APS Budget Commission forwards $685.2 million budget to Board for approval – no tax increase [Updated]

April 17, 2015

On Wednesday the Atlanta Public School Budget Commission tentatively approved a $685.2 million FY16 Budget on an 8-1 vote. The Commission considered raising property taxes to fund a $700.8 million budget – which included the full list of  expenditures considered – but then reached a consensus to accept an increase in funding for additional classroom and programmatic expenditures and for implementing additional positive behavior support programs.

Revenues are projected to be $682.8 million and the remaining $2.4 million deficit will be funded out of General Fund reserves.

The Board will formally act on the proposal in a Special Meeting scheduled for Monday, April 20 at 6 p.m.

Byron Amos voted against the $685.2 million budget and indicated that he was in favor of raising property taxes to fund the full $700.8 million budget which funded most of the priorities considered by the Board over the course of its deliberations.

The Commission participants (all Board members were in attendance) appeared to be generally in favor of funding all the priorities that had been identified. However, they were constrained from doing so as the $14 million Beltline payment from the City of Atlanta remains in dispute and the timing of collecting the moneys remains unknown.

The Commission included the $14 million payment in the revenues, but believed it needed to maintain an adequate level of General Fund reserves to cover expenditures in the event the Beltline payment was not received in FY16. Under the Board’s policies, the General Fund reserve must be maintained at no less than 7.5% of expenditures.

FY16 Proposed Budget 041515

At the beginning of the budget deliberations, the Board established a $668.8 million expenditure baseline and then considered other funding sources to increase the expenditure total. Among the items considered were raising property taxes by one millage point ($18.0 million), using additional General Fund reserves (up to $12.2 million) and including the $14.0 million Beltline payment. As noted above, only the latter was adopted.

With the $668.8 million starting point, the following additional expenditures were included:

  • $9.1 million for school flexibility. This expenditure added back teaching resources that had initially been cut. The amount has been allocated to each school in APS and the principals have the flexibility to direct the allocated expenditure in a manner that they believe will best impact their school.
  • $1.0 million to recalibrate teachers at elementary schools. The initial budget allocation for teaching resources was considered to be inadequate to fund specific issues faced by the elementary schools. The additional funding is intended to redress these issues. [Update – the $1.0 million is in addition to $1.9 million included in the $668.8 million baseline budget]
  • $5.0 million for additional cluster flexibility. This amount will be added to the $9.1 million noted above and can be used by the principals to fund additional teaching resources or the cost of programmatic changes.
  • $1.3 million for “Positive Behavior Supports. The this line item includes expenditures for positive behavior supports (see BOE presentation on this topic here) and includes social and emotional learning implementation, screeners and dashboard information.

While the Commission accepted the items above, other identified priorities costing approximately $15.6 million were deferred due to lack of funding sources. The deferred items included $7.6 million for enhancing the educational environment, $0.9 million for additional cluster flexibility, $1.5 million for incremental bus maintenance, $1.0 million for Pre-K compensation parity adjustments, $1.0 million for college readiness programs, $1.0 million for career readiness programs, $300 thousand for the transition to the charter system operating model and $2.3 million in additional funding for the District’s charter schools.

It would not surprise me if the Administration reviewed the current budget allocations and made additional changes that might ultimately fund some of the unfunded items noted above.

In prior years, the budget process had often been contentious and full of mistrust between the Board and the Administration. This year it has been very different.

Budget Commission Chair Westmoreland and Superintendent Carstarphen led a very open and thorough process of identifying the District’s needs, establishing priorities and then funding what it could within the constraint of limited resources.

Nicely done!

[Follow me on Twitter @Financial_Decon & Facebook]


APS Board of Education meeting today – are you ready for a property tax increase?

April 13, 2015

The Atlanta Public School Board of Education will meet today at 2 p.m. and will consider a number of FY16 Budget alternatives. One of the alternatives includes a one point increase in the millage rate that would raise an additional $18 million for use by the District.

The following chart shows the progression of budgeted revenues and expenditures since the first meeting of the Budget Commission on February 2.

