By Annette Hinkle
When it comes to projecting the needs, revenue and growth of a school district, there’s much about the future that is unforeseeable. But that doesn’t mean there aren’t guideposts to follow based on what’s happening in the district today.
As part of a long range financial workshop, on Tuesday, Dr. Carl Bonuso, Sag Harbor School District’s interim superintendent, and budget administrator John O’Keefe shared information with the Sag Harbor School board that takes a look at what the district might be facing in the decade ahead. O’Keefe walked the board not only through budget trends, but also addressed enrollment projections, the fund balance, bond obligations and other financial challenges and mandates the district can expect going forward.
“Effective financial planning is different than developing fiscally responsible budgets,” explained Dr. Bonuso. “We need to look at projections — not just for this school year but next year and the year after that.”
“We talk about expenditures, but also revenues and resources, anticipating them and becoming more creative,” he added. “Everything from shared services to possible grants and tuition and what that might look like down the road, let alone fighting for the state aid we deserve.”
“All this factors into what we’re talking about,” added Dr. Bonuso.
In planning for the future, Dr. Bonuso stressed it’s important for the district to avoid spikes — he points to the 1.43 percent budget increase in 2008/09 and the 6.28 percent increase that came just two years later in 2010/11 as an example of what the district should work to avoid.
While the two percent tax cap levy has eliminated those sorts of spikes in the budget, at least for now, Dr. Bonuso stressed the district should also consider other factors — like the timing of renovations or facility improvements so it’s not hit with undue expenditures.
Future enrollment is also something to consider. In terms of new students, over the next 10 years, Western Suffolk BOCES predicts Sag Harbor can expect an increase of 100 new students. That’s not a lot spread over grades K-12, but, Dr. Bonuso noted, it is a problem if those students are concentrated in one particular grade level.
“We have to be prepared. Where 10 students might make a difference it might be if we have to come up with an extra section,” said Dr. Bonuso
School board member Susan Kinsella cautioned that enrollment projections can be wrong — and in fact, have been.
A few years ago, she noted, it was expected that Sag Harbor’s enrollment would decrease. However, with the unforeseen closing of Stella Maris Regional School and a tuition hike at the Ross School, there came an influx of families who moved their children to the Sag Harbor schools.
School board member Dan Hartnett also brought up the increasingly popular trend of families who rent their own homes out in neighboring districts and lease a home in Sag Harbor during the school year so their children can attend school here.
“That’s a way they’re circumventing tuition,” said Hartnett. “The neighboring district’s tax base stays the same and the number of students per class drops, while in Sag Harbor it rises.”
“That’s not a new phenomenon,” said school board vice president Chris Tice. “We have very limited amounts of year round affordable housing, so there’s a limited amount to rent.”
“I think it calls for vigilance,” added Hartnett. “Anyone who sleeps here should go to school here. I’m grateful for the vigilance for that. This district took someone to the commissioner and won. They did rent a house here, but they didn’t live in it.”
The board discussed the idea of instituting a re-registration policy which would require families to re-establish residency with the district periodically, such as when students move from elementary to middle school or from middle to high school.
“I agree it should be done more than once,” said school board member Susan Kinsella, “even twice.”
Dr. Bonuso noted the board has two ways to control growth in the district — one is through policy, the other through programming.
“For example – your tuition policy and your class size guidelines,” said Dr. Bonuso. “If it’s your policy to run classes of a certain size or charge a certain amount of money for students coming in, in many ways you can impact if people will come in.”
“As the numbers grow, we have to be concerned as a school board what that does for our programming,” said school board member Mary Anne Miller. “Especially for seniors who can’t get in a class they need to get into college.”
Kinsella pointed out that an increase in enrollment could help in that extra sections would be created if sufficient numbers were added.
“If enrollment goes up, you have to look at losing some of the tuition enrollment and that’s important to watch,” added O’Keefe.
The issue of the district’s fund balance was also raised and O’Keefe explained the amount was simply the difference between revenues and expenditures accumulated over time.
“Basically assets minus liabilities is fund balance,” said O’Keefe who added that the district’s fund balance as of June 30, 2013 was $5.9 million.
“The law allows us to retain up to 4 percent and we can take excess in the budget and fund legally established reserves or reduce next year’s tax levy,” said O’Keefe. “If your fund balance is too low, you may not have enough to cushion expenditures for emergencies.”
He added the district is in a far better position now than it was in back in 2008/09 when just $65,000 was in the fund balance.
“Spikes come from poor management of reserves,” explained Dr. Bonuso. “It’s the first thing to go when budgeting. It’s an easy fix and you get one more year, and then the spike occurs. That’s why it takes thought and time.”
“We had half a million in total in 2009/10, in 2012/13 it’s grown ten-fold,” said O’Keefe.
He also noted another important area to consider in future planning is bond obligations — both when current obligations expire and when the district could benefit from a decrease in rates.
“In 2011/12 we had $1.7 million in annual obligations,” explained O’Keefe. “The prior administration was able to renegotiate and refund those rates saving the district $200,000 a year. That’s money that went back in the general budget.”
“When you try to build a budget, everyone brings their lens,” said Dr. Bonuso. “Maybe someone will say we have to something done. A business person will say what bonds are being retired? They’re interested in knitting together the pieces to minimize spikes.”
Another big concern for the future, noted Dr. Bonuso, are decreases in state aid and the number of unfunded mandates school districts face.
“Some superintendents are worried we’re playing a game we can’t win,” he said. “We can be careful with contract agreements and tax caps, but the way formulas are structured we’re not getting our fair share on Long Island. We’re providing a much bigger educational bang for the buck with very little coming back in return.”
“Between that and unfunded mandates,” he added, “we’re looking to change the rules of the game. I think Sag Harbor is not getting its fair share from the state.”
Looking down the road, Hartnett also felt the district should consider a retirement incentive for long-term teachers that would allow the hire of new staff at lower salaries.
“Basically financial planning is something everyone does,” said O’Keefe. “It’s a component of the board, the audit committee and community members. These efforts resulted in the ten-fold increase we have in the fund balance. We also got the negative outlook dropped from our bond rating.”
“There’s still a tough road ahead,” he warned. “We do have strong reserves but can see where they could go quickly. But in a short time things are in place that will make some of this a little bit easier on us. I think we’re in better shape than if we didn’t do as much planning.”
“I think the work is realistic and sobering,” said board member David Diskin. “This is the kind of thing we need to have going forward.”