2018-19 Budget ScheduleAnd FY 2017 Selected Audit

Highlights Board Meeting At Solanco High School

December 18, 2017

Sandy Tucker

Tim Shrom

1

2016-2017 SOLANCO SCHOOL DISTRICT

FINANCIAL HIGHLIGHTS

GENERAL FUND REVENUE

2015 2016 2017

LOCAL REVENUES 29,814,012 30,968,739 32,280,508

STATE REVENUES 17,781,054 18,311,720 19,527,032

FEDERAL REVENUES 2,202,989 2,062,082 2,030,981

OTHER FINANCING SOURCES 67,791 7,885 3,177

TOTAL REVENUES 49,865,846 51,350,426 53,841,698

GENERAL FUND EXPENDITURES 2015 2016 2017

INSTRUCTIONAL SERVICES 29,082,969 31,099,335 33,066,415

SUPPORT SERVICES 14,568,451 15,179,515 15,664,793

OPERATION OF NON-INSTRUCTIONAL SERVICES 925,695 992,917 1,014,158

TRANSFER TO OTHER FUNDS 4,922,536 4,362,962 3,600,000

TOTAL EXPENDITURES 49,499,651 51,634,729 53,345,366

CHANGE IN FUND BALANCE 366,195 (284,303) 496,332

GENERAL FUND BALANCE

2015 2016 2017

NONSPENDABLE 425,987 257,825 300,061

COMMITTED 2,280,263 2,098,778 2,702,452

UNASSIGNED 3,352,060 3,390,208 3,231,826

TOTAL 6,058,310 5,746,811 6,234,339

CAPITAL PROJECT FUND

2015 2016 2017

REVENUES 7, 790 17,331 55,011

CAPITAL OUTLAYS 2,517,386 1,600,107 1,674,429

TRANSFER IN 1,847,038 4,362,962 3,600,000

CHANGE IN FUND BALANCE

(662,558) 2,780,186 1,980,582

ENDING FUND BALANCE 6,342,930 9,123,116 11,103,698

FOOD SERVICE FUND

2015 2016 2017

OPERATING REVENUE 659,796 660,234 614,563

FEDERAL SUBSIDY 869,139 913,071 942,500

STATE SUBSIDY 114,775 122,735 124,603

OTHER REVENUES 723 1,808 5,522

TOTAL REVENUES 1,644,433 1,697,848 1,687,188

TOTAL EXPENDITURES 1,571,027 1,584,070 1,515,987

CHANGE IN NET POSITION 73,406 113,778 171,201

HEALTHCARE FUNDING SOURCES

- 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00

2012-13 2013-14 2014-15 2015-16 2016-17

Hea

lth

care

Exp

ense

sin

Mill

ion

s School DistrictContributions

Retiree Contributions

EmployeeContributions

2018-19 Budget process

• 4 separate votes are required --- if the school district has not adopted an opt out resolution

• December/January/February• 1. Adopt Proposed Preliminary Budget (Target January 8)

• 2. Adopt Preliminary Budget (Target February 5)

• May/June• 3. Adopt Proposed Final Budget (30 days before step 4) [target April 23]

• 4. Adopt Final Budget (Target June 4)

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Act 1 Timeline for 2018-2019 Budget Process

• January 26, 2018 – preliminary budget public display or opt out• School district deadline to either:

• (1) make 2018-2019 Proposed Preliminary Budget on form PDE-2028 available for public inspection (public display) pursuant to resolution; or

• (2) adopt opt out resolution pursuant to Section 311(d)(1) stating district will not raise the rate of any tax by more than index

• (110 days prior to primary election – and for public display 20 days prior to preliminary budget adoption)

• Recommending January the 8th

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Act 1 Timeline for 2018-2019 Budget Process

• February 14, 2018 – Preliminary Budget• School district deadline to adopt Preliminary Budget on form PDE-2028

unless opt out resolution was adopted

• Recommending February 5th

• February 19, 2018• School district deadline to submit to Department of Education Preliminary

Budget and related proposed tax rate increases (PDE-2028, including Real Estate Tax Rate Report)

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Act 1 Timeline for 2018-2019 Budget Process

• March 1, 2018 – file referendum exception request• School district deadline to request approval from Department of Education

for referendum exceptions (Referendum Exception Application)

• March 21, 2018• Department of Education deadline to rule on school district request for

referendum exception.

