COMPRESSION
Piecing Together a New Plan
2011-2012 Board Budget Study Session #1
May 16, 2011
Agenda
1
Legislative Update
•
•
2
Preliminary General Fund Budget
•
•
3
Budget Bills
Fund Formula Bills
Expenditure Increases and Reductions
Education Jobs Funding
Annual Benchmarking Update
2
State Budget Bill Update
3
House & Senate Budgets
2010-2011
House
Senate
House/
Senate
Difference
$36.0B
$33.2B
$37.0B
($3.8B)
Facility Funding
1.2B
1.6B
1.6B
-0-
SSI & At-Risk Programs
4.4B
3.3B
3.6B
($0.3B)
Tech & Instruct Materials
1.2B
0.3B
0.7B
($0.4B)
Other
7.3B
7.0B
7.1B
($0.1B)
$50.1B
$45.4B
$50.0B
($4.6B)
($4.7B)
($0.1B)
Statewide
Estimates
Foundation Program
TOTALS
Proposed Budgets vs. 2010-2011
Overall, the Senate’s version of the 2012-2013 biennial budget provides $4.6B
more in education funding than the House’s budget. Although it does not
provide funds for enrollment growth or additional hold-harmless for declining
property value, it provides nearly as much total funding as is estimated for the
4
2010-2011 biennium.
House & Senate Budgets
Difference from Minimum Need
Statewide Estimates
2010-2011 Budget
TEA
Versus
Senate
($7.5B)
($2.9B)
(14.2%)
(5.5%)
$50.1B
New Enrollment
1.8B
Hold-Harmless for Property
Value Decline
1.0B
MINIMUM FOR 2012-2013
Versus
House
$52.9B
The Texas Education Agency requested nearly $55B for the biennium. If the
only changes made to the 2010-2011 budget were minimal increases for new
enrollment and hold-harmless for property value decline, the minimum need
for the 2012-2013 biennium would be $52.9B. The House and Senate versions
of the budget fall $7.5B and $2.9B short of that mark, respectively.
5
Formula Funding Bills
House Version
6
2010-2011 Revenue vs. 2011-2012
Difference from Current Law Revenue Estimate
NEISD General Fund
2010-2011
2011-2012
Current Law
Difference
Property Tax Revenue
$282.8M
$277.5M
($5.3M)
Other Local Revenue
4.4M
3.9M
(0.5M)
188.9M
201.5M
12.6M
23.5M
23.5M
0.0M
6.2M
5.6M
(0.6M)
$505.8M
$512.0M
$6.2M
State Revenue
TRS Revenue
Federal Revenue & Other
Total Revenue
Under current law, increases to Weighted Average Daily Attendance would
increase State Funding by $7.7M. Decreases in property tax revenue would
trigger an increase to State funding (via hold-harmless) of approximately $5M.
7
2010-2011 Revenue vs. 2011-2012
Based on House Bill 2485
NEISD General Fund 2010-2011
2011-2012
HB 2485
Difference
Property Tax Revenue
$282.8M
$277.5M
($5.3M)
Other Local Revenue
4.4M
3.9M
(0.5M)
188.9M
151.9M
(37.0M)
23.5M
23.5M
0.0M
6.2M
5.6M
(0.6M)
$505.8M
$462.4M
($43.4M)
State Revenue
TRS Revenue
Federal Revenue & Other
Total Revenue
Under House Bill 2485’s funding formula, NEISD will see a decline in revenue of
$43.4M in 2012 compared to 2011. Revenue would drop another $3M in 2013
and $2M in 2014.
8
2011-2012 Effective Revenue Loss
House Bill 2485 -- Difference from Current Law
NEISD General Fund
2011-2012
Current Law
2011-2012
HB 2485
Difference
Property Tax Revenue
$277.5M
$277.5M
$0.0M
Other Local Revenue
3.9M
3.9M
0.0M
201.5M
151.9M
(49.6M)
23.5M
23.5M
0.0M
5.6M
5.6M
0.0M
$512.0M
$462.4M
($49.6M)
State Revenue
TRS Revenue
Federal Revenue & Other
Total Revenue
Compared to the current funding formula law, NEISD will lose nearly $50M in
2012, all in State revenue. The State’s share of total General Fund revenue
would fall from 39% to 33%.
