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School district proposing cuts to shave budget deficit
By Byron Painter
Editor
The Riverton Board of Education at a special meeting Monday night discussed significant cuts both in personnel and other expenditures to help stem a projected deficit.
Before making any cuts, the district, which has reserves of approximately $3.4 million, is facing a $653,879 deficit for fiscal year 2011, and the numbers, which admittedly are
projections made by Superintendent Tom Mulligan, only get worse in future years if state funding remains in flux and local cuts are not made.
Even if all the cuts are made, the district still faces a projected deficit of $261,083 for FY11.
“There is no fat in our budget,” he said before starting his presentation, emphasizing again that all the numbers he presented were projections.
He also assumed several things: (1) a 3 percent raise for all staff (also, the teacher contract expires at the end of the school year); (2) salary projections are based on actual
numbers of current staff, including retirements; (3) based on six teachers per building moving across salary schedule; (4) 10 percent increase in health insurance; (5) $150
reduction in foundation level for FY11, level for FY12 and FY13; (6) property tax increases of 1.1 percent in FY11 and 2.5 percent in FY12 and FY13 (based on Consumer Price
Index and the fact that Riverton is a tax-capped district); and (7) and (8) level expenditures in Operations and Management (except building improvements) and transportation
(except bus purchase).
Mulligan proposed eight specific staff cuts (proposed savings are in parentheses): (1) a specific staff cut, which was further discussed in closed session ($45,000); (2) the
cutting of some overloads and extended day contracts ($28,936), (3) the cutting of a middle school secretary position ($22,500); (4) the cutting of the liaison officer position at
the high school, which Mulligan admitted would “certainly put more pressure and time on the administration and dean” and would also mean “we will have more wait time on
police incidents ($45,000, which is 3/4 of the salary paid to the officer, who is employed and paid through the Village of Riverton); (5) cutting the high school home economics
program, which would result in a reduction of freshman and sophomore electives for a year or two but “would require students to take more academic-based courses”; the
teacher in that position now is retiring ($40,000); (6) class size reductions at the elementary and middle school ($158,110); (7) intersession pay reductions ($32,000); and (8)
health insurance savings from staff cuts ($22,850).
On the home economics cut, Mulligan said he hoped it would be a short-term fix, and HS principal Bill Lamkey noted that there might be an alteration in the curriculum as well,
with the position becoming more of a Family and Consumer Science position in future years.
About the elementary school class size reductions, the average size now is 21.97 students per class in grades K-6; cutting six teachers up front and moving a tenured Pre-K
teacher into a grade level and adding an additional fifth grade teacher (to account for the much higher enrollment in that grade) would lead to a reduction of four net teachers
and the class size average going to 24.43 students per class.
“Our class sizes are substantially lower than most,” said Mulligan. “When you look at the whole concept of class size, we cannot continue to offer that kind of luxury when it is
not generating revenue (General State Aid being based on enrollment means the more students a district has, the more GSA).
Board member Mike Klebe, while asking about current positions that have been posted internally, asked if teachers who may be displaced by the cuts get specific
consideration for open positions.
“If they are good teachers and are qualified to teach other positions and they are a good fit for the district, we ought to give them consideration,” he said.
The potential savings from the above cuts are $394,396.
There are also numerous program cuts that Mulligan has proposed, which are projected to save $320,261. They are: (1) technology equipment fees, which should be minimal
because the district received the EETT tech grant, and the grant money is used to offset the local costs ($63,239); (2) reduce building improvement budget ($50,000). The QZAB
bonds will help mitigate this, and “we can reduce the current budget by $50,000 and still pay the QZAB amount plus allow for $60,000 remaining for other improvements,”
Mulligan noted in one of his many handouts to the board; (3) no bus or van purchase ($91,000); there should be little or no impact here because the bus fleet is in very good
shape; (4) supplies, purchase services, equipment and dues and fees reduction, by 25 percent at the three schools and 10 percent at the district office for things like textbooks,
postage, printing, travel, workbooks, computer supplies and gasoline ($116,022); (5) no athletic uniform purchases ($0), with the main impact being the extension of the life of
the current uniforms; (6) no new textbook purchases ($0); recent math program changes leave the district in good shape there, and with changes underway at the lower levels,
“there is no way our teachers are going to be ready to make a substantial change in math for next year,” according to Mulligan; (7) cut Pre-K program with direct state funding,
which could be a “substantial” cut because of the district’s high at-risk student population. “I just cannot justify recommending that we fund a non-mandated program in our
financial situation,” said Mulligan ($0 savings, but having two classrooms would cost around $200,000, and the district currently has the equivalent of three full-time classrooms
with its six half-day classrooms); (8) SASED level bill for FY11. The bill generally increases $60,000-$80,000 annually; the district is looking to cut one teacher and possibly an
aide and “are looking to change our delivery model in order to accomplish this reduction.”
