Economic Crisis UpdateHow Reduced State School FundingIs Effecting North Santiam School
District
Dr. Jack AdamsOctober 15, 2009
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2007-09 BienniumState School Funding
2007-09 Biennium—State funding allocation for K-12 education was set at $6.0 Billion in March of 2007
Final allocation for 2007-09 was $5.7 Billion
Loss to NSSD General Fund= $974,685**Stimulus dollars were received, but had to be used for Special Education/Title programs and were not part of the general fund budget
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History –October 2008
The U.S. recession was deepening
Tightening credit restrained spending by households, businesses, and state and local governments
The housing market started to slide
State revenue was down, effecting State School Funding for K-12 education
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Unemployment was rising
2008-09 General Fund Budget was $20,642,076
Salary & Benefits equaled 73% of the budget or $15,026,304
State School Funding cuts in October equaled $258,000 with an expected additional $300,000 by the end of the year
History—October 2008
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History—October 2008
Projected ending fund balance with State School Funding cuts was $444,000
The Superintendent initiated the following: Communication with board members, administrators, and
staff Immediate hiring freeze Retiree positions were not to be refilled unless absolutely
necessary New diploma requirements were under review 4-6 day cut in contract days proposed
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History—November 2008
Contingency plan was put together with the following guidelines:
• Communicate with staff regularly• Retain current employee positions• Retain current programs• Use the least disruptive solution for kids• Maintain economic responsibility to keep people
working
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History—December 2008
$40,000 cut from School Improvement Fund grant (SIF)
Estimate of state funding cuts is now at $604,800
New discussion—District’s Rainy Day Fund may have to be used to have enough money to carry over into the 2009-10
Additional options now being discussed as part of the contingency plan
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History-December 2008
Unions agree to a 4-6 day cut to contract for 2008-2009 to avoid layoffs
Savings equaled $65, 242 per day for a total of approximately $260,968 for 4 days
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Additional Money Saving Strategies
Buildings budgets frozen at 65% and technology budget frozen at 85%
No overtime
Freeze on maintenance projects unless supported through grant money
Substitutes for classified only as approved by principals or managers
Professional Development—must be approved by the Superintendent
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February State Budget Forecast Down Another $855 Million
Total Reductions for NSSD= $1,550,000
State cuts SSF per student by 6% or $381 per ADM= $1,050,000
SIF reduction= $40,000
Economic effects on other District revenue sources: Property tax decrease= $88,000 Less interest earnings= $60,000 Drop in timber revenue= $66,000 Drop in enrollment due to move outs/job losses (41
students)= $246,000
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History—February 2009
Superintendent makes presentation to staff on options to reduce staff or freeze roll over costs (salary and benefits) for 2009-10
Salary and benefit freeze to save approximately 20 employee positions with 8 positions unfilled due to retirements
The Superintendent, Administrators, Supervisors, Directors, and Confidential staff also agreed to cut 5 days from their contracts to save non-union represented positions
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March ForecastState shortfall now forecasted to be $3-$4 Billion for 2009-11 Biennium
Additional Cost Saving Strategies: Salary/benefits freeze approved for 2009-10 (added
approximately $665,000 back into budget and keeps staff employed, programs intact)
Retirements encouraged with no rehire planned whenever possible
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Board and Superintendent Goal
We are committed to doing what is
best for kids; making any reductions in staffing in a way that
is fair and equitable to ALL employees; and making an effort to keep as many people employed as
possible while maintaining
programs
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Preparing the 2009-10 Budget
Information given to Board and staff on projection for 2009-10 SSF and the difference between a $5.4, $5.6, $5.8, and $6.0 Billion allocation for K-12 Education
$6.0 Billion is the best case scenario, NSSD took the conservative road and built budget on $5.6 Billion allocation
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April/May 2009 Strategies for Saving
Implemented freeze on Professional Development
Limit field trips
Release of $600,000 NSSD Rainy Day Fund
Review of Co-Curricular Middle School and High School Athletics and Activities for 2009-10—Savings of $43,239
Prepared budget on $5.6 Billion allocation for K-12 education, and presented to Budget Committee at the end of May after State Forecast
34% of districts across the state budgeted at this conservative level
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State Legislature Funds K-12 at $6.0 Billion with Revenue Package
and Stipulations
NSSD keeps budget based on $5.6 Billion allocation, due to nature of
stipulations and history of tax implementations in Oregon
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Along with reducing the state budget, the 2009 Oregon Legislature passed two bills that would increase some corporate and personal income taxes.
These bills are expected to raise $733 million in revenue, which is included in the 2009-11 state budget to prevent further cuts to schools, healthcare and public safety.
What is the revenue package?
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Legislative actions taken to fill the projected 2009-11 state budget gap of $4.028 billion were:
Budget Cuts $1.994 billionFederal Stimulus $978 millionAdditional State Revenue $801 millionState Reserves $255 million
What is the revenue package?
