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HomeMy WebLinkAboutAgenda - 03-27-2000 - 1ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: March 27, 2000 Action Agenda Item No. 1 SUBJECT: County /OCS /CHCCS Discussion /Policy Issues DEPARTMENT: County Manager PUBLIC HEARING: (Y /N) No ATTACHMENT(S): As listed in "Background" INFORMATION CONTACT: John Link or Rod Visser, ext 2300 Donna Dean, ext 2151 TELEPHONE NUMBERS: Hillsborough 732 -8181 Chapel Hill 968 -4501 Durham 688 -7331 Mebane 336- 227 -2031 PURPOSE: To discuss various issues with policy and/ or financial implications that are of current interest to the Orange County Commissioners, Orange County Board of Education, and /or Chapel Hill - Carrboro Board of Education. BACKGROUND: a) School Funding Options Task Force Discussions As one element of their adopted goals for FY 1999 -2000, the County Commissioners charged the Manager and staff to prepare a report outlining options for establishing parameters for funding the public schools in fiscal year 2000 -2001 and beyond. Staff presented this report in August 1999, and the options therein outlined were discussed in December 1999 in a joint meeting between the BOCC and the two school boards. School board members suggested that a work group composed of school board members and Commissioners be convened to review those options and to make recommendations to the BOCC. In January 2000, the Board appointed a short- duration School Funding Options Task Force, consisting of two members each of the Board of Commissioners, the Orange County Board of Education, and the Chapel Hill - Carrboro Board of Education. The County Manager, the two Superintendents, and appropriate staff have provided support to the Task Force. The Task Force met twice in February. With support from County staff, Commissioners Carey and Jacobs developed a first draft of a report from the Task Force (Attachment 1a). That draft has been circulated via the Superintendents to the school board members of the Task Force for their comments prior to the formal presentation of the report to the Board of Commissioners in the near future. Attachment la — 3123100 Draft "Report from Orange County School Funding Options Task Force" 4 b) Program /Staff/Facility Issues with Future Budgetary Impacts The Board of County Commissioners requested during 1998 -99 budget work sessions that both school systems keep the County informed on an ongoing basis to provide "early warning" about initiatives that might lead to additional funding requests in future fiscal years. This topic was discussed at the joint Commissioner /school board meetings last fiscal year, and has been a regular topic reviewed at monthly meetings between the County Manager and the two Superintendents. Discussion at this meeting may focus on new /expanded initiatives that one or both school systems may be considering for 2000 -2001. The Chapel Hill - Carrboro Schools have provided a document from their February planning retreat outlining some of the factors expected to affect their budget in the next fiscal year (Attachment 1 b). The Boards may wish to discuss the financial implications of these issues, and any others that OCS or CHCCS may be considering for the upcoming fiscal year. Attachment lb — 2110100 CHCCS Memo — "Background Materials for the 2000 -2001 Budget' c) Site Development This item will afford the three boards the opportunity to discuss how school construction standards should address various aspects of development of new school sites, including issues such as existing vegetation, buffer requirements, and other County and municipal regulations that influence environmental considerations in school site design. No Attachments d) Possible Co- Location of Durham Tech Satellite Campus with New High School Campus The Board of Commissioners recently appointed a Community College Task Force to examine the feasibility of establishing a satellite campus of Durham Technical Community College in Orange County. The three boards may want to discuss the possibilities for, and potential benefits from, co- locating this facility with the new OCS high school to be constructed on Grady Brown School Road. No Attachments FINANCIAL IMPACT: There is no financial impact tied directly to the discussion at this meeting. However, decisions that the school boards and BOCC will make at subsequent meetings are likely to have significant implications for future capital and operating budgets. RECOMMENDATION(S): The Manager recommends that the boards discuss the issues noted and provide direction to staff, as appropriate. Eyffl REPORT FROM ORANGE COUNTY SCHOOL FUNDING OPTIONS TASK FORCE March 23, 2000 Introduction Attachment la In considering their goals for the 1999 -2000 fiscal year, the Orange County Board of Commissioners recognized the importance of striking the appropriate balance between many worthy, competing needs for County funding in future annual operating budgets. The Commissioners' 1999 -2000 goal for "Effective and Efficient School Funding" included the task of preparation by staff of recommendations for "parameters that can be established to guide development of school current expense budgets for FY2000- 2001 and beyond ". The Budget Director researched this topic and presented a report (Attachment 1) in August 1999 which outlines a number of models the Board of Commissioners might wish to consider in providing guidance to the County Manager concerning school funding for the 2000 -2001 budget. The options developed by County staff were discussed in December 1999 in a joint meeting between the Board of Commissioners and the two school boards. School board members suggested convening a work group composed of school board members and Commissioners to review those options and to make recommendations to the Commissioners. In January 2000, the Board appointed a short- duration School Funding Options Task Force, consisting of two members each of the Board of Commissioners, the Orange County Board of Education, and the Chapel Hill - Carrboro Board of Education. The County Manager, the Orange County Schools (OCS) Superintendent, the Chapel Hill - Carrboro City Schools (CHCCS) Superintendent, and appropriate staff provided support to the Task Force. The Task Force met twice in February 2000. Major Points of Discussion A wide range of issues was identified during the two task force meetings. A number of points of disagreement were not resolved, and not all views were mutually held, but all were aired in an atmosphere that was attentive, constructive, and respectful of other participants. Following is a list of the most significant points of discussion: 1. School representatives expressed the school systems' appreciation for past support from the BOCC. 2. All parties agreed that education has historically been the highest priority in Orange County. 3. School representatives have concerns about the impacts of mandates and fear some kind of cap would have an adverse impact on their responsibility to meet them. Schools and the County have different definitions of what constitutes a mandate. The County tends to view a "mandate" as a program or function that is required by state or federal law; failure to provide such a program or function engages penalties or sanctions. School board representatives recognize legal mandates but also speak of mandates that, from their perspective, are required to carry out their charge to best serve the students of the school system. DRAFT 4. The County's intention is to leave open any doors for the fixture, while balancing the needs of schools, affordable housing, recreation, open space, and other competing priorities. 