Investing in Student Success January 27 th, 2017 Marnell A. Cooper Chair, Baltimore City Board of School Commissioners Dr. Sonja Brookins Santelises CEO, Baltimore City Public Schools
Our annual budget process is most importantly a tool to align resources to our focus areas and the needs of our students 2 1. Student Wholeness Every student able to access programming and supports that meet the wholeness of their intellectual, social, emotional, and physical needs and interests 2. Opportunity through Literacy Every student strengthening literacy to think deeply and communicate powerfully 3. School & District Leadership Every staff member empowered to grow and lead from his/her space
We are also building on the strategic choices we ve made in the past 3 Teacher Career Pathways 21 st Century Building Plan Pre-K Quality & Expansion Middle & High School Choice
The urgent needs of our students amplify the importance and challenge of our work 4 Baltimore City Maryland State 45% FARMS 1.9x 88% Extreme Poverty (% of Children) 6.5% 19.3% 3.0x Total Crime (per 100k ppl) 2772 6516 2.4x % Special Education* 11% 18% 1.6x Source: The Baltimore, MD crime data is derived from the FBI's uniform crime reports for the year of 2015. Poverty data is from the United States Census Bureau; Demographics data is from the Maryland State Department of Education 2016. *The State of Maryland calculates Special Education differently than ERS, resulting in 18% for the number comparable to the state compared to the 15% in the analyses from ERS.
For several years, City Schools has faced a structural gap, with costs rising faster than revenue 5 $ Expenses Revenue Time
This results in the need for new reductions each year until the underlying cost or revenue structure can be changed 6 $ Expenses Revenue Time One time reductions that do not address structural issues
Urban school districts across the country are hit with costs increasing higher than revenue 7 Philadelphia schools crippled by budget crisis
In past years, City Schools has taken action by working to reduce central office to a level below peer districts 8 Spend on Leadership and Management ($ per pupil) Peer Average = $1,144 $1,768 $1,843 $862 $1,146 $1,319 $1,003 $994 $937 $794 $620 New Haven Oakland Cleveland DC Boston Denver Baltimore Austin Prince George's County Charlotte Increasing enrollment Central Office FTE per 1000 8 9 9 15 10 9 6 8 4 5 Source: City Schools FY16 Merged GL and cumulative costing details reports ALL FUNDS, ERS analysis.
Positions have also been reduced over time 9 City Schools Historical FTE Total (filled positions including Surplus, All Funds) 10,185 9,641 2013 2016 Source: City Schools 9/1 PDR Reports ALL FUNDS, ERS analysis.
City Schools has also deployed a combination of short-term solutions that cannot become a part of long-term strategy 10 Recent Examples of Annual Gap Closure Measures to Align Cost to Revenue Decision FY17 Contributions from Fund Balance Defer 21 st Century spending ($20M) Freeze all discretionary spending after January ($13M) Draw down on fund balance ($12M) Leave unfilled positions as vacant ($8M) Savings ($M) $53 FY17 One time state revenue $13 FY16 Cost supplemental services to grants $4 FY16 Reduce contractual spending $3 While these have been necessary, they are not sufficient, as they do not fundamentally shift the cost and revenue curve. They also in most cases have been exhausted or are misaligned from long-term strategy. Source: City Schools Finance Department.
Currently, fund balance is at the low end of target levels 11 General Fund Balance as % of General Fund Adopted Budget TARGET RANGE* *The board s policy on target unassigned fund balance range was instituted in FY15 4.1% 3.3% 2.6% 2.7% 1.3% 1.6% FY12 FY13 FY14 FY15 FY16 FY17 Fund Balance* $14.7M $18.0M $30.6M $32.7M $49.6M $39.8M Source: City Schools Finance Department and FY12 through FY17 Budget Books *General Fund Unassigned Fund Balance as of 6/30
Without taking on long-term solutions that make transformational change, City Schools will continually face a budget gap that will threaten its strategic priorities 12 $ (Billions) 1.16 1.14 Revenue and Expense Projections by Year* (General Fund Only) 1.20 1.20 1.24 1.27 1.11 1.16* Expense Revenue 1.31 1.16* *FY19 & FY20 revenue projections will decrease based on updated enrollment figures that were just finalized FY16A FY17B FY18P FY19P FY20P % Revenue Change 4% -7% 4% 0% % Expenditure Change 5% 3% 3% 3% Net Surplus/ Gap $0M ($129M) ($115M*) ($151M*) Source: ERS and City Schools Multi-Year Revenue Projections, General Fund Only, ERS Analysis
What causes City Schools gap? What is City Schools doing to fund FY18 and begin work on longer-term solutions?
