Aisd budget overview for fy2012


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  • Local- About 70%of our comes from local revenue primarily made up of tax collections. State As I am sure many of you are aware, When State Comptroller Susan Combs released her Biennial Revenue Estimate for the Texas Legislature in early January, it confirmed speculation that lawmakers will face a deficit of up to $27 billion for the next biennium. In response, both the Texas House and Senate have released their appropriations bills which propose cuts to the foundation school program that range from $9.3 to $9.8 billion and contain the elimination of most State grants.
  • Projected expenditures are outpacing revenue by about 2%. The boom periods between FY2006 & 2008 are behind us starting with a $5M fund balance draw down in 2009 which is the first year of the break between revenue and expenditures.
  • We have taken some expenditure reductions actions already and they total $27.7M in FY10 & FY11. We have spared local schools from these reductions. But now we are at a point where we have a substantially larger gap and have exhausted many of the obvious reduction. Unfortunately, we are at a point where schools will be affected. And the effects will be painful for everyone.
  • I want to start with the assumptions that we are using for the budget gap. As I am sure many of you are aware, When State Comptroller Susan Combs released her Biennial Revenue Estimate for the Texas Legislature in early January, it confirmed speculation that lawmakers will face a sizeable shortfall of up to $27 billion for the next biennium. In response, both the Texas House and Senate have released their appropriations bills which propose cuts to the foundation school program that range from $9.3 to $9.8 billion and contain the elimination of most State grants. While there is speculation on the amount of cuts that we will finally have to live with by the time the legislature ends. Most agree, that we have to plan for the worst. In doing so, we are position ourselves for a $79.1 million State reduction, which assumes a cut to the foundation program of $4billion.
  • Even under the assumption of a $4 billion cut, we assume that the State will cut proportionally. Based upon a State reduction of $4 billion, there are three different possible scenarios for State cuts dependent upon possible methodology that the legislature uses to reduce school district budgets; specifically: 1. Under an assumption of a 12% proportional cut for all school Districts, AISD would lose $79.1 million in State funds 2. If the State decided to cap Target Revenue at $4,760 AISD would lose $174.2 million. Under this scenario, not all school districts would lose funding. However, since AISD it is a Chapter 41 district stands to lose significantly more than other school districts. 3. Under “Proration, “ a method that was first drafted in 1993, prior to the invention of Robin Hood, and still remains in the Education Code, AISD would lose $152.6 million. Again, AISD would be disproportionally affected since it is a Chapter 41 district
  • On January 24 th the administration recommended an option to the Board to close the anticipated $94M gap. The proposal is predicated on protecting the service level, as much as possible for our students. That is why we still maintained support for full day pre k and support for the additional planning period recognizing the impact it would have on possible graduation rates.
  • Again, fund balance is not the perennial solution to our ongoing financial problems. The Preliminary Budget proposes the use of $15 M in fund balance to offset the projected gap. This amount is based on the estimated unassigned fund balance that the District will retain in its reserves at the end of FY2011 beyond the 14% required by Board policy. Board policy requires that the District maintain an unassigned fund balance adequate enough for fiscal cash liquidity purposes (i.e. fiscal reserve) that will provide for sufficient cash flow to minimize the potential of short term tax anticipation borrowing. This amount shall be equal to not less than 14% of the combined budgeted expenditures of the District General Fund. The State also requires school districts to maintain at least two and a half month of operating reserves in fund balance. Additionally, if we do not obtain the legislative or policy approval on the dependent actions, we may be forced to tap into fund balance for a total of $30M. And because we did not fully close the $94M gap, we ultimately may have to use $46.3M in fund balance just to get thru next year. Accessing fund balance beyond this $15 million level could make the district very vulnerable. The District’s fund balance is not a rainy day fund like the state has. Rather it is a cash reserve set aside to fund daily operations and meet cash flow requirements for important needs like payroll.
  • Here are some important dates for the community to keep in mind. A more detailed version can be found on page 47 of the primer.
