Op Ed: Deciphering The Montclair Schools Budget Surplus

BY  |  Wednesday, Feb 26, 2014 12:00pm  |  COMMENTS (61)

Surplus The following is an Op-Ed by Andrew Gideon, a Montclair father of two public school students.

Over the past few years, readers of  Barista Kids, the Montclair Times and attendees at Board of Education meetings have fairly regularly heard that we should “spend the surplus.” As we learned this Monday at the Board Budget meeting, that’s what the district has been doing. And now we’re done; the surplus is spent.

Let’s first review what this surplus actually is. For something that is so often misunderstood, it is actually very simple. Every year, the district prepares a budget. The district is not permitted to go over the budget. Hitting the budget exactly, as anyone involved in serious budgeting knows, is unlikely. Therefore, it is almost guaranteed that the district will actually spend less money than it budgeted. That’s the surplus.

Districts in New Jersey are permitted to carry as much as 2% of their budgets as a “fund balance” from year to year. Above, I wrote that districts are not permitted to go over their budget. Yet unexpected events do occur. A “fund balance” is a buffer, or a “fudge factor”, which provides the district with money to be spent in case of some
unexpected need.

Outside of unusual events or needs, the fund balance is carried from one budget year into the next. In a perfect world, a district would spend exactly what it budgeted. It would then end the school year with exactly the same fund balance that it had started. However, this requires that the district hit the budget exactly. This isn’t too likely.

It is possible for a district to spend less than is budgeted. One can argue that this is the desirable outcome; better to spend less than expected instead of more than expected. This money becomes “excess fund balance.” A school district is required to use this money as revenue for the budget two years later. It is used two years later rather than one because, at the time this money is identified, the next year’s budget is already approved by the county and state.

For those that like equations:

Revenue(n) = Taxes(n) + FundBalance(n-1) + ExcessFundBalance(n-2)

Revenue in year N consists of Taxes in year N plus Fund Balance carried from the previous year plus Excess Fund Balance from two years earlier. Every budget therefore has two additional sources of revenue beyond taxes: the fund balance from the previous year and the excess fund balance from two years ago.

This is normal. It is defined by law.

However, for a number of years, Montclair’s school budgets were excessively “conservative.” Line items in the budget were often assigned unrealistically high costs. This, combined with some good luck (such as unexpectedly low health care costs) and some good acts (such as bringing some Special Ed students back into the district), caused the district to spend much less than what was budgeted. While this is a good thing on one level, it is a problem on another. Every dollar the district is under budget is a dollar that either needn’t have been collected from the taxpayers or a dollar that could have been spent on something else. This also weakens the Board’s ability to exercise oversight over the district, as the presented budget does not accurately reflect reality. What does it matter if the Board demands a 10% cut in a line item if that item is 15% too high?

At the January Board of Education meeting, one person claimed that the surpluses had totaled around $40 million dollars. While this is unusually high even for some of the rhetoric we’ve heard, plenty of numbers used to describe the “surplus” have been either misunderstood or downright fictional.

The most dramatic number to use for surplus is the amount of money in the bank account on the final day of a school year. To cite this number as “extra money” is to ignore that, on the next day, more than $2 million of that will be in that next year’s budget as that year’s fund balance.

Even the excess fund balance isn’t “extra money.” By law, it becomes revenue for the budget two years later. In a way, it is money already spent.

Still, we’ve been hearing people shouting “spend the surplus” for a few years now. These people should be happy to learn that, over the past few years, we’ve been doing precisely that.

As is usual for a school district, over 80% of our costs are personnel. Most of those are teachers. And teachers have been getting raises over the past few years of between 2.5% and 3% as per their contract. Yet our school taxes have remained fixed over the past couple of years. It has been the surplus which has been funding this new spending.

In addition, there have been other changes. In the accompanying slides, you can see $4.7 million of the excess fund balance spent in the 2012-2013 budget on recurring costs such as Mandarin Teachers, SLCs, SACs, SPEDs, literacy and math coaches, etc. All this new hiring occurred with no new tax revenue. It was funded by previous years’ excess fund balance.

Today, that’s done. There is no more surplus to spend. Most accurately, there is some surplus coming from the 2012-2013 year but it’s not enough. We have staffing costs that have increased significantly as a result of those salary increases and new hires.

Without excess fund balance to pay for this, what is left is tax revenue.

On Monday, we saw the result. If no new programs are created, and with some cuts being made, we’re looking at a 4% increase in our taxes. If we do implement some of the wonderful ideas that we have been discussing as a town, that increase will grow to 6%.

This seems dramatic. It seems frightening. But it is a necessary consequence of the district spending the surplus on higher salaries and new hires. Those are costs that are paid year after year after year, and the excess fund balance couldn’t last forever. The people shouting that we should spend the surplus got precisely what they sought, and now the bill is coming due.

As dramatic as this seems, though, there is a more comfortable way to see it. Imagine that we hadn’t had that excess fund balance to spend. In that case, to pay for the increased costs over the past few years, we’d have seen school taxes go up. They’d have gone up a little each year. Instead of flat taxes over 2012-2013 and 2013-2014, taxes might have gone up 2% in each of those years. This would still yield a 2014-2015 budget 6% above 2011-2012, but it would only be 2% above 2013-2014.

In other words, we’d be in precisely the same situation we are today except we’d have reached that situation in a larger number of smaller steps.

