Presentation to AISD Board of Trustees FY2018 Board Budget Development:

FY2018-2021 Fiscal Forecast

Nicole Conley, Chief Financial OfficerDr. Fernando Medina, Chief Human Capital OfficerFebruary 27, 2017

ATTACHMENT 1

Why Multi-Year Planning is Important

• Identify how intermediate and longer-term challenges may shape your finances, before trends overtake you

– Revenue expectations

– Healthcare costs

– Enrollment

• Strengthen the case for options with longer lead time to generate fiscal impact

– Facility closures/investments

– Benefits reforms

• Determine whether proposed actions are affordable and sustainable before commitments are made

– Compensation

– Expanded programs

• Support the case for increased funding before reserves are exhausted and the system is in crisis

• Positive credit rating factor and recognized best practice

“Multi-year planning is a critical exercise. These plans will often have out-year gaps projected which allow governments to work out, in advance, the optimal way to restore fiscal balance”-Standard & Poors

2ATTACHMENT 1

Fiscal Forecast Assumptions/Highlights

• No Change to M&O Tax Rate ($1.079 per $100 of taxable value)

• Enrollment is estimated to decline by 170 students in FY2017-18 from the FY2016-17 Adopted Budget, with subsequent small declines each year thereafter according to demographer trend analysis

• Assumes no change in employee salary compensation

• Projects the State funding formula per capita rate will decrease from 390.186 per WADA in FY2017 to 200.000 in FY2018. The per capita rate is projected to be 375.000 in FY2019.

• The Travis Central Appraisal District (TCAD) will release preliminary certified values in April 2017.

• The forecast projects taxable property value growth at 11 percent, 8 percent, 7 percent and 6 percent over the next four years

• The current reserve policy is 20% of unassigned fund balance to operating expenditures (Chapter 41 excluded) so that fund balance requirements are not affected by the Chapter 41 Liability

3ATTACHMENT 1

Enrollment Projections

• A committee comprised of Facilities, Student Services and Finance developed the student enrollment projections.– Factors utilized to establish budget projections took into account feedback from

campuses, student services, demographer projections, ratio, trend and cohort data

4

102,649 101,060 99,631 100,313 99,649 99,291 98,923 98,399

84,564 83,628 82,690 83,070 82,520 82,223 81,919 81,485 77,349 76,448 75,590 75,937 75,435 75,163 74,885 74,488

70,000

80,000

90,000

100,000

2014-15Actual

2015-16Actual

2016-17Adopted

2016-17First SixWeeks

2017-18Projected

2018-19Projected

2019-20Projected

2020-21Projected

WADA Enrollment ADA

ATTACHMENT 1

Declining Enrollment & Shifting Demographics

• Affordability issues continue to affect the district's population as families move out of the central city and into the far south, southeast and northwest regions of the district and beyond

– Fewer students are qualifying for free and reduced lunch which equates to less State Comp Ed funding and Title I funding

5ATTACHMENT 1

Baseline Fiscal Forecast from FY2018 through FY2021

6

Actual Actual Actual Adopted Amended

FY2013-14

(12 Months)

FY2014-15

(12 Months)

FY2015-16

(10 Months)

FY2016-17

(12 Months)

FY2016-17

(12 Months)

FY2017-18

(12 Months)

FY2018-19

(12 Months)

FY2019-20

(12 Months)

FY2020-21

(12 Months)

Revenue

Local Sources 733,130,919 818,924,395 935,923,424 1,071,040,297 1,071,739,733 1,185,530,668 1,275,384,519 1,360,296,409 1,438,172,741

State Sources 62,544,644 62,523,918 50,329,570 66,516,398 66,517,078 52,375,357 65,436,911 52,224,158 65,009,448

Federal Sources 22,198,036 24,204,869 26,554,292 23,472,742 23,472,742 25,450,890 25,450,890 25,450,890 25,450,890

Other Resources: Including Sale of Property 1,075,523 425,851 20,584 51,000 51,000 51,000 51,000 51,000 51,000

Total Revenue and Other Resources 818,949,122 906,079,033 1,012,827,870 1,161,080,437 1,161,780,553 1,263,407,915 1,366,323,320 1,438,022,457 1,528,684,079

Operating Expenditure BudgetBaseline Excluding PPft & New Programs 714,524,751 728,197,557 662,210,150 748,115,035 775,590,527 757,822,091 760,826,324 764,248,350 766,957,395

Professional Pathway for Teacher Compensation - - - 3,000,000 3,000,000 3,000,000 3,000,000 4,237,480 7,881,869

