2016-17 Budget FAQ
- Q: What are the key drivers of the budget?
- Q: How has the budget been impacted by the rising costs of mandates like pensions and special education?
- Q: How has enrollment growth impacted the budget?
- Q: How much funding for instructional expenditures does the District receive from the state compared to other districts?
- Q: What is a fund balance and why is it important for the District to maintain? Why can't we use the fund balance to offset budget increases?
- Q: What is the District's current fund balance and what is it being used for?
- Q: What are referendum exceptions and why does the District apply for them?
- Q: How is cost per pupil calculated in Pennsylvania and what is the figure for LMSD?
- Q: What percentage of the budget goes towards salaries? What is the breakdown for teachers, administrators and support personnel?
- Q: How was the 4.44% proposed tax increase in the preliminary budget determined?
- Q: What would the potential implications be if the District developed a budget that stayed within the 2.4% increase per the state index?
- Q: Why would a District not spend all of the funds it has budgeted in a given year?
- Q: What has the District done to cut costs and reduce spending?
- Q: How does the District's proposed tax increase compare to what other districts in the area are proposing?
- Q: What is a "preliminary budget" and when is the "final budget" adopted?
- Q: What variables must a district consider when preparing its budget? What resources are used to make informed decisions on projected costs?
- Q: What are some of the unique programs and services that distinguish LMSD from other districts?
- Q: How does LMSD's level of achievement compare to other Districts?
- Q: What are the district's transportation costs? Does LMSD operate transportation services differently from other districts?
- Q: How does debt service impact the budget?
- Q: What are factors unique to school district budgeting that may be different from other taxing authorities?
- Q: How has the District's school modernization efforts impacted the budget?
- Q: What are the terms of the new contract agreement with LMEA?
Q: What are the key drivers of the budget?
A: Fixed costs, including salaries, benefits and debt service continue to be key drivers of the budget, accounting for nearly 88% of expenditures. Salaries and benefits are determined through a collective bargaining agreement between the District and its employees. Debt service refers to the District’s outstanding obligations on bonds used to finance school construction projects.
Q: How has the budget been impacted by the rising costs of mandates like pensions and special education?
A: Mandates have had a dramatic impact on the LMSD budget. Shortfalls in state funding of PSERS (state pension program) have forced local school districts to make up the difference using local tax revenues. Districts are required to contribute at a rate more than 16% higher than last year -- well beyond the established inflationary index. Additionally, the cost of providing appropriate special education services continues to increase while state support remains virtually unchanged. Since 2000, the District's special education budget has increased from less than $15M to nearly $47M. At the same time, state contributions for special education have remained flat at less than $3.5M/year. A growing list of additional unfunded/underfunded mandates include state standardized testing, school health programs and training, transportation services, PA Core compliance, staff development and Act 82, among others.
Q: How has enrollment growth impacted the budget?
A: An increasing number of students (nearly 21% growth in the past ten years) has resulted in the need for additional staff, classrooms, buses and other services to maintain existing programs. While staffing has grown, it has not kept pace with student growth. During the 2004-05 school year, there were 634 teachers in the district. Today, there are 759 teachers -- a 16.4% increase. Staffing is the single biggest driver of the budget; more students results in the need for more staffing and thus, greater costs.
LMSD's enrollment has increased more than Haverford, Radnor and Tredyffrin/Easttown combined (% and total enrollment) during the last four years. LMSD has the highest enrollment increase percentage over a three, five and ten-year period among these districts and other high-achieving districts in Southeastern PA like Wallingford-Swarthmore, Upper Dublin, Unionville and Downingtown. In fact, LMSD is now among the fastest-growing districts in the state.
|School District||% Enrollment Increase/Decrease SY11/12-SY14/15|
|Lower Merion SD||9.03%|
|Haverford Township SD||3.59%|
|Radnor Township SD||1.42%|
|Upper Merion SD||1.32%|
|Garnet Valley SD||-1.0%|
|Upper Dublin SD||-1.21%|
|Unionville-Chadds Ford SD||-1.54%|
|West Chester Area SD||-1.80%|
|Great Valley SD||-2.26%|
|Council Rock SD||-5.10%|
Q: How much funding for instructional expenditures does the District receive from the state compared to other districts?
A: Statewide, school districts receive an average of nearly 32% of their funding for instructional expenditures from state sources. In 2013-14, state sources accounted for just 2.31% of the LMSD actual instructional expense. This percentage has continued to decrease over time, forcing a greater burden on local taxpayers.
