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2014-2015 BUDGET PRESENTATION KAUKAUNA AREA SCHOOL DISTRICT Monday, October 13, 2014 5:30 pm Bob Schafer Financial Officer, KASD.

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Presentation on theme: "2014-2015 BUDGET PRESENTATION KAUKAUNA AREA SCHOOL DISTRICT Monday, October 13, 2014 5:30 pm Bob Schafer Financial Officer, KASD."— Presentation transcript:

1 BUDGET PRESENTATION KAUKAUNA AREA SCHOOL DISTRICT Monday, October 13, :30 pm Bob Schafer Financial Officer, KASD

2 BUDGET HEARING OVERVIEW The procedures which common, union high, and unified school districts should follow in formulating a budget, holding a public hearing, and adopting a budget are set forth in s , Wis. Stats. The steps involved in these required procedures are summarized as follows. The staff and school board create a proposed budget that identifies expected revenues, expenditures, and fund balances for the budgeted year in addition to the two fiscal years preceding the budgeted fiscal year. Budget detail is based upon the Wisconsin Uniform Financial Reporting Requirements (WUFAR) hierarchy of accounts. A class 1 notice (one publication) is published which contains a summary of the proposed budget described above, notice of where the detailed budget may be examined, and notice of the time and place of the public hearing. Common and union high school districts must hold the budget hearing at the time and place of the annual meeting. The public hearing is held, at which time, residents of the district have an opportunity to comment on the proposed budget. The school board shall adopt an original budget at a school board meeting scheduled after the public hearing and no later than the meeting in which the school board sets the annual tax levy amount. For KASD the official budget hearing and subsequent tax levy will be set at the October 27, 2014, Board of Education meeting.

3 FUND 10 – GENERAL OPERATING FUND BUDGET BASICS Fund 10 Fund 10 encompasses all general education expenditures for a Wisconsin public school district. Per DPI, the general fund is used to account for all financial transactions relating to the district’s current operations, except for those required to be accounted for in other funds. Fund 10 will, in the end, cover any budget shortfalls that may develop in other funds such as special education (Fund 27) or food service (fund 50). Fund 10 will make up the District’s Fund Balance at the end of each fiscal year. Other funds may or may not carry a fund balance but the focus of a district’s carryover money is based in Fund 10.

4 FUND 10 – GENERAL OPERATING FUND REVENUE HISTORY AND PROJECTION Fund 10 Revenue Below is summary of District revenues in Fund 10 over the past seven years and the expected revenue for Figures for the budget include a tax to the maximum allowable amount under the revenue limit with NO use of any of the prior year tax levy carryover

5 FUND 10 – GENERAL OPERATING FUND PROJECTED REVENUE General operating revenue by source DPI utilizes source codes to standardize among school districts where funds are received from. Minimum source codes are as follows: 100 Operating transfer in (from one fund to another fund) 200 Revenue from local sources (property tax) 300 Revenue from interdistrict sources (other school districts) 500 Revenue from intermediate sources (CESAs) 600 Revenue from state sources (equalized aid, etc) 700 Revenue from federal sources (Title funds, grants) 900 Other revenues (prior year revenues, refunds, adjustments)

6 FUND 10 – GENERAL OPERATING FUND PROJECTED REVENUE Fund 10 revenues are budgeted at $42.7 million or $1.1 million more than actuals. State revenue sources account for 65% of the overall Fund 10 budget while federal funds are 35% of the $42.7 million

7 FUND 10 – GENERAL OPERATING FUND MAJOR REVENUE CHANGES Significant changes in Fund 10 revenue from to include: Property tax levy increase of $168,114 State equalization aid increase of $773,747 Workers’ compensation insurance dividend adjusted to new guarantees which cut the revenue by $10,000 Per pupil aid from State of Wisconsin budgeted at $657,900 for – up from $332,000 in Revenues in Fund 10 show an increase of 2.67% from actuals to projected

