ACT 72: “We Survived”

ACT 72: “We Survived”

Matthew J. Malinowski, Assistant Director of Business Affairs, Wilkinsburg School District

Jack A. Myers, Director Business Operations, Bensalem Township SD

An Introduction to ACT 72 Survival Training

PASBO

March 9th, 2006

The Timetable’s Impact

• You’ve seen the calendar’s dates…no need to discuss any further.

• Creation of a Budget in January for public inspection causes one to have to rely on much earlier YTD revenue and expense data; earlier estimates by providers of insurance, benefits, IU and regional Tech School services, just to name a few.


• The Governor’s Budget is released between the time the District’s Preliminary Budget is created and made available for public inspection and when the Board must approve it on February 15.

• Changes made in the subsequent legislative process must also be reflected in the District budget.


• However, the March to May period that is thus created is an OPPORTUNITY to study the budget in greater detail, fine tuning where necessary.

• The only restriction would seem to be that the District can not increase the rate of Real Estate taxes beyond that filed with PDE in February.

Form Changes

• PDE-2028 Preliminary General Fund Budget includes several new data fields, primarily with respect to taxes and the tax base.

• The AFR’s additional data requirements with respect to revenue, special education and employee benefits were probably included to allow PDE to monitor the Act 72 exceptions and RE tax basis.

Form Changes

• The new forms created as the mechanism for districts to apply for the exceptions to the “inflation index” ARE QUITE USER FRIENDLY.

• All calculations are done for you, however if you have more than one bond issue or more than one labor agreement or more than one taxing entity, there is preliminary calculations you will have to make.

Form changes

• The information required in conjunction with the Debt Service exceptions is extensive.

• You will need to create a breakdown of employee benefit insurance costs between bargaining units, if some qualify and others don’t, based on their contract effective dates.

Act 72 Budget Calculations

• Submitted to PDE with your Preliminary General Fund Budget (PDE2028)

Budget Form

AUN

(total RE tax revenue needed in excess of index)

Exceptions being sought from Court of Common Pleas

Exceptions being sought from PA Department of Education

Signature of Superintendent Date

Return to: Pennsylvania Department of EducationBureau of Budget and Fiscal ManagementDivision of Subsidy Data and Administration333 Market StreetHarrisburg, PA 17126

I hereby certify that the above information is accurate and complete.

Total Amount of Requested PDE Exceptions $8,185,367

2. Total of Exceptions sought from PDE and CCP: $8,185,367

Health Care-Related Benefits 333(f)(2)(ix) $320,858

Retirement Contributions 333(n) $378,368

Maintenance of Local Revenues or AIE per ADM 333(f)(2)(vii) $0

Maintenance of Selected Revenue Sources 333(f)(2)(viii) $2,251,051

Special Education 333(f)(2)(v) $276,856

School Improvement Plan 333(f)(2)(vi) $0

School Construction - C 333(f)(2)(iii)(C) $0

School Construction - D 333(f)(2)(iii)(D) $0

School Construction - A 333(f)(2)(iii)(A) $4,958,234

School Construction - B 333(f)(2)(iii)(B) $0

Costs to respond to conditions posing immediate threat 333(f)(2)(iv) $0

Total Amount of Requested CCP Exceptions $0

Costs to respond or recover from emergency or disaster 333(f)(2)(i) $0

Costs to implement a court or administrative order 333(f)(2)(ii) $0

Bensalem Township School District Bucks 122091002

$9,620,8001. Amount of 2006-2007 Budget Shortfall

Summary of Referendum ExceptionsFor Budget Year 2006-2007

Act 72 of 2004

School District Name County Name

Budgeted Amount for 2005-2006

Budgeted Amount for 2006-2007

(a.1) Expenditure Object 230 $2,246,200.00 $3,171,400.00

(a.2) Revenue 7820 $1,123,100.00 $1,585,700.00

Total (a.1 - a.2) $1,123,100.00 $1,585,700.00

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

(b) $84,232.50

(c) $462,600.00

$378,367.50

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Instructions:

a. Enter budgeted amounts for expenditure object 230 and revenue 7820 for school years 2005-2006 and 2006-2007.

b. Calculation: 7.5% of budgeted 2005-2006 school district share of payments to PSERS (school district share is

calculated by subtracting revenue 7820 from expenditure object 230).

c. Calculation: line a (2006-2007 budgeted amount total) minus line a (2005-2006 budgeted amount total)

If line c is greater than 0, the amount will show; otherwise "Does Not Qualify" will appear.

