fy2012-13 budget development: revised fiscal forecast for ...fil… · college, areer, life...

Presentation to AISD Board of Trustees

FY2012-13 Budget Development: Revised Fiscal Forecast for FY2012-15 & Preliminary Budget, Tax Rate & y g ,Possible Scenarios for Consideration of a Tax Ratification Election, & CompensationNicole Conley-Abram, CFO

Mi h l H CHCOMichael Houser, CHCO

January 9, 2012

DRAFT—For discussion purposes only.

Overview of Discussion Review multi-year planning and strategy for FY2013 Discuss analysis of financial condition based onDiscuss analysis of financial condition based on

fiscal forecast for FY2012-13 and out-years- Updates revenue/expenditure data andUpdates revenue/expenditure data and

assumptions from last June- Provides “same services” budget forecastg

Discuss impact of possible compensation scenarios to baseline deficit Discuss possible options and scenarios for

consideration of a tax ratification election (TRE)

AUSTIN Independent School District

( )

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DRAFT—For discussion purposes only.

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Revised Fiscal Forecast FY2012-15 & FY2013Preliminary Budget

o d scuss o pu poses o y

C ll C Lif R diBOARD PRIORITIES FOR SY 2012-13College, Career, Life Readiness

Human Capital

Rich Portfolio of Options

E l d

College-ready Culture

Whole Child, Every Child

Systems

Improve t th hRefine our

human capital strategy to recruit, retain, promote, reward evaluate

Explore and establish new delivery models to provide an enhanced portfolio of

Expand and enhance advanced academic programs to prepare all

Expand academic (intellectual), physical (health, wellness, and safety) social

systems through accessible performance management, shared data, technologyreward, evaluate,

and develop the highest quality educators.

portfolio of academic options to promote graduation rates and higher achievement for

prepare all students for college, career, and life.

safety), social, and emotional initiatives and programs to enhance the education of the

technology integration, facility master planning, and aligned operations.

AUSTIN Independent School Districtstudents.whole child.

Building the FY2012-13 Preliminary Budget

1 Baseline

• Same Services Budget-What is the current fiscal/financial condition after careful analysis of revenue and expenditure trends and related budget drivers? What is the fiscal/financial condition likely to be in the future if no policy changes or corrective actions are made i e same services budget?

“Diagnosis”1. Baseline Assessment

policy changes or corrective actions are made, i.e., same services budget?

• New Needs Given this baseline assessment and the District’s Strategic

2. Initiatives Development

• New Needs-Given this baseline assessment and the District s Strategic Plan, what initiatives (on both the expenditure and revenue side of the budget) should be pursued. What are the fiscal implications of those initiatives, (i.e., AAFRs)?

“Treatment”Puts and Takes

3. Managing

• Monthly Reports-Continue monthly reporting tools and quarterly assessments.

• What performance measures are appropriate to monitor the success of these initiatives and are the necessary data collections/systems in place?

“Check-Up”3 a ag g& Monitoring (Implementation)

these initiatives, and are the necessary data collections/systems in place?• Revisit and revise monthly reports based on results.

AUSTIN Independent School District 4

Why Multi-Year Planning is Important Identify how intermediate and longer-term challenges may shape

finances, before trends overtake condition

- Revenue expectations

H l h

“Multi-year planning is a critical exercise. These plans will often have out-year- Healthcare costs

- Enrollment

Strengthen the case for options with longer lead time to generate fiscal impact

often have out-year gaps projected which allow governments to work out, in advance, the optimal way to

fiscal impact

- Facility closures/investments

- Benefit plan reforms

D t i h th d ti ff d bl d

restore fiscal balance”

-Standard & Poor’s

Determine whether proposed actions are affordable and sustainable before commitments are made

- Compensation

Expanded programs- Expanded programs

Support the case for increased funding before reserves are exhausted and the system is in crisis