Q: What is a fund balance and why is it important for the District to maintain? Why can't we use the fund balance to offset budget increases?
A: Fund balance is a measure of net financial assets, which is similar but not identical to equity or accumulated savings. The fund balance is equal to financial assets less financial liabilities.
A common misconception is that fund balance is a cash account, and therefore corresponds to the district's bank balance. As discussed above, fund balance represents the fund's total assets minus its liabilities (what a fund has minus what it owes). Cash is an asset, but it usually is not a fund's only asset. The fund may also have liabilities, such as an accounts payable amount due a supplier that could result in a decrease in fund cash when they are paid.
A district with an appropriate fund balance can:
- avoid excessive short term borrowing thereby avoiding associated interest cost.
- accumulate sufficient assets to make designated purchases or cover unforeseen expenditure needs.
- demonstrate financial stability and therefore preserve or enhance its bond rating, thereby lowering debt issuance costs.
The most commonly asked question regarding fund balance is how large should it be? Perhaps the best answer would be: "an amount sufficient that short term borrowing for cash flow could be avoided and would also allow the district to set aside sufficient assets to realize its longer range goals."* However, this may not always be practical.
* Governmental Accounting Standards Board (gasb.org)
Q: What is the District's current fund balance and what is it being used for?
A: Lower Merion School District carries nearly $56M in fund balance. Most of this amount represents a "committed" fund balance, which means it serves a financially-prudent purpose as permitted by law. This includes $21.3M for PSERS (state pension system). While the district's PSERS obligation for this year is currently about 15 million dollars, the state projects that within five years this amount will increase to well over $20M, necessitating planning for the future. An additional $10M is assigned for capital reserve and will be used for ongoing facilities needs, decreasing the District's reliance on borrowing. A total of $4M is reserved for post-retirement benefits as determined by actuaries and an additional $0.5M is assigned for rate stabilization on bonds (should interest rates rise, the District will be covered); Of the remaining $20.2M in "unassigned" fund balance, the District will utilize $9.3M to close its budget deficit and maintain $10.9M in reserve. The $10.9M represents 4.2% of the preliminary budget, well below the allowable 8% limit set by the PA Department of Education.
Q: What are referendum exceptions and why does the District apply for them?
A: Under Act 1 the Pennsylvania Department of Education (PDE) publishes an inflationary tax index that represents the maximum real estate property tax levy increase for each school district (without PDE exception or voter approval). This year our index is 2.4%. Districts that seek to raise taxes above the index by submitting referendum exceptions to PDE or receive approval from the local voters by referendum. The four referendum exceptions are school construction-grandfathered debt, school construction-electoral debt, special education expenditures and retirement contributions. Without these mandated obligations, the District's proposed tax increase would be within the state index.
Q: How is cost per pupil calculated in Pennsylvania and what is the figure for LMSD?
A: The Labor, Education and Community Services (LECS) Comptroller's Office, Division of School Finance certifies and issues Elementary and Secondary Tuition Rates annually in May. The rates are based on a formula that factors instructional costs for elementary and secondary programs, total student population and support services, among others. Items excluded include expenditures related to non-public services and certain overhead costs. For 2014-15, which is the most recent data available, LMSD's elementary tuition rate was $18,523.12 and the secondary tuition rate was $19,709.85.
Q: What percentage of the budget goes towards salaries? What is the breakdown for teachers, administrators and support personnel?
A: Approximately 47% of the budget goes towards salaries. Of that percentage, 32% goes to teacher salaries, 12% goes to support personnel and 3% goes to administrator salaries.
Q: How was the 4.44% proposed tax increase in the preliminary budget determined?
A: The increase was determined to ensure that the District is able to maintain existing programs and cover new costs related to enrollment growth, personnel (salaries and benefits) and mandates, including rising retirement and special education costs.
Q: What would the potential implications be if the District developed a budget that stayed within the 2.4% increase per the state index?
A: The District would first need to cover any increases related to mandatory requirements like special education and PSERS. This would account for the majority of the 2.4% increase. The District would then need to cut over $4 million in programs and personnel and potentially increase class sizes.
Q: Why would a District not spend all of the funds it has budgeted in a given year?
A: The District does not view its budget as a “blank check” to be spent carelessly. Throughout the year, the District makes every effort to reduce expenditures and realize cost savings. Funds are not spent simply because they have been budgeted – they are spent because they are necessary. Remaining funds become part of a “fund balance,” reflecting efforts taken by the District to manage its finances in a responsible manner, with an eye on future needs.
Q: What has the District done to cut costs and reduce spending?
