2017-18 Budget Request

This is the time of the year that we work on finalizing our budget for the upcoming school year. A critical step in this process is our request to the New Hanover County Board of Commissioners for local funding.

This year, our request is more critical than ever. In this edition of my blog, you will see the letter that was sent to the County Commissioners outlining the district’s budget request and the rationale for our financial needs.

On May 2, 2017, the Board of Education approved the following County Funding Request:

  • Operating Request of $76,525,302 ($2,750 per pupil) – 4.5% Increase
  • Capital Request of $3,500,000
  • Special Pre-K Request totaling $487,422

While the school system is very appreciative of County support, I need to inform you that our request of $2,750 per student is essential due primarily to the domino costs associated with the State budget and associated teacher/staff increases.  The recommendation of $2,670 leaves the school system $80 per student short, or $2.1 million short of maintaining the excellent school system we have in place.  The Capital Outlay request is $1.5 million short, leaving the school system in a precarious position, especially in the area of technology. There is no other significant source of funding for this critical need.  In other words, $2,750 is close to break even for us, and Capital Outlay is a choice of how we support our students.

The following memorandum provides historical data, as well as a summary of this budget request and the impacts of State decisions.  Even at $2,750 per student, the district plans to use a significant amount of the fund balance to make this budget work. This will drive the available funds to 6% or less than one month of reserves.

While the State has increased funding over the last several years, it has not returned to pre-recession levels of funding. The two charts below clearly show that when adjusted for inflation, we are significantly behind pre-recession levels.

Inflation Adjusted General Fund Appropriation for NC Public Schools

Inflation Adjusted Per-Pupil General Fund Appropriation for NC Public SchoolsHere in New Hanover County Schools, we have also been trying to return to pre-recession funding levels. Our goal four years ago was $2,700 per student, which was close to the 2008 per-pupil levels. We have not reached that level yet, and again, the proposal falls short of this level.  The State’s recent rapid efforts to increase education spending, especially for teachers’ salaries, has rendered the $2,700 goal insufficient. Their large increases over the last three years have outpaced our efforts to reach the $2,700 goal. Teacher raises and increased cost for insurance, retirement and other non-discretionary items will have a $3.1 million impact on our budget. Our request of $2,750 per pupil represents a break even proposition at best. Any amount below this will require significant cuts to current programs.

Operating Budget Summary

County funding represents 87% of our General Fund and 28% of our total Operating Budget. The current total Operating Budget is $259.2 million, of which 76% is used for Instructional Purposes. Four percent (4%) of the County Appropriation is transferred to Charter Schools.

Salaries and benefits for 3,623 positions, 711 of which are locally funded, equal 82% of the budget.  Most pay schedules are determined by the State and also apply to locally paid staff.  In addition, 13% of County funding is used to supplement teacher pay for both state and locally paid teachers. Over the past 10 years, benefits costs for retirement and health insurance have increased 132% and 47%, respectively, and currently, represent 16% of our operating budget.  While the total number of positions has grown 5% during this 10-year period, enrollment growth has increased 11%, resulting in higher class sizes and less classroom support.

Almost all of the 4.5% requested operating increase would be used to funds anticipated state raises and associated local salary increases.  This request would be used in combination with a proposed increase in fund balance appropriation for the following Operating Budget Priorities:

  • State salary and benefit increases estimated at $3.1 million.
  • Various operating costs of almost $1 million to include SEA-Tech Year 1 Operating Costs; Board Scholarship Fund (year 3 of 4); and cost increases anticipated for Workers Compensation, utilities, leases and technology support.
  • Essential Expansion Requests totaling $366,000 to expand support for JC Roe Center, Head Start, and additional Custodial months of employment.

K-3 Class Size

There has been much discussion about K-3 class size reduction, which has now been postponed for one year by the State Legislature.  Our original plan was to absorb the estimated increase of 48, K-3 classroom teachers by eliminating enhancement and instructional support positions, but we are now somewhat optimistic that the State may fund art, music, and physical educations positions separately in 2018-19.    We will continue to develop a transition plan to deal with changes associated with K-3 class size reduction, including space and enhancement allotments, to prepare us for full implementation in 2018-19.