  • Aisd budget overview for fy2012

    1. 1. AISD BUDGET OVERVIEW FOR FY2012 Austin Independent School District Meria Carstarphen, Superintendent Nicole Conley-Abram, Chief Financial Officer
    2. 2. Financial Landscape- Bleak <ul><li>Local Revenue </li></ul><ul><ul><li>Residential property values are declining despite relief efforts. </li></ul></ul><ul><ul><li>Certified taxable values for 2010 represent a decline of 3.66% decline. The tax appraiser projects another 2.75% to 1% decline for 2011 with modest growth of less than one percent for 2012. </li></ul></ul><ul><li>State Revenue </li></ul><ul><ul><li>State facing estimated $25B -$28B shortfall. </li></ul></ul><ul><ul><li>House Appropriations Bill reduces spending for education by $10 billion over the next two years (FY12 & FY13) and eliminates virtually all State grant programs. </li></ul></ul><ul><ul><li>Senate Bill proposes similar reductions but allocates about half a billion dollars more for public education by giving the Texas Education Commissioner about $200 million per year to allocate </li></ul></ul><ul><li>Federal Stimulus Funds </li></ul><ul><ul><li>$64 million over 2 years, ends 2010/11. </li></ul></ul><ul><ul><li>Used to expand important programming, but what happens in 2011/12? </li></ul></ul>
    3. 3. Expenditures are Outpacing Revenue
    4. 4. The Impact of Social Security <ul><li>Of 1000+ Districts in Texas, Austin is one of less than 47 Districts participating in social security. </li></ul><ul><li>$44 million in total cost to AISD. </li></ul><ul><li>No cost to most other Districts. </li></ul><ul><li>Provides additional support to teachers; viewed favorably by teachers with more experience. </li></ul><ul><li>Also comes out of teacher paychecks; viewed as a negative by teachers with less experience. </li></ul>
    5. 5. The Impact of Recapture <ul><li>RECAPTURE, also known as Robin Hood or Chapter 41 is a function of Chapter 41 of the Texas Education Code which equalizes wealth for educational spending. The Chapter 41 provision is intended to “recapture” local tax dollars from “property-rich” districts and redistribute the funds to “property-poor” districts. Under this law, golden pennies represent the six cents that property-rich school districts like AISD are allowed to retain in revenue above the one-dollar tax that is assessed on all taxable property values. Any revenue collected on property taxes above these six cents is subject to recapture by the state. In other words, nearly 40% of the revenue generated beyond the six cents is sent to the state to redistribute to property-poor school districts. In FY 2011, AISD will submit $127.8 million to the state for redistribution. </li></ul>
    6. 6. AISD Has Paid $1.3Billion to State in Chapter 41 Payments Since 2000/01 Budgeted In FY2011, AISD must send $127.8M back to the State under Recapture. Under recapture, AISD must send approximately 45% of every penny of tax revenue generated back to the State.
    7. 7. AISD Austerity Planning in FY10 and FY11
    8. 8. The Impact of State Budget Cuts AISD is preparing a FY2012 preliminary budget assuming a deficit of $94.4 million. State Cuts to Education $2 Billion State Cuts to Education $4 Billion State Cuts to Education $5 Billion Projected Expenditures $842,252,602 $842,252,602 $842,252,602 Projected Revenue $830,870,300 $830,870,300 $830,870,300 Shortfall ($11,382,302) ($11,382,302) ($11,382,302) Projected State Cuts ($39,558,345) ($79,118,408) ($98,898,010) Required Increases ($3,871,304) ($3,871,304) ($3,871,304) Deficit ($54,412,924) ($94,372,014) ($114,151,616)
    9. 9. It Still Could be Worse: State Methods to Cut AISD is preparing a FY2012 preliminary budget assuming State reductions of $79.1 million. Proportional Cut to all School Districts (Best Case Scenario) No ASATR /Hold Harmless (Target Revenue is capped) Proration $2 Billion $39,558,345 $124,191,179 $73,123,805 $4 Billion $79,118,408 $174,195,628 $152,561,567 $5 Billion $ 98,898,010 $174,193,767 $181,879,037
    10. 10. The State Funding Crisis Adds $45.1M Adds $102.8M
    11. 11. Proposed Options to Close the Gap <ul><li>For the purposes of planning the FY2012 budget, we are assuming a deficit of $94.4 million </li></ul><ul><li>Proposed reductions/savings total $ $62,849,533 </li></ul><ul><li>Reductions will affect virtually every area of the system </li></ul><ul><li>Leverages recommendations from both the budget survey and the recommendations from the TASB staffing review </li></ul><ul><li>Attempts to realize greater efficiencies in staffing; and areas like fuel, energy facilities and transportation </li></ul><ul><li>The Board is scheduled to take action on the Declaration of Financial Exigency on Feb 28 th to effectuate a Reduction In Force of 1,153 FTEs as a result of gap closing actions and expiring Stimulus funds </li></ul><ul><li>Reductions will need to be implemented over the next two years as Austin cannot absorb reductions beyond $75M in a single fiscal year </li></ul>
