More of the Same

February 25th Property and Finance Committee MeetingIn attendance: Committee Chair Sean Carpenter and members Karen Miller and Maureen Snook. Also in attendance were Board President Vince Murphy, Linda Raileanu, Sue Tiernan, and Heidi Adsett. Committee Member Ed Coyle did not attend.

There was only one topic on the agenda in addition to the approval of last month's meeting minutes, and the meeting was quite short.  There were approximately 10 audience members in attendance.

Before the meeting began, Mr. Scully, Assistant Director of Business Affairs, informed us that he would be leaving WCASD in April.  Mr. Scully is the 3rd high level administrator to leave WCASD in recent months, a somewhat alarming trend.

Dr. Moore then lead the group through a discussion on the recently released Governor's Budget for next year and what it means for WCASD.  Here are the highlights:

• state basic education funding was increased by $90M, a 1.7% increase, and WCASD's basic education subsidy was increased by $175k
• if the Governor is able to sell the state’s liquor store system, he has proposed using $1B of this for a new block grant initiative called “Passport for Learning” which would award grants to school districts for expenditures in areas such as school security, preschool education, and grade 6-12 STEM programs
• Special Education was flat funded for the 6th consecutive year, and because $10M has been moved to a contingency fund, school districts will see a small decrease in their special ed subsidies this year (WCASD will receive ~$20k less)
• the Accountability Block Grant has been level funded again after being cut by 60% in 2011
• critical subsidy items that were eliminated in prior years such as charter school reimbursements, intermediate unit funding, and school improvement grants have not been even partially reinstated so overall education funding is still far behind what it was in prior years
• It is interesting to note that the administrative budget for the PA Council on the Arts received a 3.7% increase and the PA Historical and Museum Commission received a 3.8% increase

How, you might ask, was Governor Corbett able to balance his budget without any cuts to education as we have seen for the past 2 years since he took office?  Corbett has come up with his own pension reform plan which he claims creates short term savings as well as long term structural changes.  A key part of Corbett’s reform would further reduce already suppressed pension contributions from 4.5 percent annual growth to 2.25 percent annual growth – this would achieve $175M in “savings” (delayed expense) this year and further savings over the next five years.  However, the unfunded liability will come due eventually and will continue to grow.  But this approach would allow both WCASD and the state to collectively spend almost $2M less on our district’s pension costs next year and amounts greater than that for the following 3 years.

At first glance this sounds like great news, right?  Less $ put into pensions means more $ for our kids' educations.  There are 2 problems with this "reform" however:

1. this is not "reform" in that it does not address the actual problem which is that the PSERS system is woefully underfunded, the state does not have the money to address the shortfall, and the magnitude of the underfunding is simply too great to put on the backs of taxpayers; all this proposal does is DELAY the problem, however, and put off the inevitable pain yet again; we don't need another delay, we need a CHANGE to this system which is not sustainable as is
2. Governor Corbett cannot unilaterally decide to make this funding change on his own, he must get the legislature to buy into it; in fact, he has publicly stated that if the legislature does not adopt these pension reforms then the basic education subsidy will be cut

So what could it mean for West Chester's state funding if the legislature does not buy into this idea of kicking the can down the road once more?  We know it would go down, but the exact amount is not certain because there is more than one way to estimate the impact.  Based upon a very aggressive methodology (and one I maintain does not sufficiently reflect the potential risk), since WCASD's basic education subsidy is calculated as 0.13% and the current proposed budget underfunds next year's state PSERS obligation by $154M, you could argue that our share of the $154M shortfall would be 0.13% which equates to ~$201k.  However, if you consider that the 2013-14 proposed budget includes $964k less than West Chester would receive per the current mandated PSERS rate, you could also reason that without the governor's pension reform we could actually lose that much from our state funding; this is a much more conservative estimate yet a very possible risk.  Either way, be it as low as $201k or as high as $964k, it will more than wipe out the $175k Basic Ed increase currently being projected for us.  What the governor has done is actually quite ingenious--no one is jumping up and down as they did after the initial budget draft was released the last 2 years because on paper it looks like schools will be getting a slight increase to their funding rather than the cuts we were seeing...and if it turns out that the changes to pension funding are not made and schools actually experience funding cuts yet again, well that will be the legislature's fault for not doing what it was asked to do...right?
 
Dr. Moore then presented that if this first draft of the budget was to pass without any changes, our projected shortfall for next year would decrease from $4.3M to $3.2M.  This could be partially offset with a tax increase no higher than 1.7%, with the remainder (or the entire amount) being addressed using our existing fund balance.  I felt the need to bring up the same issue I raised last month.  With or without this so-called "pension reform", we still have a multi-million dollar shortfall to address.  Given the board's objective to have a draft budget pass in April, any expense cuts or revenue enhancements should have been presented by now; since none have, one can only assume that the board is targeting neither.  The logical question is why?  There are numerous potential cost saving measures remaining from the last budget task force--why are they not being vetted?  Have we determined that there are no reasonable cuts remaining?  The pension reform that the governor has proposed will actually serve to increase the overall cost of the pensions, so the costs are not going away; while we do have enough fund balance to cover next year's costs, that will not be the case for the next several years when these costs become even higher.  So, couldn't the choice to use such a large amount of our savings in lieu of any cost cutting investigation be considered short sighted and financially irresponsible?

Similar to last month, no answer was provided.  There was talk about the capacity of the various committees to pursue any cost cutting measure they chose, but these committees are not some abstract group of people somewhere else--they are the very same people who were currently in the room, and none of them voiced any intention of pursuing any changes (yet they also would not confirm that no reasonable money saving options remain).  And so I remain baffled on exactly what the long term financial plan of this board really is--do they have one, or are they simply trying not to rock the boat as we go into Primary season with 3 current members running for re-election?  We can only wait and see, and hope that the financial health of our district does not become the casualty of a political strategy.