Budget Committee Approved Minutes
BUDGET COMMITTEE
January 8, 2013
Town Hall Auditorium 6:30 p.m.
Final School Budget Review Session
MEMBERS PRESENT:
Chairman Brian Hart, Vice Chairman Ellen Snyder, Rose-Anne Kwaks, Amy Thompson, Jack Fitzgibbon, Dana Glennon, Russ Simon, Judy Ryan, School Board Representative Linda Mantegani, Town Council Representative Gary Levy, Drew Kiefaber
EXCUSED:
Dana Glennon (recovering from surgery)
ALSO PRESENT:
Superintendent of Schools Dr. Jim Hayes, School Finance Director Christine Blouin
Chairman Hart opened the meeting at 6:30 p.m., followed by the Pledge of Allegiance.
APPROVAL OF MINUTES:
1. School Board Representative Mantegani moved to accept approve the minutes of the December 17, 2012 meeting. Councilor Levy seconded. There was no discussion. Motion carried unanimously, 10 – 0.
2. Mr. Kiefaber moved to approve the minutes of the December 19, 2012 meeting. Ms. Thompson seconded. Ms. Ryan said that Mr. Glennon had worked for UNH rather than Apple as reported on page 3.
Councilor Levy said that minutes reflect what is said at the time which might be or might not be accurate. Chairman Hart said he believed the conversation related to Mr. Glennon selling Apple computers. Motion carried 8 – 0 – 2, with Mr. Simon and Councilor Levy abstaining as they had not been at the meeting.
REVIEW OF SCHOOL BUDGET:
Ms. Blouin said the FY2014 general fund operating budget was $14,843,617, the food service budget was $329,950 and federal funds were $450,000 for a total of $15,623,567 for appropriations. Deducting estimated revenues from these same sources totaled $1,053,550 and the amount to be raised through taxation would be $10,483,774. This would result in a negative 2¢ on the tax rate for budgeted items, a negative 5¢ for the teachers’ contract, and a positive impact of 95¢ for the article on fire and life safety and a positive impact of 7¢ for the energy fund article. The total tax impact of the budget and warrant articles shows an increase of 95¢. She then directed the Committee to the default budget, which would be in place if the School Meeting did not pass the FY2014 budget. That operating budget at $15,889,684 was higher and would add 34¢ to the tax rate mainly because 5.5 staffing positions had been cut in the proposed budget. If warrant articles other than the budget passed, the total tax impact would be $1.31. She said the default budget included FY2013 appropriations and added in contractual obligations. The 2013 approved budget of $14,434,132 on page 4 of the budget dated Nov. 15, 2012 was the starting point before contractual obligations of $708,000 were added, a great part of which was for New Hampshire retirement costs. New Hampshire retirement costs are set for 2 year periods creating a spike every other year. She also added anticipated fuel costs for the default budget.
Ms. Kwaks asked what RSA the default budget was based on. Ms. Blouin read from RSA40: 13IX, which stated in part that one-time expenses that were not likely to re-occur, could not be included in a default budget. There was a question as to whether RSA 40:14b had been adopted, which would allow the Budget Committee to set the default budget... It was thought that this had not been adopted, but this will be looked into to find out the specific provisions of the law. An example of a one-time, non-recurring expense would be re-roofing a building, while a recurring expense would be for a contract or lease. The Committee discussed whether increases for fuel oil were contractual or were one-time expenses. Ms. Blouin said she had prepared a Warrant Article to create an Energy Fund to offset some of the increases when they occurred. Chairman Hart read from the law which stated that increases for such things as energy costs could not be a part of a default budget, and those costs had to remain at the prior year’s level. He felt if the school had a multi-year contract with set prices per year, they could budget for the increase. Ms. Blouin said she would challenge that as she considered oil prices a fixed cost for services that they had an obligation to provide. She said she would feel differently if they were adding to the number of units previously used. The law also stated that a default budget could not include appropriations for new items or re-purpose money. Because of the confusion in interpreting this law, the Committee will ask for a clarification from the Municipal Association.
