1. Budget Update April 12, 2012 1

2. Budget Update School Board Meeting April 12, 2012 – Local Tax Rate = 76.2 Cents – CIP/School Bus Replacement – VRS Employee Contribution – Current Funding Gap Recommendations – Requested Actions – Fund Balance Information – Dates for Future Budget Discussions 2

3. Current Funding Gap (With Updated Local Transfer) Current GapAmount School Board Request-$3,739,306 Additional Revs from Local Transfer$1,078,946 Additional Revs BOS requests for use of School Bus Replacement $648,250 New Gap (w/ Equalized Tax Rate)-$2,012,110 3

4. School Bus Replacement Funding FY 12/13 and Beyond Buses can be funded in the CIP for FY 12/13. Actions by both Boards can set the stage for CIP funding beyond FY 12/13. Based on conditional School Board actions to contribute revenue to the CIP, agree that school buses should compete equally within the CIP along with other projects. 4

5. Buses to CIP for FY 12/13 With School Board approval, BOS would make a single appropriation* of about $1.4M into the CIP for FY 12/13: – $299K in state revenues to be provided directly to the CIP (current state SOQ funding attributable to school bus replacement) – $648K from the schools local transfer – $450K transfer of the balance from the school bus replacement fund (expected fund balance after 15 buses are purchased for $1.31M in FY 11/12) * subsequent to Board of Supervisors (BOS) adoption, it may be possible to include in the appropriation of FY 12/13 budget 5

6. Buses in CIP FY 13/14 and Beyond In the adopted FY 12/13 budget, the CIP will continue to show $0 funding for buses in FY 13/14 and beyond. The School Board could take the following conditional actions: – Commit the annual portion of state SOQ funding formula attributable to school bus replacement to the CIP. – Develop a formula for annual commitment of a portion of School Division undesignated fund balance to the CIP (May 10 business meeting). – Based on conditional School Board actions to contribute revenue to the CIP, agree that school buses should compete equally within the CIP along with other projects. 6

7. VRS Employee Contribution Senate Bill 497 (SB 497) Mandates employees to share in the cost of VRS by contributing five percent of their salary Mandates a five percent increase in employee salaries Options – Any combination over the next five years equaling 5% with a minimum of a 1% increase each year – New employees may be subject to 5% VRS employee share beginning next year 7

8. Employee Costs (SB 497) 5% Option Example Employee 5% Increase “SB 497” Original Salary $ 50,000 Employee Share FICA $ 3,825 Effective Original Salary $ 46,175 Salary with 5% VRS “Offset” $ 52,500 VRS (New Employee Share) $ 2,625 Employee Share FICA $ 3,815 Final Effective Salary $ 46,060 Effective Dec./Inc. Salary $ (115) Effective Salary % Dec./Inc.-0.25% 8

9. Employee Costs (SB 497) 1% Option Example Employee 1% Increase “SB 497” Original Salary $ 50,000 Employee Share FICA $ 3,825 Effective Original Salary $ 46,175 Salary with 1% VRS “Offset” $ 50,500 VRS (New Employee Share) $ 505 Employee Share FICA $ 3,825 Final Effective Salary $ 46,170 Effective Dec./Inc. Salary $ (5) Effective Salary % Dec./Inc.-0.01% 9

10. Employee Costs (SB 497) 1% Option Example Employee 1% Increase “SB 497” +1% Salary Increase +2% Salary Increase Original Salary $ 50,000 Employee Share FICA $ 3,825 Effective Original Salary $ 46,175 Salary with 5% VRS “Offset” $ 50,500$51,000$51,500 VRS (New Employee Share) $ 505$510$515 Employee Share FICA $ 3,825$3,862$3,940 Final Effective Salary $ 46,170$46,628$47,045 Effective Dec./Inc. Salary $ (5)$453$870 Effective Salary % Dec./Inc.-0.01%0.98%1.88% 10

11. School Division Costs (SB 497) (Above School Board Requested Budget) 1% Increase5% Increase Teachers$585,876$2,928,803 Classified$279,840$1,399,203 VRS (Savings)-$674,619-$3,531,028 Group Life$3,790$18,971 Totals$194,887$815,949 11

12. Current Budget Situation Current GapAmount School Board Request-$3,739,306 Additional Revs from Local Transfer$1,727,196* Senate Bill 497 - (1% Increase)-$194,887** Local Transfer Designated (for Buses) -$648,250 New Gap (w/ Equalized Tax Rate)-$2,855,247 12 *Includes $648K BOS requests for use of School Bus Replacement. ** May be offset by BOS fund balance as discussed during their deliberations.

