Guest Contribution by Arthur Green
Timberlane’s administration and school board are taking some mitigating action against rising taxes and taking some steps to improve financial transparency. We think that our efforts, together with our colleague Cathy Gorman, have been key to these results. This is what we’ve helped to accomplish so far:
- Reduction of planned 2014 tax increase
Restraint of spending to build a 2014/15 surplus
School Board acknowledgement of taxpayer impacts and concerns
Improved transparency – staffing reports, enrollment forecasts, monthly financial statements are now being made available to the public on the District web site, after months of persistent Right to Know requests
Elimination of intrusive student surveys
Several important pieces of financial information emerged from the Sept. 18 School Board meeting that will lower the formerly anticipated tax increases.
- Upon closing the books on the year which ended June 30, the administration has found an additional $350,000 to add to the surplus from that year.
- This extra money is available either to be deposited in the Contingency Fund (“Fund Balance Retention”), as voted by the Board in June before the entire amount of surplus was known, or applied as revenue to the 2014/15 year to reduce taxes. The Board plans to discuss the options at the Oct. 2 meeting.
- The LGC HealthTrust refund of surplus issue is producing a further $387,000 to Timberlane coffers over and above the amount previously anticipated and included in the 2014/15 revenue budget. About 20% of this money will be returned to employees and retirees, but the remainder, about $320,000, will be unexpected revenue to the district.
- The administration stated that the LGC HealthTrust funds will be reported to the New Hampshire Department of Revenue Administration as part of current year revenue, and consequently will reduce the amount of taxes required from taxpayers in this current academic year (2014/15).
- The financial summary presented by the administration showed revenue from Medicaid and Catastrophic Aid higher than the budget presented at deliberative, by $275,000
- The administration reported that there are 12 unfilled staff positions.
The good news from these announcements is that up to $950,000 (round numbers) has become available to reduce the planned tax increase for the current year. The March vote which resulted in a default school board budget, a default SAU budget and approval of the support workers contract, resulted in an increased assessment to the district taxpayers of $2,100,000, or 4.6%. If the full $950,000 is applied to offset taxes, the anticipated increase of 4.6% would be reduced almost half, to $1,113,000, or about 2.4%. Town-by-town impacts vary significantly, but this would be welcome relief to all taxpayers.
The unfilled staff positions indicate that the district is moving in the direction of preserving a surplus in the 2014/15 year. Unfilled positions result in underexpenditure on salary and benefits line items, which is how the surplus is usually produced. We have called for a cap on expenditure at $2 million below the approved budget. These unfilled positions are not enough to produce a $2 million surplus, but the movement is in the right direction.
Superintendent Metzler went out of his way to emphasize that the announced mitigation of this year’s tax increase discredits our tax increase forecast. On the contrary, it shows that we were right and they decided to do something about it. We did, after all, base our forecast on the administration’s own tax impact disclosure at Deliberative in February, adjusted for the March vote results.
The administration is responding to taxpayer concerns by using discretionary means to mitigate this year’s taxpayer impact. We will certainly not criticize the administration for doing this, and will continue to encourage more movement in this direction.
A few observations on how the LGC HealthTrust revenue is being handled:
We have learned from the administration’s action this year – declaring the unanticipated revenue as current revenue – that the same course of action was available last year, when LGC HealthTrust returned $1,054,000 to the district in August. Setting aside about $200,000 owing to employees and retirees, the administration could have applied $855,000 against the very heavy tax increase last year. The existence of this alternative was never publicly discussed. – which is why a public hearing is so important and mandated by law.
If the district had used the LGC money to partially offset the tax increase last year, then the only way to produce last year’s $1.9 million surplus would have been through spending discipline.
The LGC Return of Surplus has several pieces (round numbers quoted):
$1,054,000 received as unanticipated revenue last year, of which $855,000 placed in surplus and transferred as revenue to the 2014/15 year
$320,000 budgeted as anticipated revenue in 2014/15
$320,000 received as unanticipated revenue in 2014/15, and notified to DRA for inclusion in the 2014/15 tax calculation
In total, the district is benefiting in the 2014/15 year from almost $1.5 million in one-time windfall revenue. And taxes are still going up by 2.4% (best case) average across the district.
Next budget year, even if there is no spending increase, we will need a district-wide tax increase of $1.5 million just to replace the one-time LGC windfall we had this year. This means if the budget committee passes a flat budget for 2015-2016, taxes will still go up considerably. The district has to cut spending by $1.5 just to keep your taxes at the same level as they will be when you get your next tax bill in November.
There was a heated dispute over the need for a public hearing to accept the LGC revenue in 2013/14. The School Board position on the issue, backed by a questionable legal opinion, was that no public hearing was needed if all the funds were to be applied to surplus, but that a hearing would have been needed if the funds were to be spent. Even on this basis, there is absolutely a legal requirement for a public hearing on the unanticipated portion of the LGC revenue, because those funds are being applied to the current appropriated expenditure budget. We know this because they are reducing the amount to be raised from the taxpayers.
At the Sept 18 meeting the board voted down Mrs. Green’s motion to hold a public hearing on acceptance of unanticipated revenue.
The $275,000 increase in Medicaid and Catastrophic Aid is also interesting. No details were provided on the reasons for this increase, but both line items represent payment for services rendered by the district. The expenditure appropriation is not going up, so these increases imply that the district is obliged to provide related services from the existing approved appropriation. The fact that the district is operating this year on a default budget implies that such services (to the value of $275,000) were not included in the expenditure plans. Conclusion: the financial help is good for the taxpayers, but the related expenditures will have to be covered from the existing spending plan, and therefore will tend to reduce the surplus for the next budget year.
The $350,000 increase in the year-end surplus from 2013/14 raises many questions. At the July 16 School Board meeting, the administration distributed a variance analysis showing underspending of $680,000, and extra revenue of $1,176,000 (of which $855,000 was last year’s LGC money), for an estimated surplus of $1,856,000. At that time the year-end numbers were preliminary; nevertheless, it is surprising that the surplus for the past year can change by as much as $350,000 between mid-July and mid-September, when the fiscal year had ended on June 30. We will analyse this change further when we have full and final account-level details.
Good news for the taxpayer – the district’s new-found urgency of using any possible discretion around timing and reporting of revenue in favour of mitigating taxpayer impact.
Bad news for the taxpayer – most of this movement is designed to protect a high and growing level of spending. We can’t count on getting an LGC windfall every year.