Brattleboro Representative Town Meeting Finance Committee Releases Brattleboro Union High School Budget Report

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• Submitted by cgrotke on February 9, 2018 at 7:18 am

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  Brattleboro Union High School District #6
  FY 2019 Budget Report prepared by the
  Brattleboro Representative Town Meeting Finance Committee February 1, 2018

  1. Summary and Contents
  Key findings:

  1. The proposed BUHS District budget for FY19 features a decrease in overall spending from $25,359,197 to $24,591,000, which is $768,197 or 3.0%. For the most part, services provided to the students have been maintained.

  2. The proposed amount of funding coming from previous years’ accumulated fund balance was increased from $53,500 in FY18 to $1,285,000 in FY19.

  3. An important cause of these results was a large, sudden drop in the number of Equalized Students tabulated by the Vermont Agency of Education, which in turn was caused by the removal of a hold harmless provision from the education funding formula by the Vermont legislature last year. The hold harmless provision had protected schools against a sudden drop in their number of Equalized Pupils, which is a key factor in setting the local property tax rate. (Parenthetical note: The hold harmless provision would have remained in effect had the local schools merged into a single district under Act 46.)

  4. While the portion of local taxes attributable to the BUHS budget appears to be lower, having declined from $0.859 to $0.841, this statistic may be misleading. The apparent decline is attributable to the decreased number of students in the BUHS district relative to the Town School District, and this will force a corresponding increase in the tax rate attributed to the town schools. When the two rates are added together on the tax bill, taxpayers will see an increase which is actually driven by the BUHS budget, not by the Town School District budget

  5. While the sudden decrease in Equalized Pupils is almost surely a one-time event, the BUHS district will continue to see the budgetary effects of a similarly low number of Equalized Pupils in coming years.

  6. Given the events above and the funding constraints imposed by state agencies and and the legislature, the final FY19 budget proposed by the administration and approved by the BUHS board is sound and is worthy of approval by the voters.

  7. The implications for future years, however, are sobering, as large contributions from fund balance cannot be repeatedly used to make up for a shortfall in state aid. Without the use of fund balance this year, either services would have been cut far more significantly, or the local property tax increase for the schools as a whole (BUHS plus Brattleboro Town School District) would have been higher.

  This report consists of five sections:

  1. Summary of important findings, and contents of the report;
  2. FY19 proposed spending;
  3. FY19 funding data, used to calculate the tax rate specifically for Brattleboro
  taxpayers (presented on a separate two-page handout);
  4. Narrative explanation of the funding formula and FY19 funding data; and
  5. Conclusions.

  2. FY19 proposed spending

  While the yearly funding for education in Vermont includes factors determined by the state, on the expenditure side the administration and the school board have the primary role. Some expenses are mandated by state or federal law, but the school board has the ability and the responsibility to decide what educational services to provide the students in its schools and at what cost.

  The expenditure decisions for the FY19 BUHS District budget looked rather straightforward through most of the budget process. As noted by Robert Woodworth, chair of the BUHS finance committee, after hearing from the school principals and the WSESU Finance Director, they had come close to the “level services, level-funded” budget they were trying to achieve again this year. In some areas expenditures were up, but in other areas they were down, and the total expenditures for FY19 in the initial budget proposal were going to increase by less than 0.1% compared to FY18.

  Areas of increase in the initial proposal were in staff salaries and benefits, which increase approximately 2.5% per year in accordance with negotiated contracts. Salaries and benefits make up roughly 80% of expenditures for the district. In addition a few new staff positions were proposed, including two paraprofessionals at the middle school, specifically designated to help with behavioral issues for students in the regular classroom environment, and a daytime supervisor for the districtwide maintenance program. These additions were discussed by the BUHS finance committee and considered prudent in addressing clear cut needs.

  Decreases in staffing were proposed at BAMS with a half-time math teacher position discontinued, and at the career center, where the horticulture program was provisionally targeted for elimination, unless student enrollment were to increase. In the districtwide budget, areas of projected savings included elimination of a private cleaning service contract and from consolidation and efficiency in the area of special education. Expenditures for supplies and equipment were close to level-funded overall.

