March 22, 2006
Contact: Sue Baker
For Immediate ReleaseAvedisian says RIPEC report on Warwick schools sets blueprint for the future
WARWICK – Calling the recently completed management study and benchmarking analysis (the report) of the Warwick School District that was completed by the Rhode Island Public Expenditure Council (RIPEC) “a good foundation for the future of school and governance,” Mayor Scott Avedisian tonight said that the recommendations “will go a long way to bring fiscal responsibility and financial stability” to the city.
The RIPEC report was made public tonight at a joint meeting of the City Council and School Committee held at City Hall. RIPEC staffers Peter Marino and Susanne Greschner made the presentation.
Avedisian was not present for the joint meeting as he was attending the Environmental Impact Statement public hearing relative to potential airport expansion at TF Green State Airport.
“I am pleased that RIPEC has identified a number of areas where the city and the school department can more closely work together and save money. Specifically, I am pleased to see that a number of the suggestions that I made during budget season last year have been replicated in the recommendations,” Avedisian said.
Specifically, Avedisian said that the recommendations to look at a unified Information Technology function, unified Financial Management Information System, Consolidating Controller Functions with the City, and Consolidating Purchasing Functions with the City are all items that appeared in his last budget address. “I am pleased to see that these ideas have been resurrected and may in fact be in play now to save a significant amount of money for the city and the school department,” Avedisian said.
In addition, Avedisian pointed to other recommendations of the RIPEC study that could save more money and make operations more effective and efficient. Accordingly, Avedisian said that pooling the existing clerical staff and the consolidation of facilities management between the city and schools could result in even greater savings.
The rest of the RIPEC recommendations are as follows:
Modernize the School District Budget Document – While the department’s public budget document is useful, it has a number of limitations. There are a number of potential changes to the document that would ensure taxpayers and policy makers have a robust picture of the school department’s operating budget. The school district should also consider using the budget process and its document as an opportunity to educate others on its activities. It is also an excellent opportunity to make a compelling case for its needs. Some changes to be considered include:
• An introduction narrative (and relevant tables and charts);
• All Funds Budgeting;
• Two years of actual experience;
• Current year enacted budget and a revised spending and revenue plan;
• Proposed funding plan for the coming fiscal year;
• Five year forecast; and
• A detailed Personnel Supplement
Develop a Budget Narrative – The budget document is the fundamental policy document for most organizations, and as such, should be viewed as the principal communication tool for policymakers as well as taxpayers. It serves as the central tool for fiscal discipline and control, permits policymakers the opportunity to direct resources to their highest priority, and provides an opportunity to outline the challenges that lie ahead. The current budget document presented by the School Superintendent and subsequently, the School Committee, includes a brief letter from the Superintendent, outlining a few issues in the budget. However, this does not go far enough to take advantage of the opportunity to provide explanations of the budget, its goals, and the major issues dealt with in the budget. An effective narrative should provide summaries of financial information, such as trends in revenues and spending. The narrative is also a good opportunity to discuss future educational challenges that may impact the district.
Implement All Funds Budgeting - A major component of the school district’s budget not represented in the operating budget are the district’s funding sources and related expenditures from Federal and other third party sources. A key issue facing the School District is that while it is often aggressive in pursuing Federal and other non-traditional funding to provide some relief to the general fund, these expenditures may require full or partial support after the alternative funding has ceased to exist or has diminished. Decision-makers need to understand the implications of alternative funding sources, and the potential impact they will have on the operating budget in the future.
Based on these considerations and given that the School District has nearly $6.2 million available in Federal funds annually, all these funds and related staffing should be reflected in its annual operating budget and integrated into its annual spending decisions for the school committee. These funds play a critical role in the overall fiscal health of the school district and support over 4.2 percent of the total school district spending plan.
All funds budgeting also permits decision-makers to identify potential shifts in what resource can support ongoing program and administration expenditures, such as indirect cost recovery. This is critical, especially when finances are finite and there is limited flexibility in programs due to laws and regulations. These funds also support nearly 85.0 FTE positions, the majority of which are professional teaching positions. Federal funds support approximately $4.6 million in personnel costs not reflected in the analysis above – nearly 75 percent of all Federal funds.
Enhance Internal Budgeting and Financial Management – The school department’s management of financial information and its process for developing and representing its budget provided sufficient information to develop a baseline of spending expectations.
However, while there has been improvement in the budget and financial management process in the school district, there are certain areas that could use additional attention. While one can track the budget as it progresses through the budget making process, there is a lack of sufficient documentation to track budget numbers to actual experience as the year progresses. While a budget is a living document, one needs to have consistent benchmarks to compare changes as the year progresses. This would provide the business office, the superintendent and the school committee the kind of information needed to determine how effective their budgeting was compared to actual experience as the year progresses.
Enhance Personnel Supplement - There is a need to enhance the personnel supplement information. The current supplements provide an overview of the number of FTE positions held by professional and classified employees. It provides general data about positions, where the positions are located, salary ranges, total salary cost for those positions and funding source. While this information is helpful and is certainly more detailed than in several other school districts, there are some changes that may make this document more useful as a management tool in the future.
For example, it may be worth modeling the personnel supplement after the State Personnel Supplement, which provides multiple years worth of data by office and department, includes the total personnel expenditure package – including benefits and contracted services (which are currently not included in the Warwick personnel expenditure line, but rather as a purchased services line), as well as summary information regarding funding streams. In addition, the personnel supplement is another opportunity to outline personnel trends, expenditure changes related to current programs verses changes due to financial considerations or new programs, as well as gain a greater understanding of the impact personnel has on the overall operations of the school department.