I wrote above that the idea of “surplus” is a simple one. Another perspective is that “surplus” is simply tax money that is collected too early. We collected dollars in 2010-2011, for example, that didn’t get spent until 2012-2013. If we’d not done that, we’d simply have had to collect those dollars in 2012-2013.

There are two important points to take away from this. The first is to be wary of those shouting “spend the surplus” as if it were “found money.” It’s not. The law defines exactly how we’ll spend it. Either the shouters don’t know this, or they don’t want you to know it.

The second is that, for the 2014-2015 budget, it almost doesn’t matter how we paid for those additional costs in previous years. Given the salary increases and new hires, we’d have the same costs in this new budget whether we’d the excess fund balance in previous years or not. What does matter is what we’re looking to spend in 2014-2015.  Do we want district funded Pre-K?  There’s the cost. Do we want to enhance the World Language program in the elementary schools? There’s the cost.

That’s what we need to be discussing. Hopefully, without the shouting.

61 Comments

  1. POSTED BY Frank Rubacky  |  February 26, 2014 @ 1:18 pm

    Andrew,
    Thank you for your sharing this explanation of how the budget process works. I think it will be helpful to many. Before I get to main issue, please confirm a small clarification. I believe the law also allows the option of the school district to return the excess balance to the Township General Fund after the close of the financial year instead of banking it for future budgets. Yes?

    My main issue, is the law’s definition/use of the term “property tax relief” and how the real tax levy portion of revenues is not clear to the public when a surplus is booked to future budgets.

    I think there we should be using the terms Gross % Increase and Net %Increase when it comes to public discussion & BOSE review of the school levy, budgets & actual spend.

    For example, in the 2013-14 budget (the current year), the % Net % increase was 0% – as we all have been told many times. But when you count the surplus banked by the district, the ACTUAL Gross % Increase was 4%. I did not calculate what the BUDGETED Gross % Increase was, but probably around 3%. Interestingly, applying these Gross & Net metics for the proposed 2014-15 4% Option would show the BUDGETED Net % Increase 4%, but a -0.4% ACTUAL Gross % Increase over this year. Please feel free to check my numbers.

    My point is, using these terms, we could have had a bigger discussion last year of whether a 3% increase to this current school year was appropriate and what to fund with the increase. Since the increase was not generally recognized, the public discussion was skewed to “why we were not spending more?”. Furthermore, there was no chance to challenge the MPS why they going against their own stated policy and the auditors strong recommendation not to spend excess surplus on reoccurring expenses.

    In summary, our points are the similar. We were spending the surplus, but everyone thought it was a 0% increase when it clearly wasn’t. If we are going to have a intelligent discussion, there needs to be more transparency. Just an importantly, the BOSE needs to step-up with an effective oversight role. The extent to which excess surplus is used for reoccurring expenses is a pretty rudimentary line of questioning.

  2. POSTED BY Frank Rubacky  |  February 26, 2014 @ 1:21 pm

    Correction:
    “but a -0.4% ACTUAL Gross % Increase over this year”
    should be decrease

  3. POSTED BY agideon  |  February 26, 2014 @ 2:29 pm

    “I believe the law also allows the option of the school district to return the excess balance to the Township General Fund after the close of the financial year instead of banking it for future budgets.”

    I have never heard of that option. The closest idea to this I have is moving funds into a capital reserve. I believe that this reserve could then be used to pay off debt, debt being something shared between town and district. Having done that, the town recovers some of the funds it was using for paying for/down that debt.

    This is obscure enough that I’d wonder if there is some legal impediment, but it’s the closest I can envision to what you’ve suggested.

    “the law’s definition/use of the term “property tax relief””

    *Laugh* Yes, this is very poorly labeled. It is only “relief” if the district doesn’t increase spending to match. In the presentation I cited from 2012-2013, for example, true “relief” would have been to use that $4.7 million to offset a tax cut of that size rather than the new [recurring] spending.

    That’s not to say that the new spending was a bad idea. But it is purely political to use the label “tax relief” in this context. Since laws are written by politicians, though, that shouldn’t be too much of a surprise.

    As to your use of “net” and “gross”, I don’t find it that helpful. Instead, we can speak of “spending” and “tax revenue”. I think those terms sufficiently well understood. When you write “net”, I immediately wonder “net of what?”

    When comparing budgeted to actual, we can use those labels: budgeted spending vs. actual spending and budgeted revenue vs. actual revenue. I don’t know of a case where budgeted and actual tax revenue would vary, but other revenue sources can and do vary between actual and budgeted.

    “we could have had a bigger discussion last year of whether a 3% increase to this current school year was appropriate and what to fund with the increase. Since the increase was not generally recognized, the public discussion was skewed to “why we were not spending more?””

    I’m not clear what you mean about this. The actuals for 2013-2014 are not in, so all we can compare are the budgeted numbers.

    Looking at http://www.montclair.k12.nj.us/WebPageFiles/2065/budget-13-14-130305.pdf I see both revenue (even including excess fund balance from 20111-2012) and spending going down slightly from the previous year. Note that this uses the budgeted numbers for 2012-2013 as the actuals for that year had not yet become available; we were still in that year.

    …Andrew

  4. POSTED BY agideon  |  February 26, 2014 @ 2:48 pm

    “the public discussion was skewed to “why we were not spending more?””

    I should add that I believe we could increase our budget by the cap each and every year and still have people shouting for more. Some have made it clear that they simply don’t care who can and cannot afford to live in town, and that our property values will necessarily rise as we improve our schools.