  However, when the funding data came in from the state (as noted in the next two sections of this report), changes had to be made in order to keep the tax rate from increasing to an unacceptable level. The funding data arrived on December 18, the same day as a scheduled budget meeting for the BUHS board, at which approval of the budget by the full board had been anticipated. After the funding data were presented, it was clear that expenditure changes would have to be made, and the budget was sent back to the administration for consideration of possible cuts.

  The BUHS finance committee, which had finished its work and had proposed the budget to the full board, reconvened on January 3 and adopted a set of changes devised by the administration over the previous two weeks. These recommendations were taken up by the full board on January 8, with the realization that the board would have to approve a budget within the next several days in order for the districtwide annual meeting of the voters on February 13 to be legally warned. The proposed budget cuts and adjustments included:

  • Eliminating the Diversity Coordinator position, while otherwise continuing the program;
  • Decreased allocation for electricity, based on anticipated solar electric production;
  • Decreases in project management and security expenses;
  • Eliminating instruction in Latin;
  • Doing without new furniture in the science department;
  • Cutting Technology Education and Integration at BAMS each by one half-time position:
  • Supplies and equipment at BAMS;
  • Cutting back the culinary arts program at WRCC.

  In addition, the budget allocation from BUHS to WRCC was adjusted in accordance with requirements of the funding formula.

  The January 8 meeting was not easy, with the finance committee and administration proposing cuts they did not really want to make to an audience of outspoken community members who were vehemently opposed to the cuts being proposed. Specifically, the elimination of the Diversity Coordinator position was repeatedly denounced, and there were words of support for continuing Latin instruction as well. (Also, although without an immediate budget impact, the morphing of the PEAK program into a STEP program was repeatedly criticized.) By the end of the meeting, it was clear that yet further changes would have to be made to address the concerns of everyone present, both the board and the citizenry who had showed up in large numbers.

  The result was another board meeting on January 10, at which another revised budget was presented. Again, many interested people from the community were present. At that meeting, the administration and the BUHS finance committee chair proposed the following:
  • restoring the Diversity Coordinator position (at a cost of $78,685),
  • postponing any changes to the PEAK/STEP program until the BAMS staff and other stakeholders can be consulted about the impact of proposed changes (no net financial impact);
  • decreasing a medical human systems position at WRCC from full-time to part-time (saving $37,000),
  • renegotiating an arrangement with Brattleboro Circus Arts (saving $16,000),
  • making a change in the funding of capital expenses from the operating budget (saving $61,000).

  These changes in spending were accompanied by additional revenue taken from fund balance in the amount of $90,000. Taken together, these changes kept the total spending for the year essentially unchanged from the January 8 proposal, thus keeping the proposed tax rate the same.

  Spending breakdown by budget divisions

  The complete 64-page budget of proposed general fund expenditures for FY19 (available online at the WSESU website) is subdivided into four sections. A condensed seven-page version is provided in the Annual Report 2018. The four sections are:

  • Districtwide,
  • Senior High School,
  • Brattleboro Area Middle School, and
  • Windham Regional Carrier Center.

  Separately, capital expenditures proposed for FY19 (and anticipated through FY22) are also in the Annual Report.

  Note: Tracking all the proposed changes in spending for FY19 is a time-consuming task. Small year-to-year fluctuations are numerous and tend to cancel each other out. In addition, there is a change in healthcare coverage that results in lower spending for insurance but higher spending for healthcare reimbursement accounts. Overall, the changes are expected to result in approximately a 5% increase in spending for healthcare coverage, although final figures will not be known until the end of the fiscal year. The projected healthcare changes are distributed through many cost centers and are too numerous to track in this report.

  Following are selected areas of increase and decrease in FY19 compared to FY18.

  Districtwide

  Overall Districtwide spending is increased from $10,959,447 to $11,013,193, which is $53,746 or 0.4%.

