To Plan Or Not To Plan… That Is The Question

The Octorara Area School District Board of Directors held its monthly Regular Meeting and Finance Committee Meeting on January 19, 2015. There was no Policy Committee Meeting for a second month. All members were in attendance.

During the Regular Meeting, the Board approved all listed recommended action items.

Octorara Welcomes Jeff Curtis, Business Manager

As regular readers should know, Mr Daniel Carsley has left the Octorara Area School District for greener pastures. Jeff Curtis was voted as his replacement, by the Board, in a Special Meeting in December, and began working for the District late last week. Mr Curtis survived his first Finance Committee and Regular Board Meetings.

= The 2015-2016 Budget Process =

During the January 12th Work Session Meeting, Dr Necome had asked Board Members for what they wanted to be included in the 2015-2016 Budget Process. At the time there were several suggestions, but Members had until this Finance Committee Meeting to develop ideas.

Items already included on the list included the addition of costs associated with Special Request items, and to look into possible strategies to create a more even balance in the taxes between Chester & Lancaster Counties.

The Discussion Around Long Range Budgetary Planning

To the list of items to be added to the Budget Process, I asked if we could add greater emphasis to Long Range Budgetary Planning. My stated reason was because, last year, Mr Carsley made Long Range Projects that showed the District would be at Negative Fund Balance in five years without a tax increase in 2014-2015, even if the District took full Index tax increases going forward.

There were two assumptions made in Mr Carsley’s projection that turned out to be false, but the projections were never updated and revisited as hard numbers became available. The first was that the District would break even for the year, but in reality we were in the red, and the District had the pay $124,000 worth of expenses with the Reserve Fund despite ending the year under Budget. Additionally, his projection used the $48.3 Million from the 2014-2015 Draft Budget, not the $49.2 Million of the 2014-2015 Final Budget voted on in June 2014. Both of these changes would have represented a significant negative impact to the District’s long term financial health.

One Board Member became very defensive and offended that I would accuse Mr Casley’s assumptions of being “wrong,” stating no one can predict down to the exact dollar amount. I can only presume this person believed I was calling into question Mr Casley’s credibility. However, as I explained to this individual, the only problem I had was that as hard numbers became available that the projections were not revisited. Board Members need to understand the long term impact of votes made today, and that only happens if these kind of projections remain current.

An assumption is called an assumption because it is an assumption. Assumptions (projections accepted as true or as certain to happen) are used in planning to deal with uncertainty and to assist in accommodating unexpected outcomes. However, it is important to actively monitor the validity of  assumptions used in financial plans. Even though some of Mr Casley’s assumptions ended up being false, they were not “wrong” at the time because they were reasonably expected to be true based on what was known at the time.

Long Term Financial Planning

$4 Million in repairs can replace a $25 Million Renovation? 

Another reason I cited in the debate, over Long Range Budgetary Planning (which I am kinda shocked was even controversial), was the need to plan for the $25 Million Jr High Renovation listed on the Facilities Committee’s Long Range Plan. Mr Casley’s projection of a negative Reserve Fund coincides with when the Long Range Plan shows there will be a need for a renovation of the Jr High School. A negative Reserve Fund would adversely affect our credit rating, making financing more difficult and costly.

At this point, two Board Members challenged assuming the Jr High renovation in Budget Planning. They stated the renovation was only possible, and that there has not been a final determination from the Facilities Committee, nor a vote by the Board. In addition, both stated that the Long Range Plan included multiple smaller projects, at a cost of around $4 Million, that would make the renovation “unnecessary.” Therefore, in their opinion, it is not something that should even be discussed until a more formal decision is made.

So, the question is, “Since the renovation is on the Long Range Plan, and is a possibility, do we create Budgets planning it will or will not happen?” Which makes the best financial sense when doing Long Range Budgetary Planning?

Dr Newcome informed the Board that he believed doing just the repairs, in lieu of an actual renovation, would make depleting the Reserve Fund a certainty because it would not be financed.

Hank Oleyniczak spoke up stating that some kind of planning needs to be done. He does not want to see a situation where the District does nothing, and then all of a sudden taxpayers get a massive tax increase.

Samuel Ganow wanted to know when does the Facilities Committee expect to do a renovation of the Jr High… 5 years, 10 years, never?

My Final Thoughts

As I finished writing this post, I was left with the question, “Why create a Long Range Plan for Facilities, if that plan is going to be ignored in Long Range Budgetary Planning?” It says a lot about the District’s financial problems if there are those who want ignore financial issues until one can’t ignore them anymore.

The stated purpose of the Facilities Committee’s Long Range Plan is to prioritize and budget for needed future projects. Being prudent would mean items on that list must be considered in Long Range Budgetary Planning not only until a final decision, but to also help shape the decision making. How can any Board Member make a decision of any of these future projects, without knowing the potential financial impact?

Even if the Facilities Committee wants to place the Jr High Renovation on the backburner, the repairs stated still would need to be plugged into Long Range Budgetary Planning projections.

As an example, we can look at the Track Field. At the last Facilities Committee Meeting we were told that the Track Field will be included in this year’s updated Long Range Plan for Facilities. That will now have to be planned for, in Long Range Budgeting, as if the District is paying the full cost.

Now, there are still ongoing discussions about the Track Field, and it looks like the cost may be split between the District and the Boosters. However, once that item goes on the Long Range Plan for Facilities, the Finance Committee needs to add 100% of the full cost of the project to their Long Range Budgetary Planning until a final decision is made, and to help guide Board Members’ decision process. How do Board Members know how much they can afford to spend, if they don’t know how much they can afford to spend? Am I making any sense here?

Here is the worst of it. If we don’t talk about these Long Range Projects today, I suspect the same individuals who don’t want to create a Long Range Budgetary Plan, if the District does a renovation to the Jr High in 2017-2018, would describe it as something having  been “planned” since 2014, when the Facilities’ Long Range Plan was created. “Sorry for the tax increase, but if you were paying attention you would have known this was coming.”

Stay tuned kids, this is all still in the air.

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