The School Board adopted the 2017-18 School Budget on March 30, 2017. The adopted budget includes the recommendations outlined in the March 17th update as follows:

• Funds to cover the VRS rate increase.
• Funds to move employees up one step on the Pay Plan.
• Additional special education teachers and instructional aides to meet caseload regulations.
• A portion of the increase in health insurance.

The following additional background information is included for your reference and/or interest in understanding the budget decisions:

Employee Raises:

Current Year:  Employee salaries this school year (2016-17) included a 2% cost of living adjustment plus the market adjustments recommended by the Evergreen Study which equated to a total investment of $7M in salary increases (equivalent to 7% raise on average but obviously varied based on which positions were more out of market than others).  The budget included $619,578 in state revenue to partially fund these salary increases. Last August, the Governor notified school divisions that the funding would be removed from our budget due to state funding issues. The School Board did not reverse any of the salary increases. Bottom line, the state did not fund any of the salary increases provided to employees this year.

Next Year:  The newly adopted budget for 2017-18 includes a step increase for employees on the Pay Plan approved by the board last year.  The total cost of the step increase is $1.55M (equivalent to the cost of a 1.5% raise).  The value of a step increase per person will vary based on the scale but the scale itself is not changing from 2016-17.  This also means that no steps will be added to the scales and employees who have reached the top will not move to a new step.  In the past, there has been concern expressed by employees about adding steps and never being able to “get to the top”.  Adding steps also resulted in a teacher scale that was 43 steps as of last year.  The current teacher scale is 30 steps and is capped at step 30.  Employees that have reached the maximum salary at step 30 will not see an increase in pay next year as they have reached the top step.  However, in future years when the entire scale is moved to retain the competitiveness of the scale within our market, the maximum salary on the scales will increase.

The General Assembly approved funding of $394,938 for salary increases for 2017-18 and required that school boards approve a salary increase of 2% in either 2016-17 or 2017-18.  RCPS more than qualified on the salary and market adjustments provided in 2016-17 alone but the 2017-18 budget includes another 1.5% step increase.  Important point to note here is that RCPS will have invested $8.5M in salaries between the 2 years and will only receive $394,938 from the state to do so (and that is if they do not retract it next year like they did this year).

Health Insurance Premiums:

As discussed at length in work sessions on Feb 23, Mar 7, and Mar 16, the health rates have been restructured to begin to align more closely with neighboring school divisions.  The rates are based on total projected claims for next year and are split between the employee share and the employer share.  RCPS has been paying a significantly higher portion of the total premium than all other school divisions. 

The new rates for 2017-18 will require employees to pay a percentage of the total premium based on the coverage level they select.  For example, employees will pay the following for the KC1000 plan – 4% of the total premium for employee only, 28% for employee + child, and 34% for employee + spouse or family coverage.  For 10 month employees, the increase per paycheck ranges from $11 for KC1000 employee only coverage to $55 per paycheck for KC1000 family coverage. 

Employees at RCPS are paying hundreds of dollars less for dependent coverage than neighboring school divisions. This provided a clearer picture of how out of balance the salary and benefit equation has become at RCPS. Further, the career earnings for a school employee are positively impacted by salary increases rather than benefit increases. Salary increases serve to increase your average salary when you retire which results in a larger VRS retirement payout after you retire. Health benefits do not.

The good news for 60% of the employees enrolled in our health plan (always looking for the upside) is that the employees participating in KC200 have a financial incentive to move to KC1000 next year and if they do, they will actually see a reduction in their health insurance deduction per paycheck so they will benefit from both a step increase and a premium reduction.

This budget has been the most difficult budget since the Recession. The convergence of four large dollar budget needs (VRS, salary increase, special education positions, and health insurance) with new funds covering less than 50% of that cost means that there is simply not enough money to cover it all and difficult choices had to be made to do as much as possible within the available funding. The School Board Budget for 2017-18 was submitted to the Board of Supervisors for approval by the April 1st deadline and they are scheduled to consider the school budget for approval at their May 11thboard meeting.

Employee open enrollment meetings for benefits are coming up next month so be on the lookout for important information about the new online enrollment process using TalentEd.  This will be similar to the process used for the Letters of Intent last month.