    12. 12. Highlights of Affected Areas <ul><li>Class sizes/Workload/Program Design: </li></ul><ul><ul><li>Class size increase by two pupils in grades Pre-k thru 4 th </li></ul></ul><ul><ul><li>Teacher workload increase to 174 at secondary campuses </li></ul></ul><ul><ul><li>Reduction of Parent Support Specialists (shared service model) </li></ul></ul><ul><ul><li>Changing the model for Librarians at secondary campuses </li></ul></ul><ul><li>Programmatic Reductions: </li></ul><ul><ul><li>Reducing summer school programming to mandatory requirements </li></ul></ul><ul><ul><li>Reading and transition programs for at-risk students </li></ul></ul><ul><ul><li>Reducing interventions for struggling schools </li></ul></ul><ul><ul><li>Athletics reduction of 5% </li></ul></ul><ul><ul><li>Reducing Professional Development days </li></ul></ul><ul><li>Employees will share the burden as we could face higher contributions for health, two unpaid furlough days, a reduction in leave days and elimination of bonuses </li></ul>
    13. 13. Proposed Actions To Cover the Gap-Base/Survey
    14. 14. Proposed Actions To Cover the Gap-Add’l Reductions
    15. 15. Proposed Actions To Cover the Gap-Base/Survey Grand Total-$77,849,533
    16. 16. Dependencies Within the Option Item Savings Increase class size at Elementary by 2 pupils (1:24, k thru 4) (State waiver and legislative change required) $9,810,000 Two day furlough (requires statute change; may need add'l days) $4,200,000 Leave accrual reduction (2 days) (policy change required) $750,000 Total $14,760,000
    17. 17. AISD May Need to Use $31M to All of its Fund Balance <ul><li>Projected year end unobligated fund balance is $145.4M </li></ul><ul><li>Since we did not fully resolve the gap of $94.4M, AISD will need to access $31.2M in fund balance </li></ul><ul><li>If specific legislative actions are not approved, it would increase AISD’s use of fund balance to $46.3M. </li></ul><ul><li>If the State uses a wealth based approach to pass on school district cuts, AISD could experience add’l reductions of $45M to $95M on top of the $94.4M, which would essentially deplete the District’s fund balance </li></ul><ul><li>Accessing Fund balance beyond $15M will put AISD at a dangerous level and corrective actions will need to me taken so that its bond rating is maintained </li></ul><ul><li>Since accessing fund balance is a one-time option, significant cuts would also need to be made in FY2013 to stabilize the budget </li></ul>
    18. 18. Why Fund Balance Matters <ul><li>It is not a “rainy day” fund like the stat has but a cash reserve for operations. </li></ul><ul><li>AISD is one of a handful (7) of Districts with the highest rating of “Triple A” in Texas. </li></ul><ul><li>Affects our overall credit worthiness which determines borrowing costs </li></ul><ul><ul><li>It is estimated we saved taxpayers approx. $1.2M annually or $16.5M for the life of the bonds in our most recent bond issue as a result of our increase in rating </li></ul></ul><ul><li>Maintains cash reserve to cover operating costs during low cash periods </li></ul><ul><ul><li>Property tax collections lag until due date making it tougher to float payroll thru December </li></ul></ul><ul><ul><li>Maintaining a cash reserve helps AISD avert costs of issuing Tax Anticipation Notes (TANs) </li></ul></ul><ul><ul><li>cover unforeseen expenditure needs, revenue shortfalls and emergencies </li></ul></ul><ul><ul><li>provide funds to leverage state or federal grants </li></ul></ul><ul><li>Bond rating reports indicated deficiency that continued drawdown on reserves would weaken districts financial position and credit quality </li></ul>
    19. 19. Budget Milestones Going Forward <ul><li>Community Conversations (March) </li></ul><ul><ul><li>March 24th, Reagan HS </li></ul></ul><ul><ul><li>March 31th, Bowie HS </li></ul></ul><ul><li>April 11 th Revised Budget Presentation to Board </li></ul><ul><li>April 25 th Public Hearing on the Revised Budget </li></ul><ul><li>May 30 th End of Regular Legislative Session </li></ul><ul><li>June 6 th Recommended Budget Presentation to Board </li></ul><ul><li>June 13 th Public Hearing on the Recommended Budget </li></ul><ul><li>June 20 th Board Adopts 2011-2012 Budget </li></ul><ul><li>Aug 30 th Board Adopts Tax Rate and FY2012 Budget Amendments </li></ul>