1. Gateway School District General Fund Budget Preliminary Summary Budget Information for the 2015-2016 Fiscal Year As of April 13, 2015

2. Summary of Preliminary Total Revenues for 2015-2016  Projected Preliminary Total Revenues for the 2015-2016 fiscal year of $68,982,000.  (***Projected Preliminary Total Revenues currently DON’T include any real estate tax increase ($0) for the 2015-2016 fiscal year.***)  Decrease of ($1,198,000) or (1.71%) under the 2014-2015 fiscal year budgeted Total Revenues.

3. Summary of Preliminary Total Expenditures for 2015-2016  Projected Preliminary Total Expenditures for the 2015-2016 fiscal year of $73,293,000.  Increase of $3,113,000 or 4.44% over the 2014-2015 fiscal year budgeted Total Expenditures.

4. Net Preliminary Budgetary Shortfall or Deficit for 2015-2016  Decrease in Revenues of ($1,198,000) +  Increase in Expenditures of $3,113,000 =  Net Projected Preliminary Total Budget Shortfall or Deficit for the 2015-2016 fiscal year of ($4,311,000).

5. Two Significant Issues Impacting the Budget for 2015-2016  Net Revenues are Decreasing primarily due to a Decrease in Current Year Real Estate Tax Revenues and the 14-15 fiscal year Utilization of Fund Balance.  Net Expenditures are Increasing primarily due to an Increase in the Required Employer PSERS contribution.

6. Direct District Impact of Preliminary State Budget Proposals for 2015-2016  Increase of $605,778 in Basic Education Subsidy in the State budget.  Increase of $162,885 in Special Education Subsidy.  Increases NOT Included in the 2015-2016 fiscal year Budget due to the unlikelihood of the State being able to fund the increases. Time will tell!

7. Direct District Impact of Preliminary State Budget Proposals for 2015-2016  State grant called the Ready to Learn Block Grant (RLBG) to be included in the BEF for the 2015-2016 fiscal year - ?  Restore the Accountability Block Grant funding - ? (This grant was collapsed into the RLBG for the 2014-2015 fiscal year.)  Charter school funding reimbursement of approximately 10% of the required charter school tuition expenditure payments the District is required to make for the 2015-2016 fiscal year - ?  Reduction in tuition expenditure payments paid by the District to cyber charter schools for the 2015-2016 fiscal year - ?

9. Proposed Change to Cyber Charter School Tuition  Establish a statewide regular education student tuition rate for cyber charter schools of $5,950.  GSD Adjusted 14-15 Rate $13,282.09  Less: New State Rate ($5,950.00)  GSD Savings Per Student $7,332.09  Projected GSD Regular Education Cyber School Savings of $388,600.77 for 53 students.

10. Other Proposed Charter School Changes  For cyber charter school special education students, the flat rate of $5,950 would be marked up based on the cost category of the student over three different cost categories.  Make pension “double-dip” permanent.  Require an annual reconciliation and audit of expenditures & require refunds of excess tuition paid back to the school districts.

11. Proposed State Tax Increases and New State Taxes  Increase the State’s Personal Income Tax from 3.07% to 3.70%.  Increase the State’s Sales Tax from 6.0% to 6.6% & eliminate nearly all current exemptions (day care expense & nursing home care).  Increase the State’s Cigarette Tax from $1.60 per pack to $2.60 per pack.  Create a New Natural Gas Severance Tax of 5% at the well head plus $.047 per MCF.  Increase the State’s Bank Shares Tax from.89% to 1.25%.  Decrease the state’s Corporate Net Income Tax from 9.99% to 5.99% beginning in tax year 2016 and then further reductions over subsequent years.

12. State Retirement Changes – No Immediate Changes for 2015-2016  No changes to the Pennsylvania School Employees Retirement System (PSERS) have been immediately proposed to provide financial relief to the school districts.  (***ALL Changes to PSERS must first be approved by the State Legislature.***)  Eliminate PSERS fund management fees and issue bonds for the unfunded pension liability - ?

13. PA Pension Reform Issues  $50 billion in unfunded State Pensions (SERS & PSERS).  PA is 2 nd -most underfunded pension next to New Jersey.  Proposed plan to issue $3 billion in pension bonds to reduce unfunded liability by $8 billion.  3 rd -worst Moody’s credit rating of any state (Illinois & New Jersey rank worse).  Pension bonds to be paid through increased profits earned through modernization of State LCB system.  Current plan management fees and associated income – “You get what you pay for.”  For $482 million in investment fees, PSERS earned an additional $1.27 billion net of the fees above the index return.