    I don’t know that we can increase taxes indefinitely, even if our schools keep improving, w/o adversely impacting property values. I get stuck before this, though, because I do care about who might be priced out of town. It’s not even necessary to be altruistic about this. The current tax increase might not chase me out of town, but that’s not to say that another in some future year won’t.

    So while some would happily gentrify Montclair, I don’t count myself among them.

    That said, though, I do believe that ideas such as those in Mr. Fleischer’s presentation’s “option 3″ should be discussed. People have been asking for Pre-K for a while, for example. There’s the price. So do we do it? That’s what we need to be discussing over these next few weeks of “budget season”.

    …Andrew

  5. POSTED BY Frank Rubacky  |  February 26, 2014 @ 5:34 pm

    Andrew,
    You’re right. Accounting concepts to not come naturally to me and it shows. I only do it as a mental workout that will hopefully slow the effects of aging on my brain.
    So, teacher, in the proposed budget on page 14, bullet 1, is that $1.5MM coming out of the legally allowable 2% surplus balance carry-forward?
    Also, if this year MPS spent 100% of the $500k allowed maintenance fund this year, this Powerpoint does not seem to indicate we are replenishing this. Can you add anything on this?

    Thanks again.

  6. POSTED BY agideon  |  February 26, 2014 @ 6:45 pm

    “Accounting concepts to not come naturally to me”

    Well…

    “in the proposed budget on page 14, bullet 1, is that $1.5MM coming out of the legally allowable 2% surplus balance carry-forward”

    For someone to whom this doesn’t come naturally, you’ve quickly hit one of the items that I find somewhat worrisome. Your understanding of this matches my own.

    I worry about it because we’re now budgeting more aggressively at the same time that we’re reducing our fudge factor. Of course, this assumes we’re both interpreting that item correctly.

    “this Powerpoint does not seem to indicate we are replenishing this. Can you add anything on this?”

    It’s not clearly what you’re asking, but that might be a part of the ~M$7.5 for “Plant Operations & Maintenance”. That’s a great question to ask during the first budget workshop.

    …Andrew

  7. POSTED BY thinking4myself  |  February 26, 2014 @ 9:43 pm

    Informative op ed. Thanks.

    One question: In the proposed budget, there is 3% listed as Consultants and Professional Services. By using Fleischer’s “one percent is about $1 million” that means about $3 million in consultants, just 1% less than the % increase being requested in one of the budget scenarios (the one to keep staffing levels as is). How does this compare to past budgets? Any data on exactly who/what these consultants are?

  8. POSTED BY Frank Rubacky  |  February 26, 2014 @ 10:11 pm

    So, are you worried the level of MPS budgetary planning prowess has remained constant and/or that we might have to, for the foreseeable future, maintain less than the full 2% surplus cushion allowed under the law?

    It would also seem axiomatic that the inverse relationship of the available surplus to tax levy increases in the highly regulated school revenue budgeting environment you described as having attributes of a rudimentary leading indicator.

  9. POSTED BY agideon  |  February 27, 2014 @ 12:37 pm

    “How does this compare to past budgets? Any data on exactly who/what these consultants are?”

    I don’t know. I checked a few of the overviews/presentations from the last few years of the Alvarez era, and this wasn’t broken out.

    There are numerous “consulting” line items in http://www.montclair.k12.nj.us/WebPageFiles/699/budget-12-13-book-120319.pdf and it would take going through the book and summing them up to answer your question. Unfortunately, the “book” online is a scan rather than a generated PDF, so it is not searchable. I did do one quick pass, and I was unable to locate any item that is clearly aimed at the DMC. Since I know we’ve been paying them consulting fees for years, that I could not locate this suggests that “consulting” items may not be obvious (or I might simply have missed it).

    This is probably another good question to ask: What constitutes “consulting” and how has that changed over the years?

    …Andrew

  10. POSTED BY agideon  |  February 27, 2014 @ 12:43 pm

    “are you worried…”

    I am worried that, in moving to a more aggressive budgeting approach, we could go “too far” in some line items. We might expect something to cost $10 when it actually costs $12.

    Fund Balance is a way to deal with those issues. However, at the same time we’re budgeting more aggressively we’re also reducing Fund Balance.

    That is, we’re increasing the chance of having too little funding in a line item at the same time that we’re putting less aside for cases where we have too little funding in a line item.

    David Deutsch asked an interesting question at the last BOE meeting: where does the district stand on energy costs? Are we trending over or under the budgeted amount? Given our cold temperatures recently, we could be over on that item. What if next winter is cold too?

    …Andrew

  11. POSTED BY State Street Pete  |  February 27, 2014 @ 1:10 pm

    Nicely written Andrew! I got a bit of an education on school budgets and the fun if Fund Balances during last year’s budget debacle in Bloomfield and you’ve explained it very well, and that’s not easy.

  12. POSTED BY Frank Rubacky  |  February 27, 2014 @ 1:44 pm

    We’re trending over, but not to a level of concern for me. Even if costs are 20% ahead, it would be over only $300K max. If the MPS can’t plan energy appropriately, I think we have a bigger problem.

    The overall budget category was planned extremely conservatively last year…maybe even a category to park extra cushion. This year was more aggressive.

  13. POSTED BY agideon  |  February 27, 2014 @ 3:21 pm

    “We’re trending over”

    Please forgive me if I should already know the answer to this, but: how do you know? Mr. Fleischer said that he didn’t know, and would have to check.

    “If the MPS can’t plan energy appropriately”

    Percentage-wise, I’d imagine this being one of the more uncertain line items. Weather, after all, is not something over which we’ve much control.

