ORCSD 21-22 School Budget
The COVID-19 pandemic made it very difficult for residents to attend the budget public hearing and the Deliberative Session. I put together this guide to help provide some insight into the budget process and this year's proposed budget.
The Budget Process
ORCSD's fiscal year starts July 1 and ends June 30. Each fall, the School Board develops a budget goal to help guide the superintendent in the development of the budget. In late October or early November, the School Board holds a budget workshop and discusses an initial proposal. School principals and department heads give the Board an update on their needs for the next year. In late December, the School Board votes on a final proposal and holds a public hearing in January. This hearing gives residents a chance to learn about the budget, make comments, and ask questions. After the hearing, the School Board is not allowed to make additions to the budget. In February, the district hosts a public meeting called the Deliberative Session. Residents from the cooperative communities register at the meeting and have an opportunity to vote for changes to the budget. This sets the warrant articles for the March election.
21-22 Budget Challenges
The superintendent and the School Board knew that this was going to be a difficult budget. Last May, we formed a budget committee to help develop a budget goal and to provide a final budget recommendation to the Board. As the committee began to look ahead, we worked on addressing two major budget challenges.
The first challenge was paying for the new middle school without spiking tax rates. The New Hampshire state government no longer provides building aid to help communities offset school construction costs. As you would expect, this has made it very difficult to replace old buildings. To help prevent a sudden local tax spike, our plan was to divide the total building cost into two bond payments and to gradually add them over several years' budgets. The table below shows how the bond fits into the next four budgets.
The second challenge was providing the district flexibility to operate in the pandemic. While vaccines will ultimately provide a pathway to the new normal, we have clear needs this summer and fall. The Budget Committee worked on developing a COVID contingency fund within the operating budget that could address staffing or PPE as needed.
School Board Budget Goals
This year's goal included 3 options: 2.5%, 3% and 3.5% increases from the 2021 approved totals. The goal includes funds 10 (general fund), 21 (food service), 22/23 ( federal, special, and pass-through funds), and any added dollars from warrant articles. This gave the committee a range between 1.2 and 1.7 million dollars to best follow the district strategic plan. The proposed budget increase met the 3% goal.
Fund 10: The Operating Budget
Staffing is the largest segment of the operating budget. Teachers, paraprofessionals, bus drivers, secretaries, and custodial staff are organized into collective bargaining units. They usually have multi-year contracts that are approved by the voters as warrant articles on the March ballot. The contracts are rolled into the following year's fund 10. This year, the Board offered a staff retirement incentive. 16 guild members and 3 other staff accepted the offer, and due to declining enrollment, 4 guild positions and 4 paraprofessional positions will not be replaced. This is projected to reduce expenses by $600,000.
In addition to salaries, health insurance and pensions add to staffing costs. Since New Hampshire has small risk pools, health insurance is volatile. Next year's maximum rate is a 6.5% increase and that is actually considered good news. The State of New Hampshire has also stopped contributing to the teachers' pension fund and downshifted the cost to local districts. The proposed budget includes a $677,037 requested contribution to the pension fund.
The Capital improvement plan is the most fluid section of the operating budget. This year, it needed to absorb the Middle School bond, provide a $300,000 COVID contingency fund, and provide the funding for the office renovation at Moharimet. All this increased the budget by $677,029. We are extremely lucky to have excellent staff in our facilities.
Apportionment and State Aid
Revenue and credits are used to offset funds and warrants and determines the amount apportioned to the towns. This is where the Barrington tuition agreement really helps ORCSD. It is projected to bring in 3.3 million dollars in revenue in the next fiscal year. Last November, the district learned of significant state aid losses and used $500,000 of emergency funds as added revenue. This decreased the amount apportioned to the towns and represents a 2.39% increase over last year's apportionment.
The formula ORCSD uses to determine each town's percentage of the apportionment is based on the town's number of students and appraised property value. Since these values can change, the town's share of the apportionment can change.
The table above highlights the issue of state aid and town tax rates. Despite the school district only increasing apportionment by 2.39%, Lee and Madbury are projected to experience a significant tax hike. What happened? The answer is a reduction in state aid. This aid goes directly to the towns and helps offset the impact of the school apportionment. Since Lee and Madbury have been receiving more state aid recently, they are more vulnerable to tax fluctuations. Unfortunately, it is nearly impossible for the school district to mitigate this problem. We can use emergency funds to drive down the apportionment, but it still has to go through the apportionment formula. As a result, we can not target relief to specific towns.
March 9th and Beyond
If voters reject the budget, a default budget is accepted. The default is $92,975 less than the proposed budget and if adopted would force the board to make cuts.
While it might seem convenient to blame others for local tax issues, the state's downshifting of building construction costs, pension funding, and school aid has been tough on local districts. The impact has been more pronounced on less affluent New Hampshire communities, families, and older residents. Since It does not appear that the state's tax system will change soon, how can communities adapt?
Traditionally, town governments and school boards have occupied separate silos. Stabilizing local tax rates will take cooperation between them. The school system will need to carefully evaluate staffing and programs, and the towns will need a clear vision of how to expand their tax bases. Regular dialogues between ORCSD and town leadership should occur to discuss future issues.