Another 3 weeks closer to finalizing a budget for 2017-18 and this is what has been happening since the last update:

Budget work session on March 7th to review the final increase in state revenues approved by the General Assembly ($1.6 million) and the final increase in the transfer from the Board of Supervisors ($258,839).  The School Board had lengthy discussion of the current employee rates for the KeyCare 200 and KeyCare 1000 health insurance plans in comparison to neighboring school divisions, which are much higher.  With limited funds to address the mandatory VRS rate increase, a step on the Compensation Plan, and health insurance increases, the School Board reached consensus that the focus should be on career wages and the future retiree benefit to employees which is based on highest average salary.  Staff was asked to bring back a budget that addressed salary and the mandatory VRS rate increase first and then, if possible, address some of the health increase.  The board also reviewed preliminary budgets for the Nutrition Fund, “Textbook” Fund, Laptop Insurance Fund, Capital Fund, Grant Fund, and Bus Replacement Fund.
Budget work session last night that wrapped up all of the work sessions since January with a Superintendent’s Proposed Budget for 2017-18.  Again, there was a significant amount of discussion about focusing on wages and moving the health insurance benefit paid within the budget to a more sustainable level.

New funding for 2017-18 is available to fund essentially only one of the 4 major expenditure increases we are facing – mandatory VRS rate increase, required special education staffing needs, commitment to sustaining the Compensation Study implemented this year with a step increase, and significant increases in the group health insurance rates. 

The Proposed School Budget for 2017-18 presented to the School Board for consideration last night includes the following expenditure increases:

• Funds to cover the VRS rate increase ($1.3 million)
• Funds to move each employee up one step on the Compensation Plan ($1.55 million).  No additional steps will be added to the scales, restoring the ability for employees to “reach the top” of the scale and in alignment with best practices recommended in the Compensation Study.
• Additional special education teachers and instructional aides.
• A portion of the increase in health insurance.

The budget was balanced using sound financial practices and included the strategic use of current reserves to subsidize budget needs without creating unrealistic financial cliffs in subsequent years. 

The self-insured laptop reserve will be used to pay for the replacement of technology (servers, networking, labs, computers, etc) along with the addition of laptops for 6th grade.  This option provides significant advantages to middle school students, teachers, and facility space while eliminating the need to replace the middle school labs next year and resulted in a lower cost option.

A portion of the health reserves will be used to fund some of the health insurance increase.  The rate setting process included the following facts and assumptions:

• Multiple years of not increasing employee share of the health insurance cost have resulted in an unsustainable health insurance benefit that competes with the ability to provide salary increases to employees.
• It is reasonable for employees to pay a portion of the cost of health insurance (currently the cost of employee only coverage in KeyCare 1000 plan is less than $2 per month).
• Employee engagement in wellness benefits employees personally and at work and results in lower health care claims which impact future health insurance renewals. 
• With the opening of the Marathon Health and Wellness Center in October 2016 focused on helping employees in their personal quests for their best health, incentives to continue that engagement should be reflected in the premium and cost share structure of the health insurance plans.
• There is a balance between fair and competitive wages and fiscally sustainable employee health benefits which make up the total compensation package and allow for the retention of employees and the recruitment of new employees.
• There is a large disparity between the group health rates paid by school employees for dependent coverage and those paid by employees of neighboring school divisions.

Preliminary rates were reviewed with the School Board during the work session.  The final rates for both group health plans will be ironed out over the next few weeks and communicated with employees at that time.  Staff will also prepare a short video highlighting the value in considering a switch to the KeyCare 1000 plan which could result in the reduction in your monthly payroll deduction if you are one of the 60+% of employees enrolled in KeyCare 200.  This is good information for you to review before the open enrollment for benefits in May 2017.

So, with final direction from the School Board last night, the next step will be the presentation of this budget for approval at the March 30th board meeting and then the submission of the budget to the Board of Supervisors by April 1st for their approval.  While this has been the most difficult budget since the “great recession” and it is not a perfect solution, it does fund some high cost (and some mandated) priority budget items and maintains the effort to keep employee wages and benefits competitive in the Roanoke Valley market.   

If you are interested in the information presented at the work session last night, please reference the RCPS web site, go to the Finance Department, and click on the link to the Mar. 16, 2017 Superintendent’s Proposed Budget for 2017-2018. 

Again, more information will be forthcoming on health insurance renewal rates and the reissuance of the Compensation Plan at the end of March.  Until then, let’s hope that the Spring weather returns soon so we can enjoy the later daylight hours!

