ABudget Worksession 2018-10-16

Work session Budget Discussions on 10/16/2018

At the Board of Education Work session on Tuesday, October 16, 2018, we will be reviewing and discussing information pertaining to budgets for three different fiscal years. FY18 is the fiscal year we just completed as of June 30, 2018. FY19 is the current fiscal year that we are operating in, and FY20 is the next fiscal year we will be entering on July 1, 2019.

FY18 – July 1, 2017 to June 30, 2018

We are currently in the process of completing the annual audit for FY18. We have attached a draft year ending fund balance chart with actual information back through FY12. The FY18 information is from an unaudited draft, but we believe these will be the final numbers approved in the audit.

The KPBSD General Fund ended FY18 with a deficit of $355,072. This means that our expenditures and transfers for the year exceeded our available revenues by $355,072. This is the seventh year in a row that there has been an ending deficit.

It is important to note that the KPB Facilities Maintenance fund balance increased again by $470,062, because of the KPB In-Kind budget being under expended in that amount. Without the KPB increase, the KPBSD fund balance decreased by $825,134.

The other item of importance to note is that the Unassigned Fund Balance category reduced significantly from $3,954,326 to $1,671,218. This reduction of $2,283,108 means that the amount available to use for the FY20 budget is significantly reduced from prior years.

FY19 – July 1, 2018 to June 30, 2019

We are currently operating in this fiscal year. Multiple documents are attached for your review.

The first document is a sequential timeline of the significant steps involved in the FY19 Budget process. Step 1 reflects the initial deficit of $3,358,161 assuming flat funding from the State and Borough. By using one third of the Unassigned Fund Balance, the deficit was reduced to $2,040,052. Step 2 illustrates the list of potential reductions recommended by Administration if no new sources of revenue materialized. Step 3 reflected the addition of $1,405,152 in one-time funding by the legislature, and the revised Administrative recommended reductions of $522,787. The additional revenue allowed for 11.5 FTE in teachers to be reinstated in the budget and for three days of work for support staff aides to be reinstated as well. Step 4 reflects the additional legislative funding and the Administrative recommendation to increase fund balance usage from $1,318,109 to $1,430,222. Steps 5 and 6 reflect the Administrative recommendations for the additional $652,609 KPB Revenue the Borough Assembly added for the District. However, the Mayor vetoed the additional funding so those items were not addressed by the School Board. The final FY19 Budget was passed as detailed in Step 4.

We have also attached a one-page summary detailing the General Fund revenue sources and expenditures detailed by function.

You will also find a page detailing the budget reductions that have been made over the last 5 fiscal years.

We have also included a page that breaks down the Defined Contribution Forfeiture funds that the Division of Retirement and Benefits wrote to us about. After requesting additional information, the folks in Finance and Information Services have been able to determine the amount of funding attributable to the General Fund, Title Funds and Charters Schools. The Title Funds and Charter School amounts are not available for expenditure by the School Board. However, the $787,055 from the General Fund can be used by the School Board to reduce the existing $1,430,222 deficit and use of fund balance, or it could be reassigned to other expenditure categories.

We are currently in the middle of the 20-school-day counting period that determines state aid based on our enrollment or Average Daily Membership (ADM). We will have updated information for discussion at the worksession.

As you know, we are currently in negotiations with both KPEA and KPESA regarding salary and benefits for FY19. While the District has only proposed an agreement for FY19, the associations have proposed agreements for FY19, FY20 and FY21. We have attached a page that estimates the cost related to the proposals presented by KPEA and KPESA. These costs are relevant to the budget discussions for FY19 and beyond.

FY20 – July 1, 2019 to June 30, 2020

We are at the start of a very long process to determine the FY20 Budget. We cannot make a prediction for the FY20 enrollment figures until we complete the FY19 20-school-day counting period on October 24. It is too early to start making specific projections, but there are items that we can consider for discussion.

House Bill (HB) 287 passed with language that allocated $30 Million in one-time funding for K-12 education in FY20. This would be $10 Million more than the $20 Million in one-time funding passed for FY19. If our enrollment stayed steady, it could mean approximately $702,576 in new one-time funds for FY20 beyond the FY19 one-time funding. However, before we start spending that money, we need to consider the contingency language that was included in HB 297. The relevant bill language is quoted below:

* Sec. 4. DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT. The sum of $30,000,000 is appropriated from the general fund to the Department of Education and Early Development to be distributed as grants to school districts according to the average daily membership for each district adjusted under AS 14.17.410(b)(1)(A) - (D) for the fiscal year ending June 30, 2020.

* Sec. 7. CONTINGENCY. The appropriations made in secs. 4 and 5(c) and (d) of this Act are contingent on passage by the Thirtieth Alaska State Legislature and enactment into law of a version of Senate Bill 26.

Therefore, what this means is that the next legislature, the Thirtieth Alaska State Legislature, has to pass the bill as well before it is funded. The last time future school funding was passed with this type of contingency language, it was not passed by the subsequent legislature. This could mean that not only would we not get the additional $702,576 for FY20; we would also not get the $1,405,152 we are currently receiving in FY19.

We are also attaching a copy of the proposed FY20 Budget Calendar for your review.