Board Examines Factors That Drive the School Budget

Is it possible to build a model to project Scarsdale School budget for the next three, five or even ten years? Though some in the community have urged the administration to find a way to provide accurate forecasts of long-term budget growth, (similar to corporations) according to Assistant Schools Superintendent Linda Purvis, formulating this number can only be done to a certain extent. Though some factors can be modeled, many of the components of the budget do not follow the Consumer Price Index (CPI) and rely on factors that vary from year and cannot be accurately predicted. To that end she provided a framework of the factors that go into formulating the budget to help the Board and the community understand what numbers drive the budget discussions each year.

What are these factors?

As Purvis patiently explains every year at this time, almost 80% of budget costs are people-related –including salaries, benefits, pension and retirement costs and health insurance.

Though salaries are negotiated on a multi-year basis, the district never knows exactly how many teachers they will require until enrollment estimates are released, usually in the spring of the budget year. And even those numbers are put to the test each summer when families move into town without warning and expect to find a place for their child in the schools.

The district also cannot predict how many staffers will choose to retire on a yearly basis. And when a seasoned teacher retires and is replaced with a new recruit, there is often a big salary savings that effects the bottom line.

Claims against the district's self-insured health plan can also be volatile. It is difficult to predict what these will be year over year –and that's why the district formerly maintained a health care reserve fund to buffer against large claims that would otherwise need to be funded via the operating budget. Though the district was pressured to dissolve the health care reserve fund last year, new legislation was passed to permit funding of a healthcare reserve and Purvis recommended that the Board fund a healthcare reserve in the 2015-16 budget.

Pension costs grew precipitously after the downturn in the market in 2008 and are now "trending downward." The pension contribution is determined by the state each year and now compromises 10% of the total school budget.

Utility costs are driven by the weather, the economy and oil and gas prices. These are also unpredictable.

Each year the district is required to pay back taxes to property owners who file grievances and are awarded settlements. Tax certiorari settlements can be sizable and again impossible to forecast.

Special education costs are also unpredictable, particularly if litigation is involved.

Purvis concluded this portion of the discussion by noting that new educational programs or enhancements also require funding. Multiyear budget planning could preclude the board from having the flexibility to adopt new programs.

Purvis then took a look at the "revenue" side of the budget which includes property taxes, state aid and the use of budget surpluses. Purvis told the Board that decisions about the use of surplus funds is their responsibility and can have a big impact on taxes. This year the administration estimates that there will be a budget surplus of $2 million from the 2014-15 operating budget in addition to $2.2 million in planned surplus. In the past few years the Board has drawn down budget reserves to fund annual budgets but has made an effort to reduce their dependence on using reserves to keep tax growth down. Last year the Board allocated $3.5 million in surplus funds to the 2014-15 budget.

The tax cap is determined by the state each year. This is another factor that affects budgeting decisions each year and cannot be projected.

Purvis then posed a list of questions to the Board that will affect budgeting.

Here are the questions:

-Will the Board consider requests for new program or other enhancements to the educational program if such enhancements require an increase in budget/tax dollars?

-Is the tax cap going to be a defining consideration in determining what the proposed budget will include?

-How much of this year's anticipated surplus will be used to reduce the tax rate? To replenish health insurance reserves?

-The list of plant improvement projects for 2015-16 is approximately as the same dollar value as 2014-15. Understanding that each project will need to be individually justified, is the Board comfortable with a capital/plant improvement allocation at roughly the same level as last year?

In the discussion that followed, Bill Natbony asked Purvis if she would be more comfortable with lower planned surpluses if the Board funded reserve accounts and she replied yes and said, "I think you should have less planned surplus but you have to be willing to raise taxes to backfill or cut costs."

Responding to the questions, Chris Morin said, "We certainly should consider any new program proposals. Discussing the tax cap, he added, "Breaking the tax cap has real world implications – we have high surpluses, flat enrollment, and retirement costs are working in our favor this year."

Board Vice President Lelia Shames Maude said, "I think frameworks are great and help the process. But if the faculty and administrators have ideas for new programs I would not want this to put the brakes on this. Does it mean you have to cut something to add something? I want to be sensitive that ideas that may percolate up."

Board President Mary Beth Gose added, "We have to think differently than we have in the past. I agree that the tax cap is silly and arbitrary but we had a bad experience with the cap and the budget and we need to learn from it." Discussing new programs, she said, "We have to have strong justification for adopting any new programs -- that is the reality."