School district needs to plan for difficult financial future

        If the school tax levy rises by four percent each year for the next five years and basic state aid to schools remains the same during that time, the Fort Plain Central School District will be broke by 2014.    

        That was the sobering message Dr. Rick Timbs of Bernard P. Donegan, Inc. financial consultants recently gave to the Fort Plain school community.

         This projection is contained in a report commissioned by the school board to analyze district finances from 2004 to 2008 and make projections for district finances to 2014. Timbs presented his findings at the March 18 school board meeting and at a meeting of district personnel March 27.

          Reasons for this projection include increased costs, especially the rising cost of benefits; the state budget situation; and that the assessable property in the district is mostly residential and unlikely to significantly increase in total value.

         “Benefits are going up like a rocket. They are starting to eat the budget,” Timbs said.
Health insurance, which cost the district $1.5 million in 2004, cost $2.3 million in 2008. Local cost for the teachers’ retirement system (TRS) has flattened, Timbs said, but is likely to rise in the next five years because the system is heavily dependent on stock market performance. “This year is not the problem, next year is the problem,” Timbs said of the TRS.

           As a category, employee benefits, which include health insurance, the TRS, Social Security, and Workers’ Compensation, accounted for about 17 percent of the school budget in 2004, and about 23 percent in 2008.

          Besides benefits, transportation and utility costs have risen over the past five years and will likely do so in the next five, Timbs said. He noted that the Consumer Price Index has little relation to costs, especially benefits, incurred by school districts.

          Instruction as a percentage of the Fort Plain budget has actually decreased in the past five years, Timbs said. Unlike many other districts he has studied, Timbs said, Fort Plain is “right-sized” meaning it does not have excessive staff for the size of the student population.

         Also on the positive side, the district has done a “great job” operating with cash, meaning district officials have budgeted well over the past five years. Revenues have been higher than expenses by 1.1 to 4.5 percent and actual expenses have been less than budgeted amounts by 1 to 5 percent. But, Timbs said, surplus (fund balance) created by this good budgeting will probably be gone by 2014, as property taxpayers would not likely be able to stand more than a 4 percent tax levy increase per year. The district is handicapped in that a large majority of its assessable property is residential, not commercial or industrial. The full-value assessment of all taxable property in the district is projected to decline slightly by 2014.

      What, then, should district officials do?
       In his recommendations, Timbs outlined various steps the district should take as part of a sound financial plan. They include:
       • Remove non-essential expenditures from the budget and freeze current budgets with mission-critical exceptions.
        • Control expenses long and short term by re-examining costs associated with personnel, contractual obligations, and reallocation of resources.
        • Limit non-essential purchases and increase the yield on investments.
        • Limit the impact of high cost benefit items by using existing consortiums, examining possible staff decreases, and renegotiating collective bargaining agreements.
        • Examine the possibility of shared services with other districts and/or use BOCES aid support programs, services, and resources.
        • Examine the possibility of merging with neighboring districts.
        • Lobby for more state aid, request special grants in aid, and lobby for changes in state aid formulas.
         • Work with local town and village officials regarding the impact of potential assessment challenges, changing demographics, and residential and commercial developments. Establish reserves to offset budget implications of assessment challenges. Support local and regional efforts to maximize the STAR exemption benefit.

        Anyone who would like a complete copy of the report should contact the district office.

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