Ms. Blouin will send an itemized list of the final increases to the FY2013 budget used in setting the default budget. Chairman Hart pointed out that the Committee did not have the authority to change the default budget, only the School Board could do that as RSA40: 14b had not been adopted. The School Board could spend money on different items if one cost came in lower as long as the total amount of appropriations did not increase. If there was a cost savings, the money would not have to be returned to the taxpayers. The law states how the budget is created, not how it can be spent, as long as it is spent for education. Money can be appropriated or re-appropriated to other accounts only if they had funding the previous year. Last year’s surplus was from 2 Warrant Articles that cost less than the amount asked for, but because those funds had been specifically voted for 2 purposes; those funds could not be used to defray expenditures for other items. Ms. Blouin said that to cover overages in the operating budget last year, they had to use monies from the Trust Funds expenses that were designated as appropriate to those Funds. Recently, she had 3 unexpected out-of-district special education placements which will cost $100,000 and necessitated a budget freeze. She said that they needed to build a safety net into the budget and they were operating as tightly as possible. She referred to a Warrant Article which is discussed later in the meeting, which would give the School Board the authority to expend unanticipated revenues in part to offset unexpected expenses. The line item for summer school referred to the Special Education program, as the other summer school program had been eliminated.
WARRANT ARTICLES: Any amendments to the Warrant Articles cannot eliminate the subject matter of the
Article. This was included as a new clarification to the Warrant.
Warrant Article 1: Operating Budget; Recommended by the School Board, 4-0, with one abstention.
Dr. Hayes asked that they not discuss the collective bargaining agreement at this time and save their questions for the presentation on Article 3. The Article asks for passage of the FY2014 operating budget of $15,623,567 which if not passed would allow for a default budget of $15,889,684. The Article makes provision for a Special School Board Meeting for the issue of a revised operating budget only. No funds from other Warrant Articles are included in this Article. If Article 3 concerning the teachers’ contract passes, the operating budget will be reduced by $37,339. The presentation of the Article included back-up information comparing appropriations, revenues and estimated tax impact between the requested and default budgets. (This was discussed earlier in the meeting.) The requested budget shows a 2.84% or $409,485 increase above the FY2013 approved budget. Monies for federal funds have to be included in the operating budget and then are washed out by the same amount in the revenue budget, so that those funds are not raised through taxation. Mr. Simon asked if revenues come in lower than specified in the budget, after approval by the voters, would they still spend the money. Chairman Hart said they approve the bottom line amount only, and if the School knew it was not receiving the amount expected, it would reduce expenditures as much as possible so that the tax rate would not go up. The authority to spend the money and actually spending the money are 2 different things. Other background information was not discussed, as it had been dealt with earlier in the meeting.
Warrant Article 2: Fire and Life Safety ;Recommended by the School Board 5 – 0.
The Article represents year 3 of a 4 year plan totaling $2,020,301 that was designed to raise funds gradually. The Article asked that the sum of $706,907 be added to the Construction of a New School Building and Renovation of Existing School Buildings for Fire and Life Safety Code Compliance Capital Reserve Fund established in 2012. The flexibility in the title of the Fund allows for monies to be spent either on a new school or in renovating the present structure. Repairs are expected to be complete or the present building abandoned by September, 2015 unless construction on a new school has begun. The District has completed some renovations, but, after conferring with state and local fire officials, has held off on those that would be costly and unneeded if the decision is to build. For example, this year the egress from the 2nd floor science labs will be corrected, but the addition of an elevator and enclosed stairway will be delayed. Because the fund has a dual purpose, and delayed funds for renovations can be put towards a new building. It is necessary to continue to raise additional funds even if not all the renovations have been done at this time. An Article to raise $50,000 for architectural fees for a new building had been eliminated from the Warrant.