    This isn’t so?

    …Andrew

  14. POSTED BY Frank Rubacky  |  February 27, 2014 @ 3:56 pm

    I can’t be certain as I am unable to find/download a copy of the final 2013-14 school budget on the MPS web site. Not to go off on a tangent, but what is the deal with this web site? It is truly unsatisfactory. The design is wanting, but why can’t key public reports like the 2014 Enrollment Full Report and the 2013-14 Final Budget? The Historic Preservation Commission should give MPS web site a Preservation Award this Spring.

    Natural gas prices have spiked and, more importantly, the budgeted numbers for the related energy categories are just bewilderingly low. That might be a result of over-compensating for 2012-13. MPS transferred out a $570,000 surplus from the energy sub-categories alone.

    This year, the oil category number is just wrong or MPS converted to some more gas fired boilers within the last year. If they did, they didn’t adjust the gas number enough.

    Or, Mr Fleischer did check.

  15. POSTED BY complainerpuss  |  February 27, 2014 @ 4:17 pm

    “I can’t be certain as I am unable to find/download a copy of the final 2013-14 school budget on the MPS web site.”

    Frank – I believe you can find a copy of the final 2013/14 school budget by going to gobookee.org.

  16. POSTED BY State Street Pete  |  February 27, 2014 @ 4:34 pm

    Well played puss, well played.

  17. POSTED BY agideon  |  February 27, 2014 @ 5:10 pm

    It’s a lousy web site. It’s an ancient web site. This goes along with our…questionable technology support in the district. Hopefully, this is now changing. We’ve a new IT directory (not sure of the exact title) starting at the end of March.

    “The Historic Preservation Commission should give MPS web site a Preservation Award this Spring.”

    No no no! Wouldn’t that require that they keep it unchanged forever?

    *laugh*

    For budget materials: http://www.montclair.k12.nj.us/WebPage.aspx?Id=1708 http://www.montclair.k12.nj.us/WebPage.aspx?Id=699 http://www.montclair.k12.nj.us/WebPage.aspx?Id=2065

    I find things by searching on Google and adding “site:montclair.k12.nj.us”.

    …Andrew

  18. POSTED BY Frank Rubacky  |  February 27, 2014 @ 5:48 pm

    Andrew,
    Sorry, but the link page does not include the final budget. It is the proposed budget of March 4th. I am well aware of this version. It may well be what was eventually approved, but I doubt it as the BOSE did make some minor tweaks. There is also another County sign off after the BOSE approval.

    In googling for the final, I ran across this article on the BOSE approval. The quotes are interesting in today’s context.

    http://www.northjersey.com/news/201561091_Board_approves_budget_for_Montclair_s_public_schools.html

    PS: The Township protocol is to post their final budget. I do not think I’m being persnickety in asking of a $113MM public organization to get their act together on such a simple task. It sends the wrong message.

  19. POSTED BY Frank Rubacky  |  February 27, 2014 @ 6:25 pm

    Andrew,
    I realize you are just sharing what others have said about ebooks & technology, so this is not directed at you.

    The district’s intention to migrate to ebooks anytime soon is totally unrealistic based on the the current level of MPS technological sophistication and staffing. If there are even 3,000 more devices available to the 6,800 students, the ability to clone, maintain & support them would be beyond the MPS’s current capabilities & mindset. This is in addition to the ongoing challenge of updating existing desktop pcs & software.

    I think the network design & management issues revealed over the last 6 months illustrate a more pressing & substantial need – one that will likely take a year to work through. Like infrastructure improvements, residents don’t see them, they just see the bills.

    Then there is the MPS web site – an online testament to mediocrity with content deficiencies that are not technology related. I think many people will pay for quality. Most people will pay for perceived value. We seem to lack both. In this internet age, embrace it or not, the MPS web site is the storefront for school information.

    The BOE should get serious about setting a higher technology bar in this budget season.

  20. POSTED BY nycmontclair  |  February 27, 2014 @ 9:18 pm

    I am still confused as to what the BOE actually spent the surplus on and am especially confused as to
    what they get for the money. Improvement of our schools? Expensive quarterly assessments? Indeed, testing reforms ARE expensive but not necessarily deliver on educational objectives as we are seeing with districts and states that have experience with these testing reforms.

  21. POSTED BY walleroo  |  February 27, 2014 @ 9:24 pm

    an online testament to mediocrity with content deficiencies that are not technology related

    Funny!

  22. POSTED BY walleroo  |  February 27, 2014 @ 9:33 pm

    Wow, Frank and Andrew: you guys are studs.

  23. POSTED BY latebloomer  |  February 27, 2014 @ 9:38 pm

    My eyes glazeth over.

  24. POSTED BY walleroo  |  February 27, 2014 @ 11:01 pm

    Why don’t we just retire to the bar, bloomer…

  25. POSTED BY mcinmtc  |  February 27, 2014 @ 11:43 pm

    NYCmontclair — I found detail on the surplus-related spending in slides 7-9 in the MPS presentation from Monday night and linked in other Bkids articles.
    http://www.montclair.k12.nj.us/WebPageFiles/2281/budget-14-15-140224.pdf

  26. POSTED BY latebloomer  |  February 28, 2014 @ 8:08 am

    An excellent idea, walleroo!

  27. POSTED BY agideon  |  February 28, 2014 @ 12:19 pm

    “the link page does not include the final budget”

    You’re right. I don’t know if changes were made or not but, even if not, that should be clearly stated.