8 FUND 10 – GENERAL OPERATING FUND GENERAL OPERATING EXPENDITURES Fund 10 Expenditures The general education operating expenditures for KASD are budgeted at $37,973,541, up from $37,382,243 of actual costs. The budget to actual difference is $591,298 or 1.58% increase expenditures included a minor portion paid to the completion of the Park School project and a major expenditure for the Honeywell Energy project ($950,000) The Fund 10 operating budget also includes a $4.72 million transfer to Fund 27, special education, to balance that account. The actual special education transfer from Fund 10 was $4,664,000. Given current revenue projections it will cost Fund 10 and extra $58,556 to balance Fund 27.

9 FUND 10 – GENERAL OPERATING FUND EXPENDITURE HISTORY The Fund 10 expenditure budget is up $591,298 over the costs. Salary and benefit costs budgeted for account for 66.14% of the Fund 10 budget which is up from 66.07% from the previous year Open enrollment out students are accounted for under purchased services – note the high percentage of the budget shown in this area

10 FUND 10 – GENERAL OPERATING FUND EXPENDITURE BY OBJECT (%)

11 FUND 10 – GENERAL OPERATING FUND MAJOR EXPENDITURE CHANGES Significant changes in Fund 10 expenditures from to include: Salaries have increased $694,055 from actual to budget (3.92%) +$544,000Additional teaching staff +$ 22,000ELL staffing +$ 70,000Teaching leadership positions Benefits associated with payroll have decreased by $267,000 (-3.83%) -$558,000Post retirement benefit decrease paid to Fund 73 +$ 52,000Wisconsin Retirement System +$ 93,000FICA and Medicare +$ 50,000Health insurance cost Purchased services have increased $395,000 over (3.84%) +$1,085,000Open enrollment out aid transfer cost -$625,000Maintenance costs (Honeywell project) -$116,000Projected energy cost savings

12 FUND 10 – GENERAL OPERATING FUND MAJOR EXPENDITURE CHANGES Significant changes in Fund 10 expenditures from to include: Non-capital equipment budget has been decreased by $215,000 (-11.5%) -$380,000Planned textbook expenditure reduction +$ 8,0000Supplies and materials cost increase Capital equipment budget is down $21,000 (-10.5%) Insurance and judgments show an increase of $18,500 (7.78%) +$18,000Work comp insurance cost up Special education transfer from Fund 10 to fund 27 has increased $58,000 or 1.18% over previous year Must be done to balance the SPED budget

13 FUND 27 – SPECIAL EDUCATION EXPENDITURE REVIEW Historical perspective KASD spent $7,132,458 on special education in The projected expenditure for in Fund 27 is $7,269,748 or $137,290 more than the actual figure (1.92% increase) A historical perspective of special education funding is shown to the right:

14 FUND 27 – SPECIAL EDUCATION OPERATING REVENUE Special education revenue Special education revenue is from three main sources – state aid based on the previous year expenditures, federal aid, and a transfer from Fund 10 to cover costs In general both external areas have flat-lined the amount of money school districts are receiving over the past decade A summary of KASD’s special education revenues over the past four years is shown below plus the projected budget

15 FUND 27 – SPECIAL EDUCATION OPERATING REVENUE Revenue summary KASD will fund 65% of total special education costs for from the Fund 10 budget The transfer amount has grown dramatically in the past five year – nearly 9% over that time State sources will pay 21.53% of the special education costs for , federal revenues will be 12.5% of the total budget Both areas have decreased steadily which forces the higher transfer into Fund 27 from Fund 10

16 FUND 27 – SPECIAL EDUCATION OPERATING EXPENSES Special education expenditures budgeted at $7.26 million for % of Fund 27 costs are for salaries and benefits Purchased services include CESA contracted costs Just 2% of the total operating budget in special education is used for supplies and materials

