001Call this work session for the Tiger 12ton School Board to order at 5:47 p.m. So good evening everybody. What we want to do is use this work session time to provide uh fiscal updates uh as we look at having a deeper conversation and having you all take action on a reduction in force later on today. So we have um in front of us today uh director Reid and um CFO C uh who will walk us through the status of our current financial um situation and this will help to give you context for um our request for the board to consider a reduction in force and also um our controller uh Sarah Moras is joining us as well. All right, thank you everyone for joining us today. We um have passed out a current year and
002then two-year forecast which we'll refer to in a little bit. If we could have the next slide, please. All right. So, we've had a couple checkpoints this year and provided monthly financial updates in the board packets pertaining specifically to the forecast for the 25 26 year. Um, specifically when we're talking about budgeting, while we have other grants and sources, we also have our capital project and debt service funds, we primarily focus on the general fund since that's subject to the legislatively approved budget. And then in most recent years, we also track the integrated guidance portfolio of grants, which we'll learn about during or we'll learn more about during our regular meeting. But that includes um pretty significant grants such as the student investment count as well as high school success and early literacy. But as
003we look ahead to 2526 um the district is um slated to continue to potentially operate at in a deficit if reduction um efforts aren't made. And specifically as we approach the 2526 school year, you know, we've continued to use reserves last few years as we've met students where they're at in a postcoid environment. And we um when we were completing our contract with TTEA, we knew that based off of forecast that we were kind of at the end of the the road in that regard to using reserves. So why do we find ourselves in this position? Um, like most Oregon school districts, we're continuing to face a decline in enrollment. Our demographer came and shared forecasts with us in January. Part of that is because of birth rates and housing availability and then um that
004primarily is the driver there. We're also of course facing inflationary cost factors and um as well as the just the condition of state school funding which I'll show a slide later. The other thing that we discussed, you might remember in October were financially unfunded education requirements. The legislature has passed certain components of compensation such as unemployment, expansion of unemployment benefits as well as um paid family medical leave which has increased um district absences. And so that has risen to increase payroll costs. And then of course um believe it was in at the end of February might be early March when director Kinch and I came and shared about just the changes in special education and the costs associated with um serving our students. So if we want to turn to the financial forecast, I also
005brought copies of what the board reviewed when they approved the 2425 budget if you'd like to look at those as comparisons. But you can see we have the 2526 proforma budget. This is reflecting the 11.36 billion state school fund allocation that's currently included in the governor's recommended budget with a 49% recognition of revenue in the first year. It also shows a slight increase to local option levy. Um and then our other operating revenue is where you will see a decline. So, part of this um school year, we um used some service credits that are a non-re repeating revenue source. And then just as we've chewed up investment income, specifically as your um surplus cash is less, you have less to invest and recognize additional investment income. But we really tried to true up all of
006our operating revenue to have um a consistent expectation of what receipts we would experience. So that brings total operating revenue next year to be an estimated 178 a.5 million. We then can look at operating expenditures. The salary and benefits include the um contract with TTEA and some assumptions with what will happen with OCA because we're currently in negotiations with them. Um basically we've assumed a meto for OSA which is a 4% COLA and 3.4% health insurance. The other change you might remember is and we talked about it last month at the in our financial assumptions is the new 2527 PERS rates. So what looks like on paper as a slight increase of about 3% actually makes that costline increase up to 15%. And PERS continues to be a significant factor for all school districts grappling
007with um state school funding only increasing at a certain rate. So that continues to be a significant cost driver for us. We also have continued to true up some of our most significant non-payroll categories including subcosts as well as transportation. And as I mentioned at our board meeting last month, property just um you know, Oregon's micro climate in terms of forest fires and other losses with winter storms has increased our risk factor for reinsurers. Additionally, sex and molestation statewide, that insurance is significant. Um that is something that reinsurers are charging more money to provide coverage for. And so we've been told to expect at least a 17% increase and I've included a 20% increase just to um make sure we are prepared for when we get our estimates in June. We've also been continuing to
008monitor utilities. While rates had several rate adjustments last year, we've noted that our use has actually decreased because of some of the energy efficient investments we've made. And so we've includ included a 5% utility cost increase. But then you'll see that um with all of those assumptions, we're in a position where we would need to um realign the budget. And that is projecting about a $10.7 million budget reduction. And I'll talk about that as we go in through later slides. Um, you know, as we compared assumptions and the different forecasts we've done over periods of time, it was determined that if we are going to be in a process where we're making significant or reductions, we would rather just realign and um revisit systems in one summer instead of continuing to come back with um
009reduction proposals. And so, um, we believe that, as you can see, if you look over at 2627, we've included some of our assumptions there, but, um, I would really point to that line of 2627 attrition andor reductions. It's a pretty negligible amount that um we think could most likely be it's about half a million dollars and we believe that that could be absorbed through attrition or um just continuing to realign staffing especially instructional staffing to class to enrollment. So um that is going to that's at least the threeear summary. Are there any questions about that before I move on? Okay, you can go to the next slide. Before um you proceed, just one thing to note is that a lot of the information that you're we're going to put in front of you, you've already