  Districtwide spending increases include:

  • Tuition for a student placed outside the district;
  • One new paraprofessional position to provide additional classroom support for students with behavioral issues;
  • Asian studies funding to replace non-renewed grant funding;
  • Audiovisual equipment for security purposes;
  • Custodial salaries to replace a contracted service;
  • An additional crossing guard at the school.

  Districtwide spending decreases include:

  • WSESU assessment;
  • Operations and maintenance;
  • Outside cleaning contract,
  • Contribution to capital fund,
  • Electricity, slated to come from solar array;
  • Special education savings from consolidation of programs at the supervisory union level.

  Senior High School
  
  Overall Senior High School spending is decreased from $8,460,885 to $7,935,005, which is $525,880 or 6.22%.
  Senior High School spending increases include:

  • Collegiate high school program;
  • Professional development expenses Senior High School spending decreases include:
  • Summer school programs (no decrease in services);
  • Vocational ed/tuition to WRCC (large decrease due to equalized student numbers

  Brattleboro Area Middle School

  Overall BAMS spending is decreased from $3,450,722 to $3,212,021, which is $238,701 or 6.92%.

  BAMS spending increases include:

  • A second new paraprofessional position to provide additional classroom support for students with behavioral issues;

  BAMS spending decreases include:

  • Technology education position decreased to half-time;
  • Math department, a half-time teaching position not renewed;
  • Technology support position eliminated;
  • Instructional computer hardware purchase postponed.

  Windham Regional Career Center

  Overall WRCC spending is decreased from $2,488,142 to $2,430,781, which is $57,362 or 2.31%

  WRCC spending increases include:

  • Digital editing program contract services

  WRCC School spending decreases include:

  • Horticulture program eliminated
  • Medical human services program reduced
  • Culinary arts program reduced
  • Renegotiated arrangement for circus arts program.

  Capital Plan

  The total proposed spending in the capital plan for FY19 is $560,000, increased from $143,000 in FY18. There are seven proposed projects, the largest of which is a new maintenance shed at a cost of $340,000. Funding will come from the general fund in the amount of $190,000, with the remaining $370,000 coming from the capital reserve fund balance. This will bring the projected fund balance down to $783,620 at the end of FY19. (Future glimpse: For FY20, a similar amount of capital spending, $523,000, is anticipated.)

  3. FY19 funding data are reported on a separate two-page handout.

  4. Narrative explanation of the funding formula and FY19 funding data

  Understanding a school budget in the State of Vermont is complicated, especially in comparison to a municipal budget, where calculating the tax rate is straightforward. For a municipal budget, the expenditures for the year are applied to the grand list of properties in town, and the result is the tax rate needed to raise that amount of money.

  The schools are different, now that state aid is raised and allocated so as to equalize tax burdens across different towns and school districts. The following narrative goes with the Figures and Calculations to explain the process and the results for Brattleboro taxpayers for the BUHS District for fiscal year 2019.

  The Figures and Calculations are provided on the accompanying two pages. In this narrative, when specifically discussing FY19, the comments will be in italics. When discussing the general principles of school funding, italics will not be used. Also, each line of numerical data in the figures is designated by a capital letter for easy reference.

  (Please note: The figures given are a somewhat simpler presentation of the funding data provided by the administration and the school board. When a specific line item in this report can also be found on the information sheets provided by the administration, the line item number from their presentation appears in parentheses next to the capital letter used to designate line items in our analysis.)

  So let’s begin. Each year the administration and the school board decide how much money is needed for the year. This amount becomes the A-General Fund Expenditures. Next the amount of funding available from outside sources (such as grants) is subtracted, as B-Offsetting revenues, and then the amount of C-Fund balance (money saved up in prior years) the board wishes to spend is subtracted. The result is the figure known as D-Education Spending. This is the amount that will need to be raised from the local property tax and state funding.

  For FY19, these figures are shown, and the resulting D-Education Spending is 16.5% lower than in FY18. This large reduction is due to two principal factors: 1) Vernon’s contributions to the BUHS budget will appear as tuition payments rather than tax payments for FY19. Thus they appear in the B-Offsetting revenues line. 2) The BUHS board decided to propose a substantial increase the use of fund balance for FY 19.