FY16 Budget Progression 041315

Up until after the February 25th meeting all appeared to be moving forward cautiously and in a fiscally conservative manner. While there were many unfunded priorities (adding teachers in areas with large class sizes was not one of them), the self-imposed policy of maintaining a fund balance at 7.5% of expenditures seemed to restrain both the Administration and the Board from adding expenditures without a revenue source to cover them.

As background, in the February 25th meeting, the Budget Commission agreed to put the $14 million BeltLine (IGA) payment into the budget as a resource. However, it prudently recognized that the payment was in doubt due to the dispute between the City of Atlanta and APS and indicated that it would maintain its excess General Fund reserve (amount over 7.5% of expenditures) as a back up in case the BeltLine funds were not received. This action left the proposed budget balanced and, in the event the payment was not received from the Beltline, the General Fund reserve policy would be adhered to.

But then something changed – the Administration continued to push to recognize additional funding resources and the budget began to shift to a precarious position. At the April 2 meeting, the Administration proposed that in addition to including the BeltLine funds (which remain in doubt), the General Fund reserve of $12.2 million would also be used. Revenues would stay the same at $682.8 million, but expenditures would be increased to $695.0 million leaving a deficit of $12.2 million. The proposal pushed the General Fund reserve down to 7.1% of expenditures and below the Board imposed target of 7.5%.

It is also important to note that if the BeltLine payment is not received (and there is no indication that the City’s position on this has changed) the General Fund reserve would go down to $35.1 million or 5.1% of expenditures. In either case, it is likely that APS will have to borrow short-term money to cover operations during the first part of the fiscal year.

And today we are seeing a new proposal which would increase property taxes by one millage point or $18 million. With the additional property tax funds, the total revenue would increase to $700.8 million or nearly $14 thousand per student. Just last year it was closer to $13 thousand per student. In total, the increase over FY15 would be $42.8 million or 6.5%. Over two years, the increase is over $105 million.

Under the new proposal, the increased tax revenue would result in no General Fund balance being used in FY16 if – and only if – the $14 million in BeltLine funds are received. If not, then $14 million in General Fund reserves will have to be used and bring the reserve down to 6.7% of expenditures – which again is below the Board policy level.

Do you support a tax increase?

Some Board members have already indicated that they do.

If you disagree with the tax increase, it is important that you let the Board members know now.

If you disagree with spending the General Fund reserve down to levels below the prudent and fiscally conservative policy previously established by the Board, you should let them know that as well.

See you at the meeting.

[Follow me on Twitter @Financial_Decon & Facebook]


FY16 Tentative Budget approved – prioritizes spending in the schoolhouse (Part 1)

March 5, 2015

This past Monday the Board of Education passed the $688.2 million FY16 Tentative Budget and the document is a clear and unambiguous indication of the new Administration’s priorities – spending increases will go to the classroom where they will have the most impact on student educational outcomes. In addition, the Administration has taken some steps to “right size” the districts spending on non-classroom activities and has indicated that additional steps will be taken in the future.

For the Administration’s perspective on the budget, see their press release here and the Superintendent’s blog post here.

When the new Superintendent Carstarphen was being introduced to Atlanta last April, she was very clear about establishing the right priorities and then funding them. As she said then,

if you really want to know what is happening in your district, just follow the money. Don’t follow the legends and the myths – just get to the bottom of the money. And then you know what you really believe in and what you have been doing for years. If you can track down the money and the resources, you will see what you believe and then you have to say, “Is this what we want to continue to do? Are we OK with this? Or do we want to change our direction?”

This budget answers the question posed – APS is changing direction in a big way.

It is important to know that the Board and Superintendent Carstarphen spent a great deal of time establishing budget priorities and developing ways to fund them. While many decisions were made in the last Budget Commission meeting (which all Board members attended), there was extensive discussion on the budget in several Board retreats that were devoted to establishing a consensus on priorities and developing the tactical operational plan for next year.

Without question, this Board and Administration have spent far more time on planning than any I have witnessed in the past. They were focused and goal oriented – it has been quite refreshing to watch it evolve and the Administration gets high marks for driving a “priorities based” and comprehensive process.

I will go into much more detail in subsequent posts, but as a starting point, let’s look at the big picture and “follow the money”.