9
Formula Funding Bills
Senate Version
10
2010-2011 Revenue vs. 2011-2012
Based on Senate Bill 22
NEISD General Fund 2010-2011
2011-2012
SB22
Difference
Property Tax Revenue
$282.8M
$277.5M
($5.3M)
Other Local Revenue
4.4M
3.9M
(0.5M)
188.9M
164.8M
(24.1M)
23.5M
23.5M
0.0M
6.2M
5.6M
(0.6M)
$505.8M
$475.3M
($30.5M)
State Revenue
TRS Revenue
Federal Revenue & Other
Total Revenue
Under Senate Bill 22’s funding formula, NEISD will see a decline in revenue of
$30.5M in 2012 compared to 2011. Revenue would remain relatively flat
thereafter.
11
2011-2012 Effective Revenue Loss
SB 22 -- Difference from Current Law
NEISD General Fund
2011-2012
Current Law
2011-2012
SB22
Difference
Property Tax Revenue
$277.5M
$277.5M
$0.0M
Other Local Revenue
3.9M
3.9M
0.0M
201.5M
164.8M
(36.7M)
23.5M
23.5M
0.0M
5.6M
5.6M
0.0M
$512.0M
$475.3M
($36.7M)
State Revenue
TRS Revenue
Federal Revenue & Other
Total Revenue
Compared to the current funding formula law, NEISD will lose nearly $37M in
2012, all in State revenue. The State’s share of total General Fund revenue
would fall from 39% to 35%.
12
Formula Funding Bills
What if None Passes?
13
Budget Bill but No Funding Bill?
If the Legislature passes an appropriations bill but does not change
the Foundation School Program’s funding formulas to distribute only
the amount appropriated, the Commissioner of Education could:
•
Fully fund 2011-2012, and prorate 2012-2013
•
Needs approval by the Governor
•
Legislative Budget Board would propose to the next Legislature (January
2013) to take shortage from Rainy-Day to finish out 2012-2013
Sources: Legislative Budget Board; Moak, Casey & Associates
14
Budget Bill but No Funding Bill?
•
If the 83rd Legislature denies the January 2013 Rainy-Day request,
Commissioner stops payments to districts in May 2013
•
From an total allocation perspective, this hurts property-rich districts
since proration is based on available property tax base
•
From a cash perspective, however, this disproportionally hurts propertypoor districts that have their State aid payments spread evenly
throughout the year
•
•
Property-wealthy districts receive more State funds in September & October,
and live off property tax revenue beginning in January
Proration is a delay, not a reduction
•
Statute mandate any cut in 2013 would have to be added to the 20142015 biennium budget
Sources: Legislative Budget Board; Moak, Casey & Associates
15
Budget Bill but No Funding Bill?
The Commissioner of Education has the authority to
change the “compressed tax rate.”
From Texas Education Code §42.2516
“The commissioner shall determine the state compression percentage for each school
year based on the percentage by which a district is able to reduce the district's
maintenance and operations tax rate for that year, as compared to the district's
adopted maintenance and operations tax rate for the 2005 tax year, as a result of
state funds appropriated for distribution under this section for that year from the
property tax relief fund established under Section 403.109, Government Code, or from
another funding source available for school district property tax relief.”
Quote from Robert Scott:
“Please don’t put me in that spot.”
Source: TASA Capital Watch Alert
16
Tax Rate Compression
•
When the 79th Legislature lowered property taxes, they did not lower
local property tax rates to $1.00.
• The Legislature lowered each district’s rate to 66.67% of it’s
2005 rate. Almost every district in the state taxed @ $1.50 at
the time, so 66.67% compression = $1.00.
•
If the State fails to provide adequate funding to districts, such that
the total available revenue (local & state) per Weighted Average
Daily Attendance is not comparable to pre-2006 amounts, then the
commissioner must adjust the compression rate.
Sources: Legislative Budget Board; Moak, Casey & Associates
17
Tax Rate Compression
HYPOTHETICAL SITUATION
•
Commissioner changes NEISD’s compression from 66.67% to 68%
•
68% X $1.50 = new $1.02 compression rate
•
NEISD’s current tax rate is $1.04 ($1.00 compression + $0.04
enrichment pennies)
•
If NEISD does raise it’s taxes by $0.02, the State will penalize
NEISD by taking away approximately $4 million of Tier II State
funding.
•
Only 2¢ of our tax rate would be “golden pennies” instead of the 4¢
we now have (local tax rate only 2¢ above compressed rate).