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Act 1 Timeline for 2018-2019 Budget Process

• April 15, 2018• Secretary of Budget certifies total amount of slot money revenue in Property

Tax Relief Fund and Property Tax Relief Reserve Fund and total amount available for distribution.

• May/June of 2018• School district consider final and future budget and long term financial

planning steps, including: (1) fund transfer to capital reserve fund or other budget category transfers, and (2) general fund balance designation for particular future needs.

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Act 1 Timeline for 2018-2019 Budget Process

• May 1, 2018 • Slot money notice

• Department of Education notifies school districts of slot money allocation amount. This amount is used in calculating the homestead exclusion amount for tax bills.

• County homestead report• County assessment office provides each school district a certified report of homestead

and farmstead properties

• May 15, 2018 – primary election

• May -- regular school board meeting• School district appoint tax collector for direct collection of real estate taxes as

required by School Code

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Act 1 Timeline for 2018-2019 Budget Process

• May 31, 2018• School district deadline to adopt resolution declining slot money and

allowing voter decision.

• School district deadline to report to, and file certified copy with, the Department of Community and Economic Development

• School district deadline to adopt Proposed Final Budget (Resolution Authorizing Proposed Final Budget Display and Advertising –– and to submit to PDE Certification of Use of PDE-2028)

• Recommending April 23rd preliminary adoption for Final budget

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Act 1 Timeline for 2018-2019 Budget Process

• June 10, 2018 – budget public display (and at least 20 days prior to final budget adoption) • School district deadline to make Proposed Final Budget on form PDE-2028

available for public inspection (public display). Recommending April 23

• June 30, 2018 – Final Budget• School district deadline to adopt Final Budget on form PDE-2028 (Final

Budget for General Fund Approval Resolution. Recommending June 4

• School district deadline to adopt resolution implementing homestead/farmstead exclusion

• School district deadline to adopt Annual Tax Levy Resolution

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Act 1 Timeline for 2018-2019 Budget Process

• July 1, 2018 – Issue tax bills• July 15, 2018

• School District deadline to submit Final budget to Department of Education.. OR... No later than 15 days after adoption of the budget ( Adoption on June 4th -- plus 15 days for example)

• Show compliance with 8% Fund balance Cap• If referendum exceptions are used, file Certification of utilization

• August 23, 2018• Department of Education pays school district 50% of slot money allocation

• October 25, 2018• Department of Education pays school district 50% of slot money allocation.

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Start all over again for 2019-20!!!

• September 30, 2018• Department of Education deadline to notify school districts of applicable

base index or adjusted index; and of next year budget process timeline.

• November 6, 2018 --- General election• Who gets elected---Matters!

• Homestead Constitutional voter approval—

• Tax relief and Tax reform how accomplished will matter

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Recommended Solanco 2018-19 Budget Calendar – With Budget Updates as needed1. January 8th 2018 - Advertise and Adopt Resolution for preliminary

2018-19 Budget1. Apply for Exceptions to provide options for June Budget decisions

2. February 5th 2018 - Adopt Preliminary Budget ---File for Exceptions is recommended

3. April 23, 2018 – Resolution to adopt Preliminary Final 2018-19 budget

4. June 4th 2018 – Resolutions to adopt the 2018-19 budget, utilize some, all or no exceptions, and set final millage.

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Budget Discussion and Selected Items

Expenditures

• Special Education

• Pension

• Health Care

• Wages and Staffing

• Project completion and Capitalization for M & O infrastructure

Revenues

• Millage conversion

• Earned income Tax

• State Budget -- and Basic Ed and Special Education funding

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Revenues

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Millage Conversion for Reassessment• Data show 2017 values actually declined since June 2017 to

