Oct 2013 Five-Year Forecast approved

When I was appointed to the Business Advisory Council (the first time) in 2003, the BAC had just recommended the district cut $20 million out of its Five-Year Forecast.  This group of extremely bright people understood that, while the Five-Year Forecast is a projection of what could happen, it is also a very valuable tool to manage that potential future.  Unfortunately, the district, under a previous board and administration, disregarded this advice and, over the next several years, spent itself into fiscal caution status.

The first year I joined the board, the prevailing attitude was still that the Forecast was not really valuable for planning purposes and understanding the future.  The board made some very large financial decisions without an updated Forecast – and they were mistakes.  We may have made the same decisions; I can’t judge that.  But if we had, we would have at least understood the impact not only those decisions, but other changing factors, had over the next few years.

Today, I’m happy to say the administration and board understands the value of the Forecast.  After those uninformed decisions a little over three years ago, I insisted we change our approach and update the Forecast not only at the “required” times, but any time there is a major change in either revenue or expenditures.

The most recent forecast is a good example of this.  We now have more information on state funding and some other expenses (for example, staffing and insurance cost), and Treasurer Debbie Caudle presented an up-to-date forecast for our review.  This coincided well with the legal requirement to file a Forecast by October 31 – whether we had details on these pieces or not, we would have to file with the best information we had.

In addition, this Forecast looks very different than those from a few years ago.  Why?  Because the board and administration over the past six years has done exactly what the BAC recommended back in 2003, and cut over $20 million from the Forecast.

The Forecast shows where we can expect to be in five years if nothing were to change.  This, of course, is impossible:  costs will shift, new requirements will be implemented, revenues will change based on many factors.  With the new attitude of using this as a planning tool, we will keep the Forecast updated and use it to understand the shifts in the business of running a school district.

The current Forecast is available here 05 Five Year Forecast 101413 if you’d like to see it.  Any questions, please let me know.

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3 thoughts on “Oct 2013 Five-Year Forecast approved

  1. After reading the assumptions for the forecast I see that there will be no change in the school employees’ contribution percentage rate for their health insurance. I believe the rate for union employees is 15% and 0% for administrators. I had always thought and have been told that the contribution percentage was a negotiable item just like other items in the union contract. If that’s so, why is the assumption always made that it will remain at 15%? Has an agreement outside of official negotiations been made not to negotiate the rates? I know this union business is always done in secret. But, the 5-year forecast seems to say exactly that, even though the actual 15% figure was conspicuously not mentioned.
    Of course, there are consequences to this generosity. The most damaging is the fact that after paying for the increases there will not be enough money to pay for all other district expenses, namely those for educating the children. So another levy will be needed. It will have to be at least 7 to 10 mils in size according to the forecast. This time it won’t be for education. It won’t be for the kids. It won’t be for a new school. It will be to pay for the school employees’ health insurance rate increases. And if that levy should fail, the district would still be required by the contract to pay those premium increases. That would mean severe cuts in education.
    So here we are. We’re faced with the prospect of not only making sacrifices to pay for our own health care insurance increases, but digging even deeper to pay those of the school employees as well. This kind of special treatment must end. We are not here to serve the wants and desires of public employees. Nor is the board of education here to provide that servitude. We want to be fair. And offering benefits comparable to the private sector is fair. Providing health insurance for just 15% of its cost is excessively generous. It places a major hardship on the taxpayers and endangers education.
    In my opinion, unless the district mounts a successful effort to increase the employee contribution rate to at least 25% they are not serving the public needs, but rather the desires of the public employees at the expense of the public.

  2. Tom, the current contract runs through next year, so no negotiations have taken place. Given that, we cannot do anything but assume the current agreement in the five-year forecast. Actually, this year, employees are absorbing a higher percent of the health insurance increase, bringing their contribution to 17%.

    I agree, we need to be fair to everyone when we come to an agreement with the union. What that looks like, I don’t yet know. Yes, negotiations are conducted in secret – that is not something I like (I can only speak for myself, not the board or district), but it’s required by law.

    As far as levies, remember one of the big problems is they do not grow over time or with inflation. When we pass a levy and receive $3.9 million a year (this past levy), that is $3.9 million today, next year, in five years, and in 20 years. If you look at the forecast, you’ll see our revenues are projected to be flat – yet our expenses, just like expenses for any business, continue to increase. That is an untenable situation, and puts the onus of finding funding on the back of the locals. Some argue that is good, since it allows residents to determine if the district is doing a good job managing the money they have; others feel there should be some way for districts to receive increases based on cost of living or other inflationary factors. Certainly a private business would not be able to sustain with flat revenues and expenses that continue to grow – and you can’t assume the business could cut expenses to the point where they meet revenues; sometimes, that’s just not possible.

    Instead, the business would fold. That’s not an option here; we have to have a public school system. The question becomes what we as residents want it to be, and if the board/administration are delivering that to the best of their ability and at a reasonable cost. It’s a balancing act between preparing our kids, not draining our community, protecting our property values, and meeting all the requirements the state/feds put on the district. It’s not easy.

  3. Andrea
    Why the comment about the basics of school levies and inflation? Inflation is at historic lows. It has been for at least six years. And it will remain so for all the foreseeable years in the forecast. The huge rise in health insurance premiums is driven by a government sponsored program, a program that was heavily supported by the teachers union by the way. That has absolutely nothing to do with inflation.
    My comments were strictly in regard to the low percentage the school employees contribute to their health insurance premiums which in some cases is zero. It’s way way out of line with the private sector. And it diverts funding away from the children’s education. That’s a destructive situation. It must be fixed. It’s the board’s responsibility to do so.
    Unaddressed, the problem will soon get much much worse.
    Tom Cannon

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