17 FUND 38 – NON-REFERENDUM APPROVED DEBT SERVICE Fund 38 Debt Service Non-referendum debt service is generated by Board of Education action and accounted for in Fund 38 Fund 38 debt service payments are part of the District’s revenue limit calculation and directly affect the operating budget Any reduction in Fund 38 debt service will immediately impact the funds available to spend on general operations A historical and futuristic perspective of Fund 38 debt service is shown below

18 FUND 38 – NON-REFERENDUM APPROVED DEBT SERVICE Summary of Fund 38 Debt Service Wisconsin Retirement System Issued May 1, 2007, to payoff debt owed to WRS – $2,740,000 Maturity date is March, 2020 Principal owed $1,680,000, principal and interest owed $2,012,422 Qualified School Construction Bond Issued December 9, 2009, to pay for energy efficiency projects in the District - $500,000 Maturity date is March, 2020 Principal owed is $300,000 – no interest bond from federal gov Energy Efficiency Exemption Issued July 1, 2013, to pay for energy efficiency projects through Honeywell ESG - $2,000,000 Maturity date is March, 2018 Principal owed is $2,000,000, principal and interest owed is $2,090,695

19 FUND 38 – DEBT SERVICE BUDGET Fund 38 Budget Expenditures expenditures in Fund 38, will be $529,768 Payment is a combination of the three debt service issues Payment is set by the debt service schedules for each issue revenues for Fund 38, which cover payments made in March, 2014, as well as September, 2014, will be $482,985 The increase in revenue is due to the addition of the energy efficiency project bond issue that begins its repayment schedule Energy cost savings are scheduled to offset the additional debt service fees incurred A carry-over of $140, will be on the books as of June 30, Those dollars will be used to make the debt payment in September, 2015

20 FUND 38 – DEBT SERVICE BUDGET Kaukauna High School Facility Project Debt service Should the Board of Education choose to move forward with any part or all of the proposed Kaukauna High School redesign project the debt service payments will be made out of Fund 38 All debt incurred by the project would be under the revenue limit and not add any additional dollars to the tax levy Same can be said for the Honeywell ESG energy project, borrowing to pay off the Wisconsin Retirement System debt, and the zero interest loan secured to pay for the Haen School windows All principal and interest payments under Fund 38 have no direct effect on the tax levy – the only way the tax levy will be decreased should the project not be done would be to under levy and hold the potential under levy amount in abeyance for a future over levy and use of funds at that time

21 FUND 39 – REFERENDUM APPROVED DEBT SERVICE Kaukauna High School Debt Service Total debt service outstanding (principal plus interest) on Kaukauna High School, which is the only referendum approved debt on the books for the District, is $7,885,700 Principal only debt service is $7,315,000 The final debt service payment will take place in March, 2017 The final year in which the referendum approved debt service will have an impact on the tax levy is $1.6 million of the energy efficiency project borrowing will be due during the fiscal year. This figure, combined with the retirement of KHS debt, will produce a $1.0 million tax levy savings in or a drop of $0.60 per $1,000 of value on the mill rate Without major change and debt retirement KASD will see a drop in its mill rate from $9.41 per $1,000 value to $7.90 per $1,000 value in the next five years A property paying $1,872 in school tax presently ($200,000 value) would then pay $1,580

22 FUND 39 – REFERENDUM APPROVED DEBT SERVICE PAYMENT SCHEDULE

23 FUND 50 – FOOD SERVICE Fund Balance Perspective Food Service fought through a second consecutive trying year Mandated changes to products that could be used were implemented by the Federal Government at the start of the school year. Mandates were modified in January,2013, to allow for more “user-friendly” products to return to the menu which created more sales Food service supply costs continued to escalate and transportation also remained high The fund balance in food service was set-up to purchase equipment, which was accomplished during , but ended at its lowest point over the past decade - $3,950