14. State Retirement Changes – No Expected Changes for 2015-2016  NO expected reduction in the projected 2015- 2016 fiscal year employer contribution rate of 25.84%.  Current net effect (Increase in Expenditures of $1,567,289 Less Increase in State 50% Reimbursement Subsidy of $783,644) in the 2015-2016 fiscal year Preliminary Budget is an increase in pension expenditures of $783,645 to PSERS.

17. Preliminary Revenue and Expenditure Issues for 2015-2016  Reduction in Current Real Estate Tax revenues (Loss of $579,189).  Actual Increases of 2.75% for PPO & 2.75% for EPO (EPO is formerly the HMO) in employer medical insurance expenditures.  Increase of 4.44% (from 21.40% to 25.84%) in required employer retirement benefit expenditures to PSERS.

18. Composition of Major Revenue Categories for 2015-2016  Local – 72% of the Preliminary 15-16 Budget.  State – 26% of the Preliminary 15-16 Budget.  Federal - 2% of the Preliminary 15-16 Budget.  FLAT or very Little Revenue Growth Projected in the 2015-2016 fiscal year Budget.

20. Major Types of Local Revenue Categories for 2015-2016  Current Real Estate Tax (Largest).  Current Earned Income Tax.  Delinquent Real Estate Tax.  Mercantile Tax.  Deed Transfer Tax.  Delinquent Earned Income Tax.  Local Services Tax.

21. Major Types of State Revenue Categories for 2015-2016  Basic Education Subsidy (Largest).  Retirement Reimbursement Subsidy – 50%.  Special Education Subsidy.  Property Tax Reduction Allocation.  SS & FICA Reimbursement Subsidy – 50%.  Transportation Reimbursement Subsidy.  Debt Service Reimbursement Subsidy.  Ready To Learn Block Grant.

22. Major Types of Federal Revenue Categories for 2015-2016  Title I Funds (Largest) - Passed Through PDE.  IDEA Funds - Passed Through the AIU#3.  Title II Funds - Passed Through PDE.  ACCESS Funds - Passed Through PDE.  Title III Funds - Passed Through PDE.

23. Top Ten Revenues for 2015-2016  1. Current Real Estate Taxes - $41,749,302  2. Basic Education Subsidy - $7,019,943  3. Retirement Reimburse. Subsidy - $4,207,796  4. Current Earned Income Taxes - $3,600,000  5. Special Education Subsidy - $1,987,305  6. Delinquent Real Estate Taxes - $1,503,000  7. State Property Tax Reduction - $1,459,741  8. SS & FICA Reimburse. Subsidy - $1,253,341  9. Mercantile Taxes - $1,223,000  10.Transportation Reimb. Subsidy - $1,175,000

25. Top Ten Expenditures for 2015-2016  1. All Employee Wages & Salaries - $32,348,000  2. Retirement Expenditures - $8,415,593  3. Health Insurance Expenditures - $6,050,000  4. Transportation Expenditures - $4,432,000  5. Bond Debt Service Expenditures - $4,003,250  6. Charter & Cyber School Expenditures - $3,900,000  7. Special Education Expenditures (Other) - $2,857,000  8. SS & FICA Expenditures - $2,506,683  9. Technology Expenditures (All) - $1,757,000  10.Utility Expenditures - $1,062,000

27. Preliminary Total Personnel & Employee Benefit Expenditures for 2015-2016  Projected Preliminary Personnel Wage & Salary Expenditures = 44.1% of the 2015-2016 fiscal year Budget.  Projected Preliminary Employee Benefits Expenditures = 24.4% of the 2015-2016 fiscal year Budget.  Projected Preliminary Total Gross Employee Expenditures = 68.5% of the Total 2015-2016 fiscal year Preliminary Budget.

28. Projection of Ending Total Fund Balance at 6/30/15 for 2014-2015  Beginning Fund Balance as of 7/1/14 $10,074,826  Less: 1. Fund Balance to Balance 14-15 Budget ($1,777,000)  2. P/Y Real Estate Tax Refunds ($ 451,945)  3. C/Y Real Estate Tax Refunds ($ 238,512)  4. Student Parking Fees Not Collected ($ 9,800)  5. Other Expenditures ($ To Be Determined)  Add: 1. No Major Increases to List at this Time. $ 0   Net Projected Decrease for 2014-2015 Fiscal Year ($2,477,257)  Projected Ending Fund Balance as of 6/30/15 $7,597,569