Over the past 4 weeks, there has been quite a bit of budget activity occurring, including the following:

Joint meeting of the School Board and Board of Supervisors on 2/7/17 with discussion on student enrollment trends and the capital improvement plan.  Enrollment in our school division increased last school year for the first time in 8 years.  That information was used to budget a higher enrollment in the current year.  However, the enrollment this school year is reflecting a return to the levels experienced in the previous year so the revenues that go with it will need to be reduced in the 2017-18 budget year.  The biggest enrollment variable continues to be larger 12th grade classes graduating and smaller kindergarten classes enrolling resulting in a net decline in student enrollment from one year to the next.  The demographic study performed in 2016 indicated that this trend would continue very gradually over the next 9 years.
Budget work session last night that covered a significant portion of the 2017-18 budget development process including an update on student enrollment projections, comparison of the House and Senate budgets, compensation and benefits, and additional budget requests.

As part of the budget work session held last night, staff reviewed the steps taken this past year to address the Compensation Study recommendations and recommended that the 2017-18 budget include a step increase for all employees.  The cost of a step increase is $1.5 million.  In addition, requests for additional special education teachers and instructional aides, increases in substitute rates for teachers and instructional aides, and increases in coaching and academic supplements were also offered for consideration.

The School Board was also presented with the Anthem renewal for the group health plans and discussed the budgetary implications of a significant increase in plan costs.  As background, the school division is self-insured for group health claims which means that we contract with Anthem to administer the plans but the cost of claims is paid directly by the school division.  This has been a longstanding successful method of funding health insurance and avoids over-paying health insurance companies in years where claims are lower than projected.  Unfortunately, the last year of RCPS claims has been much higher than normal and therefore the projections for the renewal must reflect that claims growth.  The current plans without any changes in plan design or cost sharing will require an increase in the school budget of $1.1 million as well as increases in the portion of the premium paid by employees.  Staff is working with an independent insurance consultant to identify plan design and pricing options for consideration in reducing this budget impact.

As a side note, as we move towards the open enrollment process for employee benefits in May 2017, we will be providing opportunities for employees to learn more about the higher deductible health plan option (KeyCare 1000 plan).  Many employees were able to see the benefits this past year, as well as the lower out of pocket cost after comparing premium savings, deductibles, and the cash HRA contribution, and employee enrollment in KC1000 increased from 27% to 43%.  It is different from the traditional health plan of the past and that makes it hard for some to make the change but opportunities will be provided for you to learn more about it before you have to make your benefits decisions in May. 

Employee health plan rates for RCPS are extremely favorable compared to neighboring school divisions and are, in large part, the result of freezing employee rates in past years when salary increases were unable to be funded.  However, it is extremely difficult to sustain low rates as claims expenses increase leading to significant increases in the budget which then competes with budget demands to provide for a salary increase, pay the mandatory increase in VRS retirement rates, fund required special education positions, increase substitute rates, and the list of several other budget requests. 

On a disappointing note, the state funding for public schools is expected to include some funds towards a 2% salary increase but only after going through the complicated state formula which will likely only amount to about $300,000 while a 2% salary increase for RCPS employees costs $2,000,000.

So, the challenge begins…how to make the money stretch as far as we can to do the most good to support our exceptional employees providing an excellent educational program for every student.  As we move into the month of March, the School Board and staff will be working closely to balance the expenditures against the available revenues with the following budget work sessions scheduled:

• March 7 – Nutrition, Textbook, Grants, Capital, Buses, and Technology Funds
• March 9 – Operating Fund Review
• March 16 – Presentation of Superintendent’s Recommended Budget for 2017-18
• March 21 – School Board direction on adjustments to recommended budget
• March 30 – Adoption of School Budget for 2017-18
• April 1 – Submission of School Budget for 2017-18 to County Board of Supervisors for approval

If you are interested in the information presented at the work session last night, please reference the RCPS web site, go to the Finance Department, and click on the link to the Feb 23, 2017 Work Session Documents. 

Until next time, enjoy the Spring weather that arrived before Winter was over!

Last night, the School Board met in a budget work session to hear about the district wide technology plan and the planned rotation cycles for servers, networking equipment, computers, laptops, active boards, telephones, computer labs, and wireless connections. Information was presented on the costs associated with the replacement of equipment scheduled for 2017-18. In addition, principals, teachers, technology staff, and students (via video) from all 5 middle schools provided feedback to the School Board on the benefits of the 7th grade laptop pilot this year. There was overwhelming support for expanding the laptop program to the 6th grade. Many of the middle school labs are due to be replaced next year based on their age so if the 6th graders are provided with laptops, the computer labs scheduled for replacement can be eliminated from the budget. The cost of the middle school labs is almost $300,000 more than the cost of the 6th grade laptop option which is also a powerful incentive for expanding the laptop program. If this is the direction ultimately decided in the budget, the middle school labs not scheduled for replacement can be rolled to the elementary schools next year providing additional resources in K-5 while also freeing up physical space in the middle schools.

