BUFFALO FISCAL STABILITY AUTHORITY - City of Buffalo Schools

[Night Owl]

Quotes from the Control Board

The Plan contains a series of gap-closing actions for the City and Buffalo Public Schools, which face combined shortfalls ranging from $88 million in 2004-05 to $164 million by 2007-08. Through a combination of cost-cutting strategies, reengineering and an historic City/County intermunicipal agreement to operate City parks, the Plan bridges budget gaps annually in accordance with the Act that created the Fiscal Stability Authority.

Closing 10 school buildings between 2004 and 2008 to produce $17 million in recurring savings. These closings, along with certain academic program reductions, will enable an additional $14.7 million in staff reductions in 2004-05, growing to $23.1 million in 2007-08.

The City and School District face significant gaps over the course of the next four year Financial Plan. The baseline gap in the City is projected at $49.6 million in FYE05; $55.8 million in FYE06; $66.0 million in FYE07; and $81.8 million in FYE08. The School District’s baseline gap increases similarly, from $39.1 million in FYE05 to $53.9 million in FYE06; $67.9 million in FYE07; and $82.6 million in FYE08. Together, the City and School District face combined baseline gaps of $88.7 million in FYE05; $109.7 million in FYE06; $133.9 million in FYE07; and $164.4 million in FYE08. The aggregate combined four-year gap totals $496.7 million for the two entities.

In conjunction with a decreasing number of school buildings, the Financial Plan calls for a survey of street corners to determine whether the number of crossing guards could be reduced by one-third. The City’s Plan books $332,000 in annual savings from this initiative starting in FYE06. This initiative contains moderate risk, especially given that the City added 16 crossing guards in January on the basis that, according to the Administration, they were necessary for public safety.

[Night Owl]

Buffalo Public Schools

The Buffalo Public Schools’ (BPS) projected baseline gap grows from $39.1 million to $82.6 million through 2007-08. After implementing gap closing actions of $19.7 million in 2004-05 through four school closings, attrition and some program reductions, the School District assumes $19.4 million in BFSA deficit borrowing to close the remainder of its gap. The District identifies its reliance on BFSA deficit borrowing in FYE05 as “contingent,” however, noting that any additional aid contained in a completed State budget may enable it to “modify the need for borrowing or rescind it altogether.”

The Board of Education has included significant amounts of speculative revenues in the out-years of the Financial Plan, assuming recurring increases in State formula aid ($11 million between 2005-06 and 2007-08); a windfall from new aid distributions which may be triggered by studies and negotiations brought about as a result of the Campaign for Fiscal Equity decision relating to New York City schools ($14 million beginning in 2005-06); and increased sales tax revenues from Erie County ($6 million in 2006-07 and $9 million 2007-08).

The District’s Plan relies on $9.3 million in undesignated fund balance in FYE05. BFSA has recommended that the School District begin to build a reserve, and will require a Financial Plan revision that provides for the retention of some of the fund balance as a reserve.

Actions taken by BPS as part of last October’s Financial Plan have already closed a portion of the 2004-05 baseline shortfall. School closings contained in the initial Plan are projected to close the FYE05 gap by $5 million, with staff and program reductions projected to save another $14.7 million. Given the current baseline gap of $37.4 million, BPS’ Plan therefore closes 50 percent of that gap, more than the 45 percent minimum required in the BFSA Act for FYE05.

Baseline Budgetary Review

Like the City itself, the District faces baseline gaps that are the result of stagnant revenues in the face of substantial cost increases. BPS’ General Fund revenues are projected at $462.2 million in 2004-05, falling to $457.9 in each out-year of the Plan. The decline results primarily from a decreased reliance on fund balance in years 2, 3 and 4. Baseline State aid is projected at $339.5 million each year of the Plan. Outside of the General Fund, grant funding (special projects and food service) is projected virtually flat through the Plan, with only a slight increase in State and Federal food service funds in each out year.

This trend in the revenue base is outpaced by the trend of increases in General Fund expenses over the course of the Financial Plan. Increases in employee benefit categories, as well as a large jump in Charter School costs, drive the growth in BPS spending. Charter costs alone are projected to grow from $38 million in FYE05 to more than $58 million by FYE08, with employee benefits surging from $103 million in FYE05 to $116 million in FYE08.

Aside from Charter Schools, the primary General Fund cost centers pushing the District’s increasing gap include health insurance for active employees (up $6.3 million, or 21 percent through 2007-08); health insurance for retirees (up $10.7 million, or 44 percent); other benefits, including termination pay (up $6.2 million, or 38 percent just since 2003-04); and transportation (up $2.8 million, or 9 percent through 2007-08).

The District therefore faces large increases in its baseline gaps throughout the Plan. The baseline shortfall increases from $39.1 million in 2004-05 to $82.6 million in 2007-08. The School District makes no “above the line” modifications, with the exception of removing the recurring value of gap-closing actions from its baseline gap in each year. The District accounts for the $3.1 million from the BFSA-imposed wage freeze within its baseline numbers for employee compensation. After accounting for the recurring values of gap-closing savings.

Gap Closing Strategy

In accordance with the BFSA Act, the Buffalo Public Schools are required to identify gap-closing actions that produce recurring savings of 45 percent of the gap in FYE05, 60 percent in FYE06, 80 percent in FYE07 and 100 percent in FYE08.

The District’s FYE05 gap-closing plan depends on school closings, attrition and program reductions, while the out-year plan relies largely on speculative revenue increases from New York State.

While the District is already taking actions to close the required amount of the FY05 gap (i.e., closing schools, reducing staff), the out-year gap-closing plans are built heavily on speculative revenue increases that are well beyond the District’s ability to control. BFSA will continue to closely monitor State funding and will require the District to develop a contingency plan if/when it appears these speculative revenues will either not materialize or materialize later in the Financial Plan, thereby pushing the Plan out of balance.

All of the out-year gaps are assumed closed by a combination of increased State aid, additional sales tax revenues, more school closings, further staff reductions and technology upgrades. Increased State aid relied on in the Plan’s out-years includes $7 million in FYE06, with $2 million additional each of the two following years. Further, the FYE06 gap-closing plan relies on $14 million in monies related to the Campaign for Fiscal Equity (CFE) lawsuit.

BPS’ FYE05 plan closes 53 percent of the gap through actions producing recurring savings, and assumes the remainder will be filled through BFSA deficit borrowing (in the absence of additional State aid).