Total Operating Expenditure Budget 714,524,751 728,197,557 662,210,150 751,115,035 778,590,527 760,822,091 763,826,324 768,485,830 774,839,264

Chapter 41 123,694,773 181,118,956 266,073,630 406,064,487 406,064,487 536,075,144 638,805,758 726,247,100 807,508,047

Total Budget 838,219,524 909,316,513 928,283,780 1,157,179,522 1,184,655,014 1,296,897,235 1,402,632,082 1,494,732,930 1,582,347,311

Other Uses - - 10,000,000 81,000 8,112,177 81,000 81,000 81,000 81,000

Total Expenditures and Other Uses 838,219,524 909,316,513 938,283,780 1,157,260,522 1,192,767,191 1,296,978,235 1,402,713,082 1,494,813,930 1,582,428,311

Estimated Budget Surplus (Deficit) -19,270,402 -3,237,480 74,544,090 3,819,915 -30,986,638 -33,570,320 -36,389,762 -56,791,474 -53,744,232

Projected Hiring Lag and Unspent at year end - - 0 0 0 8,000,000 8,000,000 8,000,000 8,000,000

Net Change in Fund Balance -19,270,402 -3,237,480 74,544,090 3,819,915 -30,986,638 -25,570,320 -28,389,762 -48,791,474 -45,744,232

Fund Balance Beginning 240,230,810 220,960,408 217,722,928 292,267,018 292,267,018 261,280,380 235,710,060 207,320,298 158,528,824

Fund Balance Ending 220,960,408 217,722,928 292,267,018 296,086,933 261,280,380 235,710,060 207,320,298 158,528,824 112,784,592

Categories of Ending Fund Balance:

Assigned 26,606,228 18,430,045 24,643,922 16,859,313 16,859,313 17,338,893 17,165,504 17,165,504 17,165,504

Non Spendable 10,033,623 8,997,163 1,380,727 7,810,315 7,810,315 7,810,315 7,810,315 7,810,315 7,810,315

Committed 0 0 0 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000

Unassigned 184,320,557 190,295,720 266,242,369 266,417,305 231,610,752 205,560,852 177,344,479 128,553,006 82,808,774

% Unassigned/Expenditure (Chapter 41 Included) 22.0% 20.9% 28.4% 23.0% 19.4% 15.8% 12.6% 8.6% 5.2%

% Unassigned/Expenditure (Chapter 41 Excluded) 25.8% 26.1% 40.2% 35.5% 29.7% 27.0% 23.2% 16.7% 10.7%

Baseline Forecast with Inflation

ATTACHMENT 1

Baseline Fiscal Forecast Assumptions: FY2018 Budget Changes from Prior Year

Amount

Decrease in Career Ladder $-75,108

Insurance & Bonding costs 503,967

Property Appraisal and Collection Fees 396,550Shared Service: Blind/Deaf Payment to State 459,692Health Insurance Costs 6,613,673Gasoline -385,000

Utilities including water, natural gas and electricity 35,308Telephone, Telecom, Cell Phone -234,307Reduction of payroll costs resulting from decrease in student enrollment -623,333Curriculum Writing Cadre 123,632Election costs 141,000Increase Camus BTO Non-staffing allocation by 5% 300,000

7ATTACHMENT 1

Baseline Fiscal Forecast Assumptions: FY2018 Budget Changes from Prior Year (continued)

Amount

Audit Fee $15,000Increase in Custodial Maintenance Supplies 501,375

Contracted Services-Portable Buildings 707,442Software 961,114Vehicles 266,051

Net Operating Increases and Decreases 9,707,056

Increase in Chapter 41 Payments 130,010,657

Total Budget Baseline Increases $139,717,713

8ATTACHMENT 1

Budget Pressures: Projected Cost of FY2017-18 Salary Increase In Millions of Dollars (Local Funds Only)

9

Includes salary driven benefits (not including health insurance) and associated employer payroll taxes

ATTACHMENT 1

Skyrocketing Recapture

$733,765

$863,906

$1,004,287

$1,120,017

$1,215,009$1,307,777

514,000 514,000 514,000 514,000 514,000 514,000

400,000500,000600,000700,000800,000900,000

1,000,0001,100,0001,200,0001,300,0001,400,000

FY2016 FY2017 FY2018 FY2019 FY2020 FY2021

Estimated Wealth per WADA State Equalized Wealth Level

• In FY2016, AISD's wealth per WADA was 42.8 percent above the State Equalized Wealth Level (EWL). In FY2021 that percentage is projected to be 154.4 percent above the EWL. This requires the district to pay a higher percent of (increasing) local property taxes back to the state.

