Pinellas responds to union questions about cliff reserve
The Pinellas County School District is countering a suggestion from the teachers union that the district squandered most of the $21.7 million in federal education money that it received last fall and expected would cushion the blow of next year's budget cuts.
But, at the same time, it is acknowledging several unanticipated expenses, including the hiring of more teachers because of the class-size amendment.
At issue is money from last year's Education Jobs Fund and the "cliff reserve" - money the district is setting aside to make cuts less severe when federal stimulus money runs out this year. At last week's school board meeting, teachers union president Kim Black pointed to budget documents that seemed to show the cliff reserve had shrunk in recent months from $33.8 million to $15 million. She said the union wanted a "full accounting" of what happened to that money, including a "detailed listing" of jobs added this school year. (To see her remarks in full, click on the attachment below.)
In an email to school board members Friday, Kevin Smith, the assistant superintendent for budget and resource allocation, said he wanted to clear up any misunderstandings raised by Black's comments and "show that drawing the conclusion that the district spent Education Jobs fund resources on additional hires simply is not accurate."
He said the cliff reserve fluctuates as a result of changes during the year to revenues and expenditures. He noted the reserve was estimated at $17.2 million at the beginning of last fiscal year and ended up at $5.7 million.
Smith goes on to note several areas where expenditures this year have been bigger than anticipated, including the hiring of additional teachers to meet class-size reduction mandates and the costs for substitutes.
Here is Smith's email in its entirety:
A question arose at the April 26 School Board meeting regarding the difference in the cliff reserve amount noted in Budget Amendment No. 6 and the Comprehensive Accounting and Budget Model (CABM) shared with you at the April 19 workshop. I would like to clear up any misunderstanding the question may have caused and show that drawing the conclusion that the district spent Education Jobs Fund resources on additional hires simply is not accurate.
To begin with, it is important to note that the budget amendment is necessarily presented to the board as of a certain point in time; the amendment presented April 19 was for the period ended Feb. 28, 2011. Meanwhile, the CABM model projects the results of operations that will end on a future date, in this case, June 30, 2011.
An additional point to keep in mind is that the cliff reserve has, from its establishment, fluctuated from the beginning of the year to the end of the year. For example, if you look back to the second public hearing book of 2009-10, the cliff reserve was estimated at $17.2 million. At the close of that fiscal year, the actual reserve was at $5.7 million in the annual financial report. The ideal situation at the end of this fiscal year would be that the cliff reserve equal the amount of Education Jobs Fund received, or $21.7 million.
However, the reserve fluctuates as a result of changes in actual revenue and expenditures. The budget attempts to establish a guideline for our revenue and expenditures during the course of the year. These are only estimates, because the actual revenue and expenditures change during the fiscal year; hence, the necessity of the monthly budget amendment, which enables us to adjust our budget plan for these changes.
It also is important to remember that both the budget amendment and the CABM are based on projections of revenue and expenditures. As we move through the fiscal year, our expected revenue and expenditures may change for a variety of reasons. The CABM is adjusted continually as a result of those changes in an effort to predict what the final close-out numbers will be. Conversely, the budget amendment is not normally adjusted as a result of projected revenues or expenditures; rather, it is adjusted as a result of actual changes.
The CABM model is based on actual close-out numbers from the prior fiscal year, which becomes the base of expenditures for the new fiscal year. That base of expenditures is adjusted for estimated changes in expenditure patterns in the new fiscal year. Expenditures, however, will vary during the year from what we project for many reasons. Some items that have been identified include the estimate established for instructional staffing needs for the current fiscal year.
Our expectation was that the number of instructional personnel would decline by approximately 80 units in fiscal year 2010-11, a pattern consistent with prior fiscal years. But, because of the unknown class by class demands of the class-size amendment, we actually increased by 43 units which is a net increase of 123 units. Also, we project what our terminal pay expenditure will be for the fiscal year based on prior year experience. Currently, it is projected that terminal pay will increase by approximately $2.4 million over the original projections.
Some of the planned cuts for this fiscal year are not projected to be attained. In the anticipated cuts, there was an expectation that expenditures for substitutes and contracted services payments would decline by $1.2 million and $2.0 million respectively. As of the most recent projection, it does not seem that those expenditure reductions will be realized. Again, it must be emphasized that these reductions are based on projections that can, andprobably will, change.
All of these items result in an increase in expenditures over our projections. As projected expenditures increase, our projected ending fund balance will decrease and the offsetting adjustment is made to the cliff reserve to maintain the 1.50% contingency. It is true that the Education Jobs Fund may help to offset the effects of these increased expenditures if they continue to exhibit this pattern through the end of the fiscal year. However, with or without the Education Jobs Fund, these additional expenditures would have been incurred.