This year is a challenging one for MERSD. For the third consecutive year, MERSD’s Budget Goals included a commitment to work with our member towns to keep our operational budget within the levy limit. We began the FY19 budget season facing a projected $735,000 (16%) increase in health care costs. This increase follows a 28% increase in fiscal year 2018, for a total increase of $1.5 million dollars in two years. The increased cost of health care exceeds our available funds under a level services budget, leaving no additional funds to manage annual increased costs or program investments and requiring us to make some difficult choices.
Impact of Dramatic Healthcare Cost Increase
Shortly after last year’s FY18 budget was established, MERSD began to face challenges of significantly rising health insurance costs, threatening the district’s ability to keep spending growth stable and to maintain program quality. A 28% increase in health insurance rates in FY18 far surpassed MERSD’s budget estimate of 9%, due to an extraordinary, unexpected rise in high-cost claims over the course of the late winter and early spring of 2017. Although this trend has abated somewhat, the current forecast for FY19 of a 14% rate increase will result in a total $1.4 million increase in health care costs over a two-year period. This follows a six-year trend in which MERSD’s average annual increase in health insurance was just 3%, far below market trend. Unfortunately, the more recent significant increases in health care costs have been limiting MERSD’s ability to maintain educational program quality, with cuts of more than $900K needed in the FY19 budget to meet a district spending growth target that is consistent with levy limit caps of Proposition 2 ½.
Short-Term Measures – Efficiencies and Restructuring
In the short-term, to manage the FY19 budget, the District has identified a series of efficiencies in the areas of services, fees, staffing, and program to create a balanced budget to submit to the towns.
Gap Closing Measures
|
Services/Fees/Revenue Reductions
|
|
|
|
Staff Reduction through attrition
|
$354,000
|
|
|
50% Reduction Overtime/Summer work - all departments
|
$60,000
|
|
|
Hiring Cap
|
$30,000
|
|
|
Eliminate Late Buses
|
$25,000
|
|
|
HS Student Activity Cut
|
$20,000
|
|
|
Curriculum/PD Small Cap Reduction
|
$20,000
|
|
|
IDEA Grant Reorganization
|
$17,000
|
|
|
Solar Savings
|
$10,000
|
|
|
Essex - Green Community Upgrades
|
$10,000
|
|
|
Full Day K on Wednesdays/Eliminate Transportation Cost
|
$8,000
|
|
|
Reduce Custodial Supply Line
|
$7,500
|
|
|
Retirement Replacement Offset
|
$5,000
|
|
|
Eliminate Crossing Guard Fund
|
$4,500
|
|
|
Reduce Nurse Substitute Line
|
|
$3,000
|
|
$574,000
|
Although we have closed the gap, we still have unmet staffing needs at the secondary level that will require us to make additional program, staffing, and departmental changes. In total, we are looking to identify an additional $275,000 cuts to meet the enrollment needs at the high school, work that we will be continuing throughout March. At our March 6 School Committee meeting, we will present a plan for additional cuts to meet our 2018-2019 staffing needs with the goal of making decisions on a go-forward plan at the March 20th meeting.
Shifting enrollment is working in our favor. Although we are still managing a cohort of students with record high-class sizes, these students are now at the secondary level and entering elementary class enrollments have declined due to a demographic decline in school-age children. This population shift has allowed us to reduce classroom sections at the elementary level while maintaining class size benchmarks and allowing us to shift resources to the secondary level to address the larger cohort.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
||
|
Student Population
|
K
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
9
|
10
|
11
|
12
|
HS
|
MS
|
Elm
|
|
2016-2017
|
77
|
82
|
88
|
112
|
122
|
115
|
124
|
132
|
131
|
115
|
103
|
98
|
109
|
425
|
387
|
596
|
|
2017-2018
|
77
|
82
|
73
|
92
|
116
|
125
|
117
|
125
|
131
|
133
|
116
|
100
|
99
|
448
|
373
|
565
|
|
2018-2019
|
70
|
77
|
82
|
73
|
92
|
116
|
125
|
117
|
125
|
131
|
133
|
116
|
100
|
480
|
367
|
510
|
|
2019-2020
|
70
|
70
|
77
|
82
|
73
|
92
|
116
|
125
|
117
|
125
|
131
|
133
|
116
|
505
|
358
|
464
|
|
2020-2021
|
70
|
70
|
70
|
77
|
82
|
73
|
92
|
116
|
125
|
117
|
125
|
131
|
133
|
506
|
333
|
442
|
Long-Term Measures – Reduce Cost of Health Care
Over time, MERSD will attempt to work collaboratively with teachers and staff to find ways to lower the cost of health insurance. Similar collaborative efforts have generated significant results in the past, including a recent agreement to reduce the cost of mandated health insurance for retirees (known as Other Post-Employment Benefits or OPEB) by migrating staff to less costly plans. This effort has enabled MERSD to budget $1.7 million over four years – funded entirely by savings from employee benefits restructuring – to be placed into a trust fund to ensure that long-term liabilities do not pose an unnecessary future burden on taxpayers. This successful collaboration has put MERSD far ahead of most other regional school districts, which have yet to face mounting OPEB liabilities.
We look forward to working with teachers and our two towns to find creative solutions to these budgetary challenges, with a shared goal of continuing to offer a robust educational program that meets the needs of all learners in the District.
