SCHOOL FINANCEMEETING THE CHALLENGE

Allen Independent School DistrictCommunity PresentationMarch 7, 2011

1

To advance slide, either click on the screen or use the arrow tools on your keyboard to go forward and backward.

IntroductionThank you for your interest in our schools. This presentation is intended to provide basic information about the current state financial crisis and its impact on the Allen Independent School District.

If you have more questions following the presentation, you may email the school district at publicinfo@allenisd.org or call 972-727-0510.

The State of State FinancesThe current budget crisis began with a financial report prepared by the Texas Comptroller for legislators at the start of the 82nd Legislature. The report showed a potential budget deficit of $15 - $27 billion.

Budget report to 82nd Legislature shows deficit of

$15 - $27 billion

The State of State FinancesA major cause of the current deficit is a shortage in revenue to fund the state’s public schools. Local property taxes that funded Texas schools were lowered by approximately one third in 2007. The state revenue that was expected to replace the tax funds did not materialize.

Property taxes were significantly lowered in 2007 but revenue to replace them

never materialized

The State of State FinancesLegislative leaders have publicly committed to not raising taxes and not using the state’s rainy day fund. As a result, most of the deficit will be addressed by cuts to balance the budget. Since public education represents 44% of that budget, major cuts to school funding are expected.

Legislature is committed to not raising taxes which means a

majority of deficit will be addressed by budget cuts

Allen ISD Financial SituationWith no changes to the state funding formula for 2011-2012, Allen ISD would face a deficit of approximately $2.8 million.

Allen ISD could balance the budget and erase this $2.8 million deficit with reductions that were planned.

Allen ISD has faced a deficit budget each year since 2007 when the Texas Legislature lowered taxes statewide.

Allen ISD Financial SituationProposed legislation (HB1 and SB1) would reduce state funding to Allen ISD by an additional $18 - $23 million. The exact amount will not be known until the legislature completes its work in May 2011.

The projected loss of $18 - $23 million for Allen ISD is based upon

the House appropriations bill projections filed in January. The

number could be lower by the end of the legislative session.

Allen ISD Financial SituationLocal school districts have a limited option to increase school taxes through a TRE (Tax Ratification Election). If Allen ISD voters approved such an increase, only $9.6 million could be raised by law. This means that only half of the proposed budget cuts could be addressed by a local TRE election.

Allen ISD lowered the Maintenance & Operation tax rate from $1.50 to

$1.04 in 2007. The current M&O tax rate is still $1.04.

Allen ISD Target RevenueSchool districts receive a set amount of money for each student in attendance. This is called target revenue. The formula that sets this target revenue is based on enrollment growth in 2006 and has not changed since that time.

The following three charts show that Allen receives less funding per student than our neighboring schools each year. This is the primary reason why Allen ISD faces a deficit and budget reductions each year.

Target Revenue Comparison

2010 Funding Per Student (WADA)

Lovejoy ISD

Prosper ISD

McKinney ISD

Frisco ISD

Plano ISD

Allen ISD

$7,630 per student

$7,576 per student

$5,832 per student

$5,808 per student

$5,799 per student

$5,535 per student

10

Target Revenue Comparison

2010 Funding Variance Compared To Allen ISD

Lovejoy ISD

Prosper ISD

McKinney ISD

Frisco ISD

Plano ISD

Allen ISD

$2,095 more per student

$ 2,041 more per student

$297 more per student

$273 more per student

$264 more per student

11

$0

Target Revenue Comparison

Revenue Compared To Allen ISD If Enrollments Were Equal at 21,000

Lovejoy ISD

Prosper ISD

McKinney ISD

Frisco ISD

Plano ISD

Allen ISD

$43.9 million

$42.9 million

$6.2 million

$5.7 million

$5.5 million

12

$0

Allen ISD Budget BasicsThe Allen ISD Budget is made up of three different funds:

Maintenance and Operation (M&O) Debt Service (I&S) Student Nutrition

State law prevents revenue and expenses from these funds from being mixed.

The following chart shows how the budget is divided.

