Superintendent´s Recommendation for 2009/10 Budget Cuts

The Superintendent´s Recommendation for Budget Cuts for 2009/10 will be presented to the School Board at a report and presentation at the May 18, 2009 School Board Meeting. No action will be taken at this meeting. The School Board will be asked to vote on the Budget Cuts for 2009/10 at the School Board Meeting of June 8, 2009. Also on this agenda will be the Superintendent´s plan for District Office budget cuts.

According to the Florida Legislature´s Office of Economic and Demographic Research Florida´s growth has slowed significantly over the last two years. The state´s economy is based on growth and residential construction.

According to the Florida Center for Fiscal & Economic Policy Florida has experienced a 17% reduction in recurring General Revenue over the past three years. The state of Florida will have $5.5 billion less to spend next year on essential services such as education.

Our operating budget in year 2008/09 has been reduced by $30 million. In the original budget, we made $21 million in cuts. During the middle of the school year, we made additional cuts of $9 million for a total of $30 million in cuts this year.

Our original estimate for the 2009/10 year was that our budget for operations would be reduced by $20 million next year. The results of this year´s legislative session are much better than we expected. Our General Operating Budget will have a reduction in funding of $20 million from the state; however, the legislature has allowed us to transfer an additional $6 million from capital and has provided us with $14 million from Stabilization funds from the Federal Government Stimulus Package.

The Federal stabilization dollars will go away after two years. Our original estimate was $20 million in cuts for 09/10 year, now with the results of the legislature and the receipt of Federal stabilization dollars our new estimate is $25 million in cuts over a three-year period.

This is good news for Manatee Schools. A cut of $20 million for the 2009/10 year would have been very difficult to manage. A cut of $25 million over three years will be difficult, but manageable. We cannot wait until year 3 to make the $25 million in cuts. We need to begin today to size our organization to the revenue available.

We will have an easier time addressing the shortfall compared to other districts because as the state reduced our funding over the last two years we made cuts in our budget to deal with the reduced revenue. Some districts have tapped into reserves or used non-recurring revenues to balance their budget, which will make their deficits more significant to deal with.

We have asked our stakeholders for their input in this budget process. We have focused on the process of gathering ideas and seeking feedback through town hall meetings, School Advisory Council meetings, television shows, faculty meetings, presentations to civic clubs and the district web site. This budget process has been rich in the education of our budget to our community. We have used our website as an educational tool to communicate to our community the challenges we face and the components of our budget.

Our feedback from the community has been consistent with the Board´s priorities - maintain a high quality system of education for our students. Do not eliminate art, music, physical education, JROTC, and other elective programs. This does not mean that we will not reduce offerings in these areas. If we used to have 5 business teachers, we may now have only 4 business teachers and class sizes may be increased in non-core classrooms.

Our strategic plan, EdVantage, is our plan for the future - it has provided us a focus in our decision-making. We will continue expansion of eFolio and we will continue implementation of the Manatee Core Curriculum. Our students are our future; we have to prepare them to be the leaders of our community.

This year the School Board added 10 community members to the Budget Committee. The addition of these 10 community members´ “fresh eyes” changed our process of budget development and review. The Budget Committee´s primary focus was to maintain programs at schools and save the classroom. More importantly, the budget cuts that will be made in the years 2010/11 and 2011/12 will come from ideas developed by the Budget Committee.

I have listened to the feedback at town hall meetings, Budget Committee suggestions, website submissions, and to our parents and employees; this recommendation takes into account the feedback received through this process.

The cuts made in the 2008/09 school year included:

• 68 District Office positions, including an Assistant Superintendent position
• across the board salary reduction of
  
  
  • 1% for employees
  • 2% for high level district office employees
  • 5% for the School Board, Superintendent and School Board Attorney

Based on the feedback from employees, taxpayers, Budget Committee, and our community I am recommending the following cuts for 2009/10:

Please note the following items not on the list of cuts:

• No to reductions in School Resource Officers
• No to closing schools. We will need all our classrooms if the class size reduction amendment gets measured at the classroom level. If the Class Size Amendment is not measured at the classroom level, we may have to look at closing schools as an option in the future.
• No to a four-day school week. We need at least 180 days of school. To shorten the school year would be a big mistake for many reasons.
• No to across the board salary reduction. This economic decline is not a short-term situation. Our plans for budget cuts need to take into account the nature of this downturn, we need to develop a budget that reflects the state´s ability to fund education, without placing the burden of budget cuts on our teachers, support staff, and other employees.

