Octorara Administration Office

228 HIGHLAND ROAD, SUITE 1, ATGLEN, PA 19310-1603 Phone: (610) 593-8238 Fax: (610) 593-6425 www.octorara.k12.pa.us Thomas L. Newcome II, Ed.D. Superintendent of Schools

To: From: Date: Re:

Board Directors Tom Newcome January 14, 2013 Budget Points for Understanding

The Board of Directors and the Administration have spent many hours over multiple years learning the parameters that influence the budget process. It is not possible to put all the knowledge and understanding of what drives the Octorara Area School District budget into a few short pages so my intention is to do the following. First, as I follow the discussion with the Board and the public I will try to develop some responses to questions and input that is provided. I will share this with the Board of Directors at the public meetings and will post the information on the District Website once the Board of Directors has had an opportunity to review the materials. Second, I will make myself available to anyone that would like to learn more about what is driving the budget or anyone that has ideas they would like to put forward. I will meet with them as is convenient to them. All they must do is contact Jill Hardy at 610-593-8238 X3500 to set up a time. I am available during regular office hours and evenings to be most convenient to the interested party. 1. Budgeting is a Process The reports in January about the Octorara Area School District budget were based on a moment in time during a long process. This process includes steps required to assure public understanding of the process and the progress of the process. The Commonwealth of Pennsylvania requires that the Local Education Authority (LEA) follows a timeline for budget development. A Preliminary Budget that must be balanced is required to be placed on display by the Board of Directors by January 31, 2013. The Board of Directors must approve the Preliminary Budget by February 20, 2013. The mechanism to balance the budget in the preliminary stages is to project the tax rate that it would require to balance the budget with the assumption that work will be done throughout the process to mitigate some or all increases.. By April 15, 2013 the Proposed Final Budget must be approved by the Board of Directors. The deadline to approve the Final Budget is June 28, 2013. The Board of Directors will attempt to approve the Final Budget by their meeting on June 17, 2013. Please see attached document Budget Process History. This document demonstrates that during the public portion of the budget process from January through June the percent of increase in millage rate drops. This happens because of reductions in projected spending and/or increases in revenue projections. If one looks at the process for the 2012-2013 budget one can see that from January to June the estimated increase in millage dropped from 4.07 % to 1.98% as a result of the on-going work on the budget. In the process for 2011-2012 budget one sees a reduction in millage from January to June from a projected 3.92% increase to a 0.58% decrease in millage rate.

(Note: I referred to the public portion of the budget process as a means to help those that do not follow the process closely to understand that there is internal work going on in developing the budget between July and December - which includes a line-by-line review of the budget in the business office.) There are monthly Finance Committee meetings that are publicly posted and open for public attendance. This is a new committee incorporated in the past two years. In the past the District has offered different opportunities for the public to learn more about the process and to provide input. In April 2012 Mr. Carsley , Business Administrator, held a School Finance Fair. I have a standing invitation for any individual or group that wants to discuss a topic that they may schedule with my secretary and we will arrange to meet. Budget materials are posted on the District Website. 2. Historical View of Reductions in Spending and Enhancement of Revenue Sources There has been a suggestion that the budget needs to be reviewed line-by-line. The implication that comes with this suggestion is that this has not been done and thus the increases in taxes. Conservatively, since the 2009-2010 budget cycle there has been over $4,000,000 in spending reductions and over $450,000 in revenue enhancements. Please see attached documents Budget Reductions and Revenue Enhancements. This would yield a net in potential savings for the tax payer of $4,450,000. Debt Services increased during this same period by approximately $1,000,000. This is a cost to the tax payer. The areas listed above are within the control of the Board of Directors. That which they control has realized a net in savings the past four years of approximately $3,450,000. Areas the Board of Directors do not have control over (since 2009-2010 budget): Revenue from State Sources Revenues from Federal Sources Increases in Public Charter School Tuition Increases in Retirement Fund Reduced by approximately $300,000 Reduced by approximately $1,200,000 Approximately $660,000 Approximately $2,329,000

The increase in the Retirement Fund and the loss of Federal Revenues negates almost all the spending reductions the Board of Directors made and left them with filling the gap for reductions in State Revenues and increases in Public Charter School Tuition. Therefore, despite the Board of Directors making a lot of hard decisions about spending they are not able to control what comes from the State level. (Note: The Board of Directors has reduced the number for the Retirement Fund by reducing staffing.) (Note: Attached is analysis done in February 2012 on Redundant Cost To Tax Payers For Public Charter Schools. This is another item that the Board of Directors does not control.) 3. Collective Bargaining Agreements The press releases for the prior two collective bargaining agreements are attached. I believe that the substance of the CBA for both groups, teachers and support staff, outlines a serious position by the Board of Directors to assure that costs are contained.

As indicated previously, in addition to negotiating CBAs that have helped contain cost, the Board of Directors have reduced staff in all classifications and have reduced hours for hourly staff. Both measures assist in the long-term reduction in spending. 4. Energy Solar and Wind The District worked for almost a year with an engineering firm to investigate potential energy savings or revenues that may be available to the District. We specifically asked for input on the utilization of wind or solar energy. While there are grants available to offset some of the cost in developing wind and solar sources of energy, the Board of Directors found there was no substantive savings because of the upfront cost that would be years in paying off. It was determined that the only reason to initiate a solar or wind program would be for environmental reasons and that the increase in taxes could not justify the green initiative. There is no economically reasonable manner in which to pursue these initiatives. There are educational and environmental reasons to pursue these initiative but no economical reasons. 5. Octorara Regional Planning Commission In 2006 the Octorara Area School District initiated an effort to work in the communities that comprise the District in an effort to develop the tax base. Under the direction of the superintendent of schools there was a great deal of effort put into bringing together people to help initiate smart growth in our communities. Elected officials from the State and municipal levels were asked to participate in this effort. Representative Tom Houghton worked very hard at this effort, placing a lot of resources from his office and energies of his own into the effort to help the Octorara Area School District develop smart growth to take some pressure off the home-owner to support school funding. Senator Mike Brubaker and Representative Bryan Cutler provided resources and time to the effort as well. There were local representatives most active involvement came from Parkesburg, Sadsbury Township, West Fallowfield Township and West Sadsbury Township. Parkesburg and West Sadsbury Township were by far the most active in the endeavor. After Representative Houghton left office the initiative slowed and at this time the initiative is not active. (Note: The District did take an initiative to develop a tax abatement program to stimulate growth potential for business and industry in the area. The abatement program was referred to as LERTA.)

The mission of the Octorara Area School District, through a partnership among school, community and family, is to promote educational excellence in a safe, secure environment, empowering our students with the skills necessary to be successful, responsible members of society.