BOE discusses 2013-14 district budget

Board of Education seeks alternatives to raising taxes for South Orange and Maplewood

By: Yael Katzwer - Staff Writer

Photo by Yael Katzwer
South Orange-Maplewood Board of Education members met Jan. 28 for a preliminary discussion about the 2013-14 budget. Members of the board, from left, are: Wayne Eastman, second Vice President Lynne Crawford, President Beth Daugherty, first Vice President Sandra Karriem, Andrea Wren-Hardin and Bill Gaudelli. Present at the meeting but not pictured were board members Jeffrey Bennett and Madhu Pai.

MAPLEWOOD/SOUTH ORANGE — At the Jan. 28 Board of Education meeting, the board spent more than an hour discussing the 2013-14 budget, where it stands on the self-imposed 2-percent tax cap, and the use of available bank capital.

This is the BOE’s first year deciding the budget for the South Orange-Maplewood School District; it passed a resolution Dec. 18 that moved BOE elections to Election Day in November, limiting the power of the Board of School Estimate, which previously controlled the district’s budget. Now, a funding proposal will only be placed before the BSE if the proposal exceeds the state-mandated cap.
District Superintendent Brian G. Osborne prefaced the budget presentation with a reminder that nothing is definite as the district has not yet received notifications regarding the size of the 2013-14 state and federal grants.

“These numbers are very preliminary,” Osborne said at the meeting. “We are still considering all avenues forward; the numbers here are subject to change.”
According to Cheryl Schneider, the board’s business administrator and secretary, the guiding principle for deciding the budget is the district’s fourth goal, which calls for the development of “a transparent, efficient budget that aligns with and supports the attainment of district goals and that reins in spending on the budget categories that are rising at a faster rate than the cost of living.”

In essence, the district will try to fulfill district goals within an attainable budget.

Using trends as a basis, Schneider has made some assumptions for the state of the 2013-14 district budget. According to Schneider, state aid is expected to remain at the same level in 2013-14 as it was in 2012-13; state aid notices will be sent to N.J. school districts Feb. 28.

The district can expect to see a reduction in federal grants to just 75 percent of the 2012-13 total.

“We’re anticipating those grants will be cut by 25 percent,” Schneider said. Those figures will be made available to the districts in May, two days after the district budgets are due to the county.

Board President Beth Daugherty asked Osborne if there was any way to get those numbers earlier, so that the board could use them in making budget decisions, but Osborne replied that several districts have already raised the same question, and that it has “fallen on deaf ears.”
Schneider again reminded the board that “these assumptions are subject to change due to the uncertain financial climate.”

Schneider also informed the board that there is an excess surplus from the 2011-12 audit totaling $2,152,272, and a bank capital, or bank cap, of $975,328 available for the 2013-14 budget.

The main question on the table is whether to increase the budget or to begin cutting.

A middle ground for now, according to Schneider, is improving the efficiency of current programs, thus reducing costs without eliminating anything.

According to Schneider, the district has been working to make transportation more efficient, saying that, cost-wise, “mainly we’ve been keeping that flat.”

Additionally, “through capital improvements, we saw (energy costs) stay flat in ’11-12 … and we dropped in ’12-13,” Schneider said. She did, however, point out this is partly a result of the warm winters the area has recently experienced, which has resulted in reduced heating costs.
The budget, according to Schneider, mainly goes toward salaries; benefits; out-of-district tuition; professional services;

utilities; repairs and maintenance; transportation and equipment; and supplies.

Some of these make up “required spending,” which are fees that are mandated, or fixed costs, for the district. According to Schneider, 95.2 percent of the budget goes toward fixed costs and state-mandated spending, whereas only 4.8 percent goes toward variable costs.
Fixed costs and state-mandated spending includes contract salaries; contracted health benefits; mandated special-education spending; mandated professional services such as a lawyer, auditor and architect; essential maintenance of the buildings; transportation; mandated insurances, which, according to Schneider, became more expensive after Superstorm Sandy; fixed equipment costs, such as copy machines and telephones; and state-mandated testing services. While mandated election costs are also on this list, that number will see a reduction due to the date change for the BOE elections, according to the board.