29. Composition of Projected Ending Fund Balance at 6/30/15 for 2014-2015  Unassigned Fund Balance $1,043,551  Nonspendable Fund Balance $ 886,504  Committed Fund Balance $5,667,514  Projected Total Fund Balance $7,597,569

30. Components of Fund Balance  Unassigned Fund Balance: Portion that is immediately available to be utilized for identified purposes such as balancing the Budget & making transfers to other funds.  Nonspendable Fund Balance: Portion that offsets the amount of Prepaid Expenditures on the District’s balance sheet & is not available for expenditure.  Committed Fund Balance: Portion that is not immediately available due to official designation by the Board for specific purposes through a formal Board resolution. Can be designated by the Board for different purposes or classified back to Unassigned Fund Balance through an additional formal Board resolution. Designations Currently Include: 1. Future employer health insurance increases; 2. Future employer pension cost increases; & 3. Future capital repair project expenditures for District school buildings.

31. Projection of Total Fund Balance at 6/30/16 for 2015-2016  Projected Fund Balance as of 7/1/15 $ 7,597,569  Less: Projected Utilization to Balance the ($ 4,311,000)  2015-2016 fiscal year Budget  Projected Fund Balance as of 6/30/16 $ 3,286,569  The Projected Total Ending Fund Balance Represents 4.48% of the Preliminary 2015-2016 fiscal year Budget.  (NOTE: The Unassigned Fund Balance portion of the Total Ending Fund Balance is projected to be 1.42% of the 2015-2016 fiscal year budgeted expenditures which is in compliance with 24 PS 6-688 or less than 8% in a fiscal year when the real estate tax millage rate is increased by the District.)

32. Balancing Two Fiscal Year Budgets  Utilization of Fund Balance:  Projected Net Used for 15-16 $4,311,000  Less: 14-15 Utilization ($1,777,000)  Actual Amount for 15-16 $2,534,000

33. What if Only Two Budget Line Items Didn’t Change for 2015-2016?  Utilization of Fund Balance ($4,311,000)  Add: Net Increase in PSERS $ 783,645 Expenditures. Expenditures.  Add: Net Decrease in Current Year $ 579,189 Real Estate Tax Revenue. Real Estate Tax Revenue.  Adjusted Utilization of Fund Balance ($2,948,166) for the 2015-2016 fiscal year if the for the 2015-2016 fiscal year if the PSERS Rate & Current Year Real PSERS Rate & Current Year Real Estate Tax Revenues Didn’t Change. Estate Tax Revenues Didn’t Change.

34. Gateway School District General Fund Budget Preliminary Real Estate Tax Millage Rate & Other Budget Information for the 2015-2016 Fiscal Year As of April 13, 2015

35. What is Millage?  Millage is a tax rate applied to a real estate property’s assessed valuation for the purpose of revenue generation by a taxing body such as the District.  Each mill represents $1 of tax assessment per $1,000 of assessed property value.  A mill is derived from the root word mill, which means “thousand.”  Thus, one mill is one part per thousand or 0.1% which can also be expressed as.001 for calculation purposes.

36. Gateway School District Real Estate Tax Millage Rate for 2014-2015  At 18.8919 Mills in the 2014-2015 fiscal year, GSD has the 18 th Lowest Millage Rate out of 42 school districts in Allegheny County.  McKeesport Area School District – Lowest in Allegheny County at 15.70 Mills.  Wilkinsburg Area School District – Highest in Allegheny County at 32.63 Mills.

37. Neighboring Allegheny County School District Real Estate Tax Millage Rates for 2014-2015  Gateway School District – 18.8919 Mills  Plum Borough School Dist. – 18.7580 Mills  Penn Hills School District – 24.1540 Mills  Woodland Hills School Dist. – 22.400 Mills  East Allegheny School Dist. – 27.540 Mills

39. Effects of Allegheny County Real Estate Reassessment in 2015-2016  Real estate assessment values for properties located in Monroeville and Pitcairn CONTINUE to decrease in value and owner appeals will CONTINUE to occur in the 2015-2016 fiscal year.  Current year and prior year real estate tax refunds will CONTINUE to have a negative effect on current year real estate tax revenue as well as prior year real estate tax refund expenditures which will ultimately effect the District’s Fund Balance.

40. District Real Estate Assessment Issues for 2015-2016  The current total assessed value of the District’s real estate properties CONTINUE to decrease each month.  The number of taxpayer appeals CONTINUE to occur and the successful taxpayer appeals further decrease the total assessed real estate value of the District.  Thus, the District’s calculation of real estate tax revenue for the 2015-2016 fiscal year has factored in an adjustment for the continuation of successful taxpayer appeals.  In addition, new taxpayer appeals will probably CONTINUE to be initiated during the 2015-2016 fiscal year which CAN NOT be quantified by the District.