Budgeted School District Share of Payments to PSERS

2006-2007 budgeted amount total minus 2005-2006 budgeted amount total:

7.5% of 2005-2006 budgeted school district share of payments to PSERS:

Allowable Retirement Contributions Exception (c - b):

Retirement ContributionsReferendum Exception Worksheet for Budget Year 2006-2007

333(n)BENSALEM TOWNSHIP SCHOOL DISTRICT

(a) YES

(b)Budgeted Amount for

2005-2006Budgeted Amount for

2006-2007

211 - Medical Insurance $1,942,076.00 $2,251,724.00 212 - Dental Insurance $155,958.00 $173,113.00 215 - Eye Care Insurance $4,536.00 $4,672.00 216 - Prescription Insurance $277,152.00 $340,897.00 271 - Self-Insurance Medical Health Benefits 272 - Self-Insurance Dental Health Benefits 275 - Self-Insurance Eye Care Health Benefits 276 - Self-Insurance Prescription Health Benefits General Fund (10) Total $2,379,722.00 $2,770,406.00 211 - Medical Insurance $138,043.00 $165,659.00 212 - Dental Insurance $1,745.00 $1,937.00 215 - Eye Care Insurance $62.00 $64.00 216 - Prescription Insurance $3,284.00 $4,039.00 271 - Self-Insurance Medical Health Benefits 272 - Self-Insurance Dental Health Benefits 275 - Self-Insurance Eye Care Health Benefits 276 - Self-Insurance Prescription Health Benefits Enterprise Fund (50) Total $143,134.00 $171,699.00 211 - Medical Insurance 212 - Dental Insurance 215 - Eye Care Insurance 216 - Prescription Insurance 271 - Self-Insurance Medical Health Benefits 272 - Self-Insurance Dental Health Benefits 275 - Self-Insurance Eye Care Health Benefits 276 - Self-Insurance Prescription Health Benefits Internal Service Fund (60) Total $0.00 $0.00

Total for All Funds $2,522,856.00 $2,942,105.00

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

(c) 2005-2006 Budgeted Health Care-Related Benefits increased by the Index: (b * (1 + 3.9%) $2,621,247.38

(d) Line b (budgeted amount for 2006-2007 total) minus line c $320,857.62

$320,857.62

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Instructions:

a. Enter Yes if collective bargaining agreement was in effect on or before September 3, 2004; otherwise enter No.

School district is not eligible for this exception if collective bargaining agreement was renewed, extended or entered

into after September 3, 2004.

b. Enter budgeted health benefits expenditure data (from object codes 211 /212/215/216 and 271/272/275/276), for ONLY

employees covered by a collective bargaining agreement in effect on or before Sept. 3, 2004 , from the General,

Was collective bargaining agreement in effect on or before September 3, 2004?

Allowable Health Care-Related Benefits Exception (d):

IF NO, SCHOOL DISTRICT IS NOT ELIGIBLE FOR THIS EXCEPTION

Estimated Health Care-Related Benefits for Employees Covered by Collective Bargaining Agreement in effect on or before Sept. 3, 2004 (object-level expenditures)

Health Care-Related BenefitsReferendum Exception Worksheet for Budget Year 2006-2007

333(f)(2)(ix)BENSALEM TOWNSHIP SCHOOL DISTRICT

See Worksheet at end of packet.

