It is likely that the Budget Committee will report out the existing FY15 budget to the full Board today at 4 p.m. and the full Board is likely to pass it immediately following the Committee meeting. However, the budget is subject to public comment and additional amendments before it is finalized and passed by the Board in April.
Given the short time left before the initial passage, the following are some high level observations and comments.
Revenues – Revenues are up by approximately $38 million or 6.4% to $633 million. The primary increase is due to increasing local property tax revenues and some additional revenues from the State.
Expenditures – Expenditures at $658 million which represents a $63 million increase (10.6%) over FY14.
Use of General Fund Reserves – The budget anticipates the use of $25 million in General Fund reserves, which are projected to be approximately $84 million as of June 30, 2014.
Enrollment – Since 2012, the traditional school enrollment has declined by approximately 2,200 (4.8%), from 45.3 thousand to 43.1 thousand. To put this in context, based on average school sizes, the enrollment decreases amount to nearly two elementary schools, one and a quarter middle schools and half of a high school. On the other hand, charter school enrollment has increased from 3,645 in 2012 to a projected 7,002 in FY15, with an increase this year of over 1,700 (Centennial Elementary conversion, Atlanta Classical Academy opening and expansion of other existing charter schools).
Major Changes in Expenditures:
Furlough Days – The preliminary budget removes all furlough days for all teachers and staff. The cost associated with this in an increase of approximately $4-5 million.
Comment – If this goes through, and I believe it will, the Board members campaign promise will be kept.
System Wide Salary Increase – There is a 3%salary increase for all employees with a cost of $15 million.
Comment – Many of the Board members ran on the idea that teachers and other front-line personnel (cafeteria workers, bus drivers, etc.) would receive raises. The promise appears to be on the verge of being kept. However, none of the candidates campaigned on the idea that the cost of the Central Office School Administration or General Administration would go up due to raises. On the contrary, most candidates indicated that they wanted to see a reallocation of resources from administration activities to in-school activities. I estimate that the cost of teacher and other front-line staff is approximately $7.8-8.2 million. The balance would go to non-in school administrators.
As I have noted here in the past, while administrators have not specifically been given raises in the past three years, the cost of average salaries for this group seems to always increase year over year. Additionally, the average compensation for administrative functions is far higher than for comparative school systems in the area. As a result, I would cut the additional $6.8-7.2 from the budget or hold it back subject to the administration cutting two times the amount from the administrative functions.
Elementary, Middle and High School Spending – Expenditures for direct instruction are projected to increase by $8.2 million, with the largest increases in Kindergarten ($0.8 million); fine arts programs ($1.9 million); Gifted & Talented program ($1.6 million); Exceptional Children’s program ($3.8 million); elementary school athletics ($3.3 million); and remedial education programs ($1.8 million). These increases are offset by a $3.6 million reduction in elementary, middle and high school general education programs, a $830 thousand reduction in media and library services and a $1.3 million reduction in non-traditional education programs.
Comment – It is important to remember that the increases above include the cost of eliminating furlough days which is over one-half of the $8.2 million increase. Additionally, the cost of any teacher raises are not yet included in the total increase to these programs.
Further, during a recent Budget Committee meeting, the administration indicated that it would likely reallocate approximately $4.0 million of the increases to implement Student Support Teams and add additional social worker services that would focus on “at risk” children at every school. These reallocations should be published this week.
Additionally, the proposed “per student spending” in these core functional areas is up 8.6% as compared to a FY14 due to higher spending and a 2% lower enrollment. The increased “per student spending” is consistent with the promises made by Board candidates during the election. I also believe the Board is on the right track in terms of reallocating some of the increases to address “at risk” students.
The one item I am uncomfortable with is the lack of transparency in the budgeted amounts for elementary, middle and high school as these components are not broken out in the budget. The Committee has asked the administration to break out the spending for each level – this should give us a much better understanding of the budgeting trend for elementary, middle and high schools. This information is critical as it will let the Board members, who campaigned on increasing resources for early education, assess if the administration is enhancing its effort in this area.
In-School Administration Spending – Expenditures for In-School Administration (principals, etc.) are increasing by $3.1 million; however, this increase is composed of eliminating the Vacancy Management program (which was not successfully implemented last year) and the elimination of furlough days. Additionally, there appear to be 12 fewer positions – 4 principals, 4 registrars and 4 clerks.
Comment – Once we get a breakdown of both the impact of the Vacancy Management and furlough days included in last year’s budget, we will be better able to assess the spending in this area.
