Rochester Board of Education Beatriz LeBron Commissioner of Schools 131 West Broad Street  Rochester, New York 14614 June 13, 2018 The Honorable Loretta Scott President, Rochester City Council City Hall 30 Church Street Rochester, NY 14614 Dear President Scott: Over the last several months, as a new member of the Rochester Board of Education, I have spent time reading, asking questions and analyzing the scope of the District’s $915,945,579 budget. I have met with financial experts to gain a better understanding of our expenses and revenues streams. Additionally, I reviewed the adopted budgets of the past five years and comparatively assessed the budget adoption processes including deliberative questions and answers over the past several years. In my analysis, I found that the District’s State and Federal Aid Grant funds and School Lunch funds must be accounted for with little flexibility as to how the money must be spent to serve our students and families. However, we have a greater degree of control and flexibility when allocating our General Fund and our Fund Balance monies. In the 2013-14 fiscal year, we used approximately $12 MM from the Fund Balance to balance the budget. In the 2014-15 fiscal year approximately $13 MM from the Fund Balance was allocated to close the budget gap. In the 2015-16 fiscal year, no allocation from the Fund Balance was allocated. In the 2016-17 fiscal year, $15 MM dollars from the Fund Balance was used to close the budget gap. In the current 2017-18 budget, it is projected that the District will spend $17 MM from the Fund Balance. The 2018-19 fiscal year budget before you, is proposing a $20 MM allocation from the Fund Balance to “close the gap” which leaves us with only $8 MM in the Fund Balance which is designated to account for unforeseen shortfalls. Given that we are facing the same short falls in the budget for the coming year, with no clear path forward on how we may balance the budget, the projected estimates for the next three years call for $8 MM annually from the Fund Balance to close the gap - which we will not have. 131 West Broad Street  Rochester, New York 14614  (585) 262-8525  Fax: (585) 262-8381 The trend is clear that our expenses continue to increase while our revenues fall flat. We will not have enough money to meet the growing demands of our community. The District’s three year projection clearly demonstrates that we are heading towards bankruptcy. It happened in Chicago, with an enrollment of 371,000 students, and in Detroit, with an enrollment of 44,000 students - they too had early warning signs and ignored them. If we further exam revenue trends, we will see that the District’s revenues will continue to decline with the trend of shrinking student enrollment. For example, this year we spent nearly $15 MM on consultancy fees while salaries increased by over $30 MM and our Foundation Aid failed to keep pace with an increase of only $12 MM. Even with additional funding due to the increased enrollment of newly arrived Puerto-Rican and hurricane-impacted area students, the budget shortfall will continue to grow. The District simply will not be able to keep up with our spending trend if we do not act immediately. The data I am discussing is public information. This is not new information. However, this information has been overlooked and warrants immediate attention. In the 2018-19 budget book in Section 3 Pages 27 and 28, you will find projected budget gaps both in narrative and graphical forms; see attachments. There are some steps that we as fiduciary stewards can take now. These include instituting a hiring freeze on all positions to allow for identification of critical need areas, drastically reducing consultancy services, and eliminating all unnecessary travel. I have a passion for serving our students, families, and teachers and staff. I do not want future budgetary decisions based on past inefficiencies to negatively impact the educational opportunities we provide to our community. Thank you for attention to this matter. Regards, Beatriz LeBron Commissioner, Rochester