November 2017 – attributed to the work on, and focus on reassessment---2018 Values = 27.1% increase to $2.4 B

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2018 2017 Increase %

Bart Twp $210,778,300 $169,131,700 24.6%

Colerain Twp $294,821,400 $234,613,400 25.7%

Drumore Twp $217,303,400 $183,583,600 18.4%

East Drumore Twp $324,069,300 $250,324,900 29.5%

Eden Twp $150,489,300 $121,709,100 23.6%

Fulton Twp $227,607,700 $177,809,400 28.0%

Little Britain Twp $324,774,200 $251,366,700 29.2%

Providence Twp $482,820,300 $370,331,900 30.4%

Quarryville Boro $194,648,300 $150,291,300 29.5%

Totals: $2,427,312,200 $1,909,162,000 27.1%

2018 = November 9 cutoff County data from county

2017 = November 8 cut-off

Solanco Reassessment Numbers

Millage conversion: From 12.8109 to 10.1347

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2017-18 re-cap

Assessment July 1, 2017 for 2017-18

Budget 1,915,000,000 2,420,682,167

Multiplied times millage 12.8109 24,532,874 Multiplied times NEW millage 10.1347 24,532,888

Multiplied times Collection rate 97.2% 23,845,953 Multiplied times Collection rate 97.2% 23,845,967$

Less Slot funds 545,938 23,300,015 Less Slot funds 545,938 23,300,029

Budgeted 2017-18 6111 property tax 23,300,103 Budgeted 2017-18 6111 property tax 23,300,103

Variance/ Rounding (88) Variance/ Rounding (74)

Assessment extrapolated July 1, 2017 for 2018-19

millage conversion

ConversionProof 2017-18: Proof 2018-19:

Millage Conversion and Preliminary Budget

• January 8th 2018 preliminary budget will be utilizing the new 2018 assessment values (i.e. valid for January 1 County and Municipal tax duplicates.....and for July 1, 2018 for School Districts) and the revised millage at 10.1347.

• Final Millage will NOT be set until the June 4, 2018 Meeting• Based on State Revenue

• Based on revised assessments

• Based on use of all, some or no exceptions.

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Earned Income Tax

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EIT: FY

Audit

2007 5,679,011

2008 6,623,118 944,107 16.62%

2009 6,203,344 (419,774) -6.34%

2010 4,756,179 (1,447,165) -23.33%

2011 4,888,591 132,412 2.78%

2012 5,772,632 884,041 18.08%

2013 7,016,102 1,243,470 21.54%

2014 6,728,477 (287,625) -4.10%

2015 7,046,945 318,468 4.73%

2016 7,212,916 165,971 2.36%

2017 7,297,915$ 84,999 1.18%

2018** 7,420,500 122,585 1.50%

** Budget

Audited EIT: Solanco SD FY

6,623,118

4,756,179

6,728,477

7,046,945

7,212,916

$7,297,915 7,420,500

R² = 0.43

4,000,000

4,500,000

5,000,000

5,500,000

6,000,000

6,500,000

7,000,000

7,500,000

8,000,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018**

FY A

ud

it o

r *E

stim

ate

Solanco SD Earned Income Tax at 1.18%: FY Audit

State Budget 2017-18...From November of 2017—there is some good news....• $100 M Increase in BEF or 1.7% all to the new formula (approx. $453

M in the new vs the total of $5.995 B)

• $25 M increase in SEF or 2.3% all to the new formula (approx. $88.8 M in the new formula vs the total $1.122 B)

• Pension Growth will be Approx. $125 M statewide assuming approx. $14 B in base salary statewide

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State Final Budget ‘Plan’—67% of the $2.243B hole filled with a borrowing• $1.5 billion in borrowing against (or monetizing) the Tobacco

Settlement Fund

• $300 million in one-time transfers

• $200+ million in gaming expansion

• $3 million in fireworks tax

• $10 million in sales tax application to 3P online vendors

• $30 million in capping CNIT net operating losses

• $200 million transfer from the PA Professional Liability Joint Underwriting Association

