There's reason for optimism in the Warren County School District's preliminary budget.
The proposal, released on Tuesday after unanimous approval from the school board on Monday night, sets total expected revenue at $65,956,569 with total expenditures estimated at $70,111,741.
While a starting deficit of $4,155,172 is significant, Superintendent Brandon Hufnagel is hopeful that the actual deficit the district will face at the conclusion of the fiscal year will be much smaller.
"I truly believe, when we get to the final budget, revenue will be a bit higher and expenditures will be lower," he said, noting that a preliminary budget is a starting point and the district "will make alterations from here."
Of the total budgeted revenues, $26,330,939 is local, $36,431,324 is state funding and $3,194,306 is federal funding.
Tax increases were not included in the preliminary budget. According to the state index, which allows school districts to increase property tax millage rates to a certain point without referendum, the district can increase taxes at a level of 2.5 percent, approximately 1.274 mills.
At the state level, Hufnagel indicated that the preliminary budget assumed that state funding will remain flat. Gov. Tom Corbett will not release a budget proposal until February. However, Hufnagel told the board he has heard that any cuts to education will affect higher education, not school districts. "(We're) sitting back and waiting for the governor's address in late February," he said.
State funding provided under the Hold Harmless provision is also a concern. The provision, which ensures an automatic two percent increase in basic subsidy for rural schools, hasn't been in effect in the last two years and is under attack from urban, growing districts. "This is a big deal to us if it changes," Hufnagel said. "Hold harmless is what is making sure how we're funded hasn't changed. We would lose up to two percent of our state funding with the hold harmless legislation going away. That would be a lot of money for us to lose."
Another state program that is "always on the state chopping block," the Accountability Block Grant, is used to pay for full-day kindergarten in the district. "I have a commitment to keeping full-day K," Hufnagel said. "Full-day kindergarten is a priority and the board (has) made it a priority. That's not changing."
Labor at $30,805,720 and benefits at $17,844,844 are the two biggest spending items in the preliminary budget. While the last two budget cycles have included extensive staff furloughs, Hufnagel doesn't expect that to be the case this year. "Attrition is all I'm looking at right now," he said. "We're pretty thin in the teaching (ranks) as it is. I'm not sure how we would operate with more significant cuts."
The district does face several items that have increased over last year's cost. Without a negotiated salary freeze that was in place in the 2012-2013 budget, salaries will increase $1,100,000. Health care costs, slated to increase $900,000, and the district's contribution to the state retirement fund, PSERS, spiking $1.45 million, both are up. For the PSERS contribution, Hufnagel explained that the district may seek to procure an exception which would allow taxes to be raised to cover those costs without referendum.
Hufnagel also said that zero-based budgeting techniques have increased building budgets by approximately $150,000 which is "still less than what building budgets started at last year."
No text book purchases or computer upgrades are present in this budget. "That's something that the board is going to take a look at and how they want to handle," he said, indicating that administration has been procuring prices on computer upgrades as well as prioritizing what computers should be replaced first.
In addition to the proposed closure of South Street Early Learning Center, Hufnagel said that the district could save potentially as much as $300,000 in unemployment contributions. "We do think we can reduce expenditures if we go down the road of not looking to lay off any additional employees," he said.
Hufnagel is also expecting a staff attrition of 10 heading into next school year. "We're estimating those 10 staff giving us a $700,000 value in reduction," he said. "Unlike the furloughs, these are going to be very strategic. By doing it through attrition, we won't pick up the additional expense of unemployment."
These items have the potential to drive down the district's $4.1 million structural deficit.
The district's fund balance is much healthier this year than in the last couple of budget cycles; $800,000 that was allocated to balance last year's budget was not needed and revenues fell by an additional $900,000.
"Through some different cost savings, spending freeze, we actually have saved $1.7 million in the operational budget last year," Hufnagel said. Speaking to the board, he said, "If we spend as budgeted, you have a fund balance that can cover your deficit."
The fund balance was originally projected to dip slightly under $1 million in 2013, according to a budget presentation from January 2012. "We thought our fund balance was going to be devastated," Hufnagel explained. "We put things into action last year to preserve it." He explained that cost savings measures were successful to a degree that the district generated a surplus, boosting a fund balance level of $4.2 million at the beginning of the 2012-2013 fiscal year to a projected $4.8 million heading into next year.
By approving a preliminary budget, the district would, in the coming months, retain the option of attempting to increase taxes above the state index via referendum. With uncertainty surrounding state education finding, Hufnagel said to the board that not approving a preliminary budget "would be a risky maneuver not giving yourself the option down the road."
The district is required to have a budget in place by July 1.