5. There will likely be a need to go back to voters soon for bond funds for school needs, justice facilities, open space, and senior centers. 6. The School Boards have concerns about not only the increased cost of providing for more students, but also more programs being mandated for more students. 7. Commissioners hear from people who come to public hearings asking for tax increases to pay for schools, but also hear from people who don't come to public hearings. There are many citizens on fixed incomes in Orange County, more than there are students in school. 8. The County is not looking at a hard cap, but thinking in terms of "targets" rather than "open- ended" school funding requests that leave us increasingly Losable to address other needs. The County might set a target and ask schools to meet it, but this is an evolving process and no limits are intractable. 9. School representatives noted that allocating 48% of County general fluids to education might not necessarily reflect overinvestment in schools, but underinvestment in other areas of County services. There was also discussion that funding needed for education may or may not be affected by the saine economic forces that affect funding needed for other County services. 10. CHCCS presented a memorandum (Attachment 2) articulating certain concerns, including: a) the belief that operating budgets should be separated from capital and debt budgeting, which have iD discrete revenue streams associated with them; b) about 85% of funding increases in recent years have gone to meet legal, moral, or ethical mandates; c) the formulaic approach to budgeting as a percentage of the County budget could lead to underfunding or overfitnding of education in any given year. 11. The CHCCS memorandum addresses 3 alternative models: a) Model 6 — per pupil County appropriation would increase 11 % annually; b) Model 7 — noting Governor Hunt's call for North Carolina to become #1 in education by 2010, this model would provide a 20% annual increase in per pupil funding for current expense; c) Model 8 — forego any formulaic approach and "simply use sound reasoning and good judgment ", suggesting that this approach that has worked in the past and should not be abandoned. 12. County representatives cited the 1988, 1992 and 1997 school bond referenda as evidence that we are not moving away from sound reasoning and are not relying just on historical patterns. Nothing the County proposes would preclude using "sound reasoning and good judgment ". Funding for schools must be part of the equation and everything must be on the table in evaluating needs. 13.00S representatives provided a review of their 5 -year history of mandates or "non- negotiables ". The two school systems share concerns that with a formula covering all major school funding categories, DRAFT escalation of required expenditures for capital and debt would reduce the amount of funding for operating expenses, perhaps when it is most needed. 14. CHCCS representatives pointed out anticipated budget pressures for next year with 600 more students than were projected for this year (costing $1.5 million more, without covering mandates) and an expectation that the final year implementation of the Excellent Schools Act will require $1.5 million just for salary increases. 15. There was discussion of what kind of rigorous, non -staff review of operating budgets is done, both for County and schools. CHCCS mentioned the 1995 Pannesi report, 80% of which has been implemented, with the balance waiting on the State to upgrade SIMS. 16. There was a suggestion to shoot for the 5 -year historical average of just over 48% of the County's General Fund allocated to education as a target. Recommendations to the Board of Commissioners There was universal agreement that the task force process was enlightening and helpful to all parties in gaining a better appreciation of the perspectives and pressures experienced by the others. However, there was no consensus among task force members that any funding model identified either by the County or the schools should be recommended to the Board of Commissioners for implementation. There was mutual recognition that the County is not seeking to impose a hard cap on school funding, and reaffirmation that it is the responsibility of each school board to determine how best to allocate the operational funds appropriated to each system annually by the Board of Commissioners. The task force discussion focused more on targets for school funding, and in the end there was acceptance of the concept that the County Manager should consider various "benchmarks" in developing school current expense funding levels in his recommended annual operating budget. Schools would continue to base their requests on identified needs, and would submit their requests for funding over the previous year's appropriation with annotation of the school boards' priorities. There would continue to be an opportunity for each school board to present to the Board of Commissioners any concerns left unaddressed, in their view, by the Manager's school funding recommendations. In reviewing and approving the overall County budget, the Board of Commissioners would likewise consider benchmarks related to school funding. These benchmarks could include: ■ 10 year historical figures of school funding on a per pupil basis; ■ 10 year historical figures on average annual increase in total school funding; ■ 10 year historical figures of total school funding as a percentage of the County's General Fund; ■ 10 year historical figures of school funding by major component (current expense, long -term capital, recurring capital, and debt service); ■ 10 year historical figures on average annual increase in current expense funding; ■ relative position of Orange County in school funding per pupil compared to other North Carolina jurisdictions ■ total effort (actual dollars per pupil — for 1999 -2000, this is $3,755 in Orange County vs. $2,747 in the 2 nd ranked county, Mecklenburg); ■ relative effort (considering Orange County ability to fund, given comparative wealth); ■ 5 year historical figures on percentage of school funding that has been allocated for continuation /mandates vs. new initiatives; ■ other relative major impacts on County budget that must be considered (e.g. federal /state human service mandates, assumption of new debt). There was "agreement to disagree" on the issue of what categories to consider in the shaping of funding parameters. County representatives continue to believe that school funding must be viewed in toto, as that is a more appropriate context for establishing the County's annual budget and is the approach used by external entities such as the North Carolina Public School Forum and the North Carolina Association of County Commissioners in comparing school funding effort among the State's 100 counties. School representatives remain concerned that lumping together all categories of funding in establishing parameters could lead to unreasonable constraints on operational expenses in years when debt service costs increase, and could lead to an inability to meet all their educational priorities in programming. Attachments 1. August 31, 1999 County Report: "Education Funding in Orange County" 2. February 27, 2000 CHCCS Memo: "School Funding Formulas " 3. Table —Annual General Fund Appropriations for Education by Major Component 4. Table — Estimated Impacts of School Funding Models 6 and 7 as Proposed by CHCCS Attachment 1 Education Funding in Orange County August 31, 1999 Education Funding in Orange County In North Carolina, each county is responsible for supplementing state appropriations to public education. Local current expense appropriations are allocated to each school system based