(a.1) Bond issue, note or loan 1996 1998 1999 1991 2002 2006 Total

(a.2) Original or Refunding original refunding refunding original original original

(a.3) If Refunding on a.2, list bond issue, note or loan refunded 08/23/97 08/23/97

(b) PDE lease number for line a.1 (if applicable)

(c) Bond issue/note/loan principal amount for line a.1 $24,800,000 $5,000,000 $10,000,000 $10,000,000 $26,300,000 $100,000,000 $176,100,000

(d) Date line a.1 incurred (mm/dd/yy)

1. Latest date before 9/3/2004 06/16/96 11/18/98 12/16/98 05/01/91 09/25/02 08/25/04 2. Earliest date on or after 9/3/2004

(e) Date line a.1 issued (mm/dd/yy) 06/23/96 12/17/98 01/14/99 05/15/91 10/29/02 09/15/06

(f) Principal for line a.1 incurred before 9/3/2004 as % of Total

1. Principal incurred before 9/3/2004 $24,800,000 $5,000,000 $10,000,000 $10,000,000 $26,300,000 $100,000,000 2. Principal incurred on or after 9/3/2004 3. Total principal incurred (f.1 + f.2) $24,800,000 $5,000,000 $10,000,000 $10,000,000 $26,300,000 $100,000,000 4. Funds on line f.1 as percent of Total (f.1 ÷ f.3) 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

(g) Refunded indebtedness incurred before 9/3/2004

1. Principal refunded on indebtedness incurred before 9/3/2004 $8,800,000 2. Principal refunded on indebtedness incurred on or after 9/3/2004 3. Total indebtedness refunded (g.1 + g.2) $8,800,000 $0 $0 $0 $0 $0 4. Refunded indebtedness incurred before 9/3/2004 as % of total (g.1 ÷ g.3) 100.00% 0.00% 0.00% 0.00% 0.00% 0.00%

(h) Proceeds used to fund capital projects and to refund outstanding bond issues. Do not include issuance costs.

1. Escrow or call requirement for refunding 2. Deposit to construction fund (new money for reimbursable and non-reimbursable projects)

3. Total - refunding and new money (h.1 + h.2) $0 $0 $0 $0 $0 $0 4. Refunding requirements as % of total (h.1 ÷ h.3) 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

(i)Principal on indebtedness incurred after 9/3/2004 as % of total xRefunded indebtedness incurred before 9/3/2004 as % of total xRefunding requirements as % of total ((1 - f.4) * g.4 * h.4)

0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

(j) Percentage assigned to indebtedness incurred before 9/3/2004 (f.4 + i) 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

(k) 2005-2006 total principal and interest payments * $1,404,275 $252,133 $515,575 $1,405,000 $1,172,171 $0 $4,749,154

(l) Reimbursable percentage (if applicable) 0.3069 0.3069 0.3069 0.2895 0 0

(m) Applicable aid ratio (greater of MV AR, CARF or Density) 0.2917 0.2917 0.2917 0.2917 0.2917 0.2917

(n) Estimated state share (k * l * m) $125,715 $22,572 $46,156 $118,648 $0 $0 $313,091

(o) Local share attributable to pre-9/3/04 debt ((k - n) * j) $1,278,560 $229,561 $469,419 $1,286,352 $1,172,171 $0 $4,436,063

(p) 2006-2007 total principal and interest payments * $2,453,420 $250,750 $511,650 $1,405,000 $1,172,070 $4,000,000 $9,792,890

(q) Reimbursable percentage (if applicable) 0.3069 0.3069 0.3069 0.2895 0 0

(r) Applicable aid ratio (greater of MV AR, CARF or Density) 0.286 0.286 0.286 0.286 0.286 0.286

(s) Estimated state share (p * q * r) $215,345 $22,009 $44,909 $116,330 $0 $0 $398,593

(t) Local share attributable to pre-9/3/04 debt ((p - s) * j) $2,238,075 $228,741 $466,741 $1,288,670 $1,172,070 $4,000,000 $9,394,297

