2020/2021 BUDGET REDUCTION PLANNING Board of Education – May 13, 2020 Kathleen Askelson, Chief Financial Officer Nicole Stewart, Director-Budget & Treasury
CURRENT NEWS FROM THE STATE Colorado Department of Education: Plan for a 1 to 10 percent reduction Joint Budget Committee: May 12 updated economic forecast Plan to introduce Long Bill and School Finance Act by May 26 Legislators planning to complete school finance by June Possible extension for budget adoption from legislation
CHALLENGES … Short timeline to implement changes for July 1 Large range in reduction projection Long term outlook unknown; expectation for multiyear impact Specific information for federal aid starting; anticipated receipt at least 60 days out
REDUCTION PLANNING
DRIVING VALUES IN DEVELOPING REDUCTIONS Quality student experiences Our people (employees) Our community Short and long term financial stability
FILLING THE BUDGET HOLE
2020/2021 REDUCTION OPTIONS Pay Reductions Layoffs Program Cuts School Closures/Consolidations Use of Reserves
2020/2021 REDUCTION OPTIONS Pay Reductions Furlough Days – 1 day $3.6M % Reduction of Pay – 1% $6.3M Combination of Both No layoffs of staff or reduction of services Impacts to staff, loss of income
2020/2021 REDUCTION OPTIONS Layoffs (Reduction in Staff) Central division School Student Based Budget (SBB) Difficult to implement quickly Will impact staff, student and community support
2020/2021 REDUCTION OPTIONS Program Cuts Central division support cuts School program support cuts Short term central cuts, already identified Longer term – difficult to implement quickly with fidelity and community input Will impact staff, student and community support
2020/2021 REDUCTION OPTIONS School Closures/Consolidations Not recommended for a short term solution Demographics could change in the next few months Difficult to implement quickly Will impact staff, student and community
2020/2021 REDUCTION OPTIONS Use of Reserves $87.8M current year projection, 12.5% of expenditures • Using $30M reserves would be 8% of expenditures, lowest recommended balance • Can be used for short term and long term reduction planning • Use of reserves could eliminate immediate impact to students, staff and community. • Important to monitor balance for impact to financial stability
MODELS OF REDUCTIONS
2020/2021 PROPOSED BUDGET ASSUMPTIONS (NOT FINAL) State funding decrease 12% $(74.3) 5A mill levy inflationary increase 0.6 Loss of specific ownership tax (1.5) Loss of interest (1.7) Loss of revenue from 350 student decrease (3.0) CARES Act funding (if we can use to backfill revenue loss) 6.0 Total 2020/2021 Change in Revenue $(73.9) Mandated PERA increase .5% $2.6 Retirement/Turnover Savings (5.0) Implemented Reductions (32.5) (34.9) Total 2020/2021 Change in Expenditures Net use of reserves $(39.0)
12% REDUCTION MODEL Reduction Description Amount (in recommended implementation order) Ongoing Savings Identified in 2019/2020 $3.0 Central Department Reductions #1 5.0 Eliminate Innovation Funding 1.0 SBB Reduction – (Plan B schools have worked on) 5.0 Eliminate School Improvement Funds 2.2 Reduce Capital Transfer 5.5 Implement 3 Furlough Days Across All Staff 10.8 Total Reductions $32.5
2020/2021 CENTRAL REDUCTIONS #1 Reductions planned so far, under different assumptions Excluded cuts that would directly impact schools (custodial, ERD literacy interventionists and ESL support) Forms a starting point for more reductions; from here we must go deeper. Sweep in reductions to custodial and ERD + adding in all other proposed district reductions. Reduce the innovation fund to $0.
2020/2021 CENTRAL REDUCTIONS #2 Central Division Proposed Budgets (in amount order, with potential impacts): IT/Tech/Devices/Network (reduction or slowing of IT projects) $33.7M Reductions Curriculum teams, Research, Assessment could be made (no curricular supports, PD, tests, evaluations to base or tracking of strategic plan) $30.1M mandated Telecom, Network & Utilities (would require school amounts. closures) $28.8M Complete Custodial (reduced cleaning) $27.9M eliminations Student Success less MOE (mental health supports, GT, may not be diversity and ELA) $23.7M possible for all Transportation (eliminate routes) $19.8M divisions. Field Services (less preventative maintenance) $18.7M Athletics (less sports programs) $10.1M
2020/2021 CENTRAL REDUCTIONS #2 (continued) Central Division Proposed Budgets (in amount order, with potential impacts): School safety (no district safety program) $8.2M Financial Services (internal controls, less customer service Reductions for purchasing, budget support) $5.6M could be made Human Resources (reduced recruiting, slower onboarding to base and reduction of leaves and benefit support) $5.4M mandated Early Childhood 5A support (loss of licensed staff and amounts. programs) $3.2M Complete School Leadership (reduction in school support) $3.1M eliminations Employee Relations (reduce performance management may not be supports) $1.8M possible for all Communications (reduce outreach) $1.1M divisions. Superintendents office (support for BOE and Supt daily operations) $0.9M Board of Education (reduction of memberships and community engagement) $0.6M
2020/2021 CENTRAL REDUCTIONS #3 Central district positions $7.5M of senior district leaders Proportionate cut should be made Already deferred raises w/5A Labor market (these people can and will leave) Leadership/expertise vacuum
2020/2021 OTHER BUDGET ITEMS Insurance reserve fund needs an increased transfer due to increased premiums (see proposed budget pages 256 & 257) Recommendation: • Utilities trending lower than budget • Shift utility budget underspend to insurance reserve transfer
2020/2021 RESERVES 2019/2020 estimated unassigned reserves: $88.5M or 12% of expenditures 2020/2021 estimated unassigned reserves after $39M spend down: $49.5M or 7% of expenditures
POPULAR IDEAS FOR REDUCTIONS Early Retirement Incentives (ERI): Always an option to consider, the district has done small incentive programs that were not influential or produce desired outcome Formally evaluated by a third party with larger incentives in 2010 and recommendation was not to implement The Government Finance Officers Association has a Best Practice Recommendation of not using ERI’s due to the difficulty of accurate projections and lack of positive results
POPULAR IDEAS FOR REDUCTIONS Outsourcing: Always an option to consider, even when not making reductions Caution must be taken; not all outsourcing results in savings Careful evaluation is needed to identify opportunities Requests for proposals must be structured specifically Must be viewed in a long-term view and watch for loss leading by vendors Depending on the outsourcing, start up costs could be involved and/or reversal costs could be prohibitive
2020/2021 REDUCTION PRIORITIZATION Is this the Board’s prioritization? Prioritized reductions to be flexible with changing state revenue estimates Last reductions on list adjusted down or removed
NEXT STEPS
NEXT STEPS 1. School Finance Act drafted by May 18 2. Option to add a Board meeting after May 18 and before June 4 3. Budget adoption is scheduled for June 4 4. Option to add a Board meeting to move budget adoption towards the end of June
COMMUNITY ENGAGEMENT FACEBOOK Live event 4/23/2020 Public Comment for Budget – May 7 Student Town Hall with Superintendent 05/11/2020 Teacher Advisory Committee 05/13/2020 Revised Community Survey in May after updated forecasts Community Budget Advisory Committee
QUESTIONS
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