Mr. Simon said that if they had not spent the $700K approved last year because of delays he was concerned that the taxpayers were being asked to raise an additional amount. Dr. Hayes said they had build flexibility into the Fund, but they had to have a certain amount for all the work. They would have to raise a larger amount the following year to supplement the amount in the four year plan to reach the $2,020,301 amount. In addition, they would not have time to complete all projects required by the State Fire Marshall. School Board Representative said if repairs were not done, they had to have approval to either renovate the existing building or build a new one in the form of an approved Warrant Article. Mr. Simon asked then if they had looked for alternative solutions in projects that would cost less. This would consider that the amount might have been over-estimated, but would be different from not funding one year of the plan. The monies going into the dual purpose fund were for purposes authorized by the taxpayers. The only delays were for items that would be less useful and costly if a new school were built. The language and purpose of this Capital Reserve Fund was suggested in a previous year by the Budget Committee, and the voters agreed that they wanted flexibility in the Fund. Dr. Hayes added that they had negotiated this plan with the State Fire Marshall’s office, and any serious delays in the schedule for raising money and doing the work would send the wrong message about committing to fire and life safety in the building.
Warrant Article 3: Collective Bargaining; Recommended by the School Board 4 – 0, with 1 abstention.
There was a savings in health insurance which was applied to salary increases and salary-driven benefits. This was not from a reduction in health benefits, but from a change in insurance carriers and the addition of a plan. The impact for FY2014 showed an increase in compensation of $307,616, based on current staffing levels, less health insurance savings of $344,955 and with passage would reduce the operating budget by $37,339. In year 2 of the contract compensation increases would total $178,583 and in year 3, $179,163. Mr. Simon asked if the operating budget would also be reduced with passage of the Article for the $110,000 in health insurance savings for non-teachers. Ms. Blouin said they had talked about this, but since they did not yet know the affect of the Affordable Care Act that will become law in January, 2014, they had decided to leave the amount in. She said they could incur penalties for those who were eligible but not enrolled in the plan. Those penalties could be as high as $67,000 and would reduce the amount considerably. Also they had had significant inquiries about joining the new insurance plan in July because it is less expensive than the current one.
There would also be an opt-out payment for those who provided proof of insurance in an alternative, non-subsidized plan. The payment of $1,000 minus any penalty that the District incurs for subsidized insurance, would be made in the last pay period of the fiscal year. If enough teachers opt-out of the District insurance in 2013-2014 that the District recoups the increase in opt-out payments to teachers who had opted-out in 2012-2013, the amount of each payment would increase in FY2014 and in subsequent years. Payments for opting out of single coverage would be $1,500, for two-person coverage, $2,000 and for family coverage, $3,000 minus any penalty the District incurs for subsidized insurance. Health insurance for a family plan costs about $30,000, so this would save the District a great deal of money. Ms. Blouin said that they were hoping that the opt-out program would offset any increase in participation, but it would be difficult to determine that for the first year. Part of the $110,000 might be necessary to offset any increases.
The contract will take effect on July 1, 2013 and end in three years, on June 30, 2016, and the “phrase “or until a subsequent agreement is ratified” had been deleted. If a new contract is not in place, the only increases would be for those changing columns by earning an advanced degree. Personal leave had been defined for personal, family, religious or legal business that could not be conducted outside of work hours; it is no longer cumulative and cannot the rolled into unused sick leave. Reduction in force would not be based solely on seniority, as the state had declared that illegal. It now would be defined by assignment area and by a priority point system listing 8 considerations. Observations and annual evaluations would now include an overall performance rating with back-up comments. In the case of reduction in force, the teacher with the least number of points would be the person let go. A person displaced in one assignment area can request moving to another if holding a higher point rating than another teacher in that area. This would also depend upon certification and at least 2 years experience in the last 15 years in the new area. Ms. Kwaks asked what the criteria were for the overall performance ratings. Dr. Hayes said they used the Danielson model for standards, and he will give the book to the Committee if anyone is interested in reading it.
The top of page 11 highlighted proposed changes to advancing on the salary column. Beginning on July 1st, most credits would have to be from graduate level courses, and completed with a grade of at least B. Salary adjustments will not be made until all transcripts are on file and verified by the SAU office. Professional development courses, such as workshops and conferences would not qualify. Reimbursement for graduate courses is included for up to four credits at the UNH rate.