The following chart very clearly tells the story of what the Board’s and Administration’s priorities are (click to enlarge).

FY16 Funding Allocations 030415 v2

As a starting point, the total FY16 spending in the traditional schools is up $9.7 million as compared to FY15. As this is the Superintendent’s first budget, let’s focus on where the increases in funding went.

Without question, the most significant change is the $10.1 million increase in Direct Instruction expenditures which exceeds the total traditional school cost increase of $9.7 million by $400 thousand. The traditional college prep courses increased by $6.2 million – a 2.9% increase as compared to FY15. The specialty programs (special education, remedial programs, vocational and non-traditional programs) increased by $3.9 million or 4.0% as compared to FY15. The bulk of the increase went to special education to bring the program into regulatory compliance.

The message has been sent and delivered – spending in the classroom is a top priority and all other functions need to get behind what is being spent in the classroom.

It is also important to note that Student Services – activities that directly support what his happening in the classroom – has a 22.8% share of the total increase. The FY16 budget has approximately $2.0 million for positive behavior support programs to enhance the learning environment.

However, there is one change that will impact spending in the schoolhouse – the total spent on In-School Administrators (principals, assistant principals, academy leaders, registrars and school secretaries) is decreasing by $4.0 million and is being scaled back to spending levels incurred in FY12. It is important to acknowledge what has happened since FY12 – a number of schools have been closed or merged out of existence. Given the changes, this adjustment is warranted and is part of the Superintendent’s “district right sizing” plan and the reduced spending should have no effect on educational outcomes.

When all schoolhouse activities are combined, over 86% of the spending increases have been directed to funding the education of students and providing additional support to improve educational outcomes.

Central Office School Administration spending also increased by $1.2 million in FY16 as compared to FY15. As part of this category Professional Development increased by $860 thousand. However, in prior years this cost was primarily covered by Federal grants and, due to reduced Federal funding, had to be transferred to the General Fund in FY16.

The Operations group (facilities, custodial, transportation and security) is also getting a $1.9 million share of the increased spending. While cost cutting measures have been taken in many of the departments, there is increased spending for much-needed HVAC maintenance, improved custodial services and the initial funding to bring the security resource officers back in-house (currently provided by the Atlanta Police force). These three areas account for an increase of $2.8 million, but these increases are partially offset by $900 thousand in reductions in other Operations departments.

Another very positive change is the $1.8 million reduction in General & Administrative spending. Finance led the charge with a $1.1 million or an 8.1% reduction. IT spending is coming down by $355 thousand and Human Resources is reducing its cost by $221 thousand. These reductions are a start in the right direction and reverse a three-year trend of increased spending on General & Administrative functions. However, it is also important to note that the General & Administrative function costs have increased by $8.1 million (18.8%) since FY13 and it appears as if there is a lot more “right sizing” work to do here.

The budget is still “tentative” at this time and we may see other changes before the final budget is approved in April.

As the title states, this post represents Part 1 of the FY16 budget review and subsequent posts will get into a far more detailed analysis of the expenditures and cost trends across each major function.  However, I believe that it is important to initially focus on the “big picture” – and as I have noted above, the statement made by this budget is positive and the spending priorities are focused where they belong – in the classroom.

To the Board of Education, Budget Commission Chair Westmoreland, Superintendent Carstarphen and the entire Finance team – a great start and job well done!

[Follow me on Twitter @Financial_Decon]


Atlanta Public School Board of Eduction meeting today at 2 p.m. – $682.8 million FY16 Tentative Budget on the Agenda

March 2, 2015

The Atlanta Public School Board of Education will hold its regular meeting today starting at 2 p.m.  The key item on the Agenda is the consideration of the FY16 Tentative Budget. The budget is considered to be “tentative” as it can modified before final approval in April.

The Agenda for the meeting is at BoardDoc’s here.

As usual, the more interesting topics will be covered in the Work Session. Today there are five topics as follows:

  • District Assessment of Performance Standards – presentation by Carlton Jenkins, Chief Academic Officer, Samuel Taylor, District Effectiveness Program Manager, GaDOE and Susan White, District Effectiveness Specialist, GaDOE – see the presentation materials here.
  • Charter System Application and Cluster Planning Update – presentation by Angela Smith, Special Assistant to the Superintendent – see the presentation materials here.
  • Positive Behavior Supports – Tammie Workman, Assistant Superintendent of Student Services – see the presentation materials here.
  • FY16 Tentative Budget & Monthly Financial Update – Chuck Burbridge, Chief Financial Officer – see the presentation materials here and here.