24 FUND 50 – FOOD SERVICE Fund Balance Perspective Fund 50 can carry a fund balance at the end of each fiscal year but a school district must have a plan for use of the fund balance in the following year KASD has made large gains in the past six years on equipment purchased from the food service fund balance Replaced lunch tables at ALL elementary school sites New walk-in cooler at River View New dishwasher at River View New oven at KHS, Park School (2013) New mixer and stand at KHS Upgraded small equipment/cooking utensils/trays at various sites Upgraded computers and technology at various sites New serving stations at River View and Kaukauna High School

25 FUND 50 – FOOD SERVICE Fund Balance History The fund balance in food service has been strong over the past four years which has allowed the District to increase spending on needed equipment $4, $52, $129, $61, $16, $ 3,950 The trend over the past two years was anticipated based on purchases but the ending figure was less than desired due to decreased sales and increased costs

26 FUND 50 – FOOD SERVICE Budget Balanced budget is in place for Expenditures, revenues set at $1,251,192 Maintenance department salaries and benefits account for $42,597of the total food service expenditures. The figure is based on 5% of the salary and benefit costs of each individual employed by the District in the maintenance department The reasoning behind this is to move the amount out from under the revenue limit formula and “free” up funds in the general operating budget Building Services accounts for $35,598 of the total food service expense budget. This figure is based on actual hours billed by BSG for work done in the kitchen/cafeteria of each building Combined cost for maintenance and cleaning billed to Fund 50 - $78,000 – does impact the fund balance directly as those costs must be covered by sales Fund balance projected to remain flat at $3,950 on June 30, 2015

27 FUND 72 - SCHOLARSHIPS Fund 72 KASD holds approximately $170,000 in Fund 72 from which scholarships are awarded on an annual basis $127 was earned in interest during the school year in Fund 72 $3,800 was paid out to scholarship recipients at the conclusion of the school year 13 separate scholarship accounts make up Fund 72 $138,000 of the $170,000 is located in three of the 13 accounts Fund 72 does not account for all scholarship funds that are paid out on an annual basis only for those that have had money turned over to KASD to be managed

28 FUND 73 – EMPLOYEE BENEFIT TRUST FUND (OPEB) Wisconsin Act 99 Wisconsin State Statute enacted in 2006 allows school districts to invest funds for the sake of offsetting costs for future post employment benefits (health insurance, dental insurance, and other contractual agreements) Legislation requires reporting, on an annual basis, the following information: Amount held in the trust account or accounts Investment return earned during the last fiscal year Total disbursements made during the previous fiscal year Name of the investment manager if applicable

29 FUND 73 - REVIEW OF Trust balance KASD held $2,758, in its Fund 73 Trust Account as of June 30, 2014 The projected post employment benefit liability of the Kaukauna Area School District is $8,124,000 based on the latest actuarial study KASD has 34.0% of the unfunded liability covered KASD earned $14, in interest on investments held in Fund 73 during the fiscal year KASD earned $78,051 on investments in Fund 73 during fiscal KASD paid $815,715 for post employment health, dental, life, and other retiree benefits during Basically this figure is the pay-as-you-go amount for retired employees and benefits owed to them based on past contracts The amount listed comes directly out of the District’s operating budget and is under the umbrella of the revenue limit KASD transferred $40,785 more to Fund 73 from Fund 10 which essentially was available due to unspent Fund 10 dollars The ultimate goal of Fund 73 will see investment earnings offset the cost of the post employment benefit freeing revenue limit funds to be used in other areas

30 FUND 73 – EMPLOYEE BENEFIT TRUST FUND Trust Fund Advisor The Kaukauna Area School District will continue to utilize the services of CESA 6 and their affiliates for its Fund 73 Employee Benefit Trust investments KASD employees and former employees with a vested interest in its Employee Benefit Trust Fund program can, at any time, request documentation on the partnership between KASD and CESA 6 as well as any other pertinent information regarding investment accounts Budget KASD expenditures for post retirement benefits is budgeted at $841,000 for A transfer from Fund 10, General Operations, and Fund 27, Special Education, to Fund 73 will take place cover OPEB costs KASD revenues for investment income purposes has been set at $13,000 for ; return on investment at $25,000 Post retirement benefit costs directly affect the Fund 10 operating budget of a school district

