001Good evening. Welcome to the work session of the Marlington Local School District Board of Education, Tuesday, May 6, 2025. Call the role, please. Josh Hagen, here. Karen Humphre, here. Kathy Krepco, here. Mark Ryan, here. Jonathan Swift, here. Is there a motion to adopt the following agenda for this meeting? So moved. Second. Discussion. Call the role. Mr. Hagen? Yes. Miss Krepco? Yes. Miss Humphre? Yes. Mr. Ryan? Yes. Mr. Swift? Yes. Business. Okay. Thank you for coming to the board work session tonight uh for premium prior to our board meeting. We do have the 5-year forecast that has to be submitted at the end of the month. So going to kind of hand it over to Ryan and Bob and let them uh go over where we are currently uh financially. Ryan, it's all yours. Sounds good.
002Uh thanks for having me. Um we have forecast prepared for you. Uh this is an interesting time of the year. Um since I've been advising on forecast now for um over 15 years, there's more going on in legislation right now um than I at one time than we've ever seen. So we're going to take you through a couple of assumptions we're making in this forecast. They are just that assumptions. Um right now you have the governor has proposed a funding bill for schools uh for state funding. Uh in addition the house has proposed a very different funding proposal for schools. It is going through the Senate. Um there's testimony going on right now. We've not seen what their proposal is going to be. Um and then it'll go to conference committee and then hopefully by
003June we will know what the actual law is which could or could not change your forecast. Um, in addition, there's a number of property uh value, property tax, property revenue uh pieces of legislation that are proposed in both the House and uh the Senate. Most notably, there's House Bill 198, I believe, Senate Bill 66. um that could impact uh how you when your reappraisals are done in future years, how does it impact your school district uh in relation to the 20 mil floor? Are there any caps on growth from the 20 the revenue gains in the 20 mil floor? Um what is included in the 20 mil floor which wouldn't necessarily affect you guys? Um how much capital from your year? So there's a lot going on right now. We're not sure where it's all
004going to flush out, but um we have everything up to date right now, 2025. Um you will notice in this brief uh summary of the forecast, it is showing that you are going to have $29 million in revenue and 29.9 million in expenses and that you'll defend by 886,000. more than um we had perfected in the November forecast, but it is it's not what it appears. I would say there are two things. Number one, the district is going to have a significant number of retirements and as a result, you're going to experience the salary savings next year from those, but you are transferring money from the general fund into a um severance fund this year to cover the seps you're going to pay to the employees at the end of the year. So that was
005not expected at the beginning of the year. Like I said, the salary savings are building next year. I'll be able to show that here in a second. So that's about 350,000 of the variance we have here. You have you've got your settlement for the the long awaited public settlement of the pipeline has been um collected. And so you have more money being transferred. So, it's not that you're spending more, you're just moving money more, a little bit more money than typically the general fund based off that settlement into the um into your capital improvements fund. And then in addition, your salaries were slightly off um salaries, all your regular salaries, meaning your custodian, your teachers, your admin came in almost exactly where the district thought they would when forecast. the biggest variance you have right
006now um if you had some onetime stipens that's going to be reimbursed by the state at some point um when you submit that that is part of the reason why you were over in salaries and then also your supplemental dropped a little bit but overall salaries um did come in close as a total and then the final piece is because you got that large public utility settlement the county um auditor collects what's called a dreac fee which is a delinquency fee and so you were charged charge um just under $40,000 to collect that. And so that's part of other expenses. So those those things there um majority of it the additional transfers uh if you take out the additional transfers you're off just over $100,000 on expenses which on on almost 30 million is extremely
007close. And at the same time, your revenue came in um pretty close. If we look at the comparisons, um comparing this to November, um you can see there was some movement of where your unrestricted versus restricted got posted. And then some of the expenses that you charge off as revenue when it comes to XD foundation, you're off a little bit more revenue here. Um the majority of this 114 you were down a little bit in tuition, but the majority of that's going to be that 40,000 um additional cost compares other revenue. Uh this was you were down on some tuition revenue and then your interest income actually came in below anticipated and then you can see you're actually up in uh 445,000 in property taxes and you stay up in property taxes pretty much um