Board of Education POLICIES, PRIORITIES 8t: PLANS 2018 - I9 PROPOSED BUDGET Comparison by Grade Level: All Schools ALL RCSD SCHOOLS: Enrollment Comparison by Grade Intel [Cohort Survival Model) 2012-13 2013-14 2014-15 2015-16 2016-17 2017-13 2016-19 Actual Actual Actual Acmal Actual Actual Projected 2.609 2.476 2.462 2.447 2.190 2.014 2.073 1 2,592 2.663 2,478 2.479 2,235 2.202 2.001 2 2,352 2.581 2,530 2,456 2,378 2.216 2.192 3 2.275 2.277 2,483 2,363 2,325 2.363 2.162 4 2.375 2.271 2,222 2,364 2,371 2,294 2.361 5 2.142 2.184 2.037 2.122 2,091 2.184 2.301 6 2,286 2.221 2.096 1.951 1,915 2.001 2.198 7 2,057 2.015 1,939 1.966 1,794 1.807 1.971 3 2.194 2.029 1,969 1.319 1,818 1.810 1.763 9 2,640 3.028 2,815 1,927 2,746 2.589 1,815 10 2,249 2.051 2,115 2.306 2,061 2.025 2,584 11 1,550 1.602 1.602 1,650 1,497 1.511 2.068 12 11375 1.705 1,583 1.761 1,551 1,595 1,547 Total 11-12 29,197 29,103 28,401 27,611 26,984 26,611 27,056 The model uses an aging concept that moves a group, or ?cohort?, of students into subsequent grades by multiplying a progression rate by current enrollment. The resultant figure represents the projected population forthe cohort student progression from one grade to another grade), The model accounts for students progressing into the next grade or being retained, students entering or leaving the District, major demographic trends, and otherfactors. Total Enrollment 29,500 29,000 28,500 - 23,000 - 27.500 27,000 - 25,500 - 26.000 - 25,500 - 25,000 2012-13 2013-14 2014-15 2010-17 2017-13 2010-19 2015-16 Section 2 Page 9 DISTRICT - WIDE SUMMARY BUDGET 2018 . PROPOSED BUDGET Position Summary 2016 - 201'}Ir 201? - 2013 201'? - 2.013 21013 - 2019 Variance Acmal Adopted Amended Proposed Favf (Unfair) POSITIONS BY ACCOUNT Compensation Teacher 3,432.33 3,564.69 3,534.84 3343. I 5 {1 113.31; Civil Service 1 5173.3? 1,490.31 1 ,498.42 1,547.12 (49.30) ?dminismramr 305.20 273.20 302.20 309.710 {1.50} Teaching Assistan ts 230.00 293.00 301.10 3.24.50 (23 . 4-0} Pamprofessional 505.00 500.60 550.60 558.60 {8.00) Budding Substitute Teachers 2100 25.00 26.00 20.00 0.00 Employee Bene?ts 4.00 1.00 2.00 1 .00 I .00 Grand Total 6,038.42 6,152.30 6,315.16 6,510.67 {195.51} POSITIONS BY DEPARTMENT Rochester City School District - RCSD 6,033.42 0,152.30 6,315.16 6,510.6? (195.51) Section 3 Page 23 DISTRICT - WIDE SUMMARY BUDGET 2018 19 PROPOSED BUDGET MULTI-YEAR PROJECTION OVERVIEW The multi-year projection represents a forecast of the District?s revenue and expenditures for the next three ?scal years. The projections shown allow the District to begin the planning process to solve for anticipated future de?cit years. New York State educational funding, which accounts for 68% of revenue, is the primary factor determining revenue growth. As such, future revenue budget projections will be greatly in?uenced by the level of NYS Aid. Another important factor is grant funding. This analysis assumes a stable level of grant funding and anticipates the loss of competitive grants in future years. Closing future year budget gaps will require a commensurate reduction in expenditures funded by those grants or new grant revenue to sustain the activities and services. The District continuously pursues new grant opportunities to fund our academic priorities. ASSUMPTIONS Based on historical trend analysis and contractual commitments, the District utilizes the following annual rates of increase and other assumptions to develop the projections: Projected Projected Projected Assumptions 2019?2020 2020-2021 2021-2022 Revenues: State Aid Revenue - Foundation Aid Increase 2.00% 2.00% 2.00% State Aid Revenue Formula Aid Increase 3.00% 3.00% 3.00% City of Rochester Revenue Increase 0.00% 0.00% 0.00% All Other General Fund Revenue Increase 0.00% 0.00% 0.00% Appropriated Fund Balance $8,000,000 $8,000,000 $8,000,000 Grant and Special Aid Fund Increase 0.00% 0.00% 0.00% Food Services Revenue Increase 1.82% 1.83% 1.83% Expenditures: Employee Salary Increases 3.40% 3.40% 3.40% Health Insurance Increase 4.00% 4.00% 4.00% Employee Retirement System of Payroll 15.00% 