There are five big drivers of the structural gap 14 DRIVERS OF ANNUAL SPENDING INCREASE Revenue District Footprint Student Need Salary & Benefits 21st Century Investments REVENUE IS DECLINING SCHOOL SIZE MATTERS MORE DOLLARS SPENT ON STUDENTS WITH HIGHER NEEDS COMPENSATION INCREASE AT RATE OUTPACING REVENUE COMMITMENT TO BUILDING IMPROVEMENTS AREAS OF HIGHER SPENDING
FY18 revenue projection is significantly below FY17 level and historical trend Revenue 15 General Fund Revenue by Year FY16 to FY18 (M) *Annual General Fund Revenue (M) 1,139 1,192 1,181 1,159 1,203 1,114 FY13A FY14A FY15A FY16A FY17P FY18P *Note: Y-axis truncated to allow for easier comparison of annual revenue Source: City Schools Revenue Projections and Actuals
Enrollment decline is the largest contributor to revenue decrease Revenue 16 Enrollment Change from 2010 As Percent of 2010 Enrollment 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% -12% Percent Change in Enrollment from 2010 2010 2011 2012 2013 2014 2015 Montgomery County Howard County Baltimore County Anne Arundel Prince George's County Frederick County Baltimore City Carroll County Garrett County The state awarded City Schools a Special Grant for Declining Enrollment in 2017 of $12.6M Source: Maryland State Department of Education
State aid per pupil has also been flat or declining in recent years Revenue 17 $4,913 $5,945 $6,674 Total State Aid in Nominal Dollars Per Pupil (not adjusted for inflation) $7,560 $8,494 $9,877 $10,457$10,384$10,781 $10,769$10,797 $11,122 $11,185 $10,875 $10,817 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 % Change 21% 12% 13% 12% 16% 6% -1% 4% 0% 0% 3% 1% -3% -1% Consumer Price Index 3.3% 3.4% 2.5% 4.1% 0.1% 2.7% 1.5% 3% 1.7% 1.5% 0.8% 0.7% 1.7% If State Aid had kept pace with inflation between FY12 and FY16, City Schools would have received an additional $180M in revenue Note: sharp increases from 2003-2008 were due to funding of the Thorton Plan; to calculate cost from not keeping pace with inflation, all dollars were adjusted to 2015-16 using the Bureau of Labor Statistics CPI calculator, and the difference from nominal dollars per pupil was multiplied by enrollment for that year. Inflation data for FY17 not yet available. Source: City Schools Final Calculations for Major State Aid Programs
Relative to comparison districts, City Schools maintains a greater percentage of schools with low enrollment District Footprint 18 City Schools #s will shift with 21 st century implementation 34% % of ES/K8 Schools with <350 Students 39% 31% 20% 18% 25% 10% 18% 15% 23% 2% 2% Avg. Grade Size Baltimore Average PGC Anne Arundel Howard County New Haven Oakland Cleveland Denver Austin PGC Charlotte Increasing enrollment 54 83 70 76 96 - - 43 84 87-117 Source: Baltimore SY1516 Schools List, ERS CAPS database
Smaller schools and schools with smaller grade sizes create the following challenges District Footprint 19 Design implications of small schools: It is harder to organize a broad range of programming With less flexibility in staffing, it s harder to organize resources effectively to support small grouping and interventions Teacher teams that share content are smaller or don t exist, limiting teacher leadership Teachers must have a wider range of expertise, impacting the sustainability of teaching job WHOLENESS LITERACY WHOLENESS LEADERSHIP LEADERSHIP Cost implications of small schools: School Admin and Operations costs are spread over fewer students Lower grade sizes create wide variation on class size with very small or very large class sizes In City Schools, schools with less than 350 students cost ~$940 more per pupil on average than larger schools*. This difference totals to an approximately ~$13.4M investment for the district. Source: Baltimore SY1516 Schools List, City Schools Official 9/30 Student Count; City Schools FY16 Merged GL and cumulative costing details reports *Analysis controls for different levels of spending across school levels
Higher rates of student need also drive spending in City Schools Student Need 20 City Schools spends 24% of it s operating budget on services for students with disabilities, among the highest of comparison districts In part, this is explained by 41% more spending in physical health services and 60% more in social emotional services for students City Schools transportation costs are also higher for students with disabilities and rising overall, partly explained by increases in service costs and increases in homeless ridership City Schools serves more students with higher needs and spends more on each of those students than other districts. Investments beyond comparisons totals $72.6M Source: Baltimore SY1516 Schools List, City Schools Official 9/30 Student Count; City Schools FY16 Merged GL and cumulative costing details reports FY16-18 SPENDING INCREASE ($M) Transportation
These resource patterns often indicate a cycle of specialization Student Need 21 Classes with high & diverse needs More challenging for teachers to meet needs of all students Fewer resources in general education environment Cycle of Specialization Students identified for services outside of core classrooms Students may not experience a rigorous curriculum More resources devoted to special education and other support services