18
General Fund Forecast
19
General Fund Forecast
•
Reflects house version of budget and formula funding bills
•
These reflect current “near-worst-case” scenario
•
•
Does not yet reflect Education Jobs Fund
•
•
Situation more grim if either (a) law to use Rainy-Day fund to cover 10-11
biennial deficit or (b) law to delay August FSP payment do not pass.
This will be addressed later in the presentation
Significant Assumptions
•
Approximately 1,050 new students
•
Start-up costs for two new schools opening in August 2012
•
General Fund absorbs significant costs from State-killed programs,
such as Technology Allotment, Student Success Initiative, Adult Ed
and shared service arrangement for Regional Day School for the Deaf
20
General Fund Forecast
•
Based on HB 2485
1st Year
Change
2011–2012
Forecast
2nd Year
Change
2012–2013
Forecast
3rd Year
Change
2013–2014
Forecast
$505.8
($43.4)
$462.4
($3.1)
$459.3
($2.0)
$457.3
Expenditures
485.8
(16.8)
469.0
10.3
479.3
5.5
484.9
Increase (Decrease) to
Fund Balance
$20.0
($6.6)
($20.0)
($27.5)
71.9
91.9
85.3
65.3
Ending Fund Balance
$91.9
$85.3
$65.3
$37.8
Months of Operating
Fund Balance
2.4
2.3
1.7
1.0
(in millions)
Revenue
Beginning Fund
Balance
2010-2011
Forecast
Revenue/Student
$7,606
($760)
$6,846
($155)
$6,691
($134)
$6,557
Expenditures/Student
$7,305
($361)
$6,944
$39
$6,983
($31)
$6,952
The revenue reductions based on HB2485 continue past the next biennium (into at
least 2013-2014). Almost $27M in fund balance will be eroded over 2 years, and
dramatically more in 2014 if the 2013 Legislature doesn’t increase funding.
21
Expenditure Increases for 2011-2012
Costs to Absorb Educational Programs Losing Grant Funding
$3,000,000
Set-aside for Repayment of QSCBs
1,700,000
Increased District Share of Health Insurance
1,795,000
Other Increases for New Schools, Inflation, Infrastructure
2,813,000
Contingency Allowance
2,500,000
Total Expenditure Increases
$11,808,000
22
Expenditure Reductions for 2011-2012
Central Office Positions Frozen/Eliminated (~52 FTEs, 6.2%)
Eliminate Retention Supplement
($2,550,000)
(6,140,000)
Utility Savings
(450,000)
Reduce Contract Days for Teachers > 187 days
(250,000)
Central Office Department Budget Reductions
(350,000)
Reduce Contract Days by 2 for Admin & Paras >190 days
(577,000)
Total Before Campus Reductions
($10,337,000)
Campus Reduction Goals
Elementary School Teachers(130 FTEs, 6.4%)
($7,865,000)
Middle School Teachers(37 FTEs,3.8%)
(2,173,000)
High School Teachers(59 FTEs, 4.6%)
(3,551,000)
General Assistants & Clerical Admin – All levels(90 FTEs, 5.4%)
(2,716,000)
Campus Admin & Other Professionals – All Levels (25 FTEs, 3.7%)
(1,879,000)
Total Potential Campus Reductions
($18,184,000)
Grand Total Reductions
($28,521,000)
23
Reductions to Teacher Staffing Levels
Elementary School Teachers
Middle School Teachers
High School Teachers
Total
Current
Allocation
Reduction
Goal
Resignees/
Retirees
To-Date
2,030.7
130
100
(30)
953.6
37
38
1
1,284.5
59
63
1
4,268.8
226
201
(28)
5.3%
4.7%
% of Current Allocation
Teacher Turnover Rate: 2005-2006
10.1%
2006-2007
11.7%
2007-2008
11.2%
2008-2009
10.4%
2009-2010
8.2%
Difference
If 2010-2011’s turnover rate is 8%, total teacher turnover would be 341.
If 2010-2011’s turnover rate is 6%, total teacher turnover would be 255.