010seen. And so just kind of give us like so we might go a little bit faster through this so we can leave opportunities for questions because we feel like we've um done our best to bring you along in this situation so that you weren't surprised by anything tonight. All right, next slide, please. All right. So, this is an updated staffing and enrollment sheet. And if we could click twice, Thor, um, we just have an update. So, our original budget, this was shared at our community budget workg group. Um, 2425 had staffing of 1335 FTE and we're kind of bucking prior year trends with our current FTE um, being lower than budget. And that's largely because of a team of the district-wide effort that was um initiated in January where we fro did a hiring freeze
011and really only limited certain jobs to be posted. So um at the end of March prior to spring break when we were updating the slide for the last community budget work group staffing was at 139 FTE. Next slide please. So this is an updated graph just showing the state of the state school fund as a percentage of total budget. So the dark green line um that has the longest historical trend because that's the state school fund. You can see that even with um an increase of 11.3 or an increase to a total of 11.36 billion dollars the um the allocation to K12 funding through the state school fund is about 30.2% 2% or its lowest in the last 20 years. The teal line that breaks off from that shows that when you add the funding
012for the integrated guidance portfolio, including the student investment accounts, high school success, early literacy, EIS, and other items that that amount goes up to 34.3. And just as a point of um I don't know conversation, you can see that that amount in 2527 total is about what the state school fund was as a percentage just four years ago. So we can go to the next slide. So I'd like to take this opportunity to discuss reserves since that's an important facet of for the board in terms of governance. Our reserve policy is specified in board policy DBDB which specifies total reserves of 12% broken out into three categories. The first is a 5% ending fund balance. The second is a 5% rainy day reserve and the 2% is an operating contingency. So um the reserve is
013um provides stability in terms of budgeting. It also is there when time when things go sideways or there's unexpected um changes. Over the last couple of years, the board has approved a less than 12% reserve, specifically maintaining the ending fund balance and operating contingency and then um letting the rainy day reserve be used to maintain current service level and operations. It's important to note that um reserves are considered when you are selling bonds. Most as we met with our rating agency though in the fall when you look at nationwide averages and tax structures um most ending fund balances where you start to or reserves where you really start to see um like sorry rating agencies would like school districts to be anywhere between 16 and 17%. And that's just really different from what Oregon districts
014do as a regular um mode of operating. Um I think often if you look at the OSBA policy, if you don't have a rainy day reserve, the recommended fund balance can be between 5 to 8%. So you're weighing um the benefits of having stability in a savings account with also the emphasis of using dollars on the students you're serving today. So again, we've drawn down about $34 million or um our highest reserve at the general fund is $ 34 million in 2021. That was when we that was the trying to remember that was the school year where we were operating under yeah covid with hybrid operations in the spring. So, um, you know, for the last three months in the 1920 school year and then almost the first seven, eight months in the 2021 school
015year, we weren't driving students in buses. We weren't um, you know, our buildings weren't open. A lot of times, even if we had a job posted, ironically, like people weren't applying for it, there was a lot of opportunity to build up reserves. And so, we've cons consistently used those down. And as you guys know, um the 2025 school year, we will end at an 8% ending fund balance as budgeted. Um but yeah, this won't be a year where we'll end the year with a significant amount in excess of that 8%. We're working hard to hit that 8%. So um the forecast I shared with you um includes a 7% ending fund balance, that's the 2% contingency, and the 5% ending fund. And I just um a majority of this slide was pulled forward from the
016prior year where we made the note that the board's position has been to maintain reserves of 6% or more. So um that is where we are with reserves. Next slide please. So this is a different like so when we had community budget work groups we showed the functional allocation of the budget because that's the width the um functional appropriation is how the board approves a budget for purposes when we talk about um reduction in force or reduce a budget reduction plan um we're going to present you with objects. So, we have our five different workforce groups listed above with what their budget was in the 2425 budget as well as other costs including purchase services. That's things like the um contracted part of our transportation or if we hire a company to come in to
017do professional development or even sports officials at high school games. Those are all purchased services. We then have supplies and materials both consumable and non-consumable. capital outlay and then other objects includes things like insurance, dues and fees and other items and then of course transfers. So um the math is still the same as the community budget work group slides. We have about or leveraged about 85.5% in staffing. So next slide. So, as we shared, um we're looking to close the gap by, um proposing a reduction plan totaling approximately 10.7 million. Again, we had mid-year projections that we were doing in December indicating that up to 12 million over two years would be necessary. And as um cabinet and other district leaders worked together, we determined that um you know it was best to approach this
018in one reduction plan where we could specifically look at school support systems and um balance the budget with minimal impact for the year. Then next slide please. So just because we're so leveraged in staffing and that's an area that we've seen um in terms of FTE continue to grow despite reducing enrollment. We um we'll I'll have a slide with some summary of reductions by groups. These percentages though show what that group as a total would be reduced by with our reduction plan. So the licensed group would be um budgetarily reduced by 8% classified 2% confidential managers um 11% that's a really small group. So when something is reduced the percentage is very high and then specifically um and then school administrators would be another 2%. Next slide. So here um you know when you are
019realigning systems specifically under these circumstances there is some need to make additions or investments just because of how job classifications or job titles work out. So um the reduction plan is going to close that $10.7 million gap proportionately through staffing with license. It includes approximately 64.02 O2 FTE 38 of those are instructional and that happens um just by applying our pre-existing class size ratios to our current staff. So that is not adjusting class size ratio. It is just bringing that into alignment. And then we have our um non-instructional staff um which again just given the gravity of the reduction seem to be made um part of that school system realignment and calibration is reducing non-instructional licensed staff. There's an addition of three um so the licensed group would be affected reduced by $7.6 million classified.