I have been following the budget process closely and have attended several Board retreats as the budget was being developed. I have developed a draft analysis, but the process remains fluid and I want to hear the presentation today before commenting on it further.

There were a couple of interesting items on the Personnel Gains and Loss Report (see here) as follows:

  • Kelly Gunn has been appointed as Assistant Principal for the C.S. King YWLA Middle School
  • Linda Anderson – Assistant Superintendent of Teaching & Learning – has resigned effective at the end of the school year.
  • Chuck Burbridge – Chief Financial Officer – has resigned effective this month. See previous post on new position Chuck will take in Chicago here.

The rest of the Agenda items are primarily contract approvals. I did not see anything there that might be controversial. I will also add that the descriptions they are providing are improving and are much clearer.

See you there.

[Follow me on Twitter @Financial_Decon & Facebook]


Atlanta Public School CFO Chuck Burbridge accepts position as Executive Director of the Chicago Teachers Pension Fund

February 26, 2015

chuck burbridgeThe Chicago Teachers Pension & Retirement Fund (CTPF) announced today that Chuck Burbridge will become the Executive Director of CTPF effective March 16th. Burbridge has served as the Chief Financial Officer for the Atlanta Public Schools since August 2007.

Burbridge will replace Peter A. Driscoll who has been serving as the Interim Executive Director for CTPF and who had previously announced he would be leaving  the interim position in March.

CTPF, with an administrative budget of approximately $10-12 million, manages the pension funds for the teachers in the Chicago school district and has assets under management of approximately $10.8 billion and actuarial liabilities of approximately $19.5 billion. The $9.5 billion actuarial funding shortfall leaves the pension plan at a 51.6% funded level. Burbridge will have his work cut out for him as he tackles the significant deficit in funding.

Per the press release,

“Our trustees are confident Mr. Burbridge’s extensive, senior-level financial experience in both the public and private sectors will be a valuable asset to the fund going forward,” said Jay C. Rehak, president of the CTPF Board of Trustees. “In addition, Chuck’s leadership and strong background working in Chicago and Illinois will help us navigate the many challenges and opportunities facing the CTPF in the current pension fund environment.”

“I’m excited to be leading the Chicago Teachers’ Pension Fund into its next chapter,” said Mr. Burbridge, the incoming executive director of the Chicago Teachers’ Pension Fund. “For more than 100 years the fund has been a key part of Chicago and the education community. I look forward to serving our 63,000 members and working with the trustees and the staff to ensure that our pension plan’s funding gets back on track, so we are able to deliver on the promise made to our members.”

In Atlanta, Burbridge has had experience with underfunded pension plans and has worked with the Atlanta Public School Pension Task Force to develop alternatives for enhancing the funding of APS’ portion of the City Pension Plan. Currently, APS’ portion of the City Pension Plan is only 20% funded and has an actuarial liability of approximately $530 million.

Per his bio at the APS website,

Chuck Burbridge joined Atlanta Public Schools as Chief Financial Officer in August 2007. Prior to moving to Atlanta, he served as Chief Financial Officer for the Los Angeles Unified School District, the nation’s largest independent school district with approximately 700,000 students and an annual operating budget of over $7.5 billion. He has also held the Deputy CFO position at Chicago Public Schools, was also the Deputy Chief Financial Officer for Cook County in Illinois, and was the Chief Economist for the Illinois Economic and Fiscal Commission.

A Certified Information Systems Auditor, Mr. Burbridge received his Bachelors and Masters degree in economics for the University of Illinois. He is a member of the Council of Great City Councils and serves on the Microsoft K-12 Advisory Council.

I have had the privilege of getting to know Chuck well. He is a man of impeccable integrity, has a deep understanding of education finance and is extremely well liked by his staff, peers and the community at large.

We will miss his leadership in APS and we wish him well as he returns home to Chicago.