on an equal amount per pupil. In addition, counties provide funds to each system for recurring and long -range capital projects. School systems in North Carolina do not have separate taxing authority and are not allowed to issue debt for school construction and renovation projects. Therefore, issuance and repayment of long -term debt, such as general obligation bonds and private placement loans, are the responsibilities of county government. Many city school units in the state also have special district taxes. These voter - approved taxes, levied within the unit's boundaries, further supplement county funding. Historically, the Orange County Board of County Commissioners has given top priority to funding public schools. The County's number one ranking in total education funding in the state evidences this. The chart to the right compares Orange County's total 1998 -99 General ; Fund appropriations for education to several other counties in the Total Gcnci-Ld FUnd Alyropri Lit ion,, per ADM State. As the graph indicates, Orange County's total spending per pupil is almost twice the State average. $3,000 M 52-339 $2,500 Recently, the Board of County $2,000 $1,552 Commissioners asked the County $1,500 s l.le I Manager to look at various $1,000 $643 alternatives for funding public $Sao education in Orange County and to $0 0n.n Mh m C6n►.m W. 9'.t. Al.- P.... Cuwd RA... develop parameters for future funding. This report contains ■ Orange County ■ Surrounding Counties ■State Average possible funding models that the Board may choose for the Manager to use as he develops the annual recommended budget for schools. While this approach guides staff in developing the annual budget, each year the Board can consider departures from the recommendations based upon particular one -time circumstances such as start up costs for new facilities. Staff contacted several counties throughout the state to determine what, if any, funding formulas are currently in use. The counties responding to the survey included: • Alamance • Brunswick • Charlotte - Mecklenburg • Chatham • Durham • Forsyth • Guilford • Lincoln • Moore • New Hanover • Pitt • Scotland • Surry • Wake Eight of the responding counties use formulas or other guidelines to determine school funding (as shown in Figure 2 on the following page). Staff found few similarities in county funding for school systems. Some counties use a formula for current expense funding only while other counties use a formula to Education Funding in Orange County calculate all funding for education (current expense, recurring capital, debt service and long range capital). The following chart provides information gathered: Figure 2: Results of School Fundine Surve County Formula Brunswick County • Contract between County and School system in place • Thirty -seven percent of the tax rate is allocated to current expense • Debt service is funded from the school's portion of the one- half cent sales taxes Chatham County • Formula in place • Current fiscal year per pupil allocation is multiplied by the State Department of Public Instruction projected enrollment. That amount is then increased using the Consumer Price Index (CPI) • If CPI is less than three percent, schools are guaranteed an increase of three percent Forsyth County • No formula in place • County Manager provides guidelines for school requests • Average increase for the past few years has been three-to- four percent Lincoln County • No formula in place • Current expense funding is significantly lower than the state average • Board of Commissioners adopted a four year plan to bring the schools up to the state average • For fiscal year 1999 -00 total school funding is $11.9 million (26% of the County's General Fund budget) Moore County • No formula in place • Annual increase for schools is based on the increase in property valuation increase Pitt County • Formula in place • Current fiscal year per pupil appropriation is base • Annual percentage increase as determined by Consumer Price Index (CPI) and Cost -of- Living Adjustment for County employees • Holds school systems "harmless" for new students • School and County staff disagree on what source to use as average daily membership (ADM) Scotland County • No formula in place • This is the only county in the state that is mandated to fund the school system at the statewide local average (current expense only) • Annual average of $100,000 goes to recurring capital • Debt service paid from schools' portion of one -half cent sales taxes Wake County • Dedicated tax rate of thirty seven cents • This is for current expense and recurring capital • Debt service paid from schools' portion of one -half cent sales taxes Page 2 of 9 Education Funding in Orange County Funding Public Education in Orange County In developing various funding parameters for public education, staff considered the total General Fund appropriation for schools. For fiscal year 1999 -00, the County's allocation to education totaled $48,371,435 or 48.27% of the total General Fund budget of $100,251,148. The following chart provides a breakdown of the categories: Fi ure 3: Elements of Education Funding The North Carolina Department of Public Instruction (DPI) projected a total student enrollment of 15,309 for the two school districts located in Orange County for the 1999 -00 fiscal year. Taking into consideration the total General Fund appropriation, the 1999 -00 per pupil allocation is $3,160. (In calculating the amount per pupil, the total General Fund appropriation for education [$48,371,435] is divided by the total number of projected students [15,309]). This per pupil allocation represents an increase of 5.43 percent over the 1998 -99 fiscal year. For fiscal year 1999 -00, it is projected that the Chapel Hill - Carrboro City Schools will receive an additional $9,743,228 from the district's special district tax. This equates to an additional $1,094 per pupil for that district ($9,743,228 divided by 8,903 students). Historical Perspective/Trends As shown in the next chart, total funding for public schools in Orange County has comprised an average of 48.12 percent of the General Fund budget over the past five years. Page 3 of 9 % of 1999- 00 General 1999 -00 General Fund Current Expense Based on pupil $34 537 104 34.46% 3 cents on property tax; allocated to each school Recurring Capital system based on number of students enrolled $2,043,675 2.04% Debt Service Funded from sales tax & portion of property tax $8,968,305 8.95% One -half cent sales taxes and portion of property Capital Projects & Reserve tax $2.822.351, 2.82% - Total Education Fundino $48,371,4351 48.27% The North Carolina Department of Public Instruction (DPI) projected a total student enrollment of 15,309 for the two school districts located in Orange County for the 1999 -00 fiscal year. Taking into consideration the total General Fund appropriation, the 1999 -00 per pupil allocation is $3,160. (In calculating the amount per pupil, the total General Fund appropriation for education [$48,371,435] is divided by the total number of projected students [15,309]). This per pupil allocation represents an increase of 5.43 percent over the 1998 -99 fiscal year. For fiscal year 1999 -00, it is projected that the Chapel Hill - Carrboro City Schools will receive an additional $9,743,228 from the district's special district tax. This equates to an additional $1,094 per pupil for that district ($9,743,228 divided by 8,903 students). Historical Perspective/Trends As shown in the next chart, total funding for public schools in Orange County has comprised an average of 48.12 percent of the General Fund budget over the past five years. Page 3 of 9 Education Funding in Orange County