The bottom of page 11 included details of the new health insurance plan, much of which was discussed earlier in the meeting. The new plans would be school care point of service, HMO and open access plus. Employee contribution rates remain the same as in the past. Opting out payments are flat rates, not percentages of insurance plans. Currently the district pays $1,000 to those opting out, but with the new contract those people would have to show proof of insurance in a non-subsidized plan. This amount will be increased if a sufficient number of additional teachers opt out of the district’s plan. Dr. Hayes gave examples of how this plan could work. Rather than $1,000 for opting out for single, two-person or family plans, the rates would be increased per tier. In 2012-13, if 3 people opted out of a single plan, the payment would increase from $3,000 to $4,500; if 5 people opted out of the 2-person plan, the payment would increase from $5,000 to $10,000; if 7 people opted out of the family plan, the payment would increase from $7,000 to $21,000. These amounts would add up to $35,500, $20,500 higher than the $15,000 cost at the current rates. In 2013-14, if additional people decide the larger payment is incentive to opt out and wish to take alternative insurance, the additional savings to the district would be compared to the increased costs for those who opted out in 2012-13. If the additional savings were higher than those costs, the opt-out payments would increase in 2013-14 and in subsequent years of the contract. If there were not enough additional people to produce higher savings over the previous year’s costs, the payments would remain at the current $1,000 level for 2013-14 and for subsequent years of the contract.
The decision to opt-out would have to be made and proof of insurance received prior to the open enrollment time each year. After this time, the decision could only be changed if life event changes occurred, such as marriage or the birth of a child. Once intent letters are received the district will calculate the savings to determine which payment option will be used. With the new insurance provider, the new plan has a deductible, while the other 2 have co-pays only. The increase of $484,682 in the orange budget book includes retirement at the new rate and salaries and salary-driven benefits at the current level as the warrant article has not yet been voted. The increase in salary costs will be covered by the reduction in health insurance costs. Article 4 deals with Article 3 being defeated and provides the option for the School Board to re-open negotiations. Any change in health insurance has to be negotiated, and they had negotiated the tiered amounts for the op-out options. They had decided on the amounts based on a survey of teachers. Mr. Kiefaber pointed out that although the booklet shows all the health insurance savings in the first year, there will be savings in the operating budget for this item in the second and third years of the contract. Councilor Levy said the net result was a savings in insurance which offset an increase in salary costs in the school budget, while the town was basically flat or level funded. Dr. Hayes said that in the past, health insurance costs had risen faster than salaries. Ms. Blouin said that she would pro-rate any payments for the opting out if there were changes for anyone in the plan.
The bottom of page 13 highlights the proposed salary increases per step. In the first year of the contract, there would be a 3.7% increase and in years 2 and 3, 1.6% increases. Teachers must work a minimum of 91 days in the prior school year to advance to the next step in the salary schedule, which is outlined as a part of the chart. Page 14 continued with other financial aspects of the contract. The $500 bonus given to teachers on Step 1in their first year has been eliminated. There was no change in longevity experience and longevity in Newmarket payments. Upon completion of 14 years of teaching a stipend of $100 will be given for every year in excess of 14, and teachers with 10 or more years of experience in Newmarket will receive an additional $500. The latter is not cumulative. There were changes in the amounts paid to teachers beyond the Step 15 level. Those who received $3,000 or less in additional compensation to their contracts in 2012-2013, will continue to receive that amount under the present contract. Those who received more than $3,000 in additional compensation to their contracts in 2012-2013 will see that amount reduced by $500 in 2013-2014, $500 in 2014-2015, and another $500 in 2015-2016. No other teachers will be eligible for this benefit.
The chart at the bottom of page 14 showed the amounts of additional compensation at present staffing levels. Dr. Hayes said that warrant articles require that present staffing levels be used in determining costs, and do not allow taking any anticipated retirements into account. He felt over the course of three years there could be some retirements, but could not state this with any certainty. Mr. Simon said that they were in places budgeting for the maximum, but in others not reducing the budget for savings, and he would like to see a better balance. Councilor Levy said that the assumption was made that there would be a savings of $345,000 in health insurance, and he wanted to know on what that assumption was predicated. Ms. Blouin said this was based on moving people to similar plans with the new provider, but there was also the new deductible plan which, if people chose, could produce further savings. He said that on the other hand, the increase in salary was not an assumption. He said that if insurance rates increased in the 2nd year of the contract, the taxpayers would be paying more. He felt the District was not realizing the same level of benefits as the union. Ms. Blouin said they could see the insurance savings in the first year, but even an increase in rates of 10% would still be less expensive than the current plan and would be beneficial to the taxpayers.