[Follow me on Twitter @Financial_Decon & Facebook]


Atlanta Public School Budget Commission increases projected revenues by $14 million to $682.8 million for FY16 – no tax increase at this time

February 26, 2015

The Atlanta Public School Budget Commission, chaired by Matt Westmoreland, convened yesterday to consider how to fund additional educational priorities that remained unfunded under the original revenue projection of $668.8 million. The Commission decided to include up to $14 million owed by the Beltline in its revenue projections for FY16 which raises the total revenue to $682.8 million.

The $14 million Beltline payment that has accumulated over the last two years remains unpaid and is the subject of a dispute between APS and the City of Atlanta. The Beltline currently does not have the funds to make the payment and the City of Atlanta – led by Mayor Reed who is the chief negotiator – is a party to the original contract and is liable for the amount due to APS. For more background on the dispute, see the AJC article here.

The Commission is taking the position that the amount is due to APS and that the revenue should be included in the FY16 budget. However, the Commission has also determined that in the event the payment is not received, the General Fund reserves of $14 million will be used to cover the additional expenditures added to the FY16 Preliminary Budget.

In addition, the Budget Commission determined that if the Beltline payment is received, the total expenditures will increase to $696.8 million and the $14 million in General Fund reserves will be used to balance the budget. The administration anticipates that the General Fund reserves at the end of FY15 will be $61-66 million and the use of the $14 million in reserves will bring the balance down to the minimum threshold set by APS policy of approximately $50 million in reserves.

However, even with the incremental funding source, additional priorities – including the pay parity issue (see here) – remain unfunded. The Board is considering adopting a plan to restructure the Pension Liability and, if a restructuring plan is adopted and subsequently approved in a voter referendum, the restructuring could increase available cash flows by approximately $20 million in the first year and $10 in the second year – and the amount would increase over time. In the event this occurs, then the funding structure for the FY16 budget will be revised.

The alternatives presented above have multiple dependencies on the different payment streams and the following flowchart attempts to lay out the complex decisions and incremental expenditure funding under each scenario (click to enlarge).

 

Revenue and expenditure flow chart

Based on the expenditure proposals under each scenario, it is clear that Board and the Administration are placing the funding of educational priorities first. Next in-line for funding are pay raises for teacher and other personnel, but they are dependent on receiving the Beltline monies and restructuring the pension liability. Also, based on the $7.7 million in cuts announced in administrative expenditures, Superintendent Carstarphen is taking steps to “right size” these functions and reallocate the cost to other educational funding priorities.

Additionally, the Board appeared unwilling to adjust the property tax millage rate and, at this time, tax rates will stay at the same level as this past year.

The Administration will incorporate the changes that have been agreed upon and present the revised FY16 Preliminary Budget at a public hearing that will be held on Monday, March 2 at 12 p.m. prior to the regular Board of Education meeting that will begin at 2 p.m.

The Budget Commission has made substantial progress and, due to the critical nature of the discussions, all nine Board members were in attendance for part or the entire Commission meeting.

My sense is that a conclusion will me reached in the very near future.

[Follow me on Twitter @Financial_Decon & Facebook]


Atlanta Public School Budget Commission reviews FY16 Preliminary Budget – choices will be difficult

February 20, 2015

The Atlanta Public School Budget Commission met yesterday to review the FY16 Preliminary Budget (see prior post here). The information provided by the Administration was at summary level and the specific change in spending for all departments was not fully disclosed..

The Commission is now focusing on establishing the revenue estimate for FY16. Currently the revenue for the General Fund is estimated at $668.8 million. However, there are a number of other priorities that the Board and Administration wants to fund and, if the decision is made to do so, the funding source must be established.