020Um, this really comes down to making some program decisions, some some ratio, but um, specifically looking at grant opportunities and how can we braid or blend and take advantage of vacancies. Um, and so that group has a net reduction of 11.99 FTE for 940,000. And then our administrator and management group um reducing by three and adding adding one to take care of a change over on the license side that would yield um $550,000 in savings. And next slide. So part of our 2425 year budget revision has been trying to look at our non-payroll expenditures. Um, and so this is where just collectively as we've been, you know, part of the 24 or putting together the 2526 budget was also really honing in on accurate budgets for some of those um, purchase services I referred to
021earlier like or I'm referring to in the budget document like substitutes and transportation. We continue to sharpen our pencil to have a good estimate there. Um, but we also needed to absorb expenses that have been paid by one-time reserve funds that aren't being replenished. And some of those funds have just expired. So, some things like annual curriculum that it's not subject to adoption, but it needs to be renewed every year that's needed to come into the general fund. And so, um, additionally, there were some FTE and reserve funds that no longer exist or no longer have funds. And so those need to come into the the general fund based off of district need. So unilaterally, most schools and support services are tasked with a 15% reduction in non-payroll. And then specifically some items to call
022out are um reducing our me some of our mental health contracts by the amount of $75,000 and some professional development contracts by another 110. That adds up to the 1.5. and um would help us attain that $10.7 million total reduction. All right, so next slide. So this is where um I'll let L speak. Right. So um this evening you will hear from Dr. Udo regarding a declaration of a reduction in force. Um, you know, the TTA contract um requires that the district provides um written notice of layoff to individuals 60 days in advance. So that puts us in a position that by April 30th, we would need to notify any impacted staff member of layoffs. And then for classified is a 30-day notice. So we would need to do that by the end of May.
023Okay, next slide. It's actually our last slide. So whether there's any comments or any additional questions. I'll say thank you because this is hard unpleasant work for sure. And I also know and I just kind of want to bring this forward that the cabinet and other district leaders I know have done and it's been mentioned before but I think bringing it back when we're talking about programs or sort of service reductions that you have done a huge amount of work in terms of AROI and really digging deep into what are the things that are the investments that are really important to keep and which ones can we based on what we're seeing as those outcomes reduce a little bit. Um what can what do we need to plug more into? And so I think it's
024just worth noting that when we see a list of some reductions in some of those services that that's been very thoughtfully kind of calculated and it wasn't nothing's being cut. Um but really look like all the work you've done probably since Chicago um and working with the DM group I think and and really just having that huge inventory of where's our money going? How is it serving our kids? If the the ultimate goal is student learning and making sure we are getting outcomes from students that we want, where are we putting those investments, even if that means we have to shave a little bit sometimes. Um, I just wanted to acknowledge that all of that has been layered underneath sort of what this final product is is really understanding those specific cuts and those were
025really strategically even though it's not any like we don't need to wax anymore about how it's not fair and it's not right and we need more state school fund and all the things. Yes. and here we are and you've sort of done that work to be like what's in the nex of our control and how are we going to do the best that we possibly can. So I just wanted to bring that forward and say thank you and this was incredibly helpful. You good? All right. We just wanted to make sure that the board had sorry wanted to make sure the board had all the information they needed because I will provide a very abbreviated summary uh when we meet during the the general business session. And I think the way that you have gone
026through this throughout the year and been really transparent and really sort of like stairstepped all of us along this the the process gets us to a place where we don't have to like all of the outcomes, but we really understand where where that process was to get us where we are. So I think that's evident in this very quick I think that's probably the reason we don't have a ton of questions is because you have done a great job all through the year of like we're not surprised right like I mean we we've had a lot of information along the way so I really appreciate all the work you've done all right going once students going twice moss cost of living adjustment it's a cost of living adjustment. So, uh MS they asked what uh
027cola stood for just for the record and it's cost of living. That's one of the components that's contracted in um negotiations. All right. And with that, I will adjourn this work session at 6:13