Mulligan did not leave the open the possibility of ‘biting the bullet,’ so to speak, and paying for Pre-K for one year, because of the current budget situation.
He also discussed the possible, or even likely, cut in the foundation level of at least $150 as another concern.
That being said, he is “optimistic” that the state will come through with Pre-K funding.
When asked about the absence of a Pre-K program after the meeting for more than a year, he said that Riverton was “no different than a majority of schools.
“If the state does not fund Pre-K, within a year, no one will have Pre-K,” he said.
There were no proposed cuts in the math or reading areas, Mulligan added, because “those two areas are the core of the district strategic objectives.”
Even after all the proposed cuts, the financial picture is anything but rosy; the projected deficit for FY12 is $672,974 and in FY13, the deficit would be in the red $1,332,411. The
before-cut numbers are ridiculously bad: FY12 was $1,065,770 and FY13 is $1,725,207.
“If the state lowers the foundation level and keeps it level for three years, it will really hurt us badly,” Mulligan said. “As superintendent, I cannot in good conscience
recommended a $650,000 deficit budget.”
The district was also hurt by the lower interest rates; numerous certificates of deposits are coming due and investment income is down because the rate of return (in the 1
percent rate compared to 3-4 percent in recent years) has dropped precipitously.
Board member Scott McClure questioned extracurricular costs, which were not extensively mentioned in Mulligan’s proposals.
Mulligan noted that certainly “that would be something we could cut,” though he said the potential savings “would not be that substantial” without a widespread program cut.
After the meeting, Mulligan all but ruled out any possible property tax referendum, for two reasons.
“Without our bond issue, we have the lowest tax rate in the county, and we believe in that philosophically, and two, if we have a substantial increase in the education fund (from
an increase), we would lose General State Aid,” he said.
If local revenues increase, the amount of GSA drops by a certain percentage.
“If that is the benefit, it is not worth asking the taxpayers,” he said.
He mentioned the countywide 1 percent sales tax, which also was mentioned during the meeting; the Springfield District 186 board approved moving forward on that issue
Monday night.
If the tax ever came to fruition, Riverton could realize approximately $1 million that could be used to pay off the annual bond payment, for example (it could not be used to pay
salaries).
Mulligan said the state finally has paid all the money it owed from last year, and it owes $357,415 this year.
There might be more discussion about this at next week’s regular meeting, and final decisions would need to be made in March.
***
The cuts issue was not the only topic of discussion at the meeting.
The board unanimously approved 6-0 (Cuffle absent) the official withdrawal of Ball-Chatham from SASED; all other school boards in the co-op must do so, and Riverton was
the final one needing to do so.
The next topic was approving a QZAB (Qualified Zone Academy Bonds) resolution; there has been much talk at recent meetings about QZAB bonds, and there will be a column
by Mulligan about this in next week’s paper.
Eddie McLiney of McLiney and Associates spoke to the board about the bonds, which at one point were more of a zero-interest bond before the federal government stepped in
and, while it thought the banks were making too much money, the banks then pulled out in response. The market is also currently saturated in part because of the federal
stimulus package passed last year. The IRS also provided tax breaks to the banks to help lower the rates. The market is moving toward higher interest rates, according to
McLiney.
Ultimately, the board approved a resolution to issue debt certificates for $2.1 million with Bank of America at an interest rate of 1.75 percent.
