The Richmond Register

Education

May 30, 2014

Board avoids $1 million dip into contingency fund

MADISON COUNTY — In January, the Madison County School Board approved a 2014-15 draft budget that projected a withdraw of more than $1 million from the district’s contingency fund.

However, after some adjustments to predicted personnel costs and revenues, the district should be able to keep the $5.67 million it has maintained in contingency for several years, Chief Finance Officer Debbie Frazier said at Thursday’s board meeting.

“I want to be able to report to you, at this point, (the 2014-15 budget) is looking really good,” Frazier said. “Often at this point, we’re still dragging behind.”

The board approved 3-0 (board chair Mona Isaacs and vice-chair John Lackey were absent) the 2013-14 revised working general fund budget and the second draft of the 2014-15 tentative budget.

2013-14 working budget

Since the board looked at the 2013-14 working budget in January, $160,000 in property taxes were collected over what was estimated, bringing local tax revenue to $17.5 million. Frazier also was able to increase the franchise tax budget by $120,000, although total receipts, $620,000, are about $137,000 less than the year before.

“You can’t count on even distribution of it (franchise tax). It’s very cyclical,” she said.

Frazier reduced the amount budgeted for delinquent property taxes collected by $140,000, to a total of $560,000 in that category, down from $754,000 in receipts last year.

More delinquent taxes may trickle in over the next few months, Frazier said, but she anticipates an increase in the district’s contribution to the Facilities Support Program of Kentucky. Any extra tax revenue will be applied to that.

FSPK provides additional funding sources for facility construction, and the district receives around $1 million a year in these funds.

The utility tax budget was increased by $270,000, to total of $5.27 million.

The harsh winter “definitely impacted our utility taxes” as customers consumed more fuel, she said.

Omitted property taxes, which is money coming in as a result of state audits, was increased $101,600.

“But we never know what we’re going to get … nothing is guaranteed with omitted taxes,” Frazier said. That item is normally budgeted at $75,000, and will be again in the 2014-15 tentative budget.

In January, Frazier anticipated a $700,000 increase in state support for a total of $38.7 million. Her prediction was close, with a final amount of $38.8 million. This reflects an increase of 178.79 students, boosting state funds that are based on Average Daily Attendance, she said.

“That’s pretty much off the charts,” she said. “We have not been getting that kind of growth in many, many years.”

State funds, called Supporting Education Excellence in Kentucky (SEEK) are based largely on a district’s ADA and local property assessments. School funding from the local tax base is generated through real and personal property taxes. With the SEEK formula, the more revenue is produced locally, the less a district receives from the state.

Frazier made no mention of a property tax-rate increase calculated to boost revenue by 4 percent, which is generally considered by the board each year in August or September. The board voted in 2012 to keep the tax rate unchanged, but in 2013, it voted to increase the rate to generate enough funds to launch full-day kindergarten.

In January, Frazier said the SEEK formula is “based on the assumption” that boards will set a tax rate to generate the maximum revenue increase of 4 percent.

So if one year, a district does not set a higher property rate, yet it generates more funds through higher property assessments, it will still lose SEEK funds, she said. “The district is really losing on both ends there. When you don’t take the 4 percent, you can never recoup that.”

The total increase in receipts for the 2013-14 working budget is $661,000, but there will be offsets in expenditures, Frazier said.

“We do have a balanced budget, but we do have some needs,” she said, such as a few supplies required for the start of district-wide, full-day kindergarten in the fall and a few supplies at other facilities.

Those expenditures are reflected in the supply and equipment items in this year’s budget, she said.

2014-15 tentative budget

The second draft of the 2014-15 budget, first reviewed in January, reflects no changes in what was budgeted for property taxes, $17.5 million; franchise and delinquent taxes, both at $700,000; and only a slight increase in motor vehicle taxes, $2.6 million, a prediction based on historical experience, Frazier said.  

Receipts from investment interest “continues to decline,” she said, as some of the district’s higher-rate CDs have “dropped off.”

Frazier estimated a nearly $1 million increase in SEEK funds, based on the year-end ADA of 10,190, plus an anticipated growth of around 40 students. The amount of money received per pupil has increased by $84 to $3,911. When the the total was estimated in January, the district did not have these updated numbers, she said.

Compared to the draft budget in January, the tentative budget reflects a $1.8 million increase in receipts, with $1.3 million of it from SEEK funding.

The 2014-15 budget also reflects several staffing increases, some of which, around $1 million, comes from the additional staff needed for full-day kindergarten.

Frazier also budgeted $50,000 extra in salaries for preschool costs. Mid-day bus routes were eliminated for kindergarteners, who will now be attending school all day. However, preschoolers were also transported during these routes, so the additional transportation costs may have to be picked up through the district’s preschool grant, she said. In turn, preschool teacher salaries may draw extra from the general fund.

She also budgeted more salary expenses for five additional teachers and five para-educators if the student population was to grow this fall.

Although staffing is “pretty tight,” she said, “with a district our size, we can very quickly use up that allocation.”

The budget also reflects the customary 0.5 percent salary expenditure increase, around $250,000, in teacher’s step raises (for years of service) and rank changes (for educational attainment). But, this budget now includes a 1-percent across-the-board pay increase for staff mandated by recent state legislation. The total increase from these two items is around $1 million, including benefits, she said.

The percentage for which the district is responsible for classified staff retirement has decreased, which generates a savings of around $100,000, but the rate for certified staff (teachers) has increased from 1.5 percent to 2.25 percent. This will cost an additional $280,000, said Frazier, and the rate will go up to 3 percent for the 2015-16 budget.

“Just to give you a little history here, in 2009-10, we did not pay out of the general fund for any teacher retirement,” she said. “So we’ve gone from zero to about a million dollars in 2015-16 for teacher retirement.”

In January, Frazier was concerned about funding the school health program, which includes 11 nurses to staff the schools. In May 2013, the board chose a funding option that would draw $204,300 from the general fund and $250,000 from federal Title 1 funds.

However, with the 2013 federal budget sequestration, Frazier was uncertain in January how the district would fund the federal portion of the school health program. “But things have worked out,” she said, and there will be no more general fund obligation to keep the same number of nurses.

Around 81 percent of the total budget is spent on staff, she said.

Frazier said she did have a few concerns. Although 10 buses were purchased in this year’s budget, no bus purchases were included in the 2014-15 budget. She often has said in the past that 10 busses should be purchased each year to maintain the fleet.

Frazier also projects an increase in the instructional supplies budget by a couple hundred thousand. Last year, districts were permitted to reduce supply allocations to each school, but that may change with the increase in SEEK funds, she said.

Districts also will not know past the 2015-16 budget what the certified staff retirement rate will be.

In other business, the board:

• Voted to change employee pay schedules to twice a month, instead of once a month. Those who work less than 240 days a year will have 24 pay periods while those who work more than 240 days a year will have 25 pay periods.

• Voted to change school trip applications to include the total estimated cost of the trip.

Look in Sunday’s Richmond Register for a story about renovations to the district’s new central office.

Crystal Wylie can be reached at cwylie@richmondregister.com or 623-1669, Ext. 6696.

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