A: The administration and Board are focused on keeping costs down and have utilized targeted departmental budget reductions, the use of some existing fund reserves, streamlined and/or delayed purchasing practices, group/shared purchasing and strategies to reallocate and maximize existing resources. In 2010-11, employees began contributing for the first time to the costs of healthcare benefits, with increasing contributions in the most recent contract agreement. Average tax increases over the past five years are among the lowest in more than 30 years. Additionally, the District is one of a few districts in Pennsylvania to earn Moody's highest (Aaa) bond rating, reflecting strong fiscal health and responsibility and resulting in savings to taxpayers through low interest rates. The District has maintained one of the lowest tax burdens in the state (bottom quartile in equalized mills ranking) while preserving programs essential to educational excellence.
Q: How does the District's proposed tax increase compare to what other districts in the area are proposing?
A: The following are proposed tax increases for nearby districts per their 2016-17 preliminary budgets:
Tredyffrin Easttown 4.32%
West Chester 4.10%
Unionville-Chadds Ford 3.82%
Upper Dublin 3.29%
Upper Merion 3.16%
Q: What is a "preliminary budget" and when is the "final budget" adopted?
A: The "Preliminary Budget" serves as a starting point each year in a comprehensive public process that concludes with final adoption in June. The preliminary budget is subject to change and establishes a millage rate that cannot be increased in the final budget. In the spring, the Board is required to approve a "Proposed Final Budget," a more refined budget document that forms the foundation for adoption of a "Final Budget" in June.
Q: What variables must a district consider when preparing its budget? What resources are used to make informed decisions on projected costs?
A: Each year school districts prepare budgets that are an estimation of expenses for the following school year. In Pennsylvania, budgets are prepared almost a year in advance of implementation and must take into account numerous variables like enrollment changes, staffing needs, state budgets (which often aren't determined until late in the budget cycle), the local real estate market and transfer tax revenues, special education costs, facilities planning and emergency needs (winter weather, repairs, etc.), among other factors. Using data and guidance obtained from numerous sources, including its financial advisor, insurance broker, health insurance advisor, energy consultant, various local and state purchasing consortiums and internal staff, the District makes a best estimate as to its projected costs.
Q: What are some of the unique programs and services that distinguish LMSD from other districts?
A: The LMSD experience is defined by the extensive opportunities we provide our students and the extraordinary level of service we share with our families and community. Among the unique programs and services that LMSD offers are (partial list):
- International Baccalaureate program
- Elementary world language instruction
- Cultural proficiency programs
- One-to-one computing
- Post-secondary partnerships
- Enhanced summer enrichment and support programs
- Middle school interdisciplinary programs
- Extensive elementary music and arts instruction and performance programs
- Extensive field trips to support curriculum at all levels
- After-school programs at all levels
- Extensive array of clubs and athletics
- Weekend community service programs
- Travel experiences
- Evening speaker programs
- Summer entrepreneurship programs
We are committed to providing high-quality special education services and proud of our reputation for doing so. Families move into the District specifically to receive these services. The learning environment in LMSD is considered by the Department of Education to be highly inclusive for students with special needs. LMSD is a model for inclusivity across the Commonwealth and the nation.
Level of Service
- Enhanced academic support services at all buildings (literacy and math specialists)
- Enhanced holistic support services at all buildings (counselors, psychologists, etc.)
- Extensive health service programs (influenza vaccinations, wellness council, etc.)
- All support services are in-house, including custodial, transportation and operations, providing an unmatched level of personal care, attention to detail and quality.
Q: How does LMSD's level of achievement compare to other Districts?
A: By any measure, LMSD is consistently among the highest-achieving districts in the state and the country. LMSD ranks among the highest in Pennsylvania for various statistical indicators, including SAT and PSAT scores, AP Participation rate, state standardized testing (PSSA and Keystone exams), total number of National Merit Semifinalists and total number of International Baccalaureate diplomas granted. Approximately 96% percent of graduates attend institutions of higher learning, gaining acceptance to all of US News' top ten national universities and liberal arts colleges during the past three years. Harriton and Lower Merion have been named to numerous “top schools” lists, often ranking among the top three non-admissions based schools in Pennsylvania over the past ten years. LMSD has also been highlighted as a top district in various publications, including being named one of the top five school districts in the US by Business Insider/Niche.com in 2014. Last school year, LMSD earned the top ranking in PA and #2 ranking overall among 2,240 US school districts in the survey's "Best Public School Teachers in America" list. LMSD was named to the AP Honor Roll by College Board and honored as one of America's "Best Communities for Music" by the NAMM Foundation.
