Caldwell - West Caldwell Public Schools
Three Year Economic Sustainability Plan
2019 - 2022 (revised 2020)
Context: The “Fiscal Cliff”
The “Fiscal Cliff” refers to the situation faced by public school districts in which limited resources cannot keep pace with rising expenses. In the case of Caldwell - West Caldwell, over 95% of the funding stream is from the local tax levy. Increases to the tax levy are capped at 2%, but several significant components of the budget are increasing at a higher rate. Health benefits costs and special education costs, for example, frequently increase by double-digit percentages.
Thus, while cuts can be made in order to balance budgets in the short term, continued increases of more than 2% for major elements of the budget are not sustainable with a 2% cap on the overall increases to the tax levy. If we also want to consider potential expansion to programs, the Fiscal Cliff becomes even more problematic.
This plan does not purport to give a comprehensive analysis and forecast of the district’s economic sustainability. There are numerous factors, such as the health of the national and state economies, which have considerable impact and which lie outside the control of the Board of Education. This plan does, however, briefly consider some of the likely fiscal scenarios the district will be facing in the coming three years, and reviews a few of the potential steps that can be taken to address them.
General Fiscal Projections
When constructing budgets in 2014, 2015, and 2016, the district had the opportunity to use “banked cap,” i.e., it was able to increase the tax levy by more than 2% because the overall average increase remained at approximately 2%. With the passage of the Full-day Kindergarten referendum in 2018, the increased student population does allow the district to go beyond the 2% cap, which it did with the 2020-21 school budget.
Contractual increases to district staffing costs for the next three years are expected to be approximately 3%. The exact amount of annual increase to the budget in the coming years will depend on various factors, such as retirements, future contract settlements, etc., but it can be expected that it will be about $500,000 to $700,000 each year.
The district has rejoined the New Jersey School Employees’ Health Benefits Program. In 2017-18, Business Administrator Tom Lambe led the movement of the district into a private plan with Horizon. This saved significant funds, and was the main reason that the 2018-19 budget was feasible. As costs in 2019 and 2020 increased, however, it became necessary to join the NJSEHBP again. The state is involved in significant restructuring of the NJSEHBP, which could lead to some relief for districts and employees with respect to increased costs. However, early predictions about the impact of the COVID - 19 pandemic are that health insurance costs will be adversely affected.
A third key factor in budget projections is the cost of providing Special Education services. Special Education expenditures for 2019-20 were approximately $11 million. With respect to finance in particular, the key challenge is that legal and ethical guidelines require the district to make many Special Education decisions irrespective of cost. When out-of-district tuition costs increase, and when the number of students in out-of-district placements increases, the impact can be significant.
For 2020-21, the number of out-of-district placements is tentatively lower than usual--currently at 37. Maintaining students in districts is generally a positive way of meeting Least Restrictive Environment, promoting inclusion, and operating efficiently.
Three Year Sustainability Plan
In order to maintain current levels of programming in a sustained fashion over the coming three years, the district will need to consider the following steps.
- Communicate openly and thoroughly about the Fiscal Cliff and any potential impacts of the COVID - 19 pandemic. Given the potentially severe cuts and/or increases in revenue that would be required to continue current programs, we will need to ensure community awareness of the issues. We will need to continue and expand this communication so that both parents and the community at large are aware of steps that may be taken and consequences of the different options. COVID - 19 has already led to a cut in State Aid of a few hundred thousand dollars, and it could impact local revenue as well.
- Actively pursue cost-efficiencies in Special Education. As noted, many Special Education decisions must be made without regard to cost. However, there are also opportunities for reasonable cost savings that would not negatively impact student learning. For example, in 2016 the district has been offering parent transportation contracts as an alternative to transportation by bus companies and transportation co-ops. In the years since then, Mr. Lambe has created considerable efficiencies in transportation, saving the district hundreds of thousands of dollars. As also noted, the reduction of out-of-district placements has created cost efficiencies as well.
- Actively pursue grants and additional revenues with increased intensity. We have secured several kinds of grants in recent years, including tens of thousands of dollars in technology purchases, professional development grants such as the Achievement Coach program, and the federal elementary counseling grant. Given the fiscal constraints outlined above, however, it is apparent that the district needs to pursue such opportunities with even more vigor, as they may represent critical chances to provide students with new learning experiences that do not have to be supported through local funds. Two potential expansions to consider for the future are providing incentives for teachers to secure grants, and providing more professional development about grant-writing and ways to generate revenue.
- Continue to monitor health insurance costs. As noted, the move to the NJ SEHBP should provide some relief to both the district and to district employees. However, exactly how the state proceeds with its health insurance reform must be monitored closely in order to gauge the impact on CWC.