24
Cost Avoidances for 2011-2012
Eliminate Pay Raise
$9,280,000
Not Adding Teaching Staff to Accommodate Enrollment Growth
4,060,000
Reduce Contingency Allowance & AARs
2,000,000
Total Cost Avoidance
Total Reductions from 2010-2011 Actual
Total Cost Avoidances for 2011-2012
Net Change Compared to Planned 2011-2012 Cost Structure
$15,340,000
$28,521,000
15,340,000
$43,861,000
An earlier example showed that HB2485 revenue compared to current law
revenue for 2012 was nearly $50M lower. Similarly, in addition to expenditure
reductions of $28.5M resulting from this legislation, NEISD is planning $15.3M in
cost avoidances. This represents planned expenditure growth that will no
longer occur. The total change to NEISD’s anticipated cost structure due to
the under-funding of education is $43.9M.
25
Education Jobs Bill
26
Education Jobs Bill
•
North East ISD was allocated $10,594,000
•
Funds must be used for compensation and benefits of schoollevel employees for the following allowable purposes:
•
•
To retain, recall, or rehire employees
•
To restore reductions in salaries, including furlough days
Funds were intended to be distributed for use in 2010-2011
•
All Federal guidance refers to 2010-2011
•
Currently reviewing TEA guidance for proper use in 2011-2012
•
Update will be provided to Board of Trustees on May 23, 2011
27
Benchmarking Update
28
NEISD vs. 100 Largest Texas ISDs
General Fund Expenditures per Student
100
90
districts spent more per
student) NEISD spent
$250 per student
more than the
weighted average
of the group, a
difference of 3.5%.
80
Rank within Top 100
North East ISD
ranked 75th out of
the 100 largest
Texas ISDs for per
Student spending
for 2009-2010. (25
70
60
50
40
30
20
10
-
29
State Peer Group
2009-2010 Selected Demographics
Enrollment
Wealth/
WADA
EDS %
Target
Revenue
Arlington
63,385
$267,494
59.8%
$5,003
Conroe
49,323
$337,689
35.6%
$5,463
Fort Bend
69,066
$288,134
35.2%
$5,228
Garland
57,654
$193,456
57.2%
$4,999
Katy
58,444
$284,551
29.1%
$5,602
Klein
44,695
$241,173
36.2%
$5,160
Lewisville
50,664
$391,246
25.6%
$5,842
Northside
91,464
$292,113
50.3%
$5,382
Round Rock
42,777
$424,603
28.7%
$5,981
Peer Group Average
58,608
$297,224
41.2%
$5,380
North East
65,217
$357,700
42.8%
$5,704
District
30
NEISD vs. State Peer Group
General Fund Expenditures per Student
Dollars Spent per Student Variance
$100
North East ISD
spent $414 more
than the average
of our peer group,
mainly in the
areas Instruction,
Staff
Development,
School
Leadership and
Maintenance.
$202
$414
$80
$59
$60
$48
$46
$40
$20
$$(20)
$27 $25
$21
$20
$25
$10
$2
$0
($12)
$(40)
$(60)
($59)
$(80)
31
NEISD vs. State Peer Group
General Fund Expenditures per Student
% Difference in Student Spending
60%
Although North East
ISD spent $202
more for instruction
than our peer
group average,
that represents only
a 5% difference.
Alternatively, NEISD
spent 209% more
than our peer
average on Social
Work Services, but
that represents only
$27 per student.
209%
54%
50%
40%
32%
30%
18%
20%
10%
(0%)
(10%)
17%
10%
5%
9% 7%
0%
8%
6%
3%
(4%)
(20%)
(30%)
(40%)
(50%)
(52%)
(60%)
32
NEISD vs. State Peer Group
Function 11 - Instruction
NEISD
State Peers
Difference
%
Difference
$4,665.7
$4,463.5
$202.2
4.5%
Payroll as a % of Total
96.3%
96.9%
Student / Professional FTE
15.43
15.36
(0.07)
(0.4%)
Student / Para FTE
103.88
103.60
(0.28)
(0.3%)
Salary / FTE – Professional
$55,422
$52,951
$2,471
4.7%
Salary / FTE – Para
$18,239
$18,509
($270)
(1.5%)
General Fund Only
Function 11 per Student
Payroll makes up almost
all Function 11 costs!
Compared to our peers, NEISD has similar student-to-staff ratios, and
similar costs for instructional assistants. NEISD pays 4.7% higher salaries for
professional instructional staff.