Formula Changes

The proposed budget includes net reduction of 14 positions.  The following positions will be eliminated to help offset the cost of raises and other essential needs.  Reductions include:

  • 3 Assistant Principal Positions (small schools would share)
  • 5 AIG Teacher Positions (small schools would share)
  • 12 High School Teachers (increasing class size by 1)
  • Phasing out Elementary Technology Assistants over two years. For the first year, 13 will be eliminated and replaced with 11 Area Technical Coordinators.
  • Certified Secondary In-School Suspension teachers to be replaced with non-certified staff through attrition.
  • Non-certified Graduation Coaching positions to be eliminated through attrition.

Fund Balance Appropriation

We acknowledge the concerns expressed by County Commissioners in regards to our Fund Balance Reserve.  Our current budget includes a recurring appropriation to prevent growth of the reserve, and this year’s budget includes a 7% reduction in the reserve from $17.2 to $15.9 million.  Funds would be used for a combination of one-time and recurring needs, including State bonuses for locally paid staff, furniture and equipment replacement, and contracted maintenance including painting and repair projects. A detailed list is enclosed with the supporting documentation.

The rationale for maintaining Unassigned Fund Balance includes:

  • Providing for contingencies such as rising costs, emergency situations, and unfunded state and federal mandates, many of which can occur after the County Budget is approved.
  • Providing cash flow to cover federal funding for the first quarter of each year.  While federal funds are awarded to be used for the 7/1-6/30 fiscal year, the Department of Public Instruction does not generally release those funds for our use until October of each fiscal year.
  • With 82% of our operating budget used for salaries and benefits and less than 1 month of operating budget in reserve, it is critical to maintain a minimum balance to meet payroll in the event of a mid-year state or federal funding freeze or reduction, both of which have occurred in past years.

Capital Outlay

The Proposed Capital Outlay Plan for next year will be funded with a combination of revenue sources to include County Appropriation, State Lottery, State Equipment Reserve, Sales Tax Revenue and General Fund balance (furniture and equipment only).  The $3.6 million County Appropriation would fund the following projects, none of which are eligible for lottery funding:

1. Replacement of walk-in freezer at the Johnson Pre-K Center.

2. Window and rooftop unit replacement at Howe Pre-K Center.

3. Relocation of two mobile classrooms from Blair Elementary to Noble Middle School.

4. Purchase and installation of five mobile classrooms (2 – Murrayville and 2 – Parsley elementary schools and 1 – JC Roe Center).

5. Replacement of three Maintenance vehicles in poor condition.

6. Replacement of outdated desktops, laptops and iPads that are not effective to repair or upgrade.

7. Pre-K expansion furniture and facility upgrades.

Lack of full funding will greatly impact our ability to upgrade outdated classroom technology.  We are trying to implement a replacement schedule of seven to nine years for desktops, and five to six years for laptops and iPads, all of which are well beyond the normal life cycle of this type of equipment.  For the past few years, the State has been moving towards digital learning, but State funding has not supported the technology equipment needs for our Digital Learning Plan.  Local support is needed to insure the appropriate classroom resources are available.

Special Request for Pre-K Expansion

Pre-K expansion would allow us to serve 45 additional students beyond those funded by the State NC Pre-K and the Federal Head Start programs.  These students will be served at our Mosely site. The request includes recurring funds of $372,470, equivalent $14 per pupil for Charters, and a one-time request for furniture and facility upgrades of $100,000.

Charter Schools

All County appropriations and other local revenue, such as fines and forfeitures, are shared with regional charter schools on a per pupil basis using 1st month enrollment.  Local funding is based on the address of the child rather than location of the schools, so we currently transfer local funding to eight charter schools in the area.  This year’s distribution of County revenue was based on $2,662 per pupil.

Summary

The recommended funding of $2,670 per pupil would leave us $2.1 million short of our funding plan, and it would most likely result in additional position reductions that would be necessary to fund the mandated raises and unavoidable cost increases.  Enclosed is detailed documentation to provide additional justification for this request.  We will be glad to meet with you to discuss our needs and answer any questions you may have.

We sincerely thank you for your continuing support of the students in New Hanover County. We are extremely fortunate to live in a county where education is a high priority for our citizens and leaders.  A high-quality school system is a strong block to the economic foundation of New Hanover County.

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