Figure 4. Annual General Fund Appropriations for Education Fiscal Year Ending Current Expense Appropriation Recurring Capital Debt Service Long Range Capital Capital Reserve Total Total General Fund Budget Education % of Total GF Budget 1990 $11,403,973 $1,500,000 $1,792,275 $3,450,300 $0 $18,146,548 $42,494,467 42.70% 1991 $13,057,549 $1,500,000 $2,636,842 $2,044,661 $0 $19,239,052 $46,351,500 41.51 %a 1992 $14,861,157 $1,500,000 $2,963,400 $1,827,627 $0 $21,152,184 $50,935,148 41.53% 1993 $15,713,450 $1,500,000 $2,879,475 $2,603,953 $0 $22,696,878 $53,887,298 42.12% 1994 $17,258,306 $1,500,000 $4,879,002 $2,606,048 $0 $26,243,356 $60,852,952 43.13% 1995 $19,098,062 $1,500,000 $5,717,540 $1,408,581 $0 $27,724,183 $66,581,662 41.64% 1996 $21,175,309 $1,500,000 $8,524,408 $3,049,749 $476,048 $34,725,514 $73,099,271 47.50% 1997 $24,604,074 $1,624,500 $8,318,118 $4,058,571 $494,442 $39,099,705 $79,259,530 49.33% 1998 $27,197,822 $1,856,528 $8,767,660 $1,999,147 $618,843 $40,440,000 $85,483,019 47.31% 1999 $30,422,520 $1,949,652 $9,318,087 $2,353,225 $649,884 $44,693,368 $92,685,103 48.22% 2000 $34,537,104 $2,043,6751$8,968,3051$2,597,5471 $224,8041$48,371,4351$100,251,1481 48.25% In fiscal year 1999 -00, total funding for education increased by more than $3.6 million (8.23 percent). This is lower than the average of the past five (just over 12 percent) and ten (11.5 percent) years. Major factors influencing increases in the past years are: • Repayment of debt associated with three voter approved bond referenda and private placement funding for school facilities. • Increases in annual current expense funding each year. • Increases in recurring capital appropriations. (From $750,000 per school system in fiscal years 1990 through 1996 to a dedicated three cents on the property tax rate currently). • Creation of a capital reserve fund for School/Park projects. The chart to the right projects funding levels for the school systems if the Board of Commissioners elected to fund the schools at the historical rates. Should the historical percentage increases continue, appropriations for public schools would more than double over the next ten years. $160 $140 $120 $100 $90 $60 $40 $20 $0 MWbre erDOUM WD1 3003 Zoos M 3005 M W 3008 M 3010 + 1999 -00 Average — — 5 Year Average • 10 Year Average +� Page 4 of 9 Education Funding in Orange County Current Expense Funding Alternatives In order to maintain consistency between the funding formulas, staff made the following assumptions: • Total education funding consists of the following components: debt service, current expense, recurring capital, long range capital, and capital reserves. • All models hold the school districts "harmless" for new students. In other words, special consideration is given to ensuring that there will be no decrease in per pupil funding from year-to- year. • Staff used the past year growth in student enrollment as the base for the next ten years. Student enrollment projections from the North Carolina Department of Public Instruction will not be available until the week of August 30, 1999. • The 1999 -2009 Capital Investment Plan did not include major projects that would require additional debt obligations. Therefore, none of the following models includes additional debt service requirements. Listed below are funding options that staff has explored Appendix A provides a comparison of all models outlined below. Model 1 This model, similar to the formula used by Chatham and Pitt counties, increases the per pupil appropriation by the annual increase in the Consumer Price Index (CPI). (In Chatham County, if the CPI is less than three percent, schools are guaranteed a three percent increase.) This amount is applied to the projected student enrollment. Figure 6. FY 2000 -01 Funding Example if Model 1 Used (Orange County Example 1999 -00 Total General Fund Per Pupil Appropriation $3,160 Guaranteed CPI 3.00% 2000 -01 Per Pupil Appropriation $3,254 Enrollment Projections 15,705 The following questions related to the Consumer Price Index (CPI) would need to be addressed before this model is implemented: • What CPI source would be used? • What period of time would be used (January to December, July to June,' October to September)? The following chart graphically illustrates the future trend of school funding in Orange County if the Board selected Model 1 (assumes the guaranteed three percent increase). Page 5 of 9 Education Funding in Orange County Figure 7. Model 2 While similar to Model 1, this model uses the total education funding as the base instead of the total per pupil appropriation. The base is increased by the rate of inflation as determined by the CPI. Again, schools are guaranteed an annual increase of at least three- percent. The same issues cited in Model 1 are applicable to this funding model. Figure 8. FY 2000 -01 Funding Example if Model 2 Used Orange County Example 1999 -00 Total General Fund Education Appropriation $48,371,435 Guaranteed CPI 3.00% Total 2000 -01 Education Appropriation $49,822,578 Enrollment Projection 15,705 The chart below provides funding projections for the next ten years if the Commissioners selected Model 2. Figure 9. Page 6of9 Education Funding in Orange County Model 3 This formula increases the current year per pupil appropriation by the increase in the County's total property valuation. While the projected increase in fiscal year 1999 -00 is 3.37 percent, the average annual increase in valuation for the past five years is about 3.6 percent. Figure 10. FY 2000 -01 Funding Example if Model 3 Used Orange County Example 1999 -00 Total General Fund Education Appropriation $48,371,435 Five Year Average Increase in Valuations 3.60% Total 2000 -01 Education Appropriation $50,112,807 Enrollment Projection 15,705 Figure 11 illustrates future trends in school funding if Model 3 were implemented by the Board (the five year increase of 3.6 percent is used as the annual multiplier). Figure 11. $1 00,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $0 Model 4 99- 00- 01- 02- 03- 04- 05- 06- 07- 08- 09- 00 01 02 03 04 05 06 07 08 09 10 Model four guarantees that the school systems receive a designated percentage of the total General Fund budget. For the purposes of this report, staff assumed that the Board of County Commissioners would want to maintain the current forty -eight percent of General Fund funding threshold for education. Page 7 of 9 Education Funding in Orange County Figure 12. FY 2000 -01 Funding Example if Model 4 Used Orange County Example 1999 -00 Percent of General Fund Appropriated to Education 48.27% Projected 2000 -01 General Fund Budget (total) $108,435,000 Total 2000 -01 Education Appropriation $52,341,575 Enrollment Projection 15,705 The graph in Figure 13 provides information regarding future funding if Model 4 were selected Figure 13. Model 4: Education Funding as a Percentage of Total General Fund $125,000,000 $100000000 $75,000,000 a $50,000 $25,000 000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Model 5 This model proposes that the percentage increase in education funding is equal to the annual increase in county departments and outside agencies. The five -year average increase for county departments and outside agencies is just over 6 percent (6.04%). (During this same period, the average increase in total education funding is about 12 percent.) 