ORCSD Advisory Budget Committee (ABC) FINAL Report on the Proposed FY12 ORCSD Budget

ABC Report 1/21 1/4/2011 

 ORCSD Advisory Budget Committee (ABC) 

FINAL Report on the Proposed FY12 ORCSD Budget 

January 4, 2011 

I. Introduction 

The ABC began its work in late October 2010, well after planning for the FY12 budget commenced. The ABC has spent the past eight weeks attempting to understand the budget as well as the budget process. We have begun to review historical and current financial budget data, facility plans, SAU requests, overviews and tours of each school and summaries of special education, technology, transportation, and food service among many others. Since late October, the committee has been working its way up the learning curve. That said, we offer this initial set of observations and recommendations on the FY12 budget. 

II. Executive Summary 

It is apparent that the staff in the district worked hard preparing the budget. We are very pleased with the efforts of Susan Caswell who, in a short time, has identified areas where budget items were overstated, misplaced or not organized properly. We also are very pleased with the level of involvement by the principals of each school in the budget process. We also recognize the valuable contributions of Meredith Nadeau, Danielle Bolduc and others who were part of the process. 

Our greatest overarching concern is the lack of a long-term strategic plan that integrates with the budget process, as well as outdated capital plans and capital budgeting which promotes a short-term focus rather than a strategic, long-term focus on infrastructure. In other words, budgets seem to be built based on historical and current needs, but not necessarily with an eye on the future. Therefore, we suggest the following: 

A. The budget process at ORCSD must be significantly improved. Roles and responsibilities must be clearly defined, the process must start earlier in the year, a complete budget proposal must be made earlier in the year and a summary of additions and reductions to the budget from the current year and prior years must be presented. The board should be provided with a high level proposed budget comparing it to current year projected and budgeted amounts as well as prior year actual amounts. The proposed budget should be accompanied by a summary of staffing and tax rate impacts. 

B. The financial reporting process at ORCSD must be significantly improved. The chart of accounts must be adjusted to allow easy comparison from year to year in meaningful categories. Quarterly financial projections vs. budgeted amounts should be presented to ORCSD management and the ORCSD board during the year with major variances and proposed uses of any surpluses explained. The audit of annual financial statements should be completed no later than September each year. Financial information such as projections and the audited financial statements should be made available to the public on the ORCSD web site. 

C. The FY12 proposed budget should put ORCSD in a position to best serve our students and at the same time be highly sensitive to the financial situations of the taxpayers of the district. Some taxpayers have lost their jobs, many have had their wages frozen or reduced, and in the case of seniors, all have experienced a 0% increase in their social security benefits for two consecutive years. Every dollar in the expense budget must be scrutinized and all opportunities to increase non-tax revenue must be seriously considered. Large, year-end surpluses (in excess of $500,000) should not occur as they have in recent years. 

We believe that the FY12 ORCSD budget for FY12 should not exceed $36.4 million. We believe that this figure is easily achievable and perhaps can be reduced to a lower number. We offer the following possible solution to the School Board for getting to $36.4 million: 

Fund 10 Total as of 1/4/2011 $37,129,033 

Possible reductions: 

Proposed .4 FTE World Language position (32,000) 

Consolidation of small high school classes (2.5 FTE) (200,000) 

Proposed non-staff budget in IT (70,000)  

Switch to lower electricity provider (40,000) 

Do not fill vacant custodian position (40,000) 

Do not fill 34th bus driver position (40,000) 

Proposed ORMS and ORHS office improvements in CIP (115,000) 

Reduce ORMS Librarians from 2 FTE to 1 FTE (80,000) 

Bus building lease (5,000) 

10% medical benefits increase vs 13% (135,000) 

Total possible reductions (757,000) 

Total Adjusted Fund 10 Budget 36,372,033 $ 

There are alternatives to the above – for example the consolidation of small high school classes could be exchanged for adding 20 tuition paying students. More information on these items and other aspects of the budget follows. 

III. Specific Recommendations on the Budget and Reporting Process 

A. The budget process must be significantly improved. 

1. Roles of the School Board, ABC, Superintendent and his leadership team are unclear. These must be clearly defined at the start of the process. 

2. The budget process must begin earlier in the year. A suggested timeline: 

a. The School Board is provided with a year-end summary by the Superintendent and sets overall goals and targets for the budget by June 30th. 

b. A preliminary budget is submitted to the School Board and ABC by the Superintendent by September 1st. 

c. The Superintendent works with the principals and staff to develop a revised, comprehensive budget that meets the School Board’s goals and targets by November 1st. 

d. The Superintendent presents the proposed, comprehensive budget to the Board and describes and defends major changes (subtractions and additions) by November 15th. 

e. The ABC presents its report of recommendations to the School Board by December 15th. 

f. The School Board reviews the report and works with the Superintendent on refining the budget to a final proposed budget to be presented at the Deliberative Session by December 31st. 

3. The proposed budget should be presented when the budget is complete and comprehensive. It should show a complete picture of all funds of ORCSD, not just Fund 10. Activities in other funds have a direct impact on Fund 10 and need to be presented alongside Fund 10. As of 1/4/2011 a full budget has not been developed or presented by ORCSD for FY12. 

4. The budget presented to the Board should include a summary with accompanying details. The summary level should include major revenue and expense categories with historical and current data for comparison purposes. Major changes should be avoided or must be explained by management in sufficient detail to enable year to year comparisons. Some preliminary examples are shown in Appendix A. 

5. The budget presented to the Board must include a projection of the tax rate impact with comparison between previous and current years. 

6. Since staffing is the bulk of the ORCSD budget, it is very important to understand the changes in this area. The budget presented to the Board must include historical, current and proposed staffing levels by employee type and department with an accompanying explanation of changes. 

7. Budget information (historical and current) should be made easily accessible to the public on the ORCSD web site so that there is more transparency in the process, and historical information can be compared with current information. It should be easy to find and use in a standard, open, machine-readable format. 

8. An accompanying glossary of terms that explains budget terminology to the public should be developed. For example terms such as GMR, FTE, CIP, etc. are often used to describe aspects of the budget. People close to the budget process understand these terms, however, most people outside of that group do not. 

9. Every effort should be made to develop a budget that contains a reasonable contingency to address unforeseen cost increases and that reduces the likelihood of large, year-end surpluses similar to those ORCSD has experienced in the past few years. 

10. The practice of budgeting at the guaranteed maximum rate (GMR) for employee insurance needs to be re-examined. We believe this practice is extremely conservative and is a reason the ORCSD has experienced large year-end surpluses in each of the past five years. For FY12 we believe the increase should be three percentage points less than the GMR which would yield approximately $135,000 in savings. 

Fiscal Year	GMR	Final Rate
2006	8.90%	8.40%
2007	18.10%	8.60%
2008	5.60%	3.30%
2009	17.70%	8.10%
2010	6.80%	-1.70%
2011	19.50%	13.80%
2012	13.70%	?