The Commission will meet next Tuesday to consider the following funding sources:

  • Raise property taxes –each one point increase in the millage rate would generate an additional $18 million.
  • Use the General Fund reserves – APS policy states that the General Fund reserve will not go lower than 7.5% of expenditures which places the floor on the General Fund reserve at approximately $50 million. The current projection is that the General Fund balance will be at approximately $62-66 million at the end of FY15 – and the $12-16 million over the $50 million threshold could be used to fund additional activities in FY16.
  • Reallocate the proposed spending plan – the Board could request that the proposed spending plan be reallocated to fund other Board priorities by making additional cuts in other programs.
  • Include the $13.5 million Beltline payment – the current budget proposal does not include any payments that are due from the Beltline (and the City of Atlanta) as the amount due is under dispute. Inclusion of this amount in the budgeted revenues would cover a substantial portion of the other priorities under consideration but yet unfunded.
  • Generate some savings from the Pension Liability payment by restructuring the debt – this alternative could generate some incremental cash flow, however the timing and the amount of the savings cannot be determined as the Pension Committee Task Force has not yet reached a conclusion or provided a recommendation to the Board.

The decision to include additional resources in the FY16 budget is a tough one – raise taxes, reduce other costs, use the General Fund reserve or rely on potential resources that may not materialize during FY16.

On the expenditure side, the Board and Administration have four priorities that it would like to fund, but cannot do so until a decision on the revenue side is made. The four priorities are as follows:

  • It is estimated that it will cost approximately $13.0 million to address the “pay parity” issue that will bring APS employees affected by the pay freeze instituted in 2010 to the same salary level of employees hired subsequently.
  • $5.0 million in additional resources for the 10 clusters in APS – these resources would be provided to school leaders who would then have the flexibility to use the funds to address specific issues they are encountering in their schools.
  • The Board has indicated a desire to expand the Pre-K program by eliminating the current waiting list and improving employee quality and retention by increasing compensation. The cost of the expansion and compensation increases is approximately $2.6 million.
  • Increased spending on extracurricular activities and enrichment programs – the approximate cost of the incremental spending was not disclosed in the meeting.

Budget Commission Chair Matt Westmorland indicated that he wanted more time for all Board members to consider the issues they face and a meeting to consider the alternatives shown above has been scheduled for Wednesday, February 25th at 9:00 a.m.

I will add that the Board now finds itself in an interesting position. The Administration has taken certain steps to reduce the cost of the administrative functions by a total of approximately $7.7 million; however these savings have been used to fund State and other mandates (Special Education, increase in pension costs, etc.)  The reallocation of cost begins to fulfill one of the major campaign promises from last year’s election. However, except for the mandates noted above, the budget does not actually increase the number of staffing resources in direct instruction or address prior inequities in compensation practices.  If the Board intends to fund additional changes, it will have to make some very tough decisions.

On a technical note regarding the information provided by the Administration on the FY16 Preliminary Budget – while some specifics were included in the presentation, approximately 30% of the spending was grouped in an “Other” category and the specific expenditures for Program included in “Other” was not shown. Additionally, the FY15 Amended Budget – which was used for comparison to the FY16 Preliminary Budget – has changed substantially from the information released in December and again, it is unclear how the FY15 projected expenditures will look by Program.

The Board did request that additional detail at the Program level be provided in advance of the next Commission meeting – the Administration indicated that it would comply with the request.

I would add that until more comprehensive information is in the hands of the Board and the public, it is impossible to come to any conclusions on the FY16 Preliminary Budget. The Administration does get credit for generating the initial budget on a very timely basis and for using the FY15 Amended Budget as a comparison to next years spending levels. My understanding is that Finance is working hard to generate better expenditure forecasts and the information they are providing is far more relevant than the FY15 Original Budget that has been transformed by the new Administration.

In addition, it is very clear that the Administration is making every effort to produce an accurate representation of the FY16 spending and wants to be very open with the disclosure of any contingency funds included in the budget. This is a refreshing change from prior budgets that were chock full of hidden budget cushions.

As Superintendent Carstarphen stated as she was being introduced to the community last spring – “if you want to know the district’s priorities. follow the money”. By presenting a true estimate of next years spending by Program, she is providing the Board and the public with a clear roadmap to the district’s priorities.

My sense is that by presenting an open, detailed and honest budget for FY16, it will go far in moving the needle on establishing the integrity of this new Administration – and doing so is consistent with a component of the new APS mission that calls for “the community has trust in the district”.

While there are many components to this, an open and honest budget that truly reflects the direction this Administration is a great start.

[Follow me on Twitter @Financial_Decon & Facebook]


%d bloggers like this: