March 20, 2013

During the course of the deliberations concerning the Millburn Schools’ 2013-14 budget, some questions have come up regarding the budgeting philosophy we deploy when constructing the annual school budget.

What we attempt to do in the budget is predict how much money we’ll need in each of the 900+ budget accounts so that our schools continue to operate at peak performance.  I feel it is important to come right out and say this:  We do not set out to cut as many things or as much money as possible.  We do look to save money and capture efficiencies wherever possible, but the overriding priority is to ensure excellence from one year to the next.

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We include contingencies in many of the budget accounts, hoping we won’t need to spend them but making them available just in case.  Not every account needs contingency allowances, but prudent budget management would suggest that a budget’s big areas anyway (in our case, such lines as out-of-district tuition, health benefits, salaries and utilities) have some allowance for the unknown.  We are, after all, putting together a budget that doesn’t start for almost a year after the initial budget requests are submitted.

There is much talk about how much money is unspent at the end of every year.  The fact that there is money unspent at the end of a year is a good thing—the possible costly developments that were driving the need for contingency funds didn’t materialize!  Also, it is an indication that our budget managers do not spend money just because it is there.  Rather, they responsibly look at their needs and draw from their accounts accordingly.

It is our hope that the perfect storm of contingency needs doesn’t hit in any given year, so that we have about $2M of unspent funds from the 900+ accounts at the end of the budget year.  That is not an unreasonable amount, given the budget is in excess of $85M.  It’s like having $20 leftover from a home improvement project estimated to cost $850.

The unspent $2M is used (per state law) as a revenue in the next year’s budget.  One popular misconception is that it accumulates and is hidden away in some top-secret surplus account somewhere.  That is just not true.  If in a given year we have more than $2M unspent (which, again, it is important to remember is a good outcome in that more of the contingencies that might have cost the district money did not materialize), the goal is to earmark the amount over $2M for future capital projects.  This is a key point of our budgeting philosophy.  It enables the district to replenish the Capital Reserve Account, which is now more critical than ever given that all but $132K of capital projects have been cut out of the budget this year.  The good news is we are able to get much-needed capital projects done, preserving the community’s investment in its school buildings, by funding them with Capital Reserve monies (i.e., not with annual budget monies).

Why did we cut out almost all of the capital projects from the annual budget?  We did so in order to enable us to hire 11 new staff members, including five teachers and three aides.  Those 11 new employees are costing (salary only) roughly $550,000.  Combine that figure with the $990,000 required to pay existing employees their negotiated 2% raise and the grand total of new funds needed for personnel in 2013-4 is $1,540,000.  The proposed tax increase of 2% generates approximately $1,440,000 of new revenue, so costs for new and existing personnel are consuming all of the additional tax revenue plus an additional $100,000.  I hope this puts to rest the misconception out there that this budget emphasizes physical capital over human capital.  Nothing could be further from the truth.  Total amount budgeted for salaries in 2013-14 is $51,066,000.  Total amount budgeted for capital projects is $132,000.

All of us who live in New Jersey know it is not easy to pay the annual property tax bill.  This state has chosen to fund its public schools primarily through the local property tax, and that is a burden on residents, especially in communities such as ours where the state aid amounts are such a small portion of the overall revenue pie.  But it is also not easy budgeting in an environment where cost pressures are everywhere while at the same time restrictive revenue caps are in place.  The proposed tax increase of 2.00% enables the schools to keep pace with annual inflationary pressures (1.50% in the economy in general, and 2.00% locally with negotiated salary increases) and annual enrollment growth (roughly 1.00% on average of late).  In other words, it enables the district to keep operating at the high level it does now without losing ground to cost increases.  Millburn’s schools are important to the residents here, indeed a source of pride, and this budget is the road map for continuing the commitment to excellence that the community expects of its schools.

From: James A. Crisfield, Ed.D.

Superintendent, Millburn Township Public Schools

twitter:  @millburncsa