The district plans on closing around Feb. 17-18.
Over the 16-year period of the bonds, the district should realize savings of about $528,274 ($33,016 per year), compared to a normal loan of 4.25 percent (through the tax credit
option).
Mulligan said that if the district had gone out on its own shopping for debt certificate bonds, the best it likely could have gotten would be 4.25 percent.
With QZAB bonds, the banks get a tax credit from the IRS instead of more interest from schools.
The district entered into the program because of several large facility projects that need to be finished soon, according to Mulligan.
However, while it cannot prepay, if the district had extra funds available (in response to a Klebe question), McLiney said the district could instead invest the money and reap
income that way.
“Without QZAB, we would be cutting even more,” said Mulligan. “It allows us to take care of some immediately expensive facility needs without digging deeper into the operating
budget.”
The final discussion topic before the cuts was a discussion on performance contracting (PC) vs. plan/specifications (P/S).
Mulligan went over both ideas and the steps that each would have undertaken during the process.
Mulligan, who generally favors the performance contracting method, as did Klebe, compared the two approaches.
There would be one point contact for the PC method compared to several in the P/S method, including architects and other contractors, with a single point of accountability
instead of ‘no clear accountability’ under the P/S plan.
There is no risk of change orders on the PC side and there is flexibility “to work with known companies” (in P/S, the district would be required to take the low bid).
Grant writing is also an area of expertise on the PC side, Mulligan added.
Under a PC method, the district would have the ability to work with several different companies to review buildings and then develop and open a request for proposal (RFP) for
performance contracting.
Companies would have 2-3 weeks to submit a proposal and the district would interview prospective companies; if the district decided not to proceed at this point, “we will
simply benefit from their work and ideas,” Mulligan said, quoting from his handout.
Klebe said under the PC method, “we would just need to figure out in general what needed to be done” and basically “let them figure it out,” while under the P/S method, the
district would need to be more specific up front.
***
After a 25-minute executive session after the discussion on cuts, the board returned to open session and adjourned just after 8:30 p.m.
By Byron Painter
Editor
The Riverton Board of Education at a special meeting Monday night discussed significant cuts both in personnel and other expenditures to help stem a projected deficit.
Before making any cuts, the district, which has reserves of approximately $3.4 million, is facing a $653,879 deficit for fiscal year 2011, and the numbers, which admittedly are
projections made by Superintendent Tom Mulligan, only get worse in future years if state funding remains in flux and local cuts are not made.
Even if all the cuts are made, the district still faces a projected deficit of $261,083 for FY11.
“There is no fat in our budget,” he said before starting his presentation, emphasizing again that all the numbers he presented were projections.
He also assumed several things: (1) a 3 percent raise for all staff (also, the teacher contract expires at the end of the school year); (2) salary projections are based on actual
numbers of current staff, including retirements; (3) based on six teachers per building moving across salary schedule; (4) 10 percent increase in health insurance; (5) $150
reduction in foundation level for FY11, level for FY12 and FY13; (6) property tax increases of 1.1 percent in FY11 and 2.5 percent in FY12 and FY13 (based on Consumer Price
Index and the fact that Riverton is a tax-capped district); and (7) and (8) level expenditures in Operations and Management (except building improvements) and transportation
(except bus purchase).
Mulligan proposed eight specific staff cuts (proposed savings are in parentheses): (1) a specific staff cut, which was further discussed in closed session ($45,000); (2) the
cutting of some overloads and extended day contracts ($28,936), (3) the cutting of a middle school secretary position ($22,500); (4) the cutting of the liaison officer position at
the high school, which Mulligan admitted would “certainly put more pressure and time on the administration and dean” and would also mean “we will have more wait time on
police incidents ($45,000, which is 3/4 of the salary paid to the officer, who is employed and paid through the Village of Riverton); (5) cutting the high school home economics
program, which would result in a reduction of freshman and sophomore electives for a year or two but “would require students to take more academic-based courses”; the
teacher in that position now is retiring ($40,000); (6) class size reductions at the elementary and middle school ($158,110); (7) intersession pay reductions ($32,000); and (8)
health insurance savings from staff cuts ($22,850).