14. YY ZUW-U1 if Model 5 Used Orange County Example 1999 -00 Total General Fund Education Appropriation Five Year Average Increase in Appropriations Total 2000 -01 Education Appropriation Enrollment Projection $48,371,435 6.04% $51,293,070 15,705 Page 8 of 9 Education Funding in Orange County Figure 16. M odel6: Education Funding Increases at County Department Historical Trend $100,000 ' 000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $0 8 N N N N S C14 N N s s o N N N N Chapel Hill Carrboro City Schools Special District Tax Staff recommends that the Board of County Commissioners continue to address increases or decreases in the special district tax each year. Over the past few years, Chapel Hill Carrboro City Schools have used the district tax mainly to address start up costs for new facilities or new programs. When submitting their annual budget request, the Board of Education should make a separate proposal for use of the district tax proceeds. While this is a suitable use of the special district tax, the Orange County Schools does not have a district tax upon which they can rely. One alternative would be as follows: • For the start-up year, the Board of County Commissioners could chose to increase its General Fund commitment to schools and reduce Chapel Hill - Carrboro's special district tax. While Orange County could use the increase to pay for one -time start-up costs, Chapel Hill- Carrboro could supplant lost district tax revenue with the increased General Fund appropriation. Conclusion As the Board considers future education funding concepts, it is reasonable to look at models that closely align themselves with historical trends. Of the models presented in this report, model four appears to be the formula that keeps public education funding at the high level with which Orange County prides itself. The Board may be aware of other formulas that could be considered Page 9 of 9 E u AM us `:.y` 8 N N N N S C14 N N s s o N N N N Chapel Hill Carrboro City Schools Special District Tax Staff recommends that the Board of County Commissioners continue to address increases or decreases in the special district tax each year. Over the past few years, Chapel Hill Carrboro City Schools have used the district tax mainly to address start up costs for new facilities or new programs. When submitting their annual budget request, the Board of Education should make a separate proposal for use of the district tax proceeds. While this is a suitable use of the special district tax, the Orange County Schools does not have a district tax upon which they can rely. One alternative would be as follows: • For the start-up year, the Board of County Commissioners could chose to increase its General Fund commitment to schools and reduce Chapel Hill - Carrboro's special district tax. While Orange County could use the increase to pay for one -time start-up costs, Chapel Hill- Carrboro could supplant lost district tax revenue with the increased General Fund appropriation. Conclusion As the Board considers future education funding concepts, it is reasonable to look at models that closely align themselves with historical trends. Of the models presented in this report, model four appears to be the formula that keeps public education funding at the high level with which Orange County prides itself. The Board may be aware of other formulas that could be considered Page 9 of 9 Appendix A: Education Funding in Orange County Comparison of Models Presented in August 31, .1999 Report 1999 -00 Per Pupil Projected 2000 -01 Per Pupil Total FY 2000 -01 Education Funding $52,352,191 1 $54,178,442 1 $53,429,174 $51,111,346 $49,822,578 1 $50,112,807 1 $52,341,575 1 $51,293,070 Model 3: Per Model 5: Pupil Percentage appropriation Model 4: Increase in Model 1: Per Model 2: Total Increased by Guarantees that Education is Based on 5 Based on 10 Pupil Education Average Annual Schools Receive Equal to the Year Historical Year Historical Appropriation Funding Increase in at least 48% of Annual Increase Based on 1999- Average Average Increased by Increased by Property General Fund in County 00 Increase Increase Increase Annual CPI Annual CPI Valuation Budget Departments $3,160 $3,160 $3,160 $3,160 $3,160 $3,160 $3,160 $3,160 $3,333 1 $3,450 $3,402 $3,254 $3,172 $3,191 $3,333 $3,266 $52,352,191 1 $54,178,442 1 $53,429,174 $51,111,346 $49,822,578 1 $50,112,807 1 $52,341,575 1 $51,293,070 CHAPEL HILL - CARRBORO CITY SCHOOLS Lincoln Center, Merritt Mill Road Chapel Hill, North Carolina 27516 Telephone: (919) 967 -8211 Neil G. Pedersen Superintendent TO: John Link Orange County Manager Moses Carey, Chair Orange County Commissioners Barry Jacobs Orange County Commissioner FROM: Neil G. Pedersen Superintendent Elizabeth Carter, Chair Board of Education Nick Didow, Vice -chair Board of Education RE: School Funding Formulas DATE: February 27, 2000 Attachment 2 Ann Hart, Assistant Superintendent For Instructional Services Steve Scroggs, Interim Assistant Superintendent For Support Services As expressed in previous meetings, the Chapel Hill - Carrboro City School Board believes that the discussion taking place with the County Commissioners regarding the future funding of education in the County raises one of the most important issues facing these elected officials. The Board of County Commissioners and the County Manager have a long and strong history of support for public education. This support has been essential as our enrollment has increased by 50 percent during the last decade and shows no signs of letting up. At the same time, there is increased pressure to raise the level of academic performance for all students and to provide competitive salaries to our staff, particularly our teachers. Combined with the influx of Limited English Proficient (LEP) students. exceptional education students, 504 students, and charter school students, the costs for education have been escalating. We understand the Commissioners' concerns about the increasing tax rate and the number of competing needs in other service sectors. At the same time, our community has demonstrated when it has gone to the polls to vote on bond referenda and school board and county commissioner races that it wants a first -rate, well - financed school system with the facilities needed to support this burgeoning enrollment. 2 We appreciate the work that the County staff has expended on the analysis of education funding in Orange County. We, however, have several, fundamental concerns about the approach used in all of the models. These may be summarized as follows: No evidence has been provided to demonstrate that this approach to funding school districts has brought school spending under control or fostered a healthier working relationship between County Commissioners and School Boards in other counties. We would specifically suggest that you contact county commissioners, school board members, and the managers from the counties that you contacted to determine how well this approach is working, whether they would recommend it to a county and district like ours, and the extent to which they deviate from the formulas. We strongly object to identifying a budget "target" that lumps together operating costs, capital costs, and debt service. This makes little sense. For example, next year debt service costs will increase as a result of bonds that the voters approved in 1997 being sold this spring. At the same time, the state is projecting an increase of more than 600 students in the CHCCS district alone. It makes little sense to ask the school district to absorb the cost of debt service on new facilities already approved by -the voters at a time when there will be increased pressure on the operating budget to accommodate such a large increase in enrollment. There are already guidelines and restraints placed on the recurring, long- range, and reserve capital budget. It should be removed from consideration when we are developing a target for the operating budget. School districts face many factors that are beyond their control as they develop their budgets. In