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Mandated Special Education

Growth in baseline cost and placements. Board Share up $1.9 M or 68.5% of spend---State Share drops from 30.8% to 24.3%

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6,291,184

6,949,027 7,089,596

8,420,491

9,157,890

2,189,957 2,227,676

615,808 542,742 576,202

576,926 669,831

4,323,437

6,260,383

$-

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,000

$9,000,000

$10,000,000

12/13 13/14 14/15 15/16 16/17

Gross SpecialEducationExpenditures

Special EducationSubsidy

IDEA Revenue

Net Special EducationCost

State Mandated Pension – Solanco – Cumulative $3.35 million in Local funds---$7.7 Million Budget

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109,674

323,017

368,464

485,994 470,403

539,593 534,626

407,075

98,900

-

100,000

200,000

300,000

400,000

500,000

600,000

2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

*NET Annual Pension $ Increase:Solanco SD Local share

Pension Look Ahead--- Five year projection to 2023 represents $740 Million increase at a static Payroll statewide

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FY*% of

Payroll

Yr over Yr

Increase as

equated to

a % of

PYRL

% Rate of

increase

2016-17 30.03% 3.85% 16.2%

2017-18 32.57% 2.54% 8.5%

2018-19 33.43% 0.86% 2.6%

2019-20 34.79% 1.36% 4.1%

2020-21 35.26% 0.47% 1.4%

2021-22 35.68% 0.42% 1.2%

2022-23 36.32% 0.64% 1.8%

Pension Projections Looking Ahead

* all rates for FY ending 2020 and beyond are

subject to change by PSERS board, GA

mandate, subsequent legislation, and/or

combinations thereof.

Health Care• Approx. $776 K increase in claims yr over yr (2016 to 2017) or $391 K

over 2015• 2016-17 - Run out from HA to Aetna Jan 1 conversion....Run out from HA RX

to ESI carve out July 1 conversion—Claims are claims...when paid matters• A $5.61 M total 2017 spend-----Total spend was $5.66 M in 2011

• Increase in fixed costs -- trades off for risk shifts to both H S A HDHC plans as well as increase in Specific Reinsurance coverages • More predictable &/or stable, yet still provide up-side reward with down-side

limits• Admin fees increases but traded off carve out Rx with Rebates which

exceeded Admin cost growth

• HC data analytics assisting with determining fixed cost / chronic baseline growth vs shock claims and single acute incidents• Fully expect continued ROI with analytics over time to guide health care

outcomes for employees as well as cost minimization in medical and Rx arenas

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Wages and Staffing

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$20,877,868

$21,472,883

$21,165,171

$20,802,736

$21,133,400

$20,968,016

$21,598,482 $21,674,777

$20,200,000

$20,400,000

$20,600,000

$20,800,000

$21,000,000

$21,200,000

$21,400,000

$21,600,000

$21,800,000

2010 2011 2012 2013 2014 2015 2016 2017 Est.

GF AUDITED PAYROLL: FY ending

Project Updates --• Phase I Smith Middle---In process...Close out is late Fall of 2018

• Current borrowing at 2.08% rate lock.....investments at 1% and growing

• Phase II Swift / Clermont---- Bid the spring of 2018• Close out does not occur until late fall of 2019

• Investigating cash needs (any borrowings) within prior debt capacity• Review Fed positions in first quarter of 2018---3 rate increase in 2017...for 2018?

• Borrowing may or may not make sense in light of investment yields vs interest carrying cost.....meaning....

• May want to defer borrowing and “pay ourselves” and invest ---- wait until cash flow dictates the need and pay off any second borrowing first

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Next Step and Questions

• January 8, 2018---- Preliminary Budget Resolution and Advertise• Must advertise at least ten days in advance

• Budget must be available for at least 20 days in advance

• Adoption of preliminary budget at February 5th, 2018 board meeting

• Questions?

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