“We are expecting a double-digit increase this year” with regard to health benefits, Schneider said. The district offset this slightly, however, by changing the health plan to a Direct 15 plan last year, meaning that those with the plan have a flat $15 co-pay for prescriptions and doctor visits covered under the plan.

Additionally, the district hires companies for other services, such as custodians; security; paraprofessionals; and food providers.
According to Schneider, contracted services saves the district approximately $1.5 million on custodial services; security is “about half the cost of what it would cost in-house;” contracting paraprofessionals also saves approximately $1.5 million; and food services are “meeting the break-even points, whereas many districts are having to put forward money.”

As for contracted salaries, “we are in negotiation right now; we will have to live with whatever comes of that,” Schneider said.

Of the 95.2 percent of the budget going toward fixed costs and state-mandated spending, 53 percent goes toward salaries and 14 percent toward benefits. In most districts, these two categories equal approximately 80 percent of the fixed-cost budget; however, “if you add (contracted services) back in, you’re at 80 percent like most districts,” Schneider said.

Variable costs include curriculum needs, newly announced state mandates, the textbook-review cycle, professional development, building equipment, classroom supplies and technology needs.

“These tie into what the district goals are, but these are the areas where we have that flexibility,” Schneider said.

In a comparison with similar districts within Essex County — Livingston, Millburn, Montclair and West Orange — on the money spent on per-pupil costs, classroom instruction, administration, and maintenance and operation, SOMSD is about equal with most of the districts. West Orange spends more than the other four districts in every category.

“We pretty much align with the state averages across the board,” Schneider said.

The district expects it will need $110,000,000 for the 2013-14 budget. The question now is from where this money will come.

The board members agreed they do not want to rise above a 2-percent, operating-budget tax, which puts the tax-levy cap at $103,998,642, according to Schneider’s presentation. There is, however, a debt service of $3,890,983; this is the cash required for a particular time period to cover the payment of interest and principal on a debt. The combined operating- and debt-service tax impact is 2.47 percent.

The board does have the option of using all, none or some of the $975,328 bank cap, money the district will lose if it is not used. However, some board members are wary of using the bank cap, and wonder what will happen in future years without the cushion, if the budget becomes dependent on it.

According to Schneider, using half of the bank cap would raise the operating- and debt-service tax to 3 percent; using all of it, to 3.5 percent. While this would not translate into a tax increase this year, it could potentially do so in future years, in order to sustain any choices made when bank cap was available.

“I’m worried about the long-term sustainability of this,” board member Bill Gaudelli said. “I do know there is a tax burden within the community … but we don’t want to undermine the schools. I’m willing to use all the bank cap because that’s what it’s there for.”
Most board members seem to be in favor of using bank cap, but want to use it in moderation.

“I really don’t want to see tax increases, but I don’t think we have a choice,” Lynne Crawford, the boards second vice-president, said. “I am in favor of using some of the bank cap.”

“We can’t educate our students anymore with a 2-percent cap, we just heard this,” board member Andrea Wren-Hardin said at the meeting. “Years of hard work can lead to results, and I don’t want to see us jeopardize anything we’ve worked for, so I’m for using bank cap. Cutting the budget won’t get us there.”

“As much as I want to keep it at 2 (percent), I’m not willing to go much higher, not over 3 (percent),” Daugherty said.

On March 4, the board will be voting on the preliminary budget, which it will then send to the county. There will be a public hearing and take action to levy the 2013-14 school tax March 27. In the meantime, the board plans to schedule a workshop session to further discuss its concerns and options.

Yael Katzwer can be reached at newsrecord@thelocalsource.com.