particular, local school district spending is heavily influenced by decisions made in the General Assembly and by the State Board of Education. For example, teachers have received salary increases of approximately 8 percent for the past three years in accordance with new salary schedules adopted by the General Assembly. Our district, which has a large number of locally funded teachers, must pass on these same increases to these teachers. In addition, since our local supplement is a percentage of a teacher's base salary, we must increase our support for state - funded teachers as well. Other mandates from the state often relate to serving special populations such as exceptional education students, Limited English Proficient students, and non - proficient students. The other major factor beyond our control is the increasing number of students. We legally must provide an education to these students, which means building, staffing, and operating new schools and hiring additional personnel. Neither the mandates nor the enrollment increases are predictable. The budget process should be flexible enough to adapt to annual fluctuations in these factors that are beyond our control. More than 85% of our operating budget increases in the past five years can be attributed to these "mandates." Much of our discussion has focused on the percentage of the County's budget that school spending represents. The school board representatives have been asked how large this percentage should be. This is an impossible question to answer. We can, to some degree, project our needs and, consequently, our spending patterns. However, a percentage is based on the size of the County's budget, which is related to the tax rate and the growth in the County's tax base. For example, if the schools agreed that school spending should comprise 48 percent of the County budget and then the County did not increase the tax rate over the next five years and the tax base continued to grow at 3 percent, it is likely that the schools' 48 percent share would be insufficient. On the other hand, if enrollment flattened out and the County's needs in other areas escalated dramatically, it's conceivable that the 48 percent would be unduly generous or unaffordable. 3 How would the County Commissioners treat the CHCCS district tax when developing a "target" for our school district's budget? Would this be reserved for special purposes such as opening new schools or enhancing salaries? Finally, we would like to reiterate our concern over the fundamental funding problem that the County faces. Generally speaking, the County tax base is growing by about three percent per year, with most of this growth occurring in the residential sector. As we know, the property taxes paid for private residences, typically, do not cover the costs of services required by the occupants. As long as student enrollment continues to grow between three to five percent per year and teacher salaries increase from five to eight percent per year while the tax base increases by three percent, either tax rates are going to continue to be driven up or the quality of services will decline. We urge the Commissioners to focus as much attention on the revenue side of this equation as on the expense side. While residents can be expected to respond to tax increases, few want services to be reduced. Furthermore, given the strong relationship between housing prices and the quality of schools in a community, it is not in the best interest of homeowners without children for the quality of education to deteriorate. With this said, it is clear that we have some major concerns with the philosophical basis for any formulaic approach to budgeting. Sound reasoning and good judgement on the behalf of school board members and county commissioners is a better basis. Mandated Costs At our last meeting, you asked that we prepare an analysis of the mandated expenses in our budgets over the last five years. This has been prepared and is attached to this memorandum along with a summary of the expenses. We have identified as "mandates" expenses associated with salary increases mandated by the state, legislative mandates including requirements to serve special populations, costs associated with growth, including costs associated with new schools, and uncontrollable inflationary increases such as utility rate increases. As you can see, almost 86 percent of the increase in our budget is associated with such mandates. This supports our district's contention that most of our increases are associated with mandates. That said, we would be quick to point out that many of the expenditures for "non- mandates" are equally critical. For example, we have had to increase the number of personnel to support technology in our district. Unless we decide that it is not important for our staff and students to use technology effectively in their respective roles, we have no choice but to make such an investment. Proposals Model 6 You also asked us to develop another funding model. We have examined the county appropriation that we have received over the last five years. In 1994 -95 the per - pupil appropriation was $1451. Five years later, in 1999 -2000, it stands at $2256. This represents an average annual increase of 11.1 percent. During this period of time, as stated earlier, we have done little more than financially support mandates associated with legislation and growth. Furthermore, even to accomplish this, the Commissioners have found it necessary to increase our district tax rate. Assuming that this funding source is still available to us, particularly for funding the opening of new schools, we could support setting a target for our annual budget of an 11 percent increase in the per pupil county appropriation. We also would expect the County to include a "hold harmless" provision applicable to enrollment growth. It would be expected that the district would develop a budget using this guideline but that it could also provide a list of needs that would go unfunded if this target becomes the approved per- student appropriation. m Under this model, the per -pupil appropriation increases would be as follows: 1999 -2000 $2,256 (current year) 2000 -2001 $2,504 2001 -2002 $2,780 2002 -2003 $3,085 2003 -2004 $3,425 2004 -2005 $3,801 This "target" would provide a mechanism to project school spending once we agreed on the best set of student projections to use. The County Manager's staff also could project capital spending and, thereby, project the future expenditures for schools with the exception of the impact of the district tax. When combined with targets from the County Departments, the County would have a complete projection of county expenditures. The total budget picture could be fleshed out using assumptions about revenue projections and tax rates. Model 7 Model 7 is the same as Model 6; however, per -pupil funding increases would be at the 20 percent level. As stated earlier, the recent 11 percent per -pupil funding increases have allowed us to do little more than meet state mandates. Governor Hunt has called for North Carolina being Number 1 in education by 2010. Clearly, the Governor realizes that education is the fuel that feeds the economic engine of this state and this country. Likewise, our superintendent has challenged us to be the very best school district in the country. An increase of this magnitude would be consistent with these challenges and also would place less pressure on the CHCCS school district tax rate. The per -pupil appropriations under this model would be as follows: 1999 -2000 $2,256 (current year) 2000 -2001 $2,707 2001 -2002 $3,248 2002 -2003 $3,898 2003 -2004 $4,678 2004 -2005 $5,614 Model 8 The final model