Positive credit rating factor and recognized best practice


Positive credit rating factor and recognized best practice

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FY2012 Adoption: Multi-Year Budget Strategy for FY2012 & FY2013

From June 20, 2011 Presentation: Managing the Deficit

Anticipated state reductions of $35.6 million in FY2012 and additional $20 million in FY2013

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and additional $20 million in FY2013. In order to stabilize staffing in the District for the next two

years, the District would continue to implement cost y , preduction measures to increase reserve levels in FY2011 and FY2012 in anticipation of the need to access reserves in FY2013reserves in FY2013.- Continue hiring freeze, implement spending cut-offs,

modify health plan, monitor proposed Austin Energy y p p p gyrate increases, reduce/level contract costs, postpone projects and maximize grant availability.


Current Analysis of Financial Condition Projected deficit of $12.6 million in FY2013 could be lower based

upon mid-year expenditure analysis results, additional allocations of Edujobs funding from the state, and prior year state entitlementof Edujobs funding from the state, and prior year state entitlement adjustments due to appraisal audits.

First quarter expenditure analysis indicates that the District’s di t l l li t di t d B fspending controls are leveling out spending trends. Before

FY2011 historical, spending trends were escalating on average 7% a year; beyond inflation and enrollment growth.

The District’s strategy to increase reserve levels for use in FY2013 – spending controls, maximization of grant revenue, higher tax collections and increased ADA – has led to increasedhigher tax collections, and increased ADA – has led to increased reserve levels that are well within the Board’s fund balance policy.


Current Analysis of Financial Condition (continued)(continued)

Salary levels have been frozen in the district for two years. Several school districts including some of our neighborsSeveral school districts, including some of our neighbors, have frozen salaries for this year but are considering increases for next year.

Projected reserve levels would be sufficient to cover the t f l i if th B d th i d thcosts of a salary increase if the Board authorized the use

of between $20 million and $25 million of the reserves for the next two years.


Risks Thi l i dditi l ti i This analysis assumes no additional programmatic increases beyond FY2012; any future increases would be nominal and according to the projected growth in revenue due to WADA increases.

To avoid a downgraded bond rating, the Board would need to (1) adopt a stabilization plan that addresses the deficit in(1) adopt a stabilization plan that addresses the deficit in future years and (2) identify the target year for a TRE and/or spending reductions.

If the next state budget contains additional reductions in revenue, the District may need to accelerate its financial plan and consider additional expenditure reductionsand consider additional expenditure reductions.


Out-Year Planning Considerations The availability of ARRA funds and the spending controls that the District has

adopted have allowed the District to increase reserve levels to cover the deficit for FY2013.Th f h f d b l i i bl d h ld b id d h The use of the fund balance is not sustainable and should be considered a short-term solution. Rating agencies will expect the District to implement a multi-year stabilization plan.The projected deficit for FY2012 13 may decrease if as expected the state The projected deficit for FY2012-13 may decrease if, as expected, the state allocates additional Edujobs funding.

The District has implemented and exhausted many of the available efficiency options to reduce expenditures presented in both the Efficiency Study and TASBoptions to reduce expenditures presented in both the Efficiency Study and TASB Staffing Review.

A balanced approach will work best to stabilize future district budgets which necessitates revenue increases. The Board may need to consider calling for a TRE y gin either 2013 or 2014 to stabilize revenue depending on what happens in the next legislative session.


1111Compensation

Compensation OptionsO ti A l C t E ditOptions Annual Cost Expenditure

TypeSalary increase of 3% for teachers & other professionals 2% for classifieds and 1% for

$12,270,000 Recurringprofessionals, 2% for classifieds and 1% for administrators

Salary increase of 3% for teachers & other professionals 2% for classifieds and

$12,630,000 Recurringprofessionals, 2% for classifieds and administrators

Salary increase of 3% across the board $14,160,000 RecurringSalary increase of 4% for teachers & other $15 820 000 RecurringSalary increase of 4% for teachers & other professionals, 2% all others