    Do you know if “The Full Budget Book” on http://www.montclair.k12.nj.us/WebPage.aspx?Id=699 is the final for that year? It is dated March 19.

    For that matter, there should be an item-by-item comparison of the final budget to what was actually spent. One of the complaints we had about budgets as of a few years ago was no way to see how the predictions matched the actuals. Back then, of course, that was probably deliberate, but we should be sure to get this information provided now.

    The problem, though, is that it will be one year behind. For example, look at page 34 of the 2013-2014 book. It has the actual numbers for the past year, the budgeted numbers for the then-current year, and the budgeted numbers for the new year. The actuals for the then-current year cannot be available, but we could see here a comparison between the budgeted and actual numbers for the previous year. That would help us gauge our accuracy if nothing else.

    I’ve already asked for certain information to be added to the “options” we’ve been asked to consider. I have also requested that the new budget book include head count per line item (this was there in previous years, but disappeared at some point).

    I imagine that this is a good time to offer other suggestions/requests. But yours – the final budget for the current year – should be easy to accommodate.

    …Andrew

  28. POSTED BY agideon  |  February 28, 2014 @ 12:21 pm

    “based on the the current level of MPS technological sophistication and staffing”

    I don’t imagine that anyone disagrees. The new IT Director certainly has plenty to do.

    …Andrew

  29. POSTED BY agideon  |  February 28, 2014 @ 12:27 pm

    “I am still confused as to what the BOE actually spent the surplus on”

    The link “accompanying slides” in the article is wrong! That does make a big difference.

    Look at pages 8, 9, and 11 of http://www.montclair.k12.nj.us/WebPageFiles/699/budget-12-13-120319.pdf and you’ll see how the 2012-2013 explicitly spent “surplus” on certain recurring expenses (as well as other one-time expenses).

    However, the simple answer is that surplus becomes revenue over the next two years. From a certain perspective, it is “spent” on the entire budget (as are tax dollars).

    A “surplus” is simply tax money collected too early. It is (for example) revenue acquired in 2010-2011 that isn’t spent until 2012-2013.

    …Andrew

  30. POSTED BY Frank Rubacky  |  February 28, 2014 @ 12:54 pm

    Andrew,
    I’m not sure I follow completely, but this document is helpful:

    http://www.montclair.k12.nj.us/WebPageFiles/698/audit-12-13.pdf

    Of course, one would need to go back and forth between this, the unavailable approved 2013-14 budget doc, and the PP summary of 2014-15 to gain the perspective on the last 2 years vs what is being proposed.

    No, it is a draft, too. The March 19th was the book originally sent over to the BOSE to review.

    I could have been clearer on the web site content critique. The IT Director really is not a factor. The department heads (e.g. Mr Fleischer) email their reports they “want” (operative word) posted on the web site to the web master. It is really that simple.

  31. POSTED BY walleroo  |  February 28, 2014 @ 2:16 pm

    Two gin martinis, please. Extra dirty.

  32. POSTED BY Frank Rubacky  |  February 28, 2014 @ 5:11 pm

    “Look at pages 8, 9, and 11 of http://www.montclair.k12.nj.us/WebPageFiles/699/budget-12-13-120319.pdf and you’ll see how the 2012-2013 explicitly spent “surplus” on certain recurring expenses (as well as other one-time expenses).”

    Andrew,
    At the risk of driving Walleroo back to the bar, I have to caution that you are referring to Proposed budget use numbers in 2012-13, not the Approved 2012-13 budget.

    You are also referencing a Powerpoint presentation. PPS are nice to give highlights and provide unofficial numbers….at only at a specific point in time. These decks are highly perishable because of their very purpose. The only purpose of the 2014-15 deck should to describe the situation and give the 3 options.

    PS: Even the just released 2014-15 PP deck has a silly mistake rounding mistake on a very simple, but always interesting number. Hint: it is a % in red.

  33. POSTED BY walleroo  |  March 01, 2014 @ 4:32 pm

    What wash thath, Frankth? Didth you shay shomething?

  34. POSTED BY agideon  |  March 03, 2014 @ 6:48 pm

    “At the risk of driving Walleroo back to the bar, I have to caution that you are referring to Proposed budget use numbers in 2012-13, not the Approved 2012-13 budget. ”

    That’s quite true. More fundamentally, I don’t really believe there is a concept of “spending the surplus” as separate from other revenue. Revenue is fungible. Surplus goes into the same “pot” as all the other revenue, and costs are paid out of that “pot”.

    Still, those slides represent [proposed] spending increases achieved with no accompanying tax increase. So, from that perspective, I can see the “spending the surplus” sense of it. Perhaps more importantly, I see the “time bomb” this leaves for future budgets. Whether that “time bomb” is a revenue problem or a cost problem depends, I believe, on whether you believe the spending was justified. Either way, though, it left a future problem to be addressed.

    Plus, of course, people keep asking “where was the surplus spent”. The short answer – on keeping taxes flat over the past few years – leaves out a lot of detail.

    As for the difference between proposed and final: I plan to request the final be placed there.

    …Andrew

  35. POSTED BY Frank Rubacky  |  March 03, 2014 @ 7:06 pm

    OK, my disclaimer on my accounting prowess.

    I didn’t think revenue was recognized in-year. A negative variance to the original budget (spending less than planned) can be transferred out to spend elsewhere (in-year) or left there to the year end….and glopped into the fund surplus.

    While the MPS & the MPS might not have a concept of spending the surplus, I think I can make a pretty good non-accounting argument that is just what they are doing and further, from a discipline & best practices POV, all revenue is absolutely not fungible. Reckless maybe, but certainly not fungible.