School Board Representative Mantegani said there was also a large savings in changing the structure for additional payments those beyond Step 15 especially since there would be no one else added to this program. There had been disagreement and confusion about the interpretation and implementation of this program in the past, and since the language had not been clear, the payments were interpreted to be cumulative. They had negotiated out of that interpretation for the proposed contract. Mr. Kiefaber said the teachers had known that the cumulative payment of $1,500 was not sustainable, and the negotiating team had picked up on this. The severance package is the last part of the collective bargaining agreement. There will be no changes for those employed in Newmarket for 15 years as of July 1, 2013 and no cap on total severance amounts. This is another cost that was considered unsustainable. For any teacher with less than 15 years as of July 1, 2013, the maximum benefit will be $25,000. Severance is built at the rate of $600 per year for 15-24 years and $900 per year for 25 plus years of service. It would take 28 years of service to build to the maximum. Teachers may chose to spread the severance amount over 1 – 3 years, rather than taking a lump sum payment. This helps the District as well as spreading out the tax implications for the retiree. Once payments are started, the intent to retire is binding must be kept on the original schedule. They expect to pay $85,000 in severance this year, for which they have intent and binding. Ms. Blouin will email the total number of people with no maximum to their severance and the total school obligation as of this time.
The Committee went into recess from 8:52 to 9:00 p.m.
Warrant Article 4: Special Meeting; Recommended by the School Board 5 - 0
This article would take effect if Article 3 is defeated. The School Board could call a meeting to address the cost items only in Article 3. This had been discussed earlier in the meeting.
Warrant Article 5: Surplus to Expansion of School Facilities CRF; Recommended by the School Board 5-0
Warrant Article 6: Surplus to School Technology Expendable Trust Fund; Recommended by the School
Board 5 - 0
Warrant Article 7: Surplus to Special Education CRF; Recommended by the School Board 5 - 0
Warrant Article 8: Surplus to Repair and Maintenance of School Facilities; Recommended by the School
Board 5 - 0
Articles 5, 6, 7 and 8 were similar in intent and dealt with the distribution of any surplus funds. Each asked that 25% of any surplus be equally divided between the Funds up to a maximum amount of $50,000. Dr. Hayes said there was a slim chance that there would be a surplus, but they wanted to reserve the opportunity to put money in their existing trust funds or capital reserve funds. Ms. Blouin said she thought the two terms meant essentially the same thing. Dr. Hayes said that all the Articles had been reviewed and approved by their attorney and DRA. Chairman Hart suggested that, in the event of a small surplus, priorities be set among the 4. Dr. Hayes said there had been a separate warrant article proposed for technology, but that they had decided not to present it this year. He referred to the no means no law, and if a warrant article is not approved, they would not be able to use other funds for this purpose. The Technology Trust Fund can be used to purchase equipment, but has generally been used for emergencies.
Articles 2, 5 and 8 seemed to have similar purposes, although Article 2 was specifically for meeting fire and life safety repairs required by the State Fire Marshall. Many felt that the priorities for surplus funds should be technology and special education, and there was a suggestion that 5 and 8 could be combined.
Warrant Article 9: New Utility Expenses Capital Reserve Fund; Recommended by the School Board 5-0
This would create a new Capital Reserve Fund and appropriate $50,000 to help buffer increases in utility costs, especially fuel oil. The voters would have to approve any additions to this Fund in the future. The Town is allowed to have CIPs, but the School is not. Defeat of this Article would not come under the no means no law.
Warrant Article 10: Unanticipated Funds; Recommended by the School Board 5 - 0
The Article asked if the School would accept the provisions of RSA 198:20-b and allow the School Board to apply for, accept and expend unanticipated funds from a state, federal or other governmental unit or a private source which become available during the fiscal year. The law stipulates that the School Board does not have to have a Public Hearing for amounts under $5,000, but does for amounts above $5,000. The language of the Article was set by the state. Revenue sources don’t always meet the town’s calendar, and Ms. Blouin gave the example of Medicaid Funds which often come in after the budget is voted. These funds are considered in addition to funds for expenditures in the approved budget.