Establish Annual Five-Year Forecast - The school department, in concert with the city administration, should develop and annually update a five-year forecast for the school district. This should include a detailed discussion of the baseline and the assumptions upon which the forecast is based. This should be done with the understanding that a forecast is a financial tool, not a defining document of future spending needs. It provides insight into how decisions today will impact the school district’s ability to meet the needs of tomorrow. In addition, it will provide an excellent communication tool with the city administration. There is no question it will be difficult to translate some of the school district’s needs and demands into financial terms. The demands imposed by the No Child Left Behind Act will be increasingly difficult to articulate financially. But a forecast will provide everyone with a benchmark that can be used to discuss future needs, as well as compare performance to forecasted budgets.
Pursue More Aggressive Federal Indirect Cost Recovery – While this forecast assumes Federal indirect cost recoveries will grow at or about the rate of personal income growth, RIPEC would like to take this opportunity to suggest that this revenue effort could be maximized. The School District currently does not aggressively pursue Federal indirect cost recoveries, which permit school districts to allocate a portion of the Federal grant to offset administrative costs associated with the grant. RIPEC believes this has untapped potential for additional funding to support the department that would offset existing general revenue appropriations. One should note that if one does in fact identify funding that can be used for indirect cost recovery, it may mean that some of these funds would have to come from existing uses for program.
Prepare for Teacher Contract – The forecasts discussed in this Study indicate that there is a need to develop a meaningful financial plan that incorporates both permanent cost savings measures within the school department to offset some of the expenses associated with the contract and a financing structure that raises sufficient funds to support the balance of the costs of implementing a new contract. Both of these efforts will require difficult choices for both the school department as well as the City’s taxpayers. The FY 2006 budget does not include any expenditure associated with additional costs for contract provisions. The school department ended the FY 2005 fiscal year with a balance of $2.5 million, of which $2.3 million are currently set aside to finance a portion of the retro-payment costs associated with a new contract.
The following are RIPEC recommendations to begin preparing for a new teacher contract.
a. RIPEC recommends that the $2.3 million already in the Audit Reserve for Education Account should remain in said account for the sole purpose of funding any retro-payments to settle the teacher contract. In other words, the $2.3 million in surplus should not be incorporated into the school district’s FY 2006 operating budget - it should remain outside of general operations.
b. RIPEC recommends that all parties (school district, school committee, city council and the mayor) should work cooperatively to contain costs to ensure there is an adequate funding stream to meet the needs of a new contract. In RIPEC’s review of the operating budget, it appears that there may be at least $521,000 in net savings due to turnover and non-personnel spending patterns (see details in Five-Year Forecast discussion). These funds should be identified and removed from the operating budget and placed in reserve as soon as possible to assist in the payment of the retro-payment obligations for the teacher contract.
c. RIPEC recommends that further efforts, such as refraining from selected purchases of materials and leaving non-essential positions unfilled through the balance of the year, will help further reduce the impact on the FY 2007 funding plan. It is critical that the School Department concentrate on additional cost savings measures for the remainder of FY 2006 to drive the reserve up, with a goal of reaching $4.3 million in order to finance the projected retro-payment based on the School Committee’s last contract offer.
d. Should the School Committee and the Teachers’ Union come to an agreement, the School Committee and the City Council will have to be prepared to implement the provisions of such a contract. Therefore, RIPEC recommends that the School Committee, City Council and the Mayor establish a formal mechanism to coordinate and develop a long-term plan to meet the demands of a teacher contract. Consideration should be given to continuing the work of the Advisory Group established for this Management Study. RIPEC believes there has been some progress and good will established through this process, and as a result, there is a greater understanding of each other’s perspective on a wide range of issues.
e. RIPEC recommends that the Warwick School Department submit a FY 2007 Operating Budget Request that is based on current services. Given negotiations are expected to continue and the school department must develop and present a budget in the coming weeks, it is important to submit a budget that represents existing obligations. Therefore, any costs associated with a new contract should not be integrated into the budget. Rather, these costs should be discussed and outlined in the narrative section of the budget request, and should be analyzed as part of the five-year forecast (See earlier recommendations).
Address Operations Expenditures – Based on findings from the Benchmarking Analysis, Warwick’s per pupil expenditures of $12,383 in FY 2005 are the highest among the peer districts. They are also higher than the State average of $11,876. This is partially a function of declining enrollment in Warwick. However, it may be also a function of higher expenditures for operations when compared to its peer communities. In Warwick, these expenditures took up 16.6 percent of total expenditures in FY 2005 (based on RIDE In$ite data). Among its peers, the percentage ranged from 12.0 percent to 16.2 percent in FY 2005. The State average during that time period was 15.3 percent.
In Warwick, the majority of the growth within operations comes from increased expenditures to maintain facilities. Warwick had the highest per pupil expenditures for facilities, spending $1,082 per pupil in FY 2005. This outpaced all of the other peer school districts, with Warwick being 20.2 percent higher than the next highest school district. Another growth factor in Warwick was expenditures related to business operations. Warwick’s business operation expenditures of $244 per pupil were the highest among the peers, 76.6 percent higher than the peer average of $138 per pupil.