Looking into his crystal budgetary ball, Katonah-Lewisboro school district (KLSD) Assistant Superintendent for Business Michael Jumper painted a picture of the district’s financial future, which is mixed with hints of optimism and tinges of fiscal caution, at the school board meeting on Thursday, Dec. 13.
Forecasts show ballooning school budgets in the next few years, with a projected budget of $126 million in 2016-17.
Mr. Jumper hammered on the fact that the KLSD’s annual Finance Advisory Committee Expenditure (FACE) report, which is available on The Ledger’s website, is only a forecast, though, which contains a number of variables and assumptions that have yet to be determined.
“This helps the board of education and the administration provide direction in terms of development of the actual budget,” he said.
If the 2013-14 budget was to go ahead as it is currently forecasted, it would be an estimated $116.3 million, $3.3 million more than last year’s $112.9 budget and an increase of 2.98%.
Under the current tax cap scenario the budget is permitted to increase only $1.7 million, Mr. Jumper said.
Championed by Gov. Andrew Cuomo, the New York state property tax cap stipulates that school districts may not raise their tax levies more than 2% or the rate of inflation — whicever is lower — without 60% approval by taxpayers. The law has had a mixed reception, with some applauding its effort to rein in taxes while others criticize the law as an impractical financial ceiling.
“[The 2.98% increase] creates what we refer to as a structural deficit of approximately $1.6 million,” Mr. Jumper said.
Mr. Jumper reiterated time and again that this is only a forecast, and he predicted the budget is much more likely to settle around $114.5 million for 2013-14.
Mr. Jumper broke down the budget into nine categories, including salaries, benefits and debt service, with the largest category being salaries.
“We are largely dependent, and this is the same for any school district in the United States, any school district in New York state, it is the same for hospitals and those types of organizations where you are heavily dependent on personnel,” he said. “Eighty-one percent of budget is associated with salaries and benefits.”
Salaries are projected to take up 50.58% of the 2013-14 budget at a cost of $58.8 million. Benefits would constitute 30.42% of that budget at a cost of $35.3 million.
“Going back to that $1.6 million we need to find to get the budget down to the tax cap, if you assume 81% gets distributed proportionally there is going to be approximately $1.3 million in salary and benefit reductions that are necessary in order to comply with this cap,” Mr. Jumper said.
Including debt services, which would total $6.4 million and take up 5.54% of the budget, only 14%, or $15.8 million, would be left in the budget for all other school-related costs, including instruction, special education, administrative, transportation, operations, and technology costs.
Salaries and benefits
Of the $3.3 million increase projected in the 2013-14 budget, the greatest and most significant increase comes from salary and benefits. Salary increases account for $769,000, while benefits add a huge increase of $3.4 million, Mr. Jumper said. Two new full-time teaching positions and one part-time position are included in the salary increase.
The increase in benefits is driven by costs associated with health insurance and retirement system contributions, he said.
The budget would have been in worse shape if it were not for what Mr. Jumper had referred to in the past as the district’s financial ace in the hole — transportation savings. Savings from bus services amounted to nearly $1 million this year. But the savings were gobbled up by the jumps in the mandated contributions to the teacher retirement system from 11.84% of salary to approximately 15%, with an unexpected budget impact of $1.4 million. This came on the back of an anticipated but not easy to swallow increase in health insurance expenditures, adding $1.45 million to the $16.1 million budgeted last year for health insurance expenditures.
“The retirement systems are going through the roof,” Mr. Jumper said. “We are looking at a projection right now of the teachers’ retirement system, which represents all the certified staff, including the administrators, moving from 11.84% of salary, just about 12 cents on every dollar, to just about 16 cents on every dollar. That is a 35% increase in the cost associated with the teacher retirement system.”
Tentative bottom line
One of the final slides of Mr. Jumper’s presentation showed the district’s projected financial future. Two diverging lines, one rising like a ski slope, the other like a subtle hill, represent the diverging courses that expenditures and revenues are projected to take.
“The area between these two lines is what we would refer to as our structural deficit,” he said.
And the distance between the two lines only increases as the highly variable forecast for the 2016-17 budget rises to $126 million.
“I can’t caution you enough that this FACE report process, although very comprehensive, and I do go through it line by line, does not have the benefit of talking with every single director and principals and looking at the actual staffing and how the students are falling out among the different grade levels,” Mr. Jumper said. “So that is how I can stand here and confidently tell you that although this projects a $116-million budget [for 2013-14] based upon our current program, we will bring this in somewhere around $114.5 million I would think.”