Central Office School Administration – Expenditures for Central Office School Administrators are up by $1.7 million, but the bulk of this increase is related to increases in Employee Benefits, elimination of furlough days and ending the Vacancy Management program. Staffing appears to have remained stable with last year.
Comment – Again, once the cost of the Vacancy Management and furlough days included in last year’s budget is released, we can further assess the spending in this area. However, as a general starting point, the student enrollment has decreased by 4.8% over the last three years. While I understand that some administrative functions cannot be reduced due to one or two-year enrollment trends, the three-year enrollment reduction should now begin to impact the size and cost of the Central Office School Administration function and the total cost should be reduced by 5-8% as compared to last year.
Operations Spending – In Operations, there is one significant increase; however the increase is primarily related to how the State is now charging for health insurance. In the past, all Employee Benefits were budgeted based on a percentage of Salaries. This year the State is charging a flat amount for each employee. As a result, the Transportation group, which has a large number of lower paid employees, has a significant increase in Employee Benefits.
Comment – Given the change in the calculation methodology, there is not much that can be done about this increase.
General & Administrative Spending – Over all, General & Administration spending is slated to increase by $7.7 million or 15%. The bulk of the increase is a $5.5 million or 29.7% increase in Information Technology spending (excluding Media Services). Essentially, every line item in IT spending is up significantly and the proposed budget requests the addition of eight more staff.
Comment – The new CIO recently made a presentation to the Budget Committee on the need to improve the IT infrastructure. However, when asked, the CIO declined to assess the current state of the IT infrastructure on a scale of 1-10 or to what level it would move to after the increased spending. While I understand his reluctance to do so because he is new on the job, without a complete assessment of the current infrastructure, the Committee has no way to assess the value of the additional spending.
My recommendation would be to approve certain infrastructure changes that have already been committed to and eliminate the rest until such time as the new CIO has made a full and complete review of the existing systems. I also know from experience that IT infrastructure is often neglected and it is likely that improvements are necessary. As such, the Committee should indicate that it would look favorably on adding an amended increase in spending at such time as the CIO provided a complete assessment.
Charter School Spending – The amount for funding charter schools is increasing significantly during FY15. The projected spending is $71.0 million as compared to $45.1 million in FY14. The increase is the result of two factors changing – the number of charter school students is increasing by approximately 1,900 and the “local revenues” are increasing by $39 million in FY15. In FY15 the charter school enrollment is going up due to the addition of Centennial Elementary (the first conversion charter in APS), Atlanta Classical Academy and the expansion of existing charter schools.
Comment – While the $25.9 million increase appears large, it is reasonable given that the charter school allocation is based on GA statutes and is a direct function of the two factors noted above. My estimates are that the increase due to additional students is approximately $16.3 million with the balance due to the increased “local revenues”.
I am also sure that there will be a number of critics that will again claim that “charter schools are taking resources away from the traditional schools”. Based on the “per student spending” and other financial data, this claim is just nonsense. “Per student spending” in the core education areas is up for both charter schools and traditional schools.
However, I would suggest that everyone look closely at the “per student spending” on APS administrative functions – as this is up over 29% as compared to FY14. In fact, if you are looking to see what is taking resources away from traditional schools, you don’t need to look any further than the spending on administration. Regardless of your position on charter schools, this is the one area where everyone should be able to agree – it is well past the time to reallocate resources out of administration and place them into the classroom where they can have a direct impact on educational outcomes.
Summary – On an overall basis, I believe that with the incremental revenues APS is receiving this year, the Board should make every effort to balance the budget at $633 million in expenditures and not use any General Fund reserves. However, for the Board to achieve a truly balanced budget they must have a “willing partner” in the administration. Unfortunately, as it was last year, this does not appear to be the case.
At the same time, I would not recommend that the Board go through a bruising budget battle with a Superintendent that will retire in 3 ½ months. However, I would limit the salary increases as noted above and take out a significant portion of the IT spending increase. Given the position of the current administration, even if there is a $15 million budget deficit, I would give the Board a “pass” as long as they added the following condition.
The administration must place a moratorium on an amount of spending equal to the General Fund reserve usage and those funds cannot be committed or spent until the new superintendent completes a thorough review of the FY15 budget and presents his or her assessment.
Based on the new superintendent’s review – which should be completed within the first 45 days – the Board can then consider and pass any necessary amendments.
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