13. Considerations for Reduction (Tier 2) Tier 2 ReductionsAmount Administrative Assistant (Murray)$24,134 Increase Work Days for 10-Month Transportation Employees$35,574 Daytime Custodial Staff Needed at Larger Elementary and Middle Schools$46,632 Improvement of End-User to Client Service Specialist$144,816 Reclass. of School Nurse (FLSA Exemption Status and Compensation Increase)$62,700 Total:$313,856 Recommend Moving to Tier 1 (Not Considered for Reduction)Amount FY 2012-13 Staffing Standards - Media Specialists$13,170 13

14. Considerations for Reduction (Cont.) Salary Reduction ScenariosAmount 1% Classified Reduction$334,058* 1% Teacher Reduction$515,949* Total: $850,007 14 *Subject to Slight Change

15. Current Budget Recommendations Amount New Gap (w/ SB 497: 1%)-$2,855,247 Tier 2 Reductions (Revised)$313,856 Salary Reductions$850,007 Updated Potential Funding Gap-$1,691,384 15

16. Potential Solutions State Budget: – Possible Small Revenue Increases (may be as much as $330K) – Appears to permit local governments to phase-in VRS employee share over the next five years Local Options: – Request General Government fund balance to fund School Portion of SB 497 – Use additional School Fund Balance to meet needs – Reduce Tier 1 items 16

17. Potential Considerations of Tier 1 Items Tier 1 Initiatives Staffing Standards - Media $13,170Professional Development (Tech) $100,000 Staffing Standards - Counselor $32,925Staffing Standards – Art, Music, & PE $131,702 ESOL Staffing $65,851Response to Intervention (RTI) $381,936 Continue Tech Support Initiative $67,408Growth $479,789 Legislative Liaison $67,408FY 2012-13 Staffing Standards -AP $69,143 Total: $1,409,332 17

18. Protected Tier 1 Items Protected Tier 1 Initiatives Reduce Class Load in Grades 4 - 12 $1,127,369Fuel Cost $75,200 Liability/Auto Insurance $5,000 Health & Medical Sciences Academy Staffing $32,925* CATEC Increase $17,912VRS $4,268,238 Custodial Staff for Greer Addition $15,543Utility Costs $96,582 Dental Increase $35,970Unemployment Insurance $20,000 Teacher Salary Inc. (Remaining 1%)** $511,602PREP$87,940 Classified Increase (Remaining 1%)** $334,037 Total: $6,628,318 18 * Seeking alternative funding ** Moved to Tier 1 protected to preserve commonality

19. Staff Recommended Actions Reduce Salary to 1% increase over VRS mandates for both teachers and classified – Saves ~$850,007 Reduce current funding by the Revised Tier 2 Reductions – Saves ~$313,856 Discuss Meeting Minimum 1% Mandated VRS Salary Increase ($194,887) Clarify Protected Tier 1 items Delay additional action until more information is available regarding state actions 19

20. Fund Balance Information Fund BalanceAmount Beginning Fund Balance (FY 11/12)$7,554,405 Budgeted Use of Fund Balance (FY 11/12)($2,827,034) Additional Use of Fund Balance (FY 11/12)($391,099) Projected Fund Balance (End FY 11/12)$4,336,272 Budgeted Use of Fund Balance (FY 12/13)($1,800,000) Projected Ending Fund Balance (FY 12/13)$2,536,272 20

21. Future Budget Discussion § 22.1-93. Approval of annual budget for school purposes. Notwithstanding any other provision of law, including but not limited to Chapter 25 (§ 15.2-2500 et seq.) of Title 15.2, the governing body of a county shall prepare and approve an annual budget for educational purposes by May first or within thirty days of the receipt by the county of the estimates of state funds, whichever shall later occur, and the governing body of a municipality shall prepare and approve an annual budget for educational purposes by May fifteen or within thirty days of the receipt by the municipality of the estimates of state funds, whichever shall later occur. Upon approval, each local school division shall publish the approved annual budget, including the estimated required local match, on the division's website, and the document shall also be made available in hard copy as needed to citizens for inspection.15.2-2500 Approval of Budget is expected by April 26 to meet appropriation deadlines and avoid substantial delays of Capitol Improvements Projects. 21

22. Future Budget Discussion April 11 – FY 12/13 Budget Adoption (Operating and Capital): Board of Supervisors April 26 – Budget Development Worksession and Budget Worksession: School Board May 9 - FY 12/ 13 Resolution of Appropriations: Board of Supervisors June 6 – CIP review for potential adjustments: Board of Supervisors 22

23. Staff Recommended Actions Reduce Salary to 1% increase over VRS mandates for both teachers and classified – Saves ~$850,007 Reduce current funding by the Revised Tier 2 Reductions – Saves ~$313,856 Discuss Meeting Minimum 1% Mandated VRS Salary Increase ($194,887) Clarify Protected Tier 1 items Delay additional action until more information is available regarding state funds 23