Source: Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 5, September 2009
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For 97.5% of Oregonians – single people making less than $125,000, or couples making less than $250,000 – personal income taxes would not change
How would personal income taxes be affected?
Source: Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 12, September 2009
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For individuals with annual incomes above $125,000 or couples with annual incomes above $250,000, it raises the state income tax rate by 1.8%-2.0% – but only on income above those amounts
How would personal income taxes be affected?
Source: Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 7, September 2009
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Corporations would pay an additional 1.3% on profits over $250,000 in 2009 and 2010. That would be reduced to 1.0% in 2011 and 2012. Starting in 2013, the additional tax will be reduced to 1.0% on profits over $10,000,000
How would corporate income taxes be affected?
Sources: HB 3405 and Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 12, September 2009
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Two-thirds of corporations doing business in Oregon now pay an annual minimum tax of $10. This bill would raise the corporate minimum tax to $150 for corporations with revenues of less than $500,000. Those with revenues of more than $500,000 would pay about one one-thousandth of their Oregon revenues in taxes
How would corporate income taxes be affected?
Sources: Oregon Corporate Excise and Income Tax”, 2008 Edition, Oregon Department of Revenue, pages 3-14 and Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 12, September 2009
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Oregon’s business taxes are currently at 3.7% of gross state product, which ranks 3rd lowest among the 50 states. If the revenue package would be affirmed by voters, Oregon’s corporate taxes would go up to 3.9% of gross state product, which would rank as 5th lowest
How do Oregon’s business taxes compare?
Sources: ”Total State and Local Business Taxes,” Council on State Taxation, Ernst & Young, 2009 and Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 18, September 2009
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By comparison, Washington’s corporate taxes are at 5.5% of gross state product, California and Nevada at 4.6%, and Idaho at 4.7%
How do Oregon’s corporate taxes compare?
Source: ” Total State and Local Business Taxes,” Council on State Taxation, Ernst & Young, 2009
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Of the $733 million raised by the revenue package, about 40% – some $285 million – would be targeted for schools. This amount would be included in the $6.0 billion allocated to schools for 2009-11
What would this mean for Oregon’s schools?
Source: ” 2009-10 Distribution of Formula Revenue to Districts,” Oregon Department of Education
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2009-10 Immediate budget freezeCut in contract/school days
What would the impact be to NSSD if stipulations are not met in January
2010?
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Funding Levels How they look in our budget
6.05.6
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Staff Communication Plan
Continue with same format as last year, honest and transparent
Superintendent to meet with Board, Management Team and NSEA/OSEA Executive Council members
Meet with staff to keep them informed of latest information, discussing options and how each will effect staffing and programs in the District
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Details to Communicate
Used $600,000 Rainy Day Fund for 2009-10
Early Retirement must be figured in (averaging more than $300,000 per year for the past 7 years)
Reserves are needed to run the district ($600,000)
Ending fund balance for 2008-09 was $1,002,000 (with Rainy Day Fund, budget savings, and cuts in SSF)
Ending fund balance for 2009-10 is projected to be $106,450 (based on budgeted $5.6 Billion allocation from the State)
Significant PERS increases are expected
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Details to Communicate
Endorsements and degrees make a difference during layoffs
90% of districts cannot pass bonds, so they have had to spend general fund dollars on portables and boilers depleting their reserves
Federal dollars may decrease by 1-3% (stimulus, federal grants)
Unemployment costs for reduction in force $12,000 for each employee
Loss of State Funded School Improvement Fund Grant of $538,000 Employee roll over cost would be approximately $662,000*
*Based on actual savings from 2009-10
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Cash Reserves
Districts need a cash reserve to make payroll and pay for lights, heat, etc.
110-140 school districts in Oregon may end up with no cash reserve for 2010-11
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Tools for Reductions
Reduction in Force Reduction in Budget
Board with all employee
and date of hire listed
Graphs of budget areas with budgeted amount, amount encumbered, amount
spent, and amount remaining
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Communication Plan
Board and Management Team members to meet and communicate with local clubs or groups regarding the impact from the loss of SSF
Board members to submit commentary for local newspapers with Jodi or Mary’s assistance
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Time Line
Legislature must adjust the K-12 budget allocation in a Special Session if tax fails, hopefully they will keep funding intact for 2009-10 and have districts take the whole hit in 2010-11
Must have facts regarding changes to allocation before communication with community begins
Need a contingency plan with unions
Action plan will be prepared in February
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Looking Forward to 2010-11Possible Strategies for Savings
2010-11 Reduction in force based on contractual language or
salary/benefit freeze Cut in school days Larger class sizes Additional reductions to co-curricular athletics Reduced elective/academic course availability Review of transportation and food service costs Review school programs/curriculum adoptions Review increased PERS contributions
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Questions or Comments