013-14 Continue Budget Work For December 10 board review 2013-14 December 17 Preliminary Action 2013-14 January / Early February ----Final Preliminary Budget adoption 2013-14 May – Preliminary Final 2013-14 June – Final Budget