41. Continued Decline of District Total Real Estate Assessed Values During 13-14  6/14/13 Total Value $2,499,750,315  7/19/13 Total Value $2,463,880,115  8/23/13 Total Value $2,461,222,715  9/27/13 Total Value $2,453,451,165  11/8/13 Total Value $2,453,099,915  11/12/13 Total Value $2,447,304,616  12/13/13 Total Value $2,445,921,916  1/15/14 Total Value $2,451,626,716 (Certified Value from Allegheny County)  1/24/14 Total Value $2,449,255,916  2/21/14 Total Value $2,442,479,716  3/28/14 Total Value $2,438,104,566  4/4/14 Total Value $2,438,038,066  4/28/14 Total Value $2,437,550,241  5/2/14 Total Value $2,432,476,041  5/9/14 Total Value $2,432,411,041  5/23/14 Total Value $2,432,411,041  5/30/14 Total Value $2,418,463,341  From 6/14/13 to 5/30/14, the Total Real Estate Assessed Value of the District continued to Decrease by ($81,286,974) or (3.25%).  District utilized a ($36,000,000) assessment value adjustment leaving a balance of ($45,286,974) unanticipated for the 2013-2014 fiscal year.

42. Continued Decline of District Total Real Estate Assessed Values During 14-15  6/14/13 Total Value $2,499,750,315  7/25/14 Total Value $2,416,512,181  8/29/14 Total Value $2,394,109,781  9/26/14 Total Value $2,392,062,931  10/31/14 Total Value $2,391,193,131  11/28/14 Total Value $2,390,995,231  12/12/14 Total Value $2,384,813,331  1/9/15 Total Value $2,392,251,431 (Certified Value from Allegheny County)  2/20/15 Total Value $2,388,870,331  3/27/15 Total Value $2,388,979,556  4/??/15 Total Value $2,3??,???,??? (To be reported at future Budget & Finance Committee Meetings)  5/??/15 Total Value $2,3??,???,??? (To be reported at future Budget & Finance Committee Meetings)  6/??/15 Total Value $2,3??,???,??? (To be reported at future Budget & Finance Committee Meetings)  From 6/14/13 to 3/27/15, the Total Real Estate Assessed Value of the District continued to Decrease by ($110,770,759) or (4.43%).  District utilized a total of ($41,000,000) in assessment value adjustments based on available assessment appeal information leaving a total balance of ($69,770,759) unanticipated for the 2013-2014 and 2014-2015 fiscal years.

44. Assessed Value Adjustment for Taxpayer Real Estate Appeals in 2015-2016  District has utilized an adjustment of $7,500,000 for current taxpayer real estate appeals which MAY require the District to issue a refund or return current year revenue collected by the District to the taxpayers during the 2015-2016 fiscal year after a successful appeal.

45. Primary Reason for the Continued Decline in District Total Real Estate Assessed Values for 2014-2015  Successful and Pending Taxpayer Real Estate Assessment Appeals!  Thus, the District’s real estate tax millage rate was set TOO LOW for the 2013-2014 fiscal year and is TOO LOW for the 2014-2015 and 2015-2016 fiscal years without any additional increases to equalize the real estate tax revenues back to the original calculated and intended revenue amount for the 2013-2014 fiscal year.

46. Analysis of Projected Real Estate Tax Revenue at 6/30/15 for 2014-2015 Amounts through 4/9/15 with additional amounts To Be Determined (TBD) Amounts through 4/9/15 with additional amounts To Be Determined (TBD)  Amount Originally Budgeted $42,328,491  Less: Amount Collected ($41,783,239)  Add: Refunds to Taxpayers $ 238,512  Balance to be Collected $ 783,764  Less: Future Delinquents ($ TBD)  Amount Never to be Collected $ TBD  Percentage Never to be Collected TBD%

47. Correct Real Estate Tax Millage Rate  Utilizing the actual $110,770,759 decrease in the District’s total assessed value in calculating the revenue for the 2013-2014 fiscal year, the correctly adjusted millage rate would have been established at 19.5445 Mills.  District’s rank would have changed from the 18 th to the 19 th Lowest Millage Rate in Allegheny County for the 2014-2015 fiscal year.  Represents an increase of.6526 Mills over the 18.8919 mills previously set for the 2013-2014 fiscal year.