  36. POSTED BY Frank Rubacky  |  March 03, 2014 @ 7:16 pm

    Ummm. “While the MPS & the MPS” s/b “While the MPS & the BOSE”

  37. POSTED BY State Street Pete  |  March 04, 2014 @ 10:14 am

    Geez, I hope Roo got home okay last night.

  38. POSTED BY agideon  |  March 04, 2014 @ 3:52 pm

    “OK, my disclaimer on my accounting prowess.”

    The evidence from my side of this screen is that you understand this better than I. The only advantage I have is a couple of years of committee work with some people that were both very good and very kind about explaining this stuff.

    I’m still learning details. For example, one fact I gained from Mr. Fleischer’s presentation last night was that additional allocation of fund balance doesn’t reduce the 2% carried, but the excess fund balance carried forward into the next budget cycle.

    In retrospect, that’s obvious, right? Yet I’d completely misunderstood it.

    “While the MPS & the MPS might not have a concept of spending the surplus, I think I can make a pretty good non-accounting argument that is just what they are doing and further, from a discipline & best practices POV, all revenue is absolutely not fungible. Reckless maybe, but certainly not fungible.”

    From a budget perspective, how is revenue not fungible? A dollar is a dollar. If you put two piles of dollars into a pot, and then take some dollars out to be spent, can you really speak of having spent one pile or the other?

    On the other hand, of course the district has been spending surplus. That’s how the amount goes down. What I should have written is that I don’t agree with the concept of spending these dollars on this particular thing, and those dollars on that particular thing. So “spending the surplus” on some specific expense is not really something I see as a reasonable concept (though feel free to correct me if I’m missing something).

    On the third hand, it is clear that surplus has helped us to increase spending on recurring items w/o – until now – having to raise the necessary revenue in taxes. That could, I suppose, be called “spending the surplus”.

    Plus, of course, we need to keep in mind that Dr. Alvarez sold the new spending as “funded by surplus”.

    So…don’t expect me to put up much argument against that phrase.

    …Andrew

  39. POSTED BY Frank Rubacky  |  March 04, 2014 @ 4:25 pm

    Andrew,
    I understand budgeting better than accounting. In the end, it might be labeling semantics and over the process of what/when/how reoccurring expenses get increased.

    That said, I am coming to a realization that the proposed 4% option is an appropriate macro level number for 2014/15.

    I am basing this on my exchange with concernedmontclairparent in the related thread today regarding the projected 6/30/14 fund surplus and my unconfirmed understanding of how that will likely leave MPS finances a year from now.

    If my understanding is accurate, and taking into account the 2% State cap, I can appreciate the Superintendent’s & COO’s proposal.
    Which means, at a minimum, I owe them an apology for the attitude & tone of several recent posts. Almost certainly an apology for several misstatements or errors, too. I was wrong.
    Thank you to yourself and concernedmontclairparent for helping me see the light.

  40. POSTED BY agideon  |  March 04, 2014 @ 4:49 pm

    “That said, I am coming to a realization that the proposed 4% option is an appropriate macro level number for 2014/15. ”

    Perhaps you can help me come to the same conclusion. At the moment, I am woefully undecided between the more conservative 4% and the 6% with the smaller K class size and – to me, more important – sort-of universal pre-k.

    The quote of what I said during public comment in http://kids.baristanet.com/2014/03/break-downs-montclair-school-budget-last-nights-meeting/ is accurate (though they removed the stammering and fumbling for words). The possibility that we’d do this wonderful thing for kids by pricing those kids out of the district is very disturbing to me.

    Yet the advantages of pre-k have become rather clear. We put some of our students at a significant disadvantage by failing to provide this.

    On the financial side, I note that the additions within the 6% option cost 2% of the budget. It adds six FTEs not counting any staff changes for pre-k. What does this do to our budget growth in subsequent years? If those six (or more) people get raises above 2% (as has been occurring in the current MEA contract), then how can we – long term – function as a district under the 2% cap?

    That question may need to be addressed anyway, but this option pushes us that much further toward the wall.

    …Andrew

  41. POSTED BY Frank Rubacky  |  March 04, 2014 @ 5:54 pm

    When did we skip ahead and determine that any Pre-K program be funded by the school levy & run by the MPS?

  42. POSTED BY Frank Rubacky  |  March 04, 2014 @ 6:49 pm

    Andrew,

    The short answer to Pre-K is that it’s too late in the process this year to consider it. But, I’m also confused over the difference between Pre-K and “Half day preschool for the district’s approximately 80-100 NCLB Title I preschool students” (from the Powerpoint budget).

    Pre-K is an expansion of MPS core mission with long term-ramifications. MPS got out of the Pre-K business back in 1997. It will take Montclair 4 years to rewrite a new Master Plan. I think 30 days is insufficient to make a decision how to best start up public Pre-K.

    I have no problem if all the stakeholders can get together and agree on a process to get to a decision this time next year.

    Hope this is helpful.

  43. POSTED BY agideon  |  March 05, 2014 @ 12:57 pm

    “The short answer to Pre-K is that it’s too late in the process this year to consider it.”

    I’m not sure what you mean. As a town, we’re faced right now with an interesting choice. The district Superintendent has offered two different options for our budget next year (I’m ignoring the slash-n-burn third option). The more expensive option includes (1) the reduction of K class size and (2) fully funded pre-K for title-1 students.

    What do you mean by “too late”?