008compared to November forecast the length of this forecast. So the good news in total your revenue compared to the November forecast is up each year mainly due to the increase in property taxes um and you're getting a little bit less down here uh anticipate because you had less money coming in tuition um and and interest income. We continue that through. When you look on the expenditure side, there's that $800,000 variance we referenced. Most of it, like I said, is sitting here in transfers. Half of this 86,000 is the amount of the money that you were charged to collect the additional pup. Um, and then this 107,000 is mainly a lot of that's that one time segment that you are paying. It's going to be reimbured by the state at some point as well as just
009slightly overall. um with the exception of that transfer which is basically you guys are paying yourself and like I said with the teachers you're going to experience the savings next year and you can see that here in personnel savings and benefits um you're paying half of this transfer is you're paying their seance into a seance fund this year knowing you're going to get the savings next year so it's kind of just uh transactional um the district has continued to cut in this forecast um through a budget reduction plan and you can see it impacted by not replacing all the positions um that will be retiring or leaving the district at the end of this year. So additional good news for the district is overall compared November forecast your expenses moving forward you're down about $400,000
010a year. Um purchase services also came in slightly under as well. So those are good things. Um you also had um your insurance renewal for the year came in slightly less. We I we anticipated believe 7%. Um I believe we came in just under 5%. So that's other good news. Um correct me if I'm wrong about that. The premium though, but premium increase was less than than last year. So correct. Um all good news as far as moving forward looking out the uh the one piece when we go back to the the forecast summary is based off this forecast the good news is the district does have a balanced budget next year based off current law based off the house budget right um in the back of this forecast I did a comparison and it's
011critical I'm going to show you what that graph looks looks like and I have three different scenarios I'm going to compare here. So the state funding estimates moving forward just to be clear are based off the house proposal at this point because it was the last one released the the governor's which would be this one in blue if that was to go into law would result in revenue for the district because there is a cut to the guarantee. You are a guaranteed district which means you get this you're guaranteed the same amount of revenue that you collected in 2020 and 21. Under the governor's plan there's a 5% reduction in that guarantee for uh 2026 and a 10% in 2027. Under the house proposal there is the house proposal will be the proposed one which
012is this one here in red. Under the House proposal, um there's a 2025 guarantee that's put into place. They basically are superseding any law that the governor had. They they maintain the governor's budget proposal in the house proposal, but it's superseded by what's called a 2025 guarantee and they're providing a little bit less funding to each district based on number of students that you have. The issue is is once you get past 2027, um if the House budget was to go into place, there's two different things that their budget proposal says. Number one is that it rever the the 2025 guarantee sunsets. And so then you go back into the governor's 10% reduction of guarantee picks up in 28 and 29. But it also says that there will be a completely new funding formula in
01328. So whether or not that um happens, whether or not the House version becomes law, whether the Senate comes up with a different version when they go to conference committee, they all have to agree on something, we'll see. But you can see here right now, we are going with the House version and assuming that they're just going to maintain that 25 guarantee 28 to 29. Um if they were not maintain that guarantee, then you'd have slightly less revenue here in yellow if they were to start to reduce that. So Ryan, I have a question. How hard is it to do this forecast not knowing what the actual revenue is going to be? I mean, we're just throwing balls up in the air, making this stuff up. I mean, how hard is it? Every time they
014come out with a proposal, we do an analysis, right? But we don't we we based your real estate taxes on current law until we figure out what they're going to do with property taxes, if they're going to change that, and what are there any lawsuits against that? on the state funding piece as as this doesn't look great for the district. Obviously, the governor's proposal, I can tell you it's it's not as severe for your district as we're seeing in other districts in the state for two reasons. In the House budget, they are putting a stipulation in place that you cannot carry over more than 30% of your cash balance from year to year. So, there's a number of districts that are over 30% that that would go into place, they there'd be significant reductions um