31 FUND 80 – COMMUNITY SERVICE FUND Wisconsin Act 20 Does not change the authority of school boards to establish a Community Service Fund but it does limit the levy to an amount less than or equal to the amount levied for the school year in Fund 80 KASD levied $79,373 in Fund 80 last year KASD utilized the levied funds to pay for police liaison services at both River View School and Kaukauna High School as well as 50% of the administrative assistant salary and benefit cost in the District Activities Department Other rule changes with Wisconsin Act 20 include: Districts have to report to DPI on how funds will be spent DPI has to publish all Fund 80 levy information on their website and also send the information to the Joint Committee on Finance Districts must also report how funds will be spent on their website

32 FUND 80 - PROPOSED BUDGET Revenue $79, tax levy requested to offset Fund 80 expenses Approximate mill rate impact is $0.05 per $1,000 of property value A $150,000 property would pay an extra $7.50 due to Fund 80 A $300,000 property would pay an extra $15.00 due to Fund Expenditures $24,843 toward the cost of the River View police liaison officer This is roughly 45% of the annual cost $17,644 toward the cost of the Kaukauna High School police liaison officer This is roughly 45% of the annual cost $36,886 to cover 50% of the administrative assistant cost in the District Activities Office and other associated costs KASD, at one time, earmarked $15,000 to be levied in Fund 80 and donated those funds to 1000 Islands for services provided. KASD now pays 1000 Islands directly out of Fund 10 as the donation for services does not meet Fund 80 criteria. Fund balance The ending fund balance was $0.00 in Fund 80

33 KASD – OVERALL OPERATING BUDGET Revenues vs. Expenditures Projected revenues for KASD total $50,601, Projected expenditures are $50,601, The District is operating with a balanced budget. There will be no need to utilize any of the $890,000 held in abeyance due to an under tax levy in

34 PROPERTY TAX LEVY KAUKAUNA AREA SCHOOL DISTRICT The Board of Education must set the FY tax levy no later than November 1, 2014 The tax levy must be delivered to the clerk of each municipality no later than November 10, 2014 School district’s levy taxes for general operations, debt service, capital expansion, and community service KASD will levy taxes for all of the above less capital expansion Property values are equalized to reflect market value rather than local assessed value

35 PROPERTY TAX LEVY KAUKAUNA AREA SCHOOL DISTRICT All Wisconsin public school districts use the same formulas in the development of the tax levy Laws regarding maximum taxation by school districts were set in 1993 Key components to the tax levy Pupil count Equalized aid Property valuation Debt service State imposed revenue limit Prior year carryover of revenue limit funds

36 PROPERTY TAX LEVY PUPIL COUNT Pupil count FTE is shown and includes school year and summer school combined District has shown a slow but steady increase over the past decade in FTE FTE does not dictate the number of students being educated by KASD due to open enrollment FTE does include students being educated by other districts but counted by KASD for aid purposes KASD Enrollment History Year % Chg FTE % % % % % % % % % % % % % % % % % % % % % % 4439

37 PROPERTY TAX LEVY EQUALIZATION AID Why the increase? Operating expenditures outweighed operating revenues by $450,000 for which produces an increase in state aid KASD will qualify for tertiary (third level) aid for the second time in the past 10 years thus adding aid The State of Wisconsin has given more funds to schools compared to the school year As noted in the chart, major changes in equalization aid take place annually

38 PROPERTY TAX LEVY PROPERTY VALUATION Equalized valuation is a factor in the tax levy in the following ways: Equalized property value sets the final primary, secondary, and tertiary equalization aid number Equalized property value is the denominator in figuring out mill rate (amount taxed per $1,000 of equalized valuation) For example, KASD taxed $17,054,265 in FY with and equalized value of $1,836,671,689 $17,054,265/1,836,671,689 = per $1.00 of property value or $9.29 per $1,000 A 1% increase in property valuation ($1,855,038,405) with the same tax would yield a mill rate of $9.10 per $1,000