On the home economics cut, Mulligan said he hoped it would be a short-term fix, and HS principal Bill Lamkey noted that there might be an alteration in the curriculum as well,
with the position becoming more of a Family and Consumer Science position in future years.
About the elementary school class size reductions, the average size now is 21.97 students per class in grades K-6; cutting six teachers up front and moving a tenured Pre-K
teacher into a grade level and adding an additional fifth grade teacher (to account for the much higher enrollment in that grade) would lead to a reduction of four net teachers
and the class size average going to 24.43 students per class.
“Our class sizes are substantially lower than most,” said Mulligan. “When you look at the whole concept of class size, we cannot continue to offer that kind of luxury when it is
not generating revenue (General State Aid being based on enrollment means the more students a district has, the more GSA).
Board member Mike Klebe, while asking about current positions that have been posted internally, asked if teachers who may be displaced by the cuts get specific
consideration for open positions.
“If they are good teachers and are qualified to teach other positions and they are a good fit for the district, we ought to give them consideration,” he said.
The potential savings from the above cuts are $394,396.
There are also numerous program cuts that Mulligan has proposed, which are projected to save $320,261. They are: (1) technology equipment fees, which should be minimal
because the district received the EETT tech grant, and the grant money is used to offset the local costs ($63,239); (2) reduce building improvement budget ($50,000). The QZAB
bonds will help mitigate this, and “we can reduce the current budget by $50,000 and still pay the QZAB amount plus allow for $60,000 remaining for other improvements,”
Mulligan noted in one of his many handouts to the board; (3) no bus or van purchase ($91,000); there should be little or no impact here because the bus fleet is in very good
shape; (4) supplies, purchase services, equipment and dues and fees reduction, by 25 percent at the three schools and 10 percent at the district office for things like textbooks,
postage, printing, travel, workbooks, computer supplies and gasoline ($116,022); (5) no athletic uniform purchases ($0), with the main impact being the extension of the life of
the current uniforms; (6) no new textbook purchases ($0); recent math program changes leave the district in good shape there, and with changes underway at the lower levels,
“there is no way our teachers are going to be ready to make a substantial change in math for next year,” according to Mulligan; (7) cut Pre-K program with direct state funding,
which could be a “substantial” cut because of the district’s high at-risk student population. “I just cannot justify recommending that we fund a non-mandated program in our
financial situation,” said Mulligan ($0 savings, but having two classrooms would cost around $200,000, and the district currently has the equivalent of three full-time classrooms
with its six half-day classrooms); (8) SASED level bill for FY11. The bill generally increases $60,000-$80,000 annually; the district is looking to cut one teacher and possibly an
aide and “are looking to change our delivery model in order to accomplish this reduction.”
Mulligan did not leave the open the possibility of ‘biting the bullet,’ so to speak, and paying for Pre-K for one year, because of the current budget situation.
He also discussed the possible, or even likely, cut in the foundation level of at least $150 as another concern.
That being said, he is “optimistic” that the state will come through with Pre-K funding.
When asked about the absence of a Pre-K program after the meeting for more than a year, he said that Riverton was “no different than a majority of schools.
“If the state does not fund Pre-K, within a year, no one will have Pre-K,” he said.
There were no proposed cuts in the math or reading areas, Mulligan added, because “those two areas are the core of the district strategic objectives.”
Even after all the proposed cuts, the financial picture is anything but rosy; the projected deficit for FY12 is $672,974 and in FY13, the deficit would be in the red $1,332,411. The
before-cut numbers are ridiculously bad: FY12 was $1,065,770 and FY13 is $1,725,207.
“If the state lowers the foundation level and keeps it level for three years, it will really hurt us badly,” Mulligan said. “As superintendent, I cannot in good conscience
recommended a $650,000 deficit budget.”
The district was also hurt by the lower interest rates; numerous certificates of deposits are coming due and investment income is down because the rate of return (in the 1
percent rate compared to 3-4 percent in recent years) has dropped precipitously.