    In fact, your wording caused me to consider a different perspective of this. This option will “cost” about 2%. Of the budget. We can only afford that today because of the excessive surplus. Otherwise, this idea would be blocked by the 2% revenue cap.

    What this may mean is that, absent some extraordinary event of the future (perhaps the elimination of that 2% cap, for example), we may never have this option again.

    …Andrew

  44. POSTED BY Frank Rubacky  |  March 05, 2014 @ 1:34 pm

    No. I think you playing the putting the horse, a Pre-K program, ahead of the cart, fiscal discipline.

    Let’s put aside the question of Pre-K momentarily. Is your financial argument is that we should go with the 6% increase to a) fund new programs and/or b) replenish our capital reserve now because the cap will kick in next year and hamstring our choices?

    Well, like all good State regs, I’ll guess there is a way around the 2% cap. It might or might not include leveraging our legally allowed 2% emergency fund in a future year. Of course, there is also the undiscussed possibility of using the municipal levy to fund Title 1 Pre-K operated by a NGO instead of the MPS.

  45. POSTED BY Frank Rubacky  |  March 05, 2014 @ 1:35 pm

    s/b “No. I think you are putting the horse,..”

  46. POSTED BY Frank Rubacky  |  March 05, 2014 @ 4:56 pm

    The financial details of a 6% increase aside Andrew, the political ones seem challenging, too!

    A year ago, there was a lot of public backslapping over a flat levy and a cut in spending.

    Four months ago, “School budget surplus decreases in Montclair but still tops $12 million” was the feel-good headline in The Mtc Times.

    This month, a fair headline might be, “$12MM school budget surplus replaced by a 6% tax increase”.

    I doubt 6% will be approved. But if I’m on the wrong side of this, I have to ask the supporters why should we limit ourselves to just 6% increase? I think we can safely put the affordability concerns back on the shelf until the new Mater Plan draft is ready.

    There must be other worthwhile programs to that didn’t make the cut. What were the runners-up? Has 6% been determined to be the number that, when blended with the municipal & county increases, becomes The Number – the maximum acceptable % increase to voters?

  47. POSTED BY agideon  |  March 06, 2014 @ 12:56 pm

    “I have to ask the supporters why should we limit ourselves to just 6% increase?”

    Just to answer the easy part (I need to think about the other things you’ve written): We’ve “banked” a certain amount of revenue increase. 6% is about what we’ve left to “spent”, if I am counting correctly.

    “using the municipal levy to fund Title 1 Pre-K”

    Isn’t the town’s revenue increase also capped?

    …Andrew

  48. POSTED BY agideon  |  March 06, 2014 @ 1:11 pm

    “Is your financial argument is that we should go with the 6% increase to a) fund new programs and/or b) replenish our capital reserve now because the cap will kick in next year and hamstring our choices?”

    Not precisely. We are already under the cap, but – because we’d flat tax revenue over the past few years – we do have space to increase more than 2% this year. If you envision a graph with a revenue line showing a 2% annual increase, we’re below that line now and we’re free to raise taxes up to that line even if the entire increase occurs within a single year.

    So it isn’t that “the cap will kick in”. On the other hand, I see that we’ve a certain amount of revenue that we can raise above the 2% cap, and that will ultimately be “spent” when we’re back up to that “2% each year” line.

    I have to believe that, one way or another, we will end up reaching that line. Perhaps it’ll be from salary increases above 2% for a few more years. Perhaps it’ll be something else. Whatever it is, once we’re on that line we’re limited to 2% increases. Given that salaries – 85% of the budget – will be going up annually, and given that the expenses in the remaining 15% can be expected to increase as well even with no new programs introduced, in that “2% world” we’ll have little opportunity for the introduction of a major new program.

    That’s why, if we want Pre-K (or to shrink K class size), I fear it’s “now or never”.

    “political ones seem challenging”

    I agree completely. Still, I don’t view this as a reason not to try if we do believe it the proper choice. Of course, I have the freedom not to care about whether someone would vote for me as a councilor or appoint me as a BOE member *grin*. I can be sympathetic to people in a different position, but I don’t have to let political considerations guide my choices.

    Put another way: I’m starting from a position of unpopularity, so I’ve no popularity to defend by my choices.

    I do have to point out, though, that if I were trying to sell a 6% increase I’d be far happier doing so by pointing out that we’re gaining something – the free pre-K – about which many in town have been shouting for years. I might be wrong, but I don’t believe it a complete non-starter.

    …Andrew

  49. POSTED BY Frank Rubacky  |  March 06, 2014 @ 2:19 pm

    Andrew,
    Exactly because of the “unused amount” of the previous two years goes into a cap bank, we can do a 4% increase this year and slightly less than a 4% increase next year. Montclair has this flexibility because we have run 3 years of a flat levy. So, there is not a compelling financial reason to have a 6% increase this year.
    To your affordability concerns – and cost of money – it seems more prudent to spread the increase over 2 years.

    FYI, I’m ignoring the cap exemptions for increased enrollment, health care costs, etc. for simplicity’s sake.

  50. POSTED BY agideon  |  March 06, 2014 @ 2:41 pm

    “we can do a 4% increase this year and slightly less than a 4% increase next year”

    Yes. Once we’re back at the level we’d have reached had we raised revenue by 2% each year, though, that’s it: no more increases beyond 2%. That wall awaits us regardless of what we do.

    What I’m considering – I’d not call it a suggestion as I’ve not even convinced myself yet – is that, if we’re going to reach that point, why not reach it by doing something dramatic that is good for the kids and which has been sought by the public for many years (since the district’s Pre-k was shut down by a lawsuit)?

