Sean C. Morgan
School District 55 is projecting an ending fund balance from $195,000 to $1.25 million by the end of next fiscal year, June 30, 2006.
The district may have an ending fund balance between negative $190,000 to $1.5 million the following year, June 30, 2007, the second year of the biennial state funding cycle.
District officials presented a budget outlook to its two unions, classified and teachers, Thursday night in preparation for upcoming labor negotiations.
Business Manager Kevin Strong identified four key factors that may affect the budget over the next two years, including state funding, enrollment, labor costs and special education funding. He did not include factors, such as utilities, and the meeting took place prior to a new higher state revenue forecast.
State funding
Gov. Ted Kulongoski has proposed a $5 billion budget for education during the 2005-07 biennium, Strong said. Based on January’s Department of Education estimate, Sweet Home would receive $13.9 million during the 2005-06 school year and $14.4 million in the 2006-07 school year, a total of $28.35 million.
The district is building its budget based on those numbers while projecting a flat enrollment, which has declined annually in recent years.
By comparison, Strong said, the district received $14.9 million during 2003-04 and $13.1 million during 2004-05. The district held money from last year as cash carryover to avoid cuts this year.
If the estimates hold true, the district will end up with $305,000 more in the 2005-07 biennium than it had in the 2003-05 biennium.
Enrollment
Enrollment has declined from 2,433 two years ago to 2,329, as of early February, Strong said. The assumption of a flat enrollment level may be optimistic given the recent trend.
The district’s largest classes are in grades seven through 12, an average of 196 students each. Grades one through six have an average of 165 students each.
Recent economic activity, such as the announcement that Lowe’s plans to build a distribution center in Lebanon, may help offset the negative trend, Strong said.
Labor costs
Labor is approximately 87 percent of the district budget, Strong said. Counting contingency and funds reserved for long-term maintenance, labor accounts for 80 percent of the budget.
Employee benefits equal 46.4 percent of the district salaries this year, up from 41.9 percent 10 years ago, Strong said. That component of labor costs continues to climb.
The district is now paying more than $10 per hour in benefits for some positions, Strong said. Some positions earn as much in benefits as they do in wages on a per-hour basis.
Growing benefit costs are primarily from increases in retirement and health care costs.
Most school districts will have a 5.86 percent increase in Public Employee Retirement System (PERS) rates in the 2005-07 biennium, Strong said. The district joined two bond sales to buy off its PERS liability. Those bonds will be repaid in 2027.
As a result, the district will face an increase in retirement costs of about 1 percent, Strong said, although how that compares throughout the years depends on how markets perform.
Since 1999-2000, monthly health insurance premiums have grown from about $325 to more than $700 per month. The district currently pays $550 a month for each covered employee. The employees pay the rest of the premium before taxes.
Special education funding
The district has successfully applied for special education funding waivers for the past several years, Strong said. The state limits the number of special education students a district can claim at 11 percent of the student population.
The waiver allows the district to receive additional funding because it has substantially more special education students than that, about 18 percent. The state average is 13 percent.
The state is changing its method for calculating that funding for this year, Strong said. The district hopes to receive that funding, which has ranged from $313,000 to $390,000 the last three years; but district officials are reluctant to include it in revenue forecasts until they know the district will receive it.
What this means
Strong projects an ending fund balance of $1 million in a worst-case scenario on June 30. The best case would be a $1.6 million ending fund balance, depending on the special education waiver and how much of the budget remains underspent.
Next year, in the worst case, Strong projects an ending fund balance of $195,000 and a best-case scenario of $1.25 million.
In 2006-07, he projects a range from negative $190,000 to $1.6 million.
In the worst cases, it would mean staff reductions, likely concurrent with declines in student enrollment.
In looking at upcoming labor negotiations, step increases and retirements would decrease ending fund balances for 2005-06 by $112,000 and $367,000 the following year.
By the end of 2006-07, the district’s ending fund balance could range from negative $557,000 to $1.24 million.
A 1 percent pay increase for all employees and a $50 per month increase in the district’s contribution to health insurance would bring the bottom line on June 30, 2007 to negative $1.3 million to $397,000. At 2 percent, that range changes to negative $1.6 million to $87,500.
An annual salary increase of 1 percent will cost the district an additional $103,000 the first year and $310,000 over the biennium.
James Sundell, the teachers’ negotiator, outlined district carryover history, which ranged from more than $600,000 in 2000 to $894,000 in 2001; $1.7 million 2002; $1.7 million 2002; 1.1 million in 2003; and $2.6 million 2004.
He also noted that Sweet Home teachers have an average of 11.71 years experience, compared to an average 13.37 years experience around the state.
The national urban consumer price index was 2.7 percent in 2004, Sundell said.
“We wanted you to have the best information because we’re all in this together,” Supt. Larry Horton told the unions. District 55 is in better shape than other districts, who spent funds last school year assuming the tax measure that failed in January 2004 would pass.
Some legislators were telling them to spend the cash, Supt. Horton said. That was “the most foolish thing they could have done.”
Board Chairman Scott Proctor asked them to help come up with ideas to save money.