2010-2011 Allen ISD Total Operating Budget

MAINTENANCE & OPERATIONSDaily ExpensesSalaries & BenefitsSupplies & MaterialsContracted ServicesEquipment Purchases

DEBT SERVICEDebt payment on:

• Building Projects• School Bus Purchases• Major Technology

Purchases

STUDENT NUTRITIONSalaries & BenefitsFood & SuppliesMajor Equipment & Renovations

14

Allen ISD Budget BasicsState law prevents revenue and expenses from these funds from being mixed.

For example, bond money for projects such as the new auditorium and stadium cannot be used to offset operating expenses such as salaries.

The following chart shows what type of expenditures come from the two major funds that our school district uses.

Allen ISD Budget Basics

Day to Day Operational CostsContracted Services

Utilities

Employee Salaries & BenefitsClassroom Supplies New School Construction

Major RenovationsSchool Buses

Stadium – AuditoriumCareer Tech Center

Maintenance & Operations

Debt Service Fund / Bond Construction

16

Allen ISD Budget BasicsThe day to day expenses of the school district are paid through the General Fund.

State budget reductions would require Allen ISD to cut costs in the General Fund.

The following chart shows how the Allen ISD General Fund is divided. Note that 63% of the General Fund is used for direct classroom instruction.

How General Fund Is Allocated

18

Allen ISD EfficiencyAllen ISD’s goal each year in the budget process is to become more efficient without negatively impacting student performance.

Allen ISD’s schools are among the top performing in the state. Allen ISD has also been rated as #17 out of the top 200 school districts in Texas for financial efficiency according to the Educational Resource Group. The following chart illustrates this comparison of performance and finances.

Rating District Efficiency

$42.7 million

$42.2 million

$6.1 million

$5.8 million

20

How Allen Compares In Efficiency & Performance

To Top 200 Texas School Districts By Size

Data provided by the Educational Resource Group (ERG)

What Has Allen ISD Done To Address The Budget Problem?

$42.2 million

$6.1 million

$5.8 million

$5.1 million

$

•Reduce non-instructional staff

•Freeze on new staff positions

$

•Improve staffing efficiency (campus staffing, class size)

$

•Annual operations cost reductions

21

What Is Allen ISD’s Strategy For Addressing the Current Challenge?

$42.2 million

$6.1 million

$5.8 million

$5.1 million

$

•Reduce staff size through attrition

•Freeze on new hires

$

•Continue to reorganize secondary staffing

$

•Raise K-4 class sizes-21:1 average

22

What Is Allen ISD’s Strategy For Addressing the Current Challenge?

$42.2 million

$6.1 million

$5.8 million

$5.1 million

$

•Return non-teaching professionals to classroom

$

•Increase user fees

$

•Tax Ratification Election

23

Potential Impact On Allen ISDAs the state legislature seeks to erase a deficit of $15 - $27 billion, different proposals are being considered to reduce funding for public schools.

The next slide shows how three options could impact the Allen ISD budget in 2011 - 2012.

Potential Impact On Allen ISDAcross the board cuts for all Texas school districts - Loss of $18.4 million

Cap current target revenue and adjust target revenue for districts- Loss of $19.5 million

Proration of funds based on wealth of the school districts - Loss of $23.2 million

Potential Impact On Allen ISDAll three budget cutting options would have an impact on Allen ISD. Three strategies the school district would use to offset the loss of funds would be:

A tax ratification election (TRE)

A reduction In Force (RIF) of programs and/or staff

A reduction in services to students and families

Setting PrioritiesAt this point, there is not enough information from the state legislature for the Allen ISD Board of Trustees and administration to make budget decisions.

Once more specific information is available, the school district will reduce the budget as required using the following priorities as a guide.

Setting Priorities$42.7 million

$42.2 million

$6.1 million

$5.8 million

$5.1 million

Non-Instructional Support

Increase Fees/Other

Maintain instructional integrity

Classroom

28

Get InvolvedVisit Allen ISD’s Austin Alert website at www.allenisd/legislature

- Updated legislative information

- Links to key legislative leaders

- Links to the Texas House and Texas

Senate

- A brief explanation of the Texas

legislative process

Get InvolvedIf you have additional questions about the current state budget crisis contact the Allen ISD Public Information OfficeEmail: publicinfo@allenisd.orgPhone: 972-727-0510Web: http://www.allenisd.org/legislature