    …Andrew

  51. POSTED BY Frank Rubacky  |  March 06, 2014 @ 4:10 pm

    I will assume that is a rhetorical question as I have already given my reasons not to do it this year when we still have the option to do it next year. I get the benefit of doing it a year earlier with these new priorities.

    Let’s move to the big picture of overall increase to the tax levy….because I have a big concern or a big problem with math.

    The MPS slides for each option give monthly & annual added costs to taxpayers.
    Am I crazy or are these just for half year numbers? I sincerely hope I am wrong.

    As far as the taxpayers total increase, assuming muni is 2.5% & county is 1.5%, I calculate:

    The MPS 6% option would result in an overall 4.4% tax township increase.

    The MPS 4% option results in a 3.2% total township increase.

  52. POSTED BY agideon  |  March 06, 2014 @ 4:34 pm

    “when we still have the option to do it next year.”

    My concern is that we won’t have that option: that something else will come up that will take enough money away that we could no longer afford the 2%.

    “The MPS slides for each option give monthly & annual added costs to taxpayers. Am I crazy or are these just for half year numbers? I sincerely hope I am wrong.”

    At what slides are you looking? I’m seeing only the monthly number on pg 18 of http://www.montclair.k12.nj.us/WebPageFiles/2281/budget-14-15-140303.pdf but – perhaps more importantly – I’m not locating the number of properties. I know it’s in the district’s “papers” somewhere, but I am just missing it.

    Naively dividing the result of the 4% revenue increase – 3900388 – found on pg 28 of the budget book by (14.28*12) yields about 22761 properties. Does that seem reasonable? If so, then a $14.28/month average increase for the 4% revenue increase works.

    …Andrew

  53. POSTED BY Frank Rubacky  |  March 06, 2014 @ 5:15 pm

    You’re asking the math dummy?
    No, it seems like double the properties we have paying taxes.
    I’m looking at page 17,19 & 22.
    Isn’t there a workshop meeting tonight? Could you ask the question?

    Current levy: $1.799/100 assessed value

    My annualized numbers are as follows for the just the proposed school levy increase:
    6% – $545.63 $1.907 levy
    4% – $363.75 $1.871 levy
    2% – $181.88 $1.835 levy

  54. POSTED BY Frank Rubacky  |  March 06, 2014 @ 5:20 pm

    Oh, and I would still support the 4% option if I’m right.
    But, if I am, and average household is looking at a $700 total tax increase (6% school, 2.5% muni, 1.5% county, etc), then some people leaning towards 6% option might reconsider.
    It might also move the affordability issue a little higher on the priority list.

  55. POSTED BY Frank Rubacky  |  March 06, 2014 @ 5:38 pm

    I just read today’s Mtc Times article and, based on the 4th paragraph, it seems to suggest they can reconcile the number either.

  56. POSTED BY Frank Rubacky  |  March 06, 2014 @ 5:49 pm

    s/b “can not reconcile”

  57. POSTED BY Frank Rubacky  |  March 07, 2014 @ 11:53 am

    Andrew,
    I think I understand how Mr Fleischer arrived at the 2014 cost to the taxpayers. Using my same assumptions on muni/county/misc:

    On a calendar year basis, it is, as he says, a $200 school tax increase to avg homeowner.
    Therefore, the total 2014 township tax increase s/b approximately $362 or a 2.17% increase.

    On a school year basis, it is a $400 school tax increase.
    Therefore, the total 7/1/14-6/30/15 township tax increase s/b approximately $562 or a 3.37% increase.

  58. POSTED BY agideon  |  March 09, 2014 @ 3:57 pm

    All the “per household” numbers require that one know the number of households. Using the district’s numbers, the assumption appears to be 22761 properties (unless I’m making a mess of the math somehow).

    This does seem high given the number of 15,911 as of 2010 cited in http://en.wikipedia.org/wiki/Montclair,_New_Jersey#2010_Census.

    …Andrew

  59. POSTED BY Frank Rubacky  |  March 09, 2014 @ 5:58 pm

    Sorry, you are making a mess of it. Let’s look at it another way:

    Assumption: Mr Fleischer’s page 17 slide is perfectly accurate.

    Review List of Red Flags:
    1. use of powerpoint deck
    2. slide there is a slide that says a 4% increase to a nine digit budget will only cost the avg taxpayer less than $15/month
    3. when an asterisk* explanation is unusually prominent & longer than the slide’s main content
    4.with the exception of the option cost -> taxpayer slides based on the calendar year, the rest of the deck’s figures are based on the school year

    Common sense says the Mr Fleischer’s slide was only referring to the rest of this year. I wouldn’t have written the slide this way as it is misleading and not customer-centric.
    Unfortunately, I think there is a recent precedent on the municipal side. Can’t recall.

    If the township does do “only $90 year for the half year” for their budget, I think we can then safely say the JRS contract expenditure was a waste of $60,000.

  60. POSTED BY walleroo  |  March 10, 2014 @ 4:43 pm

    Keep going, Frank, keep going…

  61. POSTED BY Frank Rubacky  |  March 10, 2014 @ 6:59 pm

    I know! But, what is a guy to do when faced with a dwindling Township debt, a cap on municipal spending, the Township divorcing their servers from the MPS, the State investigations dragging on, MCAS & BOE agreeing on the new budget, the Master Plan in purgatory & the Feds withdrawing their Bridgegate subpoenas?

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