that we propose is to forego a formulaic approach to this issue and simply use sound reasoning and good judgement. This has worked well for this county and both school districts in years past. The governance system is designed for public comment and healthy debate on issues as important as the funding of our children's schools. Is it really in the best interests of our children to abandon this approach? In conclusion, we would like to reiterate what we heard both Mr. Carey and Mr. Jacobs state at our last meeting. No one is proposing a "cap" on school spending. Rather, we are discussing the development of "targets" for each school district to use in the development of its budget. Neither the school board nor the County Commissioners are relinquishing their responsibility to receive comments from our citizens and staff and to deliberate over competing priorities before appropriations and budgets are finalized. Orange County Annual General Fund Appropriations for Education by Major Component Prepared March, 2000 a n w M b r7 DRAFT Orange County School Funding Options Task Force Estimated Impacts of School Funding Models 6 and 7 as Proposed by CHCCS This table reflects projected 10 year per pupil allocations, County current expense appropriations, and estimated tax rate impacts of those levels of appropriations for each fiscal year, based on Models 6 and 7, as suggested by CHCCS representatives of the School Funding Options Task Force. Assumes annual student population growth at 3% Assumes property tax base growth (what one cent produces) at 3.5 % annually, except 15% in post - revaluation years (highlighted, in bold) :0- rt rt lb n F b rt 03/23/2000 -P, 1999 -00 1 2000 -01 2001 -02 2002 -03 2003 -04 2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10 Projected Student Population 15,309 15,768 16,241 16,729 17,230 17,747 18,280 18,828 19,393 19,975 20,574 Model 6 Per Pupil Appropriation (11 %Annual Growth) $ 2,256 $2,504 $2,780 $3,085 $3,425 $3,801 $4,220 $4,684 $5,199 $5,771 $6,406 Model 7 Per Pupil Appropriation (20% Annual Growth) $ 2,256 $2,707 $3,249 $3,898 $4,678 $5,614 $6,736 $8,084 $9,700 $11,640 $13,969 Model 6 Current Expense Approp (11 %Annual Growth) $34,537,104 $39,486,271 $45,144,654 $51,613,883 $59,010,152 $67,466,307 $77,134,228 $88,187,563 $100,824,841 $115,273,0411 $131,791,668 Model 7 Current Expense Approp (20% Annual Growth) $34,537,104 $42,687,861 $52,762,196 $65,214,074 $80,604,595 $99,627,280 $123,139,318 $152,200,197 $188,119,443 $232,515,632 $287,389,321 Estimated Revenue Produced by One Cent on Countywide Tax Rate $681,225 $705,068 $810,828 $839,207 $868,579 $898,980 $1,033,826 $1,070,010 $1,107,461 $1,146,222 $1,318,155 Model 6 Equivalent Tax Rate Impact (in cents) (11 %Annual Growth) 50.7 56.0 55.7 61.5 67.9 75.0 74.6 82.4 91.0 100.6 100.0 Model 7 Equivalent Tax Rate Impact (in cents) (20% Annual Growth) 50.71 60.51 65.1 77.7 92.81 110.8 119.1 142.2 169.91 202.91 218.0 Assumes annual student population growth at 3% Assumes property tax base growth (what one cent produces) at 3.5 % annually, except 15% in post - revaluation years (highlighted, in bold) :0- rt rt lb n F b rt 03/23/2000 -P, CHAPEL HILL - CARRBORO CITY SCHOOLS Lincoln Center, Merritt Mill Road Chapel Hill, North Carolina 27516 Telephone: (919) 967 -8211 Neil G. Pedersen Superintendent TO. Board of Education FROM: Neil G. Pedersen. Superintendent f` Atttachment lb Ann Hart, Assistant Superintendent For Instructional Services Steve Scroggs, Interim Assistant Superintendent For Support Services RE: Background Materials for the 2000 -01 Budget DATE: February 10, 2000 The School Board Planning Conference provides the Board of Education with its first look at budget requests for the 2000 -01 year. Most of the day on Friday will be spent on budget related issues. The morning will begin with information about compensation and benefits needs. We will then move into very brief summaries by our schools and divisions of the written requests that are in your notebooks. After lunch, the Board will have time to deliberate and discuss the requests that have been presented as well as other recommendations that they might have. Our budget process began last November when we asked School Governance Committees and Divisions to prepare requests. The school requests in your notebooks have been approved by the respective SGCs. Below, I will review for the Board what I consider to be priority areas for this year's budget. Growth Last year's budget was based on a projected enrollment of 8903 students. As of the end of the fourth month of school, there are 8982 students enrolled in CHCCS and we are reimbursing charter schools for 118 students — a total of 9100 students for the 1999 -2000 year. It is apparent that we were under - budgeted for this year. We have not yet received a student projection figure from the state's budget office, which is the projection that we must incorporate in our budget. The projection that we generated internally indicates that we will have 9287 students enrolled in CHHS and, for budget purposes, we are using the same charter school enrollment figure as in last year's budget —143. This means that our budget is based on 9456 students, an increase of 527 students over this year's budgeted figure. This is a substantial amount'of growth and comes on the heels of steady annual increases since the mid- 1980's. This degree of growth continues to have a major impact on our budget. The Board can expect a request for budget increases in the following areas: • Preliminary staffing and planning for Smith Middle School • Additional staff for East Chapel Hill High School 2 • Additional facility maintenance costs • Additional locally funded teacher assistants, exceptional education positions, teacher specialists, and administrators (state covers cost of classroom teachers) • Local supplements for the increased number of state -paid positions • Per -pupil expenses (e.g. textbooks, copying, supplies, staff development, equipment) State Mandates and Inflationary Expenses The major expense in the area of mandates will be funding to support the final year of the Excellent Schools Act. Once again, we are estimating teacher and principal salary increases to average 8 percent, which, alone, will cost more than $1 million. We also anticipate the state awarding 3 percent increases for classified staff. We have not made a decision at this time about including an inflationary, or cost-of- living, factor for non - personnel expenses. It has been many years since we have made such an adjustment and, for the most part, costs continue to rise at a 3 -5 percent rate. In effect, we are reducing our buying power each year. Proficiency for All Our district has made a strong commitment to the success of each student in our school district. We have made significant strides with more than 90 percent of our students in grades 3 -8 becoming proficient in reading and math. Unfortunately, 90 percent is not the same as ALL. To move to 100 percent proficiency, we must plug some gaps. The elementary schools have requested half -time proficiency specialists to work with students who are not receiving supplementary assistance now, especially in the area of mathematics. The middle schools are requesting an additional .5 reading allocation, which would provide two reading teachers per school. Additionally, we need to fulfill our commitment to the Limited English Proficient students and fund the recommendations in the Task Force report. Even though we've been adding teachers to this program at an unprecedented rate in recent years, we continue to have teachers serving approximately 40 students due to increased enrollment. These students must become proficient