48. 2.3% Index - Equivalent in Mills  The District is permitted to increase the millage rate by up to a 2.3% (Index) for the 2015-2016 fiscal year.  Current Millage: 18.8919 Mills  Multiplied by 2.3% Index: X.023  Max Increase in Millage of:.4345 Mills  Thus, the maximum amount the Real Estate Tax Millage Rate CAN be for the 2015-2016 Fiscal Year is 18.8919 Mills +.4345 Mills = 19.3264 Mills.  ***NO INCREASE IN THE MILLAGE RATE IS CURRENTLY UTILIZED TO BALANCE THE DISTRICT’S BUDGET FOR THE 2015-2016 FISCAL YEAR.***

49. Comparison of 2014-2015 to Maximum Real Estate Tax Millage Rate FOR 2015-2016  2014-2015 Millage Rate: 18.8919 Mills  2015-2016 Maximum Millage Rate: 19.3264 Mills  Maximum Increase of (.4345 Mills) in the Millage Rate.  Maximum Increase of (2.3%) in the Millage Rate.  ***NO increase in the real estate tax millage rate is currently included in the Preliminary Budget for the 2015-2016 fiscal year. A full increase of 2.3% will yield a net amount of approximately $993,776.65.***

50. $ Amount of Real Estate Tax Maximum Millage Increase Per Resident Available for 2015-2016  Monroeville:  Based on median taxable value of $107,800.  At Maximum 2.3% Index = $46.84/YEAR.  At Maximum 2.3% Index = $3.90/MONTH.  Pitcairn:  Based on median taxable value of $35,000.  At Maximum 2.3% Index = $15.21/YEAR.  At Maximum 2.3% Index = $1.27/MONTH.

51. Assessment Value for 2015-2016  Allegheny County formally issued new certified real estate assessment values via a CD on 1/9/15 for properties located in Monroeville and Pitcairn to be utilized by the District for the preliminary real estate tax calculations required in the 2015-2016 fiscal year Budget.  Allegheny County will issue another CD to the District in May 2015 with the eligible homestead properties to receive property tax relief for the 2015-2016 fiscal year.  District compares the total 1/9/15 & the May 2015 real estate assessment values and millage rate calculations to the value and millage rate calculations performed on the available summary assessment values per the Allegheny County website. The County updates the District’s summary assessment values every two weeks.

52. Homestead Exclusion for 2015-2016  The 2014-2015 fiscal year amount is initially projected to be in the District’s 2015-2016 fiscal year Budget.  State will determine (on April 15, 2015) whether any gaming revenues will actually be available for distribution to the school districts during the 2015- 2016 fiscal year.  PDE will then certify and officially release the actual distribution amount to the District on May 1, 2015 (the amount of $1,459,741.27 was received for the 2014-2015 fiscal year) for the 2015-2016 fiscal year.  The 2015-2016 fiscal year would be the 8 th year in a row for the District to receive and to distribute a State gaming revenue distribution.  Impact of the distribution would be revenue neutral in the District’s 2015- 2016 fiscal year Budget.

54. Homestead Exclusion for 2014-2015  $174.63 per eligible homestead property in both Monroeville & Pitcairn for the 2014- 2015 fiscal year. ( 15-16 should be similar.) Monroeville Pitcairn Monroeville Pitcairn.4345 Mill Increase $ 46.84 $ 15.21 Less: Exclusion ($174.63) ($174.63) Net Credit Effect ($127.79) ($159.42)

55. Budget Process for 2015-2016  A not to exceed Index (2.3%) resolution was previously adopted by the Board on January 28, 2015 for the 2015-2016 fiscal year.  Thus, referendum exceptions have not been requested and will not be utilized by the District for the 2015-2016 fiscal year to further increase the millage rate above the 2.3% Index rate.  The Proposed Final 2015-2016 General Fund Budget will be considered for adoption by the Board on May 20, 2015. The Budget will be displayed via the PDE-2028 form on the District’s website at www.gatewayk12.org  Various detailed Excel spread sheets will also be displayed on the District’s website at www.gatewayk12.org  Thus, the Pre-Act 1 budget timeline will continue to be followed by the District through final Budget adoption by the Board on June 24, 2015.

56. Future Budget Meeting Dates & Topics for 2015-2016  May 21, 2015: Review of Staffing Requirements & Personnel Budget.  June 1, 2015: Final Public Hearing.  (All Budget & Finance Committee Meetings will be held in the High School LGI at 7:00 p.m.)