Standardized test scores, publication rankings and awards, however, serve as incomplete and often misleading indicators of student performance and success. The success of LMSD graduates lies in their exposure to a rich academic and co-curricular experience, exceptional instruction and families and community members that are deeply engaged in the education process. LMSD has remained steadfast in its commitment to holistic, meaningful learning experiences. While we recognize the value of some limited standardized testing, we do not encourage extensive test preparation in classrooms. Our focus remains on learning, rather than test-taking. This commitment is reflected in the District's new strategic plan, All Forward, which is focused on redefining success and preparing students for the emerging global economy.
It should also be noted that all districts are unique in their challenges, opportunities and educational strategies. LMSD, for example, is the largest and most diverse among the Main Line's high-achieving districts, with an economically-disadvantaged student population that is 43% larger than Tredyffrin-Easttown and 17% larger than Radnor. LMSD also has the lowest class sizes and most secondary co-curricular opportunities per student among these districts, thanks in part to having two high schools (instead of one in the other communities). LMSD’s rate of enrollment growth is nearly three times that of T/E and Radnor combined over the last five years. There are countless other variables that distinguish each district; in turn, district comparisons based on publication lists and single data points can be misleading.
Q: What are the district's transportation costs? Does LMSD operate transportation services differently from other districts?
A: The transportation budget is approximately $12.5 million. Our service is unique compared to other districts as follows:
- Serving 132 public, private and parochial schools daily using 120 vehicles
- Nearly 650 daily bus routes and more than 5020 stops per day
- Two late bus runs available
- 2032 extracurricular, 800 field and 1232 sports trips per year, and
- Award-winning CNG fleet, named the top school fleet in the country for use of "green" fuels
LMSD transports more than 9,000 students twice per day, by far the most extensive service on the Main Line.
Q: How does debt service impact the budget?
A: Debt service expenditures are 10.89% of our budget.
Q: What are factors unique to school district budgeting that may be different from other taxing authorities?
A: It's important to note that most school districts in PA must rely on property taxes as their primary source of revenue. This is especially true in LMSD, where state and Federal support accounts for less than 14% of the budget and there is no EIT (earned income tax) to provide additional revenue. The result is that communities with different taxing authorities must take significantly different approaches to budgeting. In Lower Merion, the heavy reliance on property taxes forces more conservative budgeting. It should also be noted that other governmental entities (municipalities, for example) can establish budgets and cover projected expenses (and shortfalls) through other means (like parking fees, municipal service fees, etc.) and have no fund balance limit. School districts do not have this opportunity, nor the same degree of flexibility.
Q: How has the District's school modernization efforts impacted the budget?
A: All ten of the District's schools have been completely modernized in recent years to serve the needs of 21st century education. The District was particularly fortunate to secure favorable financing for the construction of the new Harriton and Lower Merion high schools prior to the 2007-08 global economic crisis. Neighboring school districts without modernized facilities will face significant challenges in renovating/building new schools in coming years due to Act 1 constraints and the rising costs of construction. The District's debt service is related to its commitment to maintain quality facilities; other Districts will eventually need to incur debt - at much greater cost - to continue to provide safe, adequate facilities.
It should also be noted that LMSD's commitment to consistent maintenance and upkeep yields long-term cost savings and value to the community. Deferring these services would lead to costly repairs, renovations and impact the curb appeal of the community's public schools -impacting property values.
Q: What are the terms of the new contract agreement with LMEA?
A: The Lower Merion School District Board of School Directors approved a new, two-year agreement with the Lower Merion Education Association in December effective retroactive to July 1, 2015 through June 30, 2017. The agreement enables the District to better maintain appropriate staffing levels and core educational programs at a time of significant enrollment growth and economic uncertainty, while supporting the District's new strategic plan and ongoing commitment to a high-quality educational experience for students and staff. LMSD will continue to offer one of the most competitive salary and benefits packages in the state.
The new contract limits increases in the salary schedule and also focuses salary advancement for educational course credits on more rigorous professional educational opportunities from preferred providers that support teacher practice and promote LMSD student achievement. Employee health care contributions increase to 2.4% of salary in year one and 2.6% of salary in year two. Additionally, both parties have agreed to health care medical plan changes, including the introduction of a medical deductible during the contract term, that reduce overall plan costs, while continuing to provide quality health care to LMSD employees. Other important changes to current practice include an extension of the professional work year to 190 days and enhanced professional development opportunities.