$15,820,000 Recurring

Split increase over two years: 2% across the board each year

$9,400,000 (year 1)$18 800 000 (year 2

Recurringboard each year $18,800,000 (year 2

and beyond)Retention stipends, which could occur over multiple years

$12.3 million to $15.8 million

One-time


multiple years $15.8 million

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1313DRAFT—For discussion purposes only.Tax Rate and Possible Options for TRE

Revenue: Considerations for a Tax Ratification Election (TRE)Ratification Election (TRE)

The national financial climate is still perceived as weak, but there are signs of recovery with recent growth in employment. Austin has a relatively stronger economy, but growth is nominal.

Voter enthusiasm for TREs is tepid statewide. In the Nov. 2011 elections, voters approved 69% of TRE initiatives and 57% of bond initiatives.Th diff i i i t S till ti h th th There are differing opinions among taxpayer groups. Some still question whether the district is operating as efficiently as possible, while others believe more investment is needed and additional cuts cannot be sustained.

Any TRE proposal must be tied to compelling programming, not just operational needs.Any TRE proposal must be tied to compelling programming, not just operational needs. The impact of rate increases imposed by other taxing jurisdictions – e.g., city, county,

Capital Metro, ACC, hospital – must be considered when determining taxpayer burden. Taxpayer acceptance is difficult to ascertain without sufficient polling.p y p p g Timing is everything.

- Affects potential success rate- Impacts bond election timing


- Impacts bond election timing

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Tax Ratification Election –Projected Additional RevenueProjected Additional Revenue

Scenario Tax R t

Local RevenueG t d

NetR

Estimated ARate Generated Revenue

RetainedAverage Taxpayer Impact(Annual)

1 Status quo 1 079 - -1 Status quo 1.079

2 Four-cent increase

1.119 $23.0M $13.2M $89

3 Six-cent increase 1.139 $34.5M $20.0M $138

4 Eight-cent i

1.159 $46.1M $26.7M $187increase

5 Nine-cent increase (max.)

1.170 $52.4M $34.8M $214


Out-Year Planning and TRE OptionsOptions Pros Cons

TRE in FY2012- •Opportunity to address pay parity and other •Economy still sluggish, flat salary growth,TRE in FY20122013(Nov. 2012)

Opportunity to address pay parity and other budgetary pressures•Better sequence with possible bond election in 2013•If successful, it would allow the district to stabilize revenue •If TRE fails, contingency budget already in place

Economy still sluggish, flat salary growth, significant state and school district staffing cuts•Recent results indicate moderate election success (TRE approval 69%, bond approval 57%)

TRE in FY2013-2014(Nov. 2013)

•Lines up with legislative session which could lead to more aggressive funding reductions and would support case for TRE•Provides more time for economy to improve and to make case with public

•Could be risky if a compensation increase is provided in FY2013 and the TRE is rejected in out-year•Could impact planned bond election in 2013

TRE in FY2014-2015(Nov. 2014)

•Better sequence with possible bond election in 2013•Provides more time for economy to improve and to make case with public•Significant state reductions could positively affect voter attitudes

•If TRE fails, no contingency budget

Changing Fiscal Year

•One-time increase to fund balance of $30-40 million•Could be option for FY2014 or FY2015 allowing for postponement of a TRE for another year•Aligns budgeting cycle with instructional timelines

•Budget estimates would be challenging as budget would be adopted without final legislative actions and certified values •Budget adjustments would be needed to account for any legislative actions taking effect in August


for any legislative actions taking effect in August

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December Budget Planning ProcessProcess

Refine revenue estimates and assumptions based on most

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precent data

Complete actuarial review of “baseline” costs Vet and review new budget requests and potential

reallocations and/or budget reductions Develop strategic funding “target” for external resources Develop strategic funding target for external resources Finalize year-end close transactions to maximize reserve

levels available to support the 2012-13 Preliminary Budget Continue to refine multi-year financial plan and assumptions


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