015in their cash balance. And then in addition, um other districts that are more heavy on the guarantee than you are because um they have much more uh decreases. And so their lines when you look at this graph are very different. And some of them are not going on a financially planned in 28 and 29, even once 26 and 27 go into place because the uncertainty of if the House version go through, they're basically not a formula anymore. If the governor version goes through, the funding formula is based off of how much does it cost to educate a student based off the calculations they have and then how much should the state pick up and how much should the local contary pick up. Well, the governor's version does not increase base costs. So, when you don't
016increase base costs, the local share continues to increase for districts that are on the formula while the state share goes down. The only time the state share goes up typically is when base costs are increasing. To answer your question, it's this is the most difficult time. We thought, you know, during CO was bad. This is a lot more difficult knowing what's going on. There's an additional stipulation um that you guys currently fall under that you could not spend more than 15% um of your expenditures on administrative costs. And so there's not been a lot of information at least what they're defining as administrative costs. as an example, when um you your taxes are collected, the county auditor charges you just like they charge you to collect for your pipeline that $40,000. Um that's not something
017you can control. And in smaller districts, that's a bigger chunk of cost that gets charged to an administrative code. We're not sure if that's going to be included or not. Um but looking at yours for last year, you still from the appearance looked like you stayed under that 15%. Um, so that's not in play for you right now. It's something we'll have to monitor, see if that becomes law, what specifically they're going to include as administrative costs. It'll be critical to make sure that you're charging things in the right places, which I know Bob does. Um, so that because they have not announced if you do exceed 15% what the penalty is, it just says you shall not don't do it. Well, Ryan, I got a question on that. if if that were ever come
018about. I know this is uh there's a lot of details to figure out, but if the county is charging us, you know, the auditor is charging us a fee for that. How do you control that? The state can't control that. We can't can't control that. So, how do you enforce that? That would be an argument that I think the associations would make when they are trying to finalize the stipulations of this law is county auditor treasure fees, how do we control that? annual state auditor fees that you get charged to audit your books. You don't get to determine the amount of money that they're going to charge you to audit the books. It's a it's an escort requirement that you get audited, right? So, there's a number of things in there that I'd hope that
019they look at excluding um but that has not been released yet. What's our what's our current percentage roughly? No. I don't have that. I'll give that to Bob. I'll send I'll send you a uh an example of that so Bob can share with you though. Sure. Brian, do you have a version of this graph uh based off our previous forecast and the assumptions of that forecast? Sure can. So if we bring in the previous forecast as well as the current proposed forecast compare those two right now this forecast is better than our previous forecast. Yeah, it's gone cash balance. It's tremendous by $2 million. And then this red line is your November forecast and this blue line is your current forecast. We're looking at cash balance here, just to be clear. Yeah. Yeah. So, it's
020combination of changes in revenue and expenses. We had in November's forecast after five years, which I told you I'm not real big on the five years. I'm big on the three years because that's where the state looks at you. But in the November, we had a cash balance after five years left of $120,000. In this current forecast, the way things are shaping out, we'll have a $2 million surplus still after 5 years. What changed? So, a couple of things that changed the the staffing. Um, if we go back to I'll go back to this inside scenario here and it'll point out each area that changed on the revenue side. You're collecting more revenue uh tax revenue based off your values and settlement coming in. So this is the overall change in property value. This is