City Schools teacher salary schedule is more generous than most local and national comparisons Salary & Benefits 22 Starting Salary Master s with 5 years experience* Maximum salary Baltimore $48,430 $60,503 $102,832 Montgomery Howard Anne Arundel $48,048 $47,351 $45,891 $60,280 $53,933 $57,495 $107,292 $98,523 $98,036 Baltimore County $45,150 $49,415 $94,941 Austin $50,690 $52,170 $96,513 Cleveland Boston Charlotte DCPS Denver PGC Oakland $50,236 $49,474 $47,089 $46,140 $43,836 $43,597 $39,046 $70,122 $54,252 $56,947 $50,922 $54,100 $46,299 $98,268 $98,986 $87,605 $95,378 $86,637 $94,729 $70,196 Note: Data is from School Year 2015-2016 * For City Schools, Professional 1 is used as the equivalent of a Master s with five years of experience. Source: National Council on Teacher Quality Teacher Contract Database
For many non-teacher positions, salary & benefits is also higher in City Schools than comparison districts Career Path & Compensation 23 Salary Benefits Position City Schools Avg $000 s Comparison District Avg $000s % Difference City Schools Avg $000 s Comparison District Avg $000 s % Difference Paraprofessionals* $36 $26 28% $15 $9 41% Sec/Clerk/Other Admin $42 $41 3% $17 $10 42% Principal $121 $116 4% $27 $15 42% Assistant Principals $107 $93 13% $26 $13 49% Instructional Coach $85 $76 11% $24 $13 45% Librarian $76 $70 8% $22 $14 37% Social Worker $84 $75 10% $23 $14 40% Coordinator/Manager $83 $70 16% $21 $12 42% *ROTC Instructors are excluded from Paraprofessional Compensation due to their higher average compensation than paraprofessionals and assistants. Note that compensation for City Schools and peer districts includes salary and benefits but excludes stipends, overtime and retirement for comparison purposes. Source: City Schools FY16 Merged GL and cumulative costing details reports ALL FUNDS, ERS benchmark database
And compensation is increasing at a rate that outpaces revenue Salary & Benefits 24 Annual Rates of Change for Compensation and Revenue 3.9% 2.7% 6.0% -1.5% Teacher Salary All Other Positions Salary All Benefits Revenue % of Operating Budget 30% 25% 17% In past years, high levels of vacancy and attrition have offset the rising levels of compensation Source: Analysis of Employee Salary Change from FY13 through FY15 Note: Revenue rate of change is the two year average from FY16 to FY18 FY16-18 SPENDING INCREASE ($M)
21 st Century commitment brought a large increase in obligations that the district must meet 21st Century Investments 25 21 st Century Capital and Maintenance Expenditures ($M) $44 $41 $38 $47 $13 $6 FY15 FY16 FY17 FY18 FY19 FY20 Source: City Schools Finance Department FY16-18 SPENDING INCREASE ($M)
Summary of spending increases between FY16 and FY18 26 Student Need Salary & Benefits 21st Century Investments Transportation for students with disabilities Salaries and benefits increases and a decrease in vacancies Capital and maintenance expenditures Total Increase $8M $46M $35M Note: Salaries increase by $12M, benefits by $24M, and the decrease in vacancies corresponds to an increase in spending of $10M Source: City Schools FY16 Merged GL and cumulative costing details reports ALL FUNDS, City Schools 5 year financial model
Summary of other structural investments above the level of peer districts 27 District Footprint Student Need Salary & Benefits Total cost premium for schools with fewer than 350 students enrolled Relatively high investment in Special Education, Physical Health & Social Emotional Services Higher average salaries and benefits than peer district averages Total Investment $13.4M $72.6M $65.1M Source: City Schools FY16 Merged GL and cumulative costing details reports ALL FUNDS; ERS comparison database
Summary of drivers contributing to $129M total FY18 gap 28 STRUCTURAL DRIVERS OF BUDGET GAP FY16 TO FY18 ($M) Increasing Benefits, $24 Transportation, $8 Revenue*, $25 Increasing Salaries, $12 Fewer Vacancies, $10 Other**, $15 21st Century, $35 Contracts Instructional Supplies Utilities Note: Structural drivers are depicted as 2-year cumulative changes in order to benchmark against the last available year of data on actual expenditures; *Between FY16 and FY18, we estimate a total revenue decrease of $~45M. When we include fund surplus and the FY16 deferral of 21st Century spending, this nets to ~$25M decrease in revenue **In FY16-18, fluctuations in other categories of spending net to $3M decrease in overall spending. Source: City Schools FY16 Merged GL and cumulative costing details reports ALL FUNDS, City Schools 5 year financial model
What causes City Schools gap? What is City Schools doing to fund FY18 and begin work on longer-term solutions?
Process 30 December: Continue to learn about and prioritize possible ideas for closing the FY 18 budget gap January: Solicit stakeholder input on big ideas February: Develop final proposal Release school allocations March and ongoing: Continue the conversation about longer-term solutions