El Dorado Springs R-2 Schools FY 17 Budget

Submitted by Mark Koča, Superintendent, June 23rd, 2016, to the El Dorado Springs R-2 Schools Board of Education

In compliance with Missouri Public School Law, section 67.010, as set forth by the Department of Elementary and Secondary Education (DESE), and the Missouri State Board of Education, the following Budget Document has been developed by the superintendent, in cooperation with administration, staff, and the El Dorado Springs R-II Board of Education.

RECAP FY 16

El Dorado Springs R-2 Schools continues to be in relatively good financial shape.  FY 16 will end with the district having approximately $4.00 million in reserves collectively in funds 1, 2 and 4.  Unrestricted fund balance will increae to approximately 30% or a change of +2%.

Fund 3 reserves have levelled out due to the prepayment of $235,000 in callable bonds (Series 2011) which was made utilizing excess Fund 3 balances.  It should be noted that this will create an issue in FY 20 as the amount required for debt service will be far lower than either FY 19 or FY 21 (due to the early payment taking that principal amount out of the amortization schedule.)  This will create a “dip” or inconsistency in the year to year debt service levy which will cause annoyances for patrons when budgeting for taxes.

Enrollment declined slightly for the 15-16 SY at around 1100 students.  This is mostly due to a much smaller than normal Kindergarten class.  The full financial impact of this will not be immediately felt as the formula calculation is based on a three year high average, but will definitely start affecting revenue by FY 18.  If this trend continues, adjustments will need to be made in staffing due to decreased revenue.

There was no change in the certified staff numbers as compared to the previous year.  Teacher turnover continued to be a slight problem with 15 new certified staff members joining the staff for the FY 16 school year. Three certified staff members retired this year.  The Board took action to provide for annual steps on the salary schedule but did not raise the base salary which remains at $30,000 for certified staff.  The district continues to fund the Career Ladder Program at 50% at a cost of about $130,000.

The district continues to be a member of the OSBA Health Insurance consortium this past year.  This year, the District paid a 15% upcharge over OSBA base rates for the consortium.  This was required in order to join the consortium due to our previous poor loss ratio; however, this rate was still lower than the previous carriers’ rate offering.  Current rate for staff is $464.87 pmpm plus a $14.50 pmpm membership fee. The Board continues to pay the full amount of the employee health insurance and the membership fee.

Returns on investments continue to be lower than previous years due to low interest rates.

Capital projects and purchases for FY 16 included the development of the Morlan property which is currently nearing completion as a practice field and parking for the football / baseball field, Roofing of the 3rd grade and Kindergarten wings, re-carpeting of the HS Library re-plumbing of the upstairs bathroom in the HS, final grading and parking blocks on student parking lot, purchase of a skid –steer loader, and the construction of press boxes at the baseball and softball fields.

The District received a Community Development Block Grant for the construction of a new Early Childhood center for the amount of $985,000.  Bids were let in June, 2015 and the only bid returned was from Westport Construction and was $315 over budget.  Project was revised slightly and rebid. In the second round of bidding, the low bid (Westport) was about $100,000 over budget.  The Board Agreed to pick up the rest of the tab for the project.  Construction began in February, 2016.  In May, a wind gust blew down the partially completed building resulting in a Builder’s risk claim on the District’s insurance.  This work was quickly repaired and the project is back on schedule for an October completion.

The District did not run a bond issue in FY16, but is looking at a possible bond issue date in November 2016.

Repairs from the September, 2015 Hail storm were completed in early 2016.

DESE (Department of Elementary and Secondary Education) implemented the new assessment and accreditation standards 2 years ago.  Missouri schools are no longer rated on the old 14 point scale. The new scale is based on 140 points.  The district scored 120 of 140 or 90% on the Annual Performance Review this year.  This is down from 129 points last year.

The District continues to participate for a second year in the “Community Eligibility Provision” through the USDA food service program.  This program provides free breakfast and lunch for all students K-12.  The district went into this with the assumption of a loss of about $25,000 for the first year, however due to much greater participation rates, the loss for the year was only about $17,500 in year one and a similar loss in year 2 .  As the District fund balances for food services are higher than the USDA allows, this is a good way to spend down these balances.  It is not likely that the program can be sustained indefinitely under the existing conditions, but the District should be able to support it for 2-3 more years.

For FY 2016, legislative manipulation resulted in a change in how the Foundation formula is applied for state funding of school district.  This legislation prevents DESE from prorating the state funds back to available funds.  Instead, the bill requires that any adjustments made in state funding must be made by adjusting the “State Adequacy Target.”  Unfortunately, this mechanism favors large schools and “hold harmless” schools at the expense of the rest of the schools.

Looking Ahead to FY 17

The Basic Formula will be adjusted in a similar fashion as last year with at new legislative twist—a 5% cap was placed on State Adequacy Target growth so that the legislature can more easily say that the formula is “fully” funded.  In terms of real dollars, the formula this year would have actually provided an increase, but the lower enrollment numbers drove the total down to about $135,000 less than last year.

Projections for Proposition C and Classroom trust money estimates are slightly higher than last year, but again as these are calculated based on average daily attendance, there will be little actual increase in these monies.

The District’s FY17 budget has been developed with the consideration of levying the tax rate ceiling.

