All of the information that went out in the last week or two is not incorrect. It's focus, however, has been solely on the cost of the High School Project. Now, when you look at your budget and try to figure out what you can afford, do you just look at the cost of a car you are going to buy? Or do you take a look at your entire budget, including all KNOWN future expenses and then figure out how that car is going to fit into your budget given what you already now? My guess is that you don't just look at the car in a vacuum. You will look at all your expenses in order to figure out what your budget should be for your car. And then you will make your car purchase accordingly.
With that in mind, I post for your information the new and improved (from 2/3/2010) Mt Lebanon School District Forecast of Budgeted Expenditures.
Click on image for larger view
You may remember that I linked to the 2009 version of this in my whitepaper last month. I had already asked for an update at the time and after a few false starts (the version from the 1/28 Audit/Finance Committee meeting had some errors in it), this is the final version we will see for 2010.
Let me make a points about this forecast:
1) It's a forecast and is based on the best information available at the time
2) 2.5% increase in salaries (historical average is 2.79)
3) High School Debt will be a total of $113 million (actual debt will be a number less than this and will depend on where bids for the project end up)
4) Healthcare will increase at 5%/yr
5) PSERS increases will go according to the PSERS Projected Schedule
6) Earned Income Tax receipts increase at 2.5% in 2010-2011 and 3% thereafter (the Municipality is forecasting flat EIT)
6) State Subsidies increase at 2% per year (right now we are looking at 0% increase)
7) Investment rates going up to 3.25% (historically this is a good number but right now we are under 1%)
8) There are no increases in the 2010-2011 preliminary budget outside of PSERS, High School Debt Service, and salaries. Increases in future years for the "other" items are kept at a very low rate.
9) There are no program changes included in the budget. Dr Steinhauer said at the Audit/Finance meeting that he would find funding for these changes in other parts of the budget.
Now, when I said above that the whole picture isn't getting shown, this is why. This five-year forecast includes ALL expenses such as PSERS and base budget increases. The information released by the District only shows High School expenses. My frustration for some time has been that there has not been enough focus on the ENTIRE picture instead of on just the High School. So when you see people say that the high school might mean a 14% increase in taxes (from this years 24.11 mills) and that's the "Bottom Line", it kind of misses the point entirely. The Bottom Line isn't just a single expense. The Bottom Line is the forecast we received last Thursday. And that Bottom Line is ugly! From 2009-2010 to 2014-2015 the millage is projected/estimated to rise from 24.11 to 33.31, a 38.15% increase in taxes.
There are some opportunities for improvements to this forecast. Here are just a few:
1) Bids for the HS project might come in under $113.3. This would reduce our debt service
2) There could be a solution to the PSERS Funding Crisis
3) Salaries could come in less than the net 2.5% increases projected
4) There may be opportunities for base budget reductions in staffing and/or programs.
5) Retirements could be a big expense reducer especially in 2010-2011 (the 2.5% salary number is net of retirements)
There are also some risks to this forecast:
1) Salaries could come in greater than the 2.5% increases projected (come on, we just started negotiations. I couldn't put salaries in one or the other!)
2) EIT growth could be less than 3% (Municipality is projecting flat revenues from EIT)
3) State reimbursements may not be 2% (no increase seems to be the case for 2010-2011 at least)
4) Interest rates on the second float of bonds unknown (to be floated in 2013-2014 three years away)
6) Funding for our OPEB liabilities (approx $600,000) is not taken into account for years after 2012-2013.
Retirements going forward will have a huge impact on the 2010-2011 budget and beyond. We will have a good idea later in February and a great idea in March about what our numbers will be for this year.
Now this forecast is not a worst case scenario. Granted there are a few areas that we are likely to improve (let's all hope HS bids come in low) but there are some significant risks as well. The greatest chance we have of seeing these numbers come down is if there is something done at the Commonwealth level to address PSERS. There are long-term solutions in front of the Legislature right now but there are no short-term ones. Something can still be done, but please contact Senator John Pippy and Representative Matt Smith and let them know that they have a role in this. They know it already, but it is always good when they hear it from their constituents.
That's all for now. I am working on something with regards to the reassessments. I will probably address it at the February Audit/Finance Committee meeting. If you are a property owner then you most likely received a letter in the mail this week regarding your property. I expect there will be a number of questions regarding this in the coming weeks and months.
Thanks for reading.
James