15.00% 15.00% Teachers Retirement System of Payroll 10.00% 10.00% 10.00% Other Bene?ts Increase 4.00% 4.00% 4.00% Charter Schools Tuition Increase 17.86% 4.07% 1.77% Transportation Contracts incl. impact of Charters 6.00% 6.00% 6.00% Special Education Private Tuition Rate Increase 4.00% 4.00% 4.00% Utilities 4.00% 4.00% 4.00% BOCES Services (Special Ed and Nursing Services) 4.00% 4.00% 4.00% CPI 1.50% 1.50% 1.50% Section 3 Page 26 DISTRICT - WIDE SUMMARY BUDGET 2018 - 19 PROPOSED BUDGET MULTI-YEAR PROJECTION Projected RCSD Budget Gap $1350 -I-Totol Expenditures ?o?Toto Revenue $1.025 - Structural $1,000 - Budget Gap $975 - .2 $950 - $925 1 $90.0 Projected Budget Gap: $0 M) ($59.3 ($111.0 $8?5 . . . Proposed Projected Projected Protected 2018-201 9 2019-2020 2020-2021 2021 -2022 Closing the De?cit Based on the multi?year projection assumptions, the District anticipates a de?cit situation in future years due to rising expenses that outpace projected revenue increases. New York State law mandates that the District maintain a balanced budget. As such, the projected de?cits for each year will be closed through actions taken in the budget process, and the projected budget gap for subsequent years will be reevaluated and revised each year. Revenue The Rochester City School District is a ?scally dependent school district and therefore cannot levy taxes. The District can impact revenue in the following ways: - Lobbying state government of?cials to fully fund proposed Foundation Aid increases - Lobbying state of?cials to increase other supports for education 0 Lobbying local government of?cials to continue their support of the District?s needs Searching for and securing additional grant funding Expenses The District continues to focus on automating operations, partnering with other government entities and businesses and cost-cutting initiatives such as: II Working with our union partners to develop innovative cost-savings labor agreements 1' Leveraging the Facilities Modernization Program to develop cost-ef?cient school structures 1' Negotiating agreements to minimize health insurance and other contractual services costs Section 3 Page 27 - WIDE SUMMARY BUDGET 2013 - 19 PROPOSED BUDGET Revenue: New York State Foundation Aid New York State Aid - Formula New York State Building Aid New York State Aid - Other New York State Aid - Adjustments City of Rochester Federal - Medicaid Other Local Appropriated Fund Balance Grant and Special Aid Fund Food Services Total Revenue Expenditures: Compensation Employee Bene?ts Total Compensation and Bene?ts Fixed Obligations with Variability Debt Service Cash Capital Outlays Facilities and Related Technology Other 1Variable Expenses Total Non-Compensation Budget Contingency Total Expenditures Total Surplusf{De?cit) MULTI-YEAR PROJECTION Rochester City School District 2018-19 Budget Projection Proposed Projected Projected Projected 2018-2019 2019-2020 2020-2021 2021-2022 $434,491,807 $443,181,643 $452,045,276 $461,086,182 120,878,788 126,317,702 131,956,308 137,496,217 64,025,321 70,776,947 79,589,354 76,996,976 4,280,000 4,280,000 4,280,000 4,280,000 {1,210,320} (1,210,320) (1,210,320) (1,210,320) 1 19,100,000 1 19,100,000 1 19,100,000 1 19,100,000 2,100,000 2,100,000 2,100,000 2,100,000 14,919,633 14,564,081 11,364,120 11,364,120 20,000,000 8,000,000 8,000,000 8,000,000 112,860,350 112,860,352 112,860,354 112,860,356 24,500,000 24,947,000 25,402,900 25,868,000 $915,945,579 $924,917,405 $945,487,992 $957,941,531 386,020,462 401,386,035 414,590,690 428,247,910 157,368,410 162,407,866 168,634,057 175,100,959 $543,388,872 $563,793,901 $583,224,747 $603,348,869 167,762,740 186 ,749,763 195,607,524 202,668,545 69,728,665 80,179,470 85,586,184 82,609,046 17,319,159 17,386,600 17,455,053 17,524,532 41,494,018 42,367,221 43,263,553 44,183,765 2,930,529 2,974,487 3,019,104 3,064,391 72,971,597 74,776,492 76,639,001 78,561,209 $372,206,707 $404,434,033 $421,570,419 $428,611,488 350,000 350,000 - - $915,945,579 $968,577,934 $1,004,795,166 $1,031,960,357 $0 ($43,660,529) Section 3 Page 23 ($59,307,174) ($74,018,826)