not only in a new language, but in other academic areas as well. Other supports in this area include funding for site directors for the Middle School Afterschool Program and the Reading Volunteers Program due to anticipated reductions in state and federal support. Compensation to Attract and Retain the Best Staff It is readily apparent that the pool of qualified teachers will not keep up with the demand for teachers over the next decade. Nothing is more critical to the success of our students than quality staff, especially teachers and school leaders. We live in the highest cost of living area of the state; an area that, in fact, is one of the highest cost of living communities in the country. Our salaries must be competitive enough to attract and retain the best personnel. In some critical areas, we are falling behind our competition. I urge the Board to place a high priority this year on boosting salaries. Other presentations during the conference will demonstrate to you exactly how competitive the market is, particularly for minority teachers. We also will share information that demonstrates how salaries for administrators, particularly central office positions, have become unattractive to classroom teachers. A school and school district will not reach its potential without high quality administrators who receive the compensation they deserve for serving in increasingly high pressure positions. We also should not forget our classified staff. For the most part, these are our lowest paid staff members. They have averaged, at best, 3 percent salary increases over the decade. Most of these staff cannot afford to live in our community. Many work two or three jobs. As a major employer in this community, we have a responsibility to do our part in paying our staff wages that will allow them to provide adequately for their families. There are also some areas that need special attention this year. They include co- curricular and coaching stipends, substitute pay, Head Start teacher salaries, maintenance, and bus driver salaries. Effective Use of Technology One of the keys to the success of this district is the effective use of technology for both instructional and administrative purposes. At this time, we are a district with pockets of excellence. We need to move to an environment in which all staff members and students use technology as a natural part of their responsibilities, and the technology becomes an asset that enhances their performance. Study after study has shown that if this is to happen, staff members need a high level of support. Teachers need technology specialists to collaborate with them in the design and implementation of their units. Schools and offices need technicians who can ensure the reliability of the systems that they are using. As you know, we recently employed a Chief Technology Officer to give greater direction and support to our technology applications. Since he will not begin work until mid- March, I am hesitant to be too specific at this time about the nature of our requests, particularly at the central office. There are some requests, however, that are clear and have strong support from our staff. Schools would like for us to fund full-time technology specialists. At this time, the district contributes one -half of a position at each school and every school has converted a position to support the other half. It seems reasonable for the district to pick up the entire cost of a technology specialist; however, the Board must recognize that to do so will not necessarily advance the cause of technology. The Administration would be more comfortable with this request if it could be assured that the "freed up" funds would be used to address a high priority area in each school, such as proficiency. I believe that it is time to move ahead with full-time media assistants in our elementary schools. They are now employed for .57 of an FTE. Media specialists need to spend more time supporting teachers and students in accessing and processing information. In order to assume this role, we are strongly encouraging elementary schools to schedule students and classes on a flexible basis. They cannot do all of this and run the media center at the same time without a full -time media assistant. A comprehensive report that includes this recommendation is included in this budget section. We also must budget for a Director of Instructional Technology and Media Services since this position was converted to the CTO position. There are other needs in this area for such positions as a webmaster for the district and additional technical support positions. Boosting Minority Student Achievement This School Board and Administration are fully committed to enhancing the achievement levels of minority students. We have made progress in recent years; however, we are not where we need to be. The high priority initiatives already described will be of great benefit to our minority students. There are some resources, however, that must be 4 particularly targeted to support our minority students. These include fully funding the Blue Ribbon Mentor Advocate Program, expanding the AVID program, expanding our volunteer services, and supporting our pre- school programs. A team of educators and community members and students is updating the Blue Ribbon Task Force's recommendations. We can anticipate that the Team will identify the need for additional resources; however, this task may not be completed prior to the submission of the Superintendent's recommended budget. Enhancing the Curriculum A quality curriculum is the foundation for an outstanding school district. Requests have been received for increasing funds for professional development, holding summer workshops to write differentiated units, and conducting a science summer institute to prepare for the adoption next year of new science programs and textbooks. The elementary schools are requesting full funding of their science specialists. At a time when teachers are feeling pressured to focus more on areas of the curriculum assessed by the state, it is important that disciplines such as science not be overlooked. We also would like to expand the international flavor of our curriculum. Chapel Hill High School has expressed interest in affiliating with the International Baccalaureate Program. We also hope to offer Japanese to students at Phillips Middle School and at both of our high schools. We have applied for a grant that does require some matching funds, Reducing Class Size The Board last fall adopted a plan for reducing class size. The first step calls for reducing class size in third grade from 26 to 23. This is not a complete list of the requests. Such a list can be found in later pages in this section. In this memorandum I have attempted to highlight priority areas for your consideration that are consistent with the District's strategic plan. As we face difficult decisions about what to keep in our budget request, I suggest that you prioritize the requests based upon the goals of the district. At the same time, there are some strongly supported requests that do not fit under one of these priority areas that deserve your strong consideration. In some cases, such as the request for a half -time nurse in each elementary school, it is important to establish a consistent level of service in all of our schools. Hopefully, we will leave the planning conference with a sense of the Board's priorities. It also would be helpful for the Board to provide the Administration with some sense of the magnitude of increase that the Board considers to be justifiable in light of these needs. It is not necessary, however, for the Board to be specific about each budget item at this time.