39 PROPERTY TAX LEVY PROPERTY VALUATION

40 PROPERTY TAX LEVY DEBT SERVICE Fund 38 (non-referendum debt) tax levy is $482,985 Wisconsin Retirement System = $319,530 (2020) Energy efficiency project = $113,455 (2018) Qualified school construction bond = $50,000 (2020) When debt service is paid off funds will be shifted to the general operating budget for use as debt is part of the revenue limit Fund 39 (referendum debt) tax levy is $2,564,350 or 14% of the total levy Tax levy is for Kaukauna High School; payoff of $9,560,000 principal is slated for 2017 Fund 39 debt service is a direct tax; upon final payment and without another referendum KASD will reduce the tax levy by approximately $2.5 million per year With the end in site regarding Fund 39 debt service the Board of Education and District leadership will have to be mindful that a drop in the mill rate of approximately $2.50/$1,000 will take place after KHS is paid for and the energy efficiency project leaves the books (2018)

41 PROPERTY TAX LEVY REVENUE LIMIT History Wisconsin Act 16 implemented revenue limits beginning with the school year. A district's revenue limit is the maximum amount of revenue that may be raised through state general aid and property tax for the General, Non- Referendum Debt (authorized after August 12, 1993), and Capital Expansion Funds, also referred to as Funds 10, 38, and 41 respectively Key components to the revenue limit Prior year equalized aid, computer aid, and debt service build a “base” Three year rolling pupil average Current year equalized property value Allowable per pupil increase KASD utilizing base amount of $9, plus $75 per pupil addition for Prior year carryover (non-taxed amount from previous year) Equalization aid

42 PROPERTY TAX LEVY REVENUE LIMIT Major revenue limit changes KASD, along with all other State of Wisconsin schools, will receive an extra $75 per student over the base amount KASD up 53 FTE from to Prior increase in FTE was 76 Estimated property value in the District is up almost 3% Final property values will be set in mid October and released by DPI Figure shown does not include untaxed dollars from District has $890,000 “on the table” that could be levied over and above the revenue limit Every $0.05 increase in the tax levy will generate an additional $100,000 of revenue limit funds to spend

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44 PROPERTY TAX LEVY PRIOR YEAR CARRYOVER Carryover The State of Wisconsin allows school districts to over expend the revenue limit through the use of prior year carryover funds Prior year carryover is essentially money left “on the table” by a school district if that district did not tax to the full amount allowed under the revenue limit the previous year KASD “under levied” in by $1.4 million Using $590,000 of the under levied tax dollars during created a balanced budget and a mill rate of $9.29 per $1,000 of value KASD is not planning on utilizing any of the $890,000 remaining in the under levy fund during As it stands the practice allowing school districts to “chargeback” for an under levy per the revenue limit is not expected to change

45 PROPERTY TAX LEVY BOARD OF EDUCATION DECISION Various and unending scenarios The Board of Education must set a tax levy by the end of October. Untaxed funds from previous fiscal years has created the potential for many varied scenarios with regards to the total tax levy and mill rate. The chart below summarizes the District’s total tax levy over the past 19 years plus the projected overall levy. KASD is expected to increase the tax levy by 0.89% for over

46 Budget Hearing Action Items The Board of Education for the Kaukauna Area School District must take action on the budget and tax levy. Action Item #1 – The Kaukauna Area School District sets the tax levy at $17,206,766. The levy includes $14,080,058 for general operations, $3,047,335 for debt service, and $79,373 for community service. The tax levy sets the mill rate at $9.09 per $1,000 of property value. Action Item # 2 – The Kaukauna Area School District sets the operating revenue budget at $55,323,982 and the operating expenditure budget at $55,323,982. Operating expenses and revenues shown include a $4,722,556 transfer from Fund 10 to Fund 27 to cover the cost of special education not funded through state or federal sources.


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