As we look ahead to February, the following important dates and budget activities will occur:

• February 7th – Joint School Board and County Board of Supervisors meeting to review the School Capital Improvement Program (CIP)
• February 9th – School Board meeting with a presentation on the school bus replacement plan and the use of propane school buses
• February 13th – Employee Advisory Committee meeting
• February 15th – General Assembly crossover day when the Senate and House of Representatives pass each of their proposed budgets to the other house for consideration. This will give us some idea of the range of school funding that is being proposed in Richmond.
• February 23rd – School Board work session on Salary and Benefits and Revenue (if available from Richmond at this time)

Finally, communications about the deferred compensation plan (a voluntary retirement plan available to all employees) switching from Nationwide to Empower Retirement has been communicated to employees via email over the past month. The retirement plan will be transitioning from Nationwide to Empower in late March. Employee meetings with our investment consultant have been scheduled for next week for employees to learn about the improvement in investment options and lower fees and how the conversion will work. Employees will be able to ask questions of our investment consultant after the informational presentation. If you have participated in the Nationwide retirement plan, please consider attending one of these meetings so you will be aware of the next steps:

January 30th at William Byrd High School Auditorium at 4:30
January 31st at Northside High School Auditorium at 4:30

As we close out the month of January, stay tuned for more information on important steps in the development of the 2017-18 school budget.

As we ring in the New Year and enjoy the first snow, the budget process is heating up. Last week, the Construction Committee agreed on the projects to be recommended to the School Board for the 10 year Capital Improvement Plan (2018-2027) which is scheduled to be approved at the January 12 board meeting this week. The projects include upgrade and/or replacement of critical infrastructure components at the following schools:

• Cave Spring High
• William Byrd High
• Hidden Valley Middle
• Burlington Elementary
• Glenvar Elementary
• W.E. Cundiff Elementary
• Glen Cove Elementary

In addition, the School Board will meet in work session on January 12th to hear presentations on the following budget components:

• Budget timeline
• Enrollment projections
• Governor McAuliffe’s proposed budget released in late December and impact on RCPS
• New budget requests
• Goal setting

Later this month, the School Board will conduct a public hearing to gather input from our school community on what should be included in the 2017-18 School Budget which will also be considered in the coming budget deliberations. So for now, enjoy the snow, be safe, and stay tuned for more regular budget updates.

Welcome to November! As we begin work on the budget for next year (2017-18), I will once again use the budget blog as a means of sharing information with all of you. So, here we go!

The School Board reviewed a tentative budget calendar for the 2017-18 budget cycle at their meeting on October 26th and they are scheduled to approve the calendar on November 10th. The calendar includes dates for important budget meetings, hearings, and work sessions with the School Board, Principals, Employee Advisory Committee, and the public. You are invited and encouraged to attend any of these meetings to learn more about the budget process.

Significant work is underway by staff working on the update of the School Capital Improvement Plan (CIP) and Capital Maintenance Plan (CMP). The CIP reflects the major school renovation projects planned for the next 10 years. Likewise, the CMP outlines the minor maintenance and capital projects planned for the next 10 years. As part of updating both of these plans, the School Board contracted with an outside vendor to evaluate the capital needs of every school building to address critical infrastructure conditions along with recommendations for facility improvements. The School Board will be reviewing the results of that study along with minor projects requested by each Principal over the next two months and will be working on prioritizing the list to match available funding.

Finally, as part of efforts to contain increasing health insurance costs in the school board budget, the Marathon Health and Wellness Center North opened last month. Employees participating in the group health insurance plan are able to seek medical care and wellness coaching at the office located in the School Administration building. You should be seeing announcements in your emails about an Open House to be held on November 9th from 1-5:00. We encourage you to stop by and meet the Marathon Health medical team and learn about the new criteria for being eligible for a reduced health premium in 2017-18. More specifics on the Wellness Plan will be released by Human Resources over the coming weeks.

As we begin the budget cycle, I will continue to share budget and finance related information with you and welcome any suggestions you may wish to share with me to make our process as transparent and informative as possible.