(u) 2006-2007 local share minus 2005-2006 local share (t - o) $959,515 -$820 -$2,678 $2,318 -$101 $4,000,000 $4,958,234

$4,958,234Allowable School Construction: Indebtedness Prior to September 3, 2004 Exception:

School Construction: Indebtedness Incurred Prior to September 3, 2004Referendum Exception Worksheet for Budget Year 2006-2007

333(f)(2)(iii)(A)

BENSALEM TOWNSHIP SCHOOL DISTRICT

I. LIST ALL ISSUES, NOTES AND LOANS WITH ANY INDEBTEDNESS INCURRED BEFORE SEPTEMBER 3, 2004II. LIST ALL REFUNDING ISSUES, NOTES AND LOANS INCURRED ON OR AFTER SEPTEMBER 3, 2004 THAT REFUNDED ANY ISSUES, NOTES

AND LOANS WITH ANY INDEBTEDNESS INCURRED BEFORE SEPTEMBER 3, 2004

* May include swap payments that are part of the interest charge on indebtedness paid by a district to an authority.

Debt Service Capital Spending Issues

• “The indebtedness is incurred only after existing fund balances for school construction and ANY UNDESIGNATED FUND BALANCES HAVE BEEN FULLY COMMITTED TO FUND THE PROJECT


• Limited to “interest and principal on indebtedness for up to 60% of the construction cost average on a square-foot basis…”


• “The indebtedness is for an academic elementary or academic secondary school building. …the following shall not be considered to be an academic elementary or academic secondary school building: natatorium, stadium bleachers, athletic field, athletic field lighting equipment and apparatus used to promote and conduct interscholastic athletics.”


• Other limits include a cap on “indebtedness for up to $250,000 of the construction cost of a nonacademic school construction project…”


• These are limits on what debt is eligible for exception to the “inflation index” increase in real estate taxes.

• This does not mean that you can’t build or finance them, only that the District can’t fund the debt service with mils generated by an exception.

What if my increases are beyond the index?

• Option 1—Cut Expenses

• Option 2– Referendum

Budget Cuts

• The challenge to grow education without spending more!

• Still have to fund state and federal mandates.

Possible ways to re-evaluate your budget

• Assign a priority level to services by budget heads across your district. In this process examine:

• Mission & Goals• Reliance on General Fund Revenue• Past two years service level changes

• Zero Based Budget Management every 5 years

But Be sure to watch. . .

• Ensure core services/programs are not deleted.

• Preserve Flexibility

• Ensure accurate projections/financial analysis is provided to the public.

Referendum

• Cost of conducting Referendum

• Learn from Failed Attempts– Wisconsin

• Model after Successful Campaigns– Illinois– California – Arizona– Florida (Pinellas County )

When developing a campaign for Referendum Remember:

• More Americans have a positive view of the nations public schools than a negative view.

• Public schools rank in the middle of the institutions in which the public says they have confidence.

• The closer people are to the public schools, the more favorable their impressions

• Parents of schoolchildren have a more favorable view of the public schools than non-parents.

Source for the above listed Key Points: The Center for Public Education (www.nsba.org)

Lessons Learned from Referendum in Florida

• Clearly communicate the district’s financial picture.

• Explain where the district's money comes from, how it is spent, and where the shortfalls occur.

• Specify how additional dollars raised through a tax increase will be spent.

• Involve parents, teachers, and staff in outreach to the community.

• Invite the community’s continued involvement after the measure is passed.

If Referendum Fails we will be left to possibly:

• Music and art on-a-cart the

• Classrooms carved out of the lunchroom

• The corner of our library turned into a computer classroom

• Classrooms separated by bookcase walls in the hallways

• The various redistricting of our students

What if I can’t cut the budget or get voter approval for increases?

• Districts can end participation in Act 72 through the approval of voters after four full years of implementation.

Related Spin-off Issues

• Fund Balance

• Bond Ratings / Insurance

• Collective Bargaining

• Local Board Discretion

Documents

ACT 72: “We Survived”