Chapter 165, RSMo, provides that all school monies must be accounted for within a framework of funds:  Incidental Fund; Teachers Fund: Debt Service Fund; and Capital Projects Fund.  The District currently maintains revenues and expenditures through the following funds:

• Fund I – General (Incidental) Fund:  All of the District’s basic services are included in the Incidental Fund, which general focus is on (1) how cash and other financial assets that can readily be converted to cash flow in and out, and (2) the balances left at year-end that are available for spending.

• Fund II – Special (Teacher) Fund:  The Special (Teachers) Revenue Fund is used to account for revenue sources legally restricted to expenditures for the purpose of teacher salaries and benefits, and tuition payments to other school districts.

• Fund III – Debt Service:  The Debt Service fund is used to account for all revenue and expenditures relating to voter approved general obligation bond propositions generally in the form of new construction and renovation.

• Fund IV – Capital Projects:  This fund is used to account for all facility acquisition and construction, all lease-purchase payments of principal and interest, and all other capital outlay expenditures with the exception of certain expenditures for classroom instructional capital outlay as allowed under Section 165.011, RSMo.

For the 2016 fiscal year, El Dorado Springs R-II School District will operate under an estimated $3.72 tax levy: $3.18 Operating Levy and $0.54 Debt Service Levy.

Fund placement requires 75% of Formula Money, and 75% of 1⁄2 Proposition C monies be placed in Fund II.  All (100%) of the State Transportation monies are to be placed in Fund 1.  Senate Bill 291 passed in the 2009 legislative session states the following provision in Section 163.043.5:  “For the 2010-11 school year and for each subsequent year, all proceeds a school district receives from the classroom trust fund in excess of the amount the district received from the classroom trust fund in the 2009-10 school year shall be placed to the credit of the district’s teachers’ and incidental funds.”  For FY17, 100% of the District’s Classroom Trust Fund monies will be place in the Incidental Fund.

Local tax revenue is calculated on the estimated total assessed valuation (AV) of $90,014,835 (2% increase) with the tax rate of $3.72 per $100 of AV.  Conservatively, revenues are projected on a 82 percent and 18 percent collection for current and delinquent taxes, $2,752,748 and $604,262 respectively. The total local receipts are estimated at $4,992,310 or approximately 39.99 percent of the total district revenues.  Receipts from non-current and other revenue sources are estimated at $2500 or less than 1%.

County receipts are generated from fines, forfeitures, railroads, and utilities.  It is estimated that $286,493 or 2.3% of the projected revenues will come from this source.  Both County and Local Revenue estimates are slightly higher than previous years.

State revenues, most of which come through the State Formula, should total approximately $5,009,257, which is about 40.13 percent and amounts to small decrease as compared to last year’s budget. Other sources of state revenue come from Classroom Trust Fund, Transportation; Early Childhood Special Education; Vocational Education Reimbursements; and State Food Service.

The federal receipts for the current budget year are estimated at $2,158,976 or about 17.30 percent of total revenues.  This is slightly higher than last year.  The majority of these monies are generated for reimbursement of Title Programs, Early Childhood Education, and food service.

As of July 1, 2016, all funds supported an estimated beginning balance of $4,439,499 in funds 1, 2, and 4.  The 2015-16 budget currently represents total projected revenues of $12,482,527 and expenditures of $12,378,584 (Surplus of $103943) These figures project a year-end balance of  4,543,442 as of June 20, 2017 (Funds 1,2,4) or 29.28% unrestricted fund balance

Major Impacts on the budget:

• 12% decrease in employee health insurance rates.  This amounted to a savings of about $103,000.  Health insurance benefits will continue to be a source of major expenditure increase in the future.

• The Early Childhood Building and the Practice Field project will consume a major portion of the Capital Projects money for this coming year—

• Staff will be added mid-year for the opening of the Early Childhood Center.  This will also generate some revenue and additional expense for the District, but numbers are fairly nebulous at this time.

• Greater Career Ladder participation

• A number of employees are taking graduate classes and moving over on the salary schedule.

• The District will continue to participate in the Community Eligibility Provision for school food services.  This program will operate at a loss for the upcoming year, but the reserves in Food Service are more than adequate to support the program for a few more years.

• The district renegotiated its student transportation contract during the renewal process to allow the contractor to utilize slightly older buses which will keep the transportation costs about equal to the previous year.  The existing contract would have added 12% to the costs.

Capital projects for the upcoming year will include: Completion of the Early Childhood Center, Completion of the Practice field, fencing, etc. around the football stadium, repairs to two driveway entrances on Park Street, repairs to the bus ramp sidewalk, Storm water control at the circle drive, roofing the 5th grade section, carpeting of the band room, Special Ed. Office, and HS Counselor’s office, installation of traffic control lights on Main street, and the installation of a new phone system.

The district is considering pursuing performance contracting for energy savings during FY 17,  Items that may be looked at for this project include upgraded lighting, upgrading and replacement of HVAC systems at the elementary and energy conservation controls for all HVAC systems.

The district is looking at running a bond issue again in Nov. 2016.

Teacher turnover is about like usual with 16 staff members leaving.  The FY 16 budget includes annual steps being granted on the salary schedule and the board picked up the full employee health insurance for next year.  Teacher base salary will raise to $31,000 for this year.  This budget also gives a 5% increase to classified staff.

El Dorado Springs continues to be a good place to work and a good school for our students to attend and remains fiscally sound with comfortable balances in reserves.

For the 16-17 school year, the adoption of this proposed budget will set an approved spending plan for the operation of the district and the day-to-day fiscal transactions.  As need arises, budget amendments may be needed.