1. 0 Economic Crisis Update How Reduced State School Funding Is Effecting North Santiam School District Dr. Jack Adams October 15, 2009

2. 1 2007-09 Biennium State School Funding 2007-09 Biennium—State funding allocation for K-12 education was set at $6.0 Billion in March of 2007 Final allocation for 2007-09 was $5.7 Billion Loss to NSSD General Fund= $974,685* *Stimulus dollars were received, but had to be used for Special Education/Title programs and were not part of the general fund budget

3. 2 History –October 2008 The U.S. recession was deepening Tightening credit restrained spending by households, businesses, and state and local governments The housing market started to slide State revenue was down, effecting State School Funding for K-12 education

4. 3 Unemployment was rising 2008-09 General Fund Budget was $20,642,076 Salary & Benefits equaled 73% of the budget or $15,026,304 State School Funding cuts in October equaled $258,000 with an expected additional $300,000 by the end of the year History—October 2008

5. 4 Projected ending fund balance with State School Funding cuts was $444,000 The Superintendent initiated the following:  Communication with board members, administrators, and staff  Immediate hiring freeze  Retiree positions were not to be refilled unless absolutely necessary  New diploma requirements were under review  4-6 day cut in contract days proposed

6. 5 History—November 2008 Contingency plan was put together with the following guidelines: Communicate with staff regularly Retain current employee positions Retain current programs Use the least disruptive solution for kids Maintain economic responsibility to keep people working

7. 6 History—December 2008 $40,000 cut from School Improvement Fund grant (SIF) Estimate of state funding cuts is now at $604,800 New discussion—District’s Rainy Day Fund may have to be used to have enough money to carry over into the 2009-10 Additional options now being discussed as part of the contingency plan

8. 7 History-December 2008 Unions agree to a 4-6 day cut to contract for 2008- 2009 to avoid layoffs Savings equaled $65, 242 per day for a total of approximately $260,968 for 4 days

9. 8 Additional Money Saving Strategies Buildings budgets frozen at 65% and technology budget frozen at 85% No overtime Freeze on maintenance projects unless supported through grant money Substitutes for classified only as approved by principals or managers Professional Development—must be approved by the Superintendent

10. 9 February State Budget Forecast Down Another $855 Million Total Reductions for NSSD= $1,550,000 State cuts SSF per student by 6% or $381 per ADM= $1,050,000 SIF reduction= $40,000 Economic effects on other District revenue sources:  Property tax decrease= $88,000  Less interest earnings= $60,000  Drop in timber revenue= $66,000  Drop in enrollment due to move outs/job losses (41 students)= $246,000

11. 10 History—February 2009 Superintendent makes presentation to staff on options to reduce staff or freeze roll over costs (salary and benefits) for 2009-10 Salary and benefit freeze to save approximately 20 employee positions with 8 positions unfilled due to retirements The Superintendent, Administrators, Supervisors, Directors, and Confidential staff also agreed to cut 5 days from their contracts to save non-union represented positions

12. 11 March Forecast State shortfall now forecasted to be $3-$4 Billion for 2009-11 Biennium Additional Cost Saving Strategies:  Salary/benefits freeze approved for 2009-10 (added approximately $665,000 back into budget and keeps staff employed, programs intact)  Retirements encouraged with no rehire planned whenever possible

13. 12 Board and Superintendent Goal We are committed to doing what is best for kids; making any reductions in staffing in a way that is fair and equitable to ALL employees; and making an effort to keep as many people employed as possible while maintaining programs

14. 13 Preparing the 2009-10 Budget Information given to Board and staff on projection for 2009-10 SSF and the difference between a $5.4, $5.6, $5.8, and $6.0 Billion allocation for K-12 Education $6.0 Billion is the best case scenario, NSSD took the conservative road and built budget on $5.6 Billion allocation

15. 14 April/May 2009 Strategies for Saving Implemented freeze on Professional Development Limit field trips Release of $600,000 NSSD Rainy Day Fund Review of Co-Curricular Middle School and High School Athletics and Activities for 2009-10—Savings of $43,239 Prepared budget on $5.6 Billion allocation for K-12 education, and presented to Budget Committee at the end of May after State Forecast 34% of districts across the state budgeted at this conservative level

16. 15 State Legislature Funds K-12 at $6.0 Billion with Revenue Package and Stipulations NSSD keeps budget based on $5.6 Billion allocation, due to nature of stipulations and history of tax implementations in Oregon

17. 16 Along with reducing the state budget, the 2009 Oregon Legislature passed two bills that would increase some corporate and personal income taxes. These bills are expected to raise $733 million in revenue, which is included in the 2009-11 state budget to prevent further cuts to schools, healthcare and public safety. What is the revenue package?