• In short, the district's property values are projected to grow at a much faster rate than enrollment.

10ATTACHMENT 1

The Impact of Recapture11

$922.9

$1,061.7

$1,176.0$1,265.8

$1,350.7$1,428.6

$266.1

$406.1

$536.1

$638.8$726.2

$807.5

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

FY2016(Actual)

FY2017(Adopted)

FY2018(Projected)

FY2019(Projected)

FY2020(Projected)

FY2021(Projected)

Mill

ion

s

M&O Collections Chapter 41 Payments

28.8%

38.2%

45.6%50.5%

53.8%56.5%

ATTACHMENT 1

Revenue vs. Recapture*

$809.7$922.9

$1,061.7$1,176.0

$1,265.8$1,350.7 $1,428.6

$628.6 $656.9 $655.6 $639.9 $627.0 $624.5 $621.1

-$181.1 -$266.1-$406.1

-$536.1-$638.8

-$726.2 -$807.5

$33.5 $22.4 $34.6 $20.3 $33.1 $19.5 $32.3

-1,000

-500

0

500

1,000

1,500

2,000

FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021

Mill

ion

s

Total M&O Collections Net M&O Collections Retained Chapter 41 Recapture Total State Aid

12

*This chart is based on the preliminary values provided by the Travis Central Appraisal District (TCAD) and the current state funding formula that were released in January 2017. The projected dollar amounts will more than likely change if the legislature alters the school finance funding elements and as TCAD will furnishes preliminary certified values and certified values.

ATTACHMENT 1

Zero Based Budgeting (ZBB)

• The District implemented ZBB for FY2018. In ZBB, it is assumed that the organization is starting a new - right from the planning stage, especially for preparing budgets

• The Budget Office provided ZBB templates to departments in October 2016

• Departments built and vetted their budgets while collaborating with their Executive Directors and Chiefs

• Completed ZBB templates were returned to the budget office in January and February 2017

• After years of budget cuts, multiple departments submitted budget increases through their ZBB

• In the next six weeks, these requests will continue to be vetted; some requests will be denied

13ATTACHMENT 1

Budget Pressures: New Programming & ZBB Requests

Amount

New Campus Programming: Montessori Program, Health Sciences Program at LBJ,

Computer Science Program at Reagan $1,350,413

Facilities Master Plan (FMP) Operating Costs TBD

ERP Stabilization & Training $1-2 million

Legal Services & Legal Settlements 379,010

Professional Services - Affiliation Agreement with Seton and Tuition for ACC Early College 2,650,130

Software (In addition to the amount in Baseline Forecast) 1,064,782

Replacement Vehicles, Vehicle Supplies and Vehicle Maintenance 1,000,962

Maintenance & Repairs - Construction Mgt, Custodial and Grounds 7,158,808

14ATTACHMENT 1

Appendix2017-18 Board Budget Development

ATTACHMENT 1

2017-18 Board Budget Development

Agenda Item Date

The Board initiates the budget process with a discussion of the approach for the FY2017-18 Budget Development Calendar

10/03/2016

The Board adopts the FY2017-18 Budget Development Calendar 10/24/2016

1st Quarter (July-September): Quarterly FY2016-17 Financial Report & Budget Amendments 12/19/2016

FY2017-18 Board Budget Development Workshop #1: FY2018-FY2020 Forecast 02/27/2017

2nd Quarter (October-December): Quarterly FY2016-17 Financial Report & Budget Amendments

02/27/2017

Travis Central Appraisal District (TCAD) will release the Preliminary Certified Values 04/03/2017

FY2017-18 Board Budget Development Workshop #2: FY2017-18 Preliminary Budget 04/24/2017

16ATTACHMENT 1

2017-18 Board Budget Development

Agenda Item Date

Board Approves Consultation Agreement in regards to the Compensation & Health Benefits Plans

04/24/2017

FY2017-18 Board Budget Development Workshop #3: FY2017-18 Recommended Budget 05/22/2017

3rd Quarter (January-March): Quarterly FY2016-17 Financial Report & Budget Amendments

05/22/2017

Board conducts legally required public hearing on proposed budget and tax rate 06/19/2017

Board adopts FY2017-18 Governmental Funds Budget 06/19/2017

4th Quarter (April-June): Quarterly FY2016-17 Financial Report & Budget Amendments. Board approves the final budget amendment for FY2016-17 (prior year)

06/19/2017

Travis Central Appraisal District (TCAD) will release the Certified Values07/25/2017

Board adopts Tax Rate for FY2017-18 08/28/2017

17ATTACHMENT 1