021the overall change in total revenue up here. So collecting a little bit less down here in other revenue more in property taxes over time about the same in state funding. It varies a little bit and and and when when you say collecting more in property taxes, that's because the valuations have gone up, not because of anything we've done as a board. Correct. Absolutely. So we had an estimate of where we thought the valuations were going to come in and then when they were certified in December and January the district got the actual values we knew specifically what they were. So that generate additional revenue and um that's what you're seeing. You get a portion of it here and then then it continues moving forward on the expense side. Uh the vast majority is the the
022the savings from the budget reduction plan for the staff that is retiring or leaving the district, not replacing some of those positions. Um this is the savings in comparison to November forecast. So those two coupled together is what made the difference in cash balance going from 120,000 by the end of the um 5 years to 2.1 million. which in the next forecast look could look completely different. Yes. Don't we know it? The six-month forecast. Another proposal the House put out is that there will now be a three-year forecast on a 5year forecast. So that this may look a lot different when we come back in November. Overall, um, as we look at where the district sits financially based off this snapshot in time, assuming that the house budget goes in, uh, you are having an
023operating surplus right now um, in 2026 and you start deficit spending in 2027 and that deficit spending would growth and essentially um you're there's no there's no sign that you're going to get additional money from the state and so you've got you've gone through that big reappraisal in the county and so you won't go get through that again for three years and like I said depending on what legislation looks like three years from now and what the economy looks like will depend on we have about a 10% increase I believe here in values opposed to the much larger increase you got before 3 years from now. Um, but there's a chance that if some of this legislation goes through, you might not get the same financial benefit of a 10% increase in values that you
024would have under current law. If this law changes, we won't know until the law. There's so many different legislations out there in property taxes. Um, we won't know until they decide on what they're doing. Currently, the only thing we can predict for sure is three years. Anything beyond that with the change in the banium budget and where they're going to do with property tax law is all going to change. So, the 28 and 29 are as usual. I always say you're you're kind of just throwing a dart up there. All right. The good news is I' I've worked with the district uh I think since 2020. I was looking back and I I' I've said this over the last couple times I presented the district has continued to rate the ship which is a good
025thing. Um I can remember five years ago or so meeting with the district and um it was a rather bleak outlook when we were looking not at this line here which is your operating surplus or deficit. um before um during that time this line you guys are looking at some negative cash balances but I think the positive thing is that you continue to sustain and as you move forward you have the ability and time to plan based off everything we know today um which I don't see any major changes but you never know with legislation but that's going to significantly affect you like it is some districts but the district continues to be in a in a in a position to to adjust and plan. Um, and you're not in a state of of distress
026like you were a couple years ago where, you know, 27 28 you had negative cash negative cash balances, not just deficit spending. So, I think it's a positive for the district. Anything else I can answer for you? Hey, uh Ryan, we gave think we gave a to the board or Bob that did one of the drafts that you must have had Bob originally at even up through maybe this morning had on year 26 uh an ending balance of positive $5,413 and it's a little different on your current adjustment and same with 27 28 and 29. Was that just an error on a Um so the one you're looking at if if you look um the reason I showed this because it pushes the renewal levy up here so you can kind of see everything and
027are you deficit spending including the renewal levies? Oh, I see your 5,000 actual forecast. This is going to be 500 different order, but that's because the emergency levies down here. Okay, I appreciate it. Sorry, that was just my oversight when I looked and there was a question brought up. It's up to the board getting questions for Ryan. Not Oh, it sounds like things are in relatively good shape. As of right now, I have no questions for Ryan. I He will be back on Thursday. Okay. Even before you approve, if there's any questions that you guys do have that Bob and I maybe could not answer, Ryan will still be available on Thursday for the board meeting for a few minutes if there's something that comes up that you want to answer. Okay. Okay. So, we
028done with Ryan then? I think so. So, yeah. Yeah. Hey, Ryan, thank you for your time. Really appreciate it. Thanks, Ryan. Thank you. Thank you. [Applause] Is there a motion to adjurnn? So move. Second. Call on the roll, please. Mr. Swift, yes. Miss Krepco, yes. Mr. Hagen, yes. Miss Humphre, yes. Mr. Ryan, yes. Thank you.