Board member Scott McClure questioned extracurricular costs, which were not extensively mentioned in Mulligan’s proposals.
Mulligan noted that certainly “that would be something we could cut,” though he said the potential savings “would not be that substantial” without a widespread program cut.
After the meeting, Mulligan all but ruled out any possible property tax referendum, for two reasons.
“Without our bond issue, we have the lowest tax rate in the county, and we believe in that philosophically, and two, if we have a substantial increase in the education fund (from
an increase), we would lose General State Aid,” he said.
If local revenues increase, the amount of GSA drops by a certain percentage.
“If that is the benefit, it is not worth asking the taxpayers,” he said.
He mentioned the countywide 1 percent sales tax, which also was mentioned during the meeting; the Springfield District 186 board approved moving forward on that issue
Monday night.
If the tax ever came to fruition, Riverton could realize approximately $1 million that could be used to pay off the annual bond payment, for example (it could not be used to pay
salaries).
Mulligan said the state finally has paid all the money it owed from last year, and it owes $357,415 this year.
There might be more discussion about this at next week’s regular meeting, and final decisions would need to be made in March.
***
The cuts issue was not the only topic of discussion at the meeting.
The board unanimously approved 6-0 (Cuffle absent) the official withdrawal of Ball-Chatham from SASED; all other school boards in the co-op must do so, and Riverton was
the final one needing to do so.
The next topic was approving a QZAB (Qualified Zone Academy Bonds) resolution; there has been much talk at recent meetings about QZAB bonds, and there will be a column
by Mulligan about this in next week’s paper.
Eddie McLiney of McLiney and Associates spoke to the board about the bonds, which at one point were more of a zero-interest bond before the federal government stepped in
and, while it thought the banks were making too much money, the banks then pulled out in response. The market is also currently saturated in part because of the federal
stimulus package passed last year. The IRS also provided tax breaks to the banks to help lower the rates. The market is moving toward higher interest rates, according to
McLiney.
Ultimately, the board approved a resolution to issue debt certificates for $2.1 million with Bank of America at an interest rate of 1.75 percent.
The district plans on closing around Feb. 17-18.
Over the 16-year period of the bonds, the district should realize savings of about $528,274 ($33,016 per year), compared to a normal loan of 4.25 percent (through the tax credit
option).
Mulligan said that if the district had gone out on its own shopping for debt certificate bonds, the best it likely could have gotten would be 4.25 percent.
With QZAB bonds, the banks get a tax credit from the IRS instead of more interest from schools.
The district entered into the program because of several large facility projects that need to be finished soon, according to Mulligan.
However, while it cannot prepay, if the district had extra funds available (in response to a Klebe question), McLiney said the district could instead invest the money and reap
income that way.
“Without QZAB, we would be cutting even more,” said Mulligan. “It allows us to take care of some immediately expensive facility needs without digging deeper into the operating
budget.”
The final discussion topic before the cuts was a discussion on performance contracting (PC) vs. plan/specifications (P/S).
Mulligan went over both ideas and the steps that each would have undertaken during the process.
Mulligan, who generally favors the performance contracting method, as did Klebe, compared the two approaches.
There would be one point contact for the PC method compared to several in the P/S method, including architects and other contractors, with a single point of accountability
instead of ‘no clear accountability’ under the P/S plan.
There is no risk of change orders on the PC side and there is flexibility “to work with known companies” (in P/S, the district would be required to take the low bid).
Grant writing is also an area of expertise on the PC side, Mulligan added.
Under a PC method, the district would have the ability to work with several different companies to review buildings and then develop and open a request for proposal (RFP) for
performance contracting.
Companies would have 2-3 weeks to submit a proposal and the district would interview prospective companies; if the district decided not to proceed at this point, “we will
simply benefit from their work and ideas,” Mulligan said, quoting from his handout.
Klebe said under the PC method, “we would just need to figure out in general what needed to be done” and basically “let them figure it out,” while under the P/S method, the
district would need to be more specific up front.
***
After a 25-minute executive session after the discussion on cuts, the board returned to open session and adjourned just after 8:30 p.m.
Issue Date: Feb. 4, 2010