There was a lengthy discussion of possible abuses of this provision, such as manipulating the budget. There was a concern that the School Board would spend additional funds on top of what had been provided through taxation, rather than returning like funds to the taxpayers. School Board Representative Mantegani said that the voters in the community vote for School Board members who they think will represent the community in an appropriate way. Ms. Thompson said there was some feedback within the community that expressed concern and distrust of the School Board with the taxpayer’s money, as they felt additional funds should be returned to the taxpayer. Ms. Blouin emphasized that this would mostly be for state, federal or other governmental funds, and in the rare case of private funds, they usually stipulated a specific purpose. In this case, she would not use funds to offset the operating budget, but use them for trust funds or capital reserves. Without passage of the Article, the school would not be able to spend monies that come in after the budget is approved. There was a question about setting aside funds or grant monies until a vote at the next town meeting. Very often grants require that monies be used by a certain date. Reimbursements require that the money be spent before being received. They are not allowed to supplant money in the operating budget with grant money. Councilor Levy said he would not personally use the word distrust, but some people would like to see this money go into fund balance or surplus and be returned to the taxpayer. He said this was a philosophical discussion.
Last year, money that came from Medicaid after the vote went to fund balance, rather than being used to offset some special education expenditures. Ms. Blouin said that she had to use money from the trust fund to cover those expenses. With passage of this Article, money could go to the operating budget, rather than to fund balance, which some would like to see happen. She said she did not think passing the Article would change the position of the School Board to return as much money as possible to fund balance and the taxpayers. However, if there was an opportunity to provide better services to the students, she felt they should take it. She said that generally, this could be decided on a case by case basis. There was a new school law that allowed school districts to take 2 ½ % of their net assessment and set it aside in fund balance for emergencies. An Article to approve that was not on the School Warrant. Instead, there were 4 Articles to use surplus for specific purposes. Ms. Blouin said it would depend on the language of a grant as to whether funds could be spent in addition or as part of the approved budget. Article 10 means that money could be spent in addition to the approved budget. School Board Representative Mantegani said that the earlier concerns suggesting distrust of the Board, were from the minority, and she took the use of the word “distrust” personally. It was pointed out that this same authority as outlined in the Article already exists for the Town Council. Councilor Levy said that sometimes words get used, but he did not think this was personal, and he hoped, in general, that people didn’t take offense. He reiterated that this was a philosophical question that people ask. School Board Representative Mantegani objected to the use of the word distrust in the conversation and was assured that this was not intended to offend.
Warrant Article 11: Inclusion of Tax Impact; Recommended by the School Board 5 -0
The School is required to put this before the voters for inclusion on next year’s Warrant. In the meantime, additional information on tax impact of warrant articles and the budget will be in hand-outs for the Public Hearing and Deliberative Session as well as on the school’s web site. Tax impact for the 4 financial Warrants add to 95¢ and $1.31 in the default budget.
Warrant Article 12:Non-Binding Referendum; Recommended by the School Board 5 - 0
Dr. Hayes said the intent of the Article was to get the pulse of the community’s interest in pursuing discussions with Oyster River, and prepare a report to the community by February, 2014. A meeting between both Districts has been scheduled for January 22nd. Any agreement to send Newmarket High School students to Oyster River would have to be voted on by the School District. He has a copy of Oyster River’s agreement with Barrington which he will for cost comparisons. He said this was easy to do for regular education, but very complicated for special education students. He was hoping to have the comparison prepared by March 5th. January 22nd has also been set aside for Budget Committee voting if not done on the 14th. There was a discussion as to when articles had to be posted before the Deliberative Session.
Warrant Article 13: Other Business; no discussion
The Committee will vote on the School Warrant Articles after the January 14th Public Hearing or on January 22nd at 7:00 p.m. The Committee cannot vote on line items. Vice Chair Snyder suggested that members prepare their ideas for the 14th. There was a further suggestion that at least some of the easier Warrant Articles could be voted on after the Public Hearing. It was hoped that Mr. Glennon would be able to attend either meeting.
Respectfully submitted,
Ellen Adlington,
Recording Secretary