The budget process has been ongoing, and particularly intense this fall and winter, as we anticipate the major challenges before us. In October, Administrative Council began meeting to assess School and Department Improvement Plans, and articulate progress in programming. In January and February, Principals and Curriculum Coordinators prepared and presented their plans at Budget/Finance and Curriculum Joint Subcommittee meetings.  In February and March the administration continued to develop various budget scenarios, and held budget forums with faculty, and the PTO and Site Council leaders. The Budget/Finance Subcommittee held about six meetings to work with the administration on these budget scenarios and percent increases. At this point in time, the administration has provided the School Committee with seven budget scenarios. This report explains these scenarios, and I support the scenario that best maintains the momentum of the school district. In the next few weeks the School Committee will make a determination about which percent increase to recommend to the Town.

We are in very challenging financial times. We are in a financial crisis. Our challenge has been to develop a budge that continues to provide quality education at all levels at a time when the Town and the School District face unprecedented financial restrictions in the current fiscal year and the years to follow.

Even though we have developed a vision and strategies to accomplish that programming and services, realistically we need to take a longer term view on our aspirations.

We need to maintain the momentum of the educational programming that we have built so far. We want to avoid undermining this momentum.

The goal is to maintain momentum for our educational program. This means we must: Protect class size, provide in-district special education programming, sustain technology implementation, make available adequate classroom supplies, and ensure professional growth for our staff.

The significant financial issue for FY2011 is economic instability. All school districts face one of the most challenging budget seasons in decades. There are 3 areas with which we are grappling.

1) Uncertain Collective Bargaining Agreements – We are just now about to start contract negotiations this week. If we have a contract by the fall, and if we could be assured that STEPs would be deferred, our budget scenarios would be significantly different.

 2) Unsettled Local, State, and Federal Revenues

Town budget gap – The Town Manager has been very clear with projected revenue and expenses. In October he projected a $4.6m deficit, and has gone so far as to say that this deficit would still be over $2.9m if there were no Departmental expenses growth.

Governor’s budget has said that Chapter 70 (funding formula for education) will not be reduced, however the State does face a $3b to $4b budget gap and is only slowly emerging from this economic crisis. Given the response that this entire proposal has received from the Legislature, the Town and the Schools are taking a conservative view of the State budget picture.

ARRA (American Reinvestment & Recovery Act) - The stimulus money on the Federal level, the ARRA funds have helped us so far start some of our new Sped programming. We have that money for next year, if we don’t have to dip into it this year to cover unforeseen costs. However, we don’t have this funding for 2012. ($500,000) unless there is another stimulus package. If there is no more funding, that is what districts are referring to as being on the “funding cliff”.

3) Unpredictable Special Education costs.

Tuition exposure & In-district programming- We always have tuition exposure, and we are trying to develop new sped programming that will serve students better in-district and make this exposure more predictable.

Circuit Breaker – In addition to his other House2 proposals, the Gov has proposed to slightly increase CB funding, resulting in a 40% reimbursement allocation this year. This 40% represents a major reduction from the 72% reimbursement that we received as recently as 2009. In fact, last year it was the ARRA funding that helped us with that deficit as well as additional allocations from the Town in late June.

So that you understand the budget scenarios and their impact, we need to explain some of the background information about the school department budget.

The pie chart is a picture of all of the sources of revenue in the School Department for the current fiscal year.  We tend to focus mostly on the biggest piece of the pie – the $32.9 million dollars which is the Town appropriation, but in fact that is only 89% of the revenue that we receive.  We have money from the State in the form of Circuit Breaker, the Federal Stimulus money, we have other Federal and State grants, some of them known as the No Child Left Behind Act and then we have programs where we take revenue in.  We have fees for our PreK and Preschool programs and we have other fees and receipts such as athletic fees, bus fees and all of those put together bring us to more of a $36 million dollar operating budget from all the different sources.

Here we are looking at where we spend all of our money.  71% of our budget is taken up by personnel costs, including salaries for all of the different personnel and their longevity payments.  The salaries are what drive this budget and it does not leave a lot left over.  The next largest piece is Special Education costs for contracted services, transportation and tuition, so the Special Education personnel costs are included in the crimson section, and that is 18%.  Utilities and maintenance, materials and services amount to only about 10%. The materials and services 5%, which we tend to spend a lot of time on, is really the only discretionary money that principals have. Finally, the technology 1%, is very small because this is the operating budget not the Capital budget.  The Town has given us a million dollars over the past two fiscal years on the Capital side for investment in infrastructure and hardware. 

We have developed several budget scenarios. These 7 budget scenarios start with what we need to move the district forward, and then because of the financial crisis we have reduced it to Level Dollar. The first one which we named the Non-Crisis scenario is still conservative and this is a compilation of most of what was presented by the principals and curriculum coordinators before Budget/Finance & Curriculum meetings in January and February, and this amounts to a 5.66% increase over this year.  Coming down from that we had to take a very hard look at what was really needed to keep the district going, maintain the momentum that we have created over the past couple of years, and that budget is a 3.84% increase.  The Level Service budget, although it falls in line here, is a little different than the Maintain Momentum scenario in that it takes a slightly different approach, which we explain in most of this report. However, Level Services tries to answer the question of what do we need in order to continue the same services that we provide to our students right now. The School Committee asked us to also develop budget scenarios for 2.0%, 1.5%, 1%, and Level Dollar. All of these scenarios have very serious ramifications.

If we were not in a financial crisis, we have a solid plan that explains where we are, how we want to improve, and how we would reach those goals. This plan is explained in the budget book before you. Each principal and curriculum coordinator has articulated the needs of our students and they have mapped out all of our programming priorities. We considered this scenario to be the opportunity to go from good to great.

We are in a financial crisis and although our planning for improving the school system was conservative, we pared these plans down so that at least we would have a chance of maintaining the momentum we have built in the past 5 years.

We made the highest priority renovations in both regular education and special education. However, these renovations do put us at increased risk for unpredictable tuition exposure with Special Education because we have significantly cut back on in-district special education programming.

In this scenario we also cut back from continuing to strengthen our technology implementation to managing to sustain it.

We did not cut back on classroom supplies, because over the past several years we have been too frugal with supplies. We currently have inadequate and out-dated classroom supplies for the curricula we need to deliver.

In this scenario we also still have the opportunity to ensure professional growth for our faculty, so that each and every teacher and administrator knows how to improve their practice with new tools and strategies, and has the support to improve and be more successful with their students.

When we move into the Level Services scenario this is what it looks like…

Let’s look at our class size. It’s more illustrative to understand that we have a range in class sizes. The smaller classes are special education classes; larger classes are regular education classes.

We want to maintain our class sizes because they are appropriate for our population. Our student population is very diverse. One third of our students come from homes where English is not the first language. We also have a high percentage of Special Education students compared to other districts in Massachusetts. The average percentage for districts in the state is 13%. Our percentage is 20%.

There are very few other school districts in Massachusetts with this kind of significant linguistic, socio-economic, and cultural diversity. The result is the wonderful challenge of differentiating our teaching to meet the needs of such a diverse and wide spectrum of learners.