  After the amount of spending is thus decided, the state funding formula takes over to determine how much money the state will provide and how much money will have to be raised through the local property tax. From here on out, local decisions have little effect, although the school board can go back and change the expenditure decisions if necessary, which is what happened this year.

  Several factors are taken into account in going from D-Education Spending to an actual tax rate. The first thing is to calculate the level of spending per student. The E- Number of actual students in the schools must be adjusted for indices of poverty in the district. The adjusted number, provided by the state, is the number of F-Equalized Pupils. Next, D-Education Spending is divided by F-Equalized Pupils to calculate G- Education Spending per Equalized Pupil. This important number is used as the basis for the tax rate of the school district, and also must be below a certain level (the Spending Threshold) in order to avoid paying a tax penalty to the state.

  For FY19, the number of F-Equalized pupils is drastically reduced from FY18, going from 1156.51 to 960.27, which immediately created big problems for the district. If everything else remained the same, a 17% decrease in the number of equalized students would cause a corresponding increase in the tax rate, which would also push the district well above the Spending Threshold, so something had to be done.

  Two primary factors contributed to the reduction in F-Equalized Pupils, Vernon’s departure from the BUHS district and the removal of the hold harmless provision for “phantom students.” Both of these events came about as a result (direct or indirect) of Act 46.

  During 2017, after a complicated sequence of events involving Act 46 and other legislative action, Vernon left the BUHS district in order to preserve school choice for its students. As a result its students and its tax payments are no longer inherently included in the BUHS district. In order to continue sending students to BUHS, Vernon will now make tuition payments to the district. In theory, this should have little effect on the budget, as long as the new tuition payments and the former tax payments are close to the same, which is likely to be true but is not guaranteed.

  A more difficult problem is the issue of “phantom students,” and the hold harmless provision of Title 16 – Vermont Education Law. Phantom students became an issue about 15 years ago when the legislature put in place a hold harmless provision, limiting the decrease in Equalized Pupils in a school district to 3.5% per year regardless of how much the enrollment had actually declined. This was done to protect school districts from a sudden decrease in funding that could not be absorbed in a single year.

  Act 46 initiated a process to phase out the phantom students, particularly in districts that did not adopt a merger proposal by November, 2017. Thus the Equalized Pupil count for BUHS suddenly came down to the baseline number calculated by the Agency of Education, without the 3.5% limit. The BUHS district thus lost approximately 76 Equalized Pupils (and the corresponding funding from the state) abruptly in mid- December, at a point where the budget process was thought to be nearly complete. A significant revision of the budget had to be undertaken at that time, with a deadline looming in early January for the budget to be approved by the full BUHS board.
  It was at this point that the amount of fund balance to be used in FY19 was increased and the proposed spending was decreased in order to bring the G-Education Spending per Equalized Pupil back down below the penalty threshold.

  Prior to receiving the reduced number of Equalized Pupils, the use of fund balance (combined operating budget and capital budget) was to be $210,000. After receiving the number, it was increased by $1,075,000 to $1,285,000. On the expenditure side, total spending prior to receiving the reduced number was to be $25,375,895, which was then reduced by $784,895 to $24,591,000. Thus the combined adjustment made in the proposed budget (increased spending from reserves plus decreased expenditures) amounted to $1,859,895. The result of all this is G-Education Spending per Equalized Pupil of $17,443, up from $17,350 in FY18, only a 0.5% increase despite the much larger decrease in Equalized Pupils.

  After G-Education Spending per Equalized Pupil is calculated, the next step is to calculate a tax rate for the district (although subject to one further adjustment, separately for each member town), by dividing it by a number called the H-Property Dollar Equivalent Yield. This is another number provided by the state, and is derived from the amount of money the legislature is projected to make available for state aid to education. If more money is available, the H-Property Dollar Equivalent Yield is higher. If less money is available, it will be lower. The calculation gives the I-Equalized Homestead Property Tax Rate, and is the initial calculation of the tax rate for the district.

