Published in the March 22, 2018 edition


NORTH READING — There are many challenges associated with creating a school budget. In his presentation to school committee members March 12, Director of Finance and Operations Michael Connelly described the impact of each challenge on the final budget proposal.

“North Reading, for the last number of years, has come to really be faced with flat state aid,” Connelly said. “We haven’t seen a significant increase in a number of years in unrestricted government local aid, as well as our Chapter 70 aid.”

According to the Massachusetts Department of Elementary and Secondary Education (DESE), “In Massachusetts, the definition of an adequate spending level for a school district is called its ‘foundation budget.’ The goal of the Chapter 70 formula is to ensure that every district has sufficient resources to meet its foundation budget spending level, through an equitable combination of local property taxes and state aid. The foundation budget is perhaps the most important factor used in calculating a district’s Chapter 70 state education aid. Foundation budgets reflect meaningful differences in enrollment, student characteristics, and geographic differences in wages.”

Based upon North Reading’s foundation budget for Fiscal Year (FY) ‘19, the town will receive the minimum increase of $20 per pupil, which according to Connelly, amounts to roughly $48,000 in state aid.

Connelly also noted constraints on local revenue, citing Proposition 2½, which is the Massachusetts statute limiting the annual raise in property taxes to a maximum of 2.5%.

(See related story in today’s Transcript for specific budget proposals for level services, recommended budget and full requested budget.)

Decline of revenue offsets

School revenue offsets include federal and state grants, reimbursements, and revolving accounts for tuition-based programming and user fees.

“(Revenue offsets) are limited. There’s not so much that we can do. We can’t increase those significantly in any given year. We have worked very hard to level off these school revenue offsets from revolving accounts and grants, to try to avoid falling off the funding cliff if any one year these funding revenues go down,” Connelly noted.

The largest offset decline for this budget season came from the state circuit breaker program. This program reimburses districts for special education costs over a certain threshold. For FY19, the circuit breaker program will only reimburse district costs at a rate of 65%. This represents a 10% loss in funding from FY18.

This loss of funding, combined with rising out-of-district costs, will force the district to increase the FY19 tuition budget by 25%.

Fixed costs rising

Budget fixed costs, including health insurance, general liability insurance, and retirement costs, are projected to increase again for FY19.

“We’ve seen all of these various fixed costs rise steadily, and in some cases see significant increases of 7%, 8%, 9% over the last several years,” Connelly said. “Certainly when you have a situation where you have fixed costs rising, in some cases almost double the amount of revenue, it’s going to present that kind of structural funding challenge.”

Transportation costs are also on the rise for FY19. The cost to operate the district’s 10 general education buses will increase by $15 per day per bus. This will represent a 5% increase in the FY19 budget.

Salaries comprise 83% of budget

Contractual obligations are another budget challenge. Salaries alone account for roughly 83% of the school budget. These salaries are mandated based upon the current negotiated contracts, which include lane and step changes, cost of living increases, and longevity payments for eligible staff.

“When you put a budget together, even if you give people modest increases, it makes it almost impossible to add the things, educationally, that you want to add,” School Committee Chairman Mel Webster stated.

“That’s a great point,” Connelly noted. “When you have so much of your operating budget that is fixed, there’s not a lot of discretionary spending that’s represented in a school budget. That’s always the biggest challenge every year.”