Fund Balance and Rainy Day Fund for Manatee County Schools: The legislature´s special session in January changed the rules on fund balance for school districts. In Special Session, the Legislature created Section 1011.51, Florida Statutes, which states that each district school board shall maintain an unreserved fund balance that is sufficient to address normal contingencies. The statute provides notification to the Commissioner of Education if fund balance falls under 3 percent and requirements that are more stringent if fund balance falls below 2 percent.

In addition to this legislative requirement, we also need to recognize the fragile status of our economy. The potential for continued decreasing state sales tax collections and revenue reductions are significant. We need to be prepared for additional mid-year budget cuts during the fall of 2009. In order to deal with the new statute on fund balance and the potential for budget cuts in the fall of 2009 I am recommending the following budget strategy:

Fund Balance will be budgeted at 4% ($12 million) for the 2009/10 school year and 5% ($15 million) for the 2010/11 school year.

In addition to this fund balance, I am recommending we establish our own “Rainy Day Fund”. This fund would be our buffer for mid-year budget cuts from the state, unexpected enrollment declines, property tax collection shortfalls, etc. I am hopeful we could establish this rainy day fund for 2009/10 at $5 million. This would keep us from mid-year reductions in force, layoffs, and additional reductions to school budgets.

We have not had this type of rainy day fund in the past. Therefore, this year when mid-year budget cuts came we had to implement painful cuts to schools. Our employees are experiencing a high level of anxiety because of the budget cuts. Leadership in our organization needs to prepare a budget that recognizes this anxiety and prepares a budget that will alleviate it in the future.

As an organization, we need to become stronger financially and implement budget strategies based on multi-year approaches instead of a year at a time.

Revenue Enhancement: The Budget Committee has recommended a number of strategies for increasing revenues for the school district and individual schools. These ideas included sharing best practices, cell phone towers on our sites, maximizing advertising revenues, implementing a credit card program where personal credit cards usage generates revenue for schools, these strategies should maximize revenues and relationships with the Manatee Education Foundation.

Grant Writing: The Budget Committee recommends that the district refine its grant writing strategies so that specific goals are established and measured. In addition, the school board needs to re-align resources so that grant writing is a higher profile, more focused effort for Manatee County Schools. The District Re-organization will reflect this re-alignment of resources and a more focused effort in grant writing.

Long Term Financial Issues:

Termination Pay: Our liability for termination pay, the value of our employees´ sick leave payable at retirement has grown significantly over the past decade. In 2000, our liability was $13.9 million and at June 30, 2008, our liability was $25.4 million. Because of the Class Size Amendment and growth, we have more teachers today than in the year 2000.

My recommendation to you is that we change our policies and negotiate to modify our employment contracts so that employees hired in the future have a reduced percentage payout of sick leave at retirement. I believe the payout of unused sick leave at retirement at lower percentages can still be a great incentive for employees to have good attendance.

There would be no change for employees currently working for the school system

Health Insurance Family Premium Subsidy: Over the past few years, the premiums for family insurance have not kept up to the cost of health insurance. This has caused the school district and employees in the plan that are single to pick up the increased cost for family health insurance. Some level of subsidy for family insurance is common in school districts and is a positive strategy for recruitment and retention of employees. The key to a subsidy for family health insurance premiums is to identify a subsidy percentage and increase premiums as necessary to keep this percentage in line. A recommendation to adjust family premiums to more closely reflect costs of health care is being researched. Any change recommended will be over two or three years so the adjustment in premiums can be planned and communicated.

The “savings” from this change will not directly be enjoyed by the General Operating Fund, but by the Health Insurance Fund (711). The savings will benefit the General Operating Fund in the future.

As Manatee County School District faces economic challenges, be assured that our students and staff are at the heart of every careful decision that is made.

Remember our motto...We Believe in Manatee!

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