  For FY 19, the H-Property Dollar Equivalent Yield has decreased to 9842 from 10,076 in FY18. This appears to be chiefly because last year (for FY18) the legislature used non- recurring sources of funds to provide extra funding for education. This year, those funds are not available, so state aid to education is projected to be lower by 2.3%. The difference will have to come from local property taxes. Thus the I-Equalized Homestead Property Tax Rate will increase from $1.708 in FY18 to $1.772 in FY19, an increase of 3.8%. However, this is not the final figure shown on the tax bill.

  The final step is to adjust for the proportion of Brattleboro students in the BUHS District in comparison to the Town School District. This adjustment is done for any town that has students in more than a single school district. Because the final tax rate is a blend of the rates for the two districts, a weighted average is calculated. The weight for making this adjustment is the J-Proportion of Equalized Pupils in each district, expressed as a percentage of the total number in both districts.

  The calculation is to take the I-Equalized Homestead Property Tax Rate and multiply it by the J-Proportion of Equalized Pupils in that district. The result is the K-Portion of the Equalized Homestead Tax Rate to be assessed for that school district.

  For FY19 for the Town of Brattleboro, the J-Proportion of Equalized Pupils in the BUHS District is 47.45%, down from 50.31% in FY18. Consequently the final tax rate to be applied to a Brattleboro resident’s tax bill to fund the BUHS budget is lower than in FY 18, down from $0.859 to $0.841 in FY19.

  The effect of this adjustment is a bit counterintuitive. Between FY18 and FY19 the proportion of students in the Town School District increased from 49.69% to 52.55%, with a corresponding decrease in the proportion for the BUHS District from 50.31% to 47.45%. The amount of tax attributable to the Town School District is thus increased, and there is a corresponding decrease in the amount of tax attributable to the High School District.

  The net effect on the taxpayer then depends on which tax rate is higher before the final adjustment. The taxpayer would like to see the higher percentage adjustment applied to the lower tax rate, in order to minimize the final number. Because the tax rate for the BUHS District in FY19 is expected to be higher than the tax rate for the Town School District, the net effect of these adjustments will be a favorable decrease in the overall tax rate for the two districts combined.

  However, this also leads to a confusing result when trying to decide which school board was more successful in controlling costs. Comparing the final numbers can give an erroneous impression. For FY19, the K-Proportion of the Equalized Homestead Tax Rate attributable to the BUHS District is lower than in FY 18, simply because the proportion of students in the high school went down. Conversely, the tax rate for the Town School District is going to look higher because their proportion of students went up. And yet the net effect of these two results is a lower final tax rate because the Town School District I-Equalized Homestead Property Tax Rate is the lower of the two.

  Taxpayers in the end will see the two rates (K-Proportion of the Equalized Homestead Property Tax Rate), one each from the BUHS district and the Town School District, added together, plus the municipal tax rate, as the final local property tax rate on their tax bills.

  5. Conclusions

  Having reviewed both the process and the final product, the Brattleboro Representative Town Meeting Finance Committee has reached the following conclusions with regard to the FY19 BUHS District budget:

  1. The WSESU and BUHS administration, the BUHS finance committee, and the BUHS board worked diligently to provide funding for a high quality education for the BUHS students with as low a tax burden as would be consistent with the educational outcomes desired by the community.
  2. The quality of education at BUHS has been and will remain high based on the proposed budget.
  3. With regard to the tax burden, changes taking place throughout Vermont, as directed by the Vermont legislature, Board of Education, and Agency of Education, have resulted in a larger than anticipated tax increase.
  4. The budget as proposed deserves passage by the voters at the annual meeting on February 13, 2018.
  5. Additional challenges remain ahead as student numbers are expected to remain relatively stable or decline. Specifically, the use of fund balance cannot provide ongoing support to the programs as it does for the proposed FY19 budget. Other means of balancing future budgets will have to be found.

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