2018/19 Preliminary Budget Overview February 20, 2018

Presented by: Brett Johnson

Chief Financial Officer Division of Finance

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Presentation Purpose

Why is this topic on the board agenda? To provide an overview of the preliminary projections for the APS

budget for the next fiscal year and potential impacts for future years

What are we asking the board to do with this information? Provide feedback about budget philosophy and priorities related to

current projections

How is this linked to the Strategic Plan, Vision, Mission, goals & core beliefs? The budget aligns fiscal resources to the APS 2020 Strategic Plan

while balancing the budget given the district’s financial constraints

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Budget Calendar Review

Current Fiscal Year (2017/18) Next Fiscal Year (2018/19)

July 2017 August 2017

October 2017 • October pupil

enrollment count day

November 2017 • Governor’s Preliminary

2018-2019 Proposed Budget

• Finalize October Pupil Count Data

December 2017 • Prepare readopted

budget for leadership team review

• BOE certifies mill levy

September 2017

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Budget Calendar Review

Current Fiscal Year (2017/18) Next Fiscal Year (2018/19)

January 2018 • BOE readopted budget approval • BOE: Enrollment projections

presentation • Refine preliminary budget

assumptions with JBC, economic forecasts, Governor's proposal

• 1st draft of all division budgets for leadership review

February 2018 • BOE: Budget planning

presentation • Principals receive budget

workbooks • Finance works with all

schools and EIL to provide training and guidance

March 2018 • All budget workbooks

due • Finance consolidates

budgets for leadership review

April 2018 • Leadership approves proposed

budget • Budget presented to District

Accountability Advisory Committee

May 2018 • Colorado Legislature adjourns

May 9 (w/School Finance and Long Bill approved)

• BOE reviews proposed budget

June 2018 • BOE final budget

approval

Budget Philosophy

Budget Philosophy: • Focused: Prioritize and align high-impact student success

• Responsive: Must account for declining scale and reduced state funding

• Strategic: Flexibility and focus on long term financial health

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Budget Planning Overview

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Overview of Budget Planning Presentation:

• Foundations of Budget • Preliminary Budget Outlook and Projections • Financial outlook: Current and ongoing budget

constraints • Budget priorities

Foundations of School Budgets

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School Finance and the State Constitution: • Gallagher Amendment (1982)

– 45% residential, 55% non-residential tax base – Residential assessment decreases over time as population

increases

• TABOR (1992) – Requires a vote to increase assessment rates or mill levies – Statewide TABOR cap can squeeze K-12 funding

• Amendment 23 – Requires state “base funding” to increase by inflation + 1%

Foundations of School Budgets - Gallagher

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• Residential rate determined on a 45%/55% ratio

• Assessment rate has decreased from 20% in 1982

• In FY 2017-18, residential assessment rate decreased from 7.96% to 7.2%

• Projected to decrease to 6.11% in April 2019

2016-17 2017-18Home Value $100,000.00 $120,000.00Assessment Rate 7.96% 7.20%Assessed Value $7,960.00 $8,640.00Mill Levy 10 Mills 10 MillsTax $79.60 $86.40

20% Home Value Increase

9% Net Tax Increase

Foundations of School Budgets: Negative (Budget Stabilization) Factor

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Foundations of School Budgets: TABOR Cap

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• TABOR limitations are on revenue, not expenditures.

• TABOR limit is set based on last year’s revenues, creating a “ratchet effect

• Referendum C allowed for a “timeout period” of TABOR cap restraints

• Hospital provider fee provided short term TABOR cap relief

Foundations of School Budgets: Competing State Budget Pressures

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Review – FY 2017-18 Readopted Budget

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Readopted Budget July 1, 2017 - June 30, 2018

Beginning Balance $37,580,583

Revenues $358,281,687

Transfers ($21,543,279)

Expenditures $338,130,419

Ending Balance $36,458,842*

*Unassigned fund balance is projected to be $18.7 million

2018/19 Preliminary Budget Outlook

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The good news is that we are in a much more favorable position compared to last year: • Last Year’s budget planning for 2017-18: Without making

any budget changes, we had a budget gap of up to $31 million

• This year’s budget planning for 2018-19: Without making any modifications, we are generally flat.

2018/19 Preliminary Budget Outlook

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• Revenues and Expenditures – Fairly Flat – Revenues increase due to state inflation factor (3%) – Revenues decline due to lower enrollment – Current projected increases include:

•Salary increase effective Jan 1 2018 (annualized for 2018-19) $3.8m •PERA rate increase effective January 1, 2018 (annualize) $500k •Increase in health benefit costs $1.5m •Increases in Exceptional Student Services Funding $1.7m •Reductions due to enrollment

*Based on conservative budget assumptions that do not include buy-down of negative factor or additional revenues over state inflation factor

Outlook: Impact of ESS Costs

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ESS students have increased by 20% while our overall enrollment has decreased by 10%:

Outlook – Charter Schools and HB 1375

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• HB1375 requires a proportional share of mill levy override dollars to be shared with Charter Schools by FY 2019-20 – Current charter school funding: $3.05m – Projected HB1375 charter school allocation: $6.54m

• In exchange for these increased funds in 2018-19, we are right-sizing our charter school fee schedule to represent actual costs.

• The net increase (mill levy dollars less increased fees is about $2.5 million

• Future approved mill levies would also be subject to HB1375

Outlook – Impacts of Declining Enrollment

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• School Finance Act: If declining use five year average for enrollment

• Softens the impact in a given year and spreads over multiple years

2017-18 total enrollment (inc. charters): 36,919 Current year funded enrollment: 37,595 • Even if enrollment decline were to end after

2018/2019 – revenues would continue to drop

Outlook – Impacts of Declining Enrollment

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APS Student Count Only (no charters or ASCENT)

Actual Count 5 Year Average Change

2013/14 33,956

2014/15 34,604

2015/16 34,534

2016/17 33,864

2017/18 32,351 33,861.80

2018/19 31,038 33,278.20 (583.60)

2019/20 31,038 32,565.00 (713.20)

2020/21 31,038 31,865.80 (699.20)

2021/22 31,038 31,300.60 (565.20)

Outlook – Impacts of Declining Enrollment

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Funded Enrollment Change

Financial Impact (at $7,975 per pupil)

2018/19 (583.60) (4,654,210.00)

2019/20 (713.20) (5,687,770.00)

2020/21 (699.20) (5,576,120.00)

2021/22 (565.20) (4,507,470.00)

Outlook – State Budget Constraints

Looking forward: Potential State Budget Constraints • TABOR cap projected to affect statewide

budget in 2019-20 • Residential Assessment Rate projected to

decline sharply in April 2019 from 7.2% to 6.11% - will have negative impact on Mill Levy Override funding

• PERA Legislation 20

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Budget Priorities

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Budget Priorities: • Human Capital: The work to recruit, retain, identify and develop a highly

effective staff • Teaching and learning resources: The work to support high-impact classroom • Equity: The work to build upon our efforts to engage students in ways that

are relevant to their lived experiences and identify and address inequities in our teaching and learning environments

• Support wraparound needs: The work to support the social, emotional and behavioral needs of our students in recognition of those needs as 21st century workforce skills

• Maintain Momentum: The work to build upon the systems and structures which have supported our trends for improved student outcomes

• Improve services to students with diverse academic needs: The work to provide better supports for students who thrive in non-traditional classroom environments

Budget Priorities

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Questions?

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