ACT 72: “We Survived”

ACT 72: “We Survived” Matthew J. Malinowski, Assistant Director of Business Affairs, Wilkinsburg School District Jack A. Myers, Director Business Operations, Bensalem Township SD

An Introduction to ACT 72 Survival Training PASBO March 9th, 2006

The Timetable’s Impact • You’ve seen the calendar’s dates…no need to discuss any further. • Creation of a Budget in January for public inspection causes one to have to rely on much earlier YTD revenue and expense data; earlier estimates by providers of insurance, benefits, IU and regional Tech School services, just to name a few.

The Timetable’s Impact • The Governor’s Budget is released between the time the District’s Preliminary Budget is created and made available for public inspection and when the Board must approve it on February 15. • Changes made in the subsequent legislative process must also be reflected in the District budget.

The Timetable’s Impact • However, the March to May period that is thus created is an OPPORTUNITY to study the budget in greater detail, fine tuning where necessary. • The only restriction would seem to be that the District can not increase the rate of Real Estate taxes beyond that filed with PDE in February.

Form Changes • PDE-2028 Preliminary General Fund Budget includes several new data fields, primarily with respect to taxes and the tax base. • The AFR’s additional data requirements with respect to revenue, special education and employee benefits were probably included to allow PDE to monitor the Act 72 exceptions and RE tax basis.

Form Changes • The new forms created as the mechanism for districts to apply for the exceptions to the “inflation index” ARE QUITE USER FRIENDLY. • All calculations are done for you, however if you have more than one bond issue or more than one labor agreement or more than one taxing entity, there is preliminary calculations you will have to make.

Form changes • The information required in conjunction with the Debt Service exceptions is extensive. • You will need to create a breakdown of employee benefit insurance costs between bargaining units, if some qualify and others don’t, based on their contract effective dates.

Act 72 Budget Calculations • Submitted to PDE with your Preliminary General Fund Budget (PDE2028)

Budget Form

See Worksheet at end of packet.

Debt Service Capital Spending Issues • “The indebtedness is incurred only after existing fund balances for school construction and ANY UNDESIGNATED FUND BALANCES HAVE BEEN FULLY COMMITTED TO FUND THE PROJECT

Debt Service Capital Spending Issues • Limited to “interest and principal on indebtedness for up to 60% of the construction cost average on a square-foot basis…”

Debt Service Capital Spending Issues • “The indebtedness is for an academic elementary or academic secondary school building. …the following shall not be considered to be an academic elementary or academic secondary school building: natatorium, stadium bleachers, athletic field, athletic field lighting equipment and apparatus used to promote and conduct interscholastic athletics.”

Debt Service Capital Spending Issues • Other limits include a cap on “indebtedness for up to $250,000 of the construction cost of a nonacademic school construction project…”

Debt Service Capital Spending Issues • These are limits on what debt is eligible for exception to the “inflation index” increase in real estate taxes. • This does not mean that you can’t build or finance them, only that the District can’t fund the debt service with mils generated by an exception.

What if my increases are beyond the index? • Option 1—Cut Expenses • Option 2– Referendum

Budget Cuts • The challenge to grow education without spending more! • Still have to fund state and federal mandates.

Possible ways to re-evaluate your budget • Assign a priority level to services by budget heads across your district. In this process examine: • Mission & Goals • Reliance on General Fund Revenue • Past two years service level changes • Zero Based Budget Management every 5 years

But Be sure to watch. . . • Ensure core services/programs are not deleted. • Preserve Flexibility • Ensure accurate projections/financial analysis is provided to the public.

Referendum • Cost of conducting Referendum • Learn from Failed Attempts • Wisconsin • Model after Successful Campaigns • Illinois • California • Arizona • Florida (Pinellas County )

When developing a campaign for Referendum Remember: • More Americans have a positive view of the nations public schools than a negative view. • Public schools rank in the middle of the institutions in which the public says they have confidence. • The closer people are to the public schools, the more favorable their impressions • Parents of schoolchildren have a more favorable view of the public schools than non-parents. Source for the above listed Key Points: The Center for Public Education (www.nsba.org)

Lessons Learned from Referendum in Florida • Clearly communicate the district’s financial picture. • Explain where the district's money comes from, how it is spent, and where the shortfalls occur. • Specify how additional dollars raised through a tax increase will be spent. • Involve parents, teachers, and staff in outreach to the community. • Invite the community’s continued involvement after the measure is passed.

If Referendum Fails we will be left to possibly: • Music and art on-a-cart the • Classrooms carved out of the lunchroom • The corner of our library turned into a computer classroom • Classrooms separated by bookcase walls in the hallways • The various redistricting of our students

What if I can’t cut the budget or get voter approval for increases? • Districts can end participation in Act 72 through the approval of voters after four full years of implementation.

Related Spin-off Issues • Fund Balance • Bond Ratings / Insurance • Collective Bargaining • Local Board Discretion

ACT 72: “We Survived”