33
NEISD vs. State Peer Group
Function 13 – Curriculum & Staff Development
NEISD
State Peers
Difference
%
Difference
Function 13 per Student
$137.4
$89.2
$48.2
54.0%
Payroll as a % of Total
82.1%
80.2%
1.9%
Student / Professional FTE
835.0
2,128.9
1,293.9
60.8%
Student / Para FTE
5,176.0
10,468.9
5,292.9
50.5%
Salary/ FTE – Professional
$67,912
$80,921
($13,009)
(16.1%)
Salary / FTE – Para
$32,632
$31,161
$1,471
4.72%
General Fund Only
Compared to our peers, NEISD has significantly lower ratios for staff
devoted to curriculum and staff development. TEA data reporting
standards do not allow for a comparison of what positions each district
codes to this function. For NEISD, it comprises mostly deans.
34
NEISD vs. State Peer Group
Function 23 – School Leadership
NEISD
State Peers
Difference
%
Difference
Function 23 per Student
$481.3
$435.7
$45.6
10.5%
Payroll as a % of Total
96.2%
98.0%
Student / Professional FTE
315.4
309.5
(5.9)
(1.9%)
Student / Para FTE
214.2
212.0
(2.2)
(1.0%)
Salary / FTE – Professional
$83,736
$77,054
$6,682
8.7%
Salary / FTE – Para
$25,410
$23,675
$1,735
7.3%
General Fund Only
Payroll makes up almost
all Function 23 costs!
Compared to our peers, NEISD has similar student-to-staff ratios in school
administrative positions. NEISD pays 8.7% higher salaries for professional
administrative staff and 7.3% more in paraprofessional staff.
35
NEISD vs. State Peer Group
Function 33 – Health Services
NEISD
State Peers
Difference
%
Difference
Function 33 per Student
$104.1
$78.8
$25.3
32.1%
Payroll as a % of Total
95.5%
97.7%
Student / Professional FTE
875.4
902.4
27.0
3.0%
Student / Para FTE
1,015.8
3,885.5
2,869.7
73.9%
Salary / FTE – Professional
$55,380
$51,534
$3,846
7.5%
Salary / FTE – Para
$18,816
$21,244
($2,428)
(11.4%)
General Fund Only
Payroll makes up almost
all Function 33 costs!
Compared to our peers, NEISD has a similar student-to-staff ratio for
professional health staff (i.e., nurses). NEISD has a significantly lower ratio
for paraprofessional health staff. TEA reporting standards do not allow
for detail of the types of paraprofessional positions at our peers; for NEISD
this is mainly clinic assistants.
36
NEISD vs. State Peer Group
Function 51 – Facilities Maintenance & Operations
NEISD
State Peers
Difference
%
Difference
Function 51 per Student
$763.7
$704.4
$59.3
8.4%
Payroll as % of Budget
57.8%
48.4%
9.4%
Utilities as a % of Budget
25.6%
33.8%
(7.2%)
Payroll Cost per Student
$433.7
$324.3
$109.3
33.7%
Student / Auxiliary FTE
93.5
138.7
45.2
32.6%
Salary / FTE – Auxiliary
$29,450
$27,792
$1,658
6.0%
Utilities Cost per Student
$195.3
$237.8
($42.4)
(17.8%)
General Fund Only
Compared to our peers, NEISD has a lower student-to-staff ratio in
custodial and maintenance positions. NEISD pays 6.0% higher salaries for
auxiliary staff. NEISD has a significant savings in utilities compared to our
peers.
37
State Peer Group
Spending vs. Target Revenue
Target
Revenue/
WADA
Operating
Costs/
WADA
Ratio of
Costs to
Target
M&O Tax
Rate
Arlington
$5,003
$5,661
113.1%
$1.0400
Conroe
$5,463
$5,524
101.1%
$1.0400
Fort Bend
$5,228
$6,012
115.0%
$1.0400
Garland
$4,999
$5,444
108.9%
$1.0400
Katy
$5,602
$6,185
110.4%
$1.1266
Klein
$5,160
$5,556
107.7%
$1.0400
Lewisville
$5,842
$6,458
110.5%
$1.0400
Northside
$5,382
$5,957
110.7%
$1.0400
Round Rock
$5,981
$6,256
104.6%
$1.0400
Peer Group Average
$5,380
$5,896
109.6%
$1.0496
North East
$5,704
$6,227
109.2%
$1.0400
District
38
Upcoming Meetings
1
May 23
2
June 13 – Call for Public Hearing
June 27 – Public Hearing
39
Questions?