18. 17 Legislative actions taken to fill the projected 2009-11 state budget gap of $4.028 billion were: Budget Cuts$1.994 billion Federal Stimulus$978 million Additional State Revenue$801 million State Reserves$255 million What is the revenue package? Source: Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 5, September 2009

19. 18 For 97.5% of Oregonians – single people making less than $125,000, or couples making less than $250,000 – personal income taxes would not change How would personal income taxes be affected? Source: Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 12, September 2009

20. 19 For individuals with annual incomes above $125,000 or couples with annual incomes above $250,000, it raises the state income tax rate by 1.8%-2.0% – but only on income above those amounts How would personal income taxes be affected? Source: Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 7, September 2009

21. 20 Corporations would pay an additional 1.3% on profits over $250,000 in 2009 and 2010. That would be reduced to 1.0% in 2011 and 2012. Starting in 2013, the additional tax will be reduced to 1.0% on profits over $10,000,000 How would corporate income taxes be affected? Sources: HB 3405 and Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 12, September 2009

22. 21 Two-thirds of corporations doing business in Oregon now pay an annual minimum tax of $10. This bill would raise the corporate minimum tax to $150 for corporations with revenues of less than $500,000. Those with revenues of more than $500,000 would pay about one one-thousand th of their Oregon revenues in taxes How would corporate income taxes be affected? Sources: Oregon Corporate Excise and Income Tax”, 2008 Edition, Oregon Department of Revenue, pages 3-14 and Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 12, September 2009

23. 22 Oregon’s business taxes are currently at 3.7% of gross state product, which ranks 3 rd lowest among the 50 states. If the revenue package would be affirmed by voters, Oregon’s corporate taxes would go up to 3.9% of gross state product, which would rank as 5 th lowest How do Oregon’s business taxes compare? Sources: ”Total State and Local Business Taxes,” Council on State Taxation, Ernst & Young, 2009 and Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 18, September 2009

24. 23 By comparison, Washington’s corporate taxes are at 5.5% of gross state product, California and Nevada at 4.6%, and Idaho at 4.7% How do Oregon’s corporate taxes compare? Source: ” Total State and Local Business Taxes,” Council on State Taxation, Ernst & Young, 2009

25. 24 Of the $733 million raised by the revenue package, about 40% – some $285 million – would be targeted for schools. This amount would be included in the $6.0 billion allocated to schools for 2009-11 What would this mean for Oregon’s schools? Source: ” 2009-10 Distribution of Formula Revenue to Districts,” Oregon Department of Education

26. 25 2009-10  Immediate budget freeze  Cut in contract/school days What would the impact be to NSSD if stipulations are not met in January 2010?

27. 26 Funding Levels How they look in our budget 6.0 5.6

28. 27 Staff Communication Plan Continue with same format as last year, honest and transparent Superintendent to meet with Board, Management Team and NSEA/OSEA Executive Council members Meet with staff to keep them informed of latest information, discussing options and how each will effect staffing and programs in the District

29. 28 Details to Communicate Used $600,000 Rainy Day Fund for 2009-10 Early Retirement must be figured in (averaging more than $300,000 per year for the past 7 years) Reserves are needed to run the district ($600,000) Ending fund balance for 2008-09 was $1,002,000 (with Rainy Day Fund, budget savings, and cuts in SSF) Ending fund balance for 2009-10 is projected to be $106,450 (based on budgeted $5.6 Billion allocation from the State) Significant PERS increases are expected

30. 29 Details to Communicate Endorsements and degrees make a difference during layoffs 90% of districts cannot pass bonds, so they have had to spend general fund dollars on portables and boilers depleting their reserves Federal dollars may decrease by 1-3% (stimulus, federal grants) Unemployment costs for reduction in force $12,000 for each employee Loss of State Funded School Improvement Fund Grant of $538,000 Employee roll over cost would be approximately $662,000* *Based on actual savings from 2009-10

31. 30 Cash Reserves Districts need a cash reserve to make payroll and pay for lights, heat, etc. 110-140 school districts in Oregon may end up with no cash reserve for 2010-11

32. 31 Tools for Reductions Reduction in ForceReduction in Budget Board with all employee and date of hire listed Graphs of budget areas with budgeted amount, amount encumbered, amount spent, and amount remaining

33. 32 Communication Plan Board and Management Team members to meet and communicate with local clubs or groups regarding the impact from the loss of SSF Board members to submit commentary for local newspapers with Jodi or Mary’s assistance

34. 33 Time Line Legislature must adjust the K-12 budget allocation in a Special Session if tax fails, hopefully they will keep funding intact for 2009-10 and have districts take the whole hit in 2010-11 Must have facts regarding changes to allocation before communication with community begins Need a contingency plan with unions Action plan will be prepared in February

35. 34 Looking Forward to 2010-11 Possible Strategies for Savings 2010-11  Reduction in force based on contractual language or salary/benefit freeze  Cut in school days  Larger class sizes  Additional reductions to co-curricular athletics  Reduced elective/academic course availability  Review of transportation and food service costs  Review school programs/curriculum adoptions  Review increased PERS contributions

36. Questions or Comments