Attachment A

WASHOE COUNTY SCHOOL DISTRICT

SUMMARY OF FISCAL YEAR 2018-19 PRELIMINARY BUDGET

BUDGET PROCESS
The Board directed staff to start the budget process much earlier for Fiscal Year 2018-19 (FY19)
to address an ongoing structural budget deficit (when recurring revenues are less than recurring
expenditures) estimated to be $22 - $28 million. Staff began the process in August, 2017 and
the Board updated the strategic plan to implement the Government Finance Officers Association
best practices for school district budgeting and to eliminate the structural deficit within 3 years
by 33% each year.

Budget policies have been updated including the use of budget principles to drive the budget
process. New budget methodologies including re-setting the base budget, use of contra accounts,
critical examination of past expenditures, use of benchmark analysis and academic return on
investment, and the introduction of priority based budgeting have been implemented as part of
the process. A community budget survey was conducted and five community budget forums
have been held to gather additional public input regarding budget priorities.

The Business Office distributed budget packets to schools and departments, met with senior
leadership and individual department managers to discuss rebasing of budgets, benchmarking
data, vacancies and other ideas to reduce the budget while also refining revenue and expenditure
projections. Base budgets were reviewed and rebased to reflect historical expenditure activity
and departments submitted recommendations for budget reductions. The recommendations
were scored and prioritized by the Financial Review Committee and further vetted by the District’s
Leadership Team.

The results of this extensive process have been summarized for this budget workshop and
included in the power point presentation. The revised structural budget deficit will be discussed
below along with a description of general fund resources and expenditures and the budget
process moving forward.

GENERAL FUND - STRUCTURAL BUDGET DEFICIT

The General Fund is a major operating fund and accounts for all financial transactions associated
with the daily operations of the District except for capital projects, debt service, food service,
grant funded programs and insurance programs.

As mentioned in numerous meetings prior to the workshop, the District’s general operating budget
continues to face a structural deficit whereby recurring expenditures outpace recurring revenues.
The District faced a $40 million structural deficit for FY18. The deficit was reduced by $23.4
million to $16.6 million by making expenditure reductions of $20.4 million and assuming additional
revenue of $3 million (Please note: A last minute change to the final budget included an increase
of $6.1 million to pay for an ongoing property tax lawsuit, should it be settled. This was a one-
time increase using fund balance so the net impact increases the prior year structural deficit to
$22.7 million but that portion of the structural deficit will not continue).

The expenditure reductions for FY18 included decreasing teacher costs (by increasing class sizes
for grades 4-12 by 2 students; changing kindergarten student to teacher ratio; shifting English

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ATTACHMENT A
learner and gifted teachers to State grant funding; and reducing deans and other allocations);
deferring other post-employment benefit (OPEB) costs; reducing textbook costs; utility and
gasoline savings; reduce contingency account; reduction of central office operating budgets and
positions; reduce number of teachers on special assignment; custodial reductions; defer bus and
white fleet purchases; elimination of one area superintendent; and enact a special early
separation incentive plan. Fund balance (or savings) of approximately $17 million was used to
offset the remaining deficit.

The structural deficit for FY19 was anticipated to grow to $22 - $28 million. This was due to the
FY18 structural deficit of $16.6 million moving forward; increase in recurring revenues not keeping
pace with the increase in recurring expenditures (ie., DSA per pupil funding and other local
revenues being less than increased costs for employee salary increments and health insurance
increases); and other costs increases (textbooks, property & casualty insurance and loss of TIF
IV grant funding).

After refining revenue and expenditure projections based on more current information and data
the budget deficit for FY19 would be revised to approximately $19.1 million by simply
incrementing existing operations forward.

This improvement from the original estimate of $22 - $28 million is mainly due to savings from
health insurance, salary and benefits basis adjustment and the special early separation incentive
plan (SESIP). Health insurance at the time of the original projection was anticipated to increase
by 10% for both FY17 and FY18. However, the actual increases approved were 7% for FY17 and
2% for FY18, therefore resulting in a savings. The salary and benefits basis adjustment is due
to the changeover of employees from the end of one fiscal year to the start of the next fiscal year
and also during the course of the fiscal year. The cost related to the SESIP was provided for after
the initial estimated for in FY18 and is not anticipated for FY19.

As mentioned above the District implemented new budget methodologies for FY19. After a critical
examination of past expenditure practices, working with departments to determine appropriate
budget rebasing and examining historical salary and benefit data to determine a practical contra
(savings) account offset, the structural budget deficit has been revised downward to
approximately $9.5 million due to this budget rebasing and use of contra (savings) accounts.

The budget rebase is $5.6 million and is simply the recognition of budget accounts that typically
are not spent from year to year, yet continue to be placed in the budget. The contra accounts
reduction is $4.0 million and is the recognition of salary and benefit savings that typically occur
by the end of the year due to employee turnover and position vacancies. Rather than wait until
the end of the year to recognize these types of savings and then utilizing those savings to offset
the subsequent year structural deficit, the savings are now being recognized up front. A summary
of these rebased and contra accounts is provided as Attachment B.

The District has also worked diligently to identify other budget reductions using benchmark
analysis, identifying process improvements, service level reductions and other ideas. Chiefs and
department managers were asked to submit budget reduction ideas based on this analysis. The
budget reduction submissions were scored by the District’s Financial Review Committee and
ranked by degree of impact as related to the strategic plan, direct student instruction and risk
assessment. The District’s Leadership Team also vetted the recommendations. Expenditure
reductions with minor, or moderate but tolerable, were recommended for reduction. Other

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ATTACHMENT A
 reductions that were determined to be have a more severe impact were not recommended. Some
reduction ideas still require a longer timeline to vet and are still in progress.

A list of these items is included on Attachment C to the staff report. It is important to note that
any positions identified as recommended for reduction will be subject to a transition plan. The
transition plan will in essence, not end a position until another comparable position becomes
vacant for the incumbent to transfer or overage in to. The impacts of the reductions are included
in the materials in Attachment D by individual Executive Cabinet member.

From one year to the next, organizations typically encounter increased costs related to new or
additional important activities or must consider continuing costs that may have been previously
paid by another source that no longer exists, such as a grant. There are several such items that
need to be considered for inclusion in the budget. These items are listed below and the rationale
for inclusion is included in the last pages of Attachment D.

A summary of the structural budget deficit for the prior year (FY18), FY19 prior to rebasing and
use of contra accounts, FY19 after rebasing and contras follows. The summary also includes the
reduction of the deficit if the recommended budget reductions were to be approved and the
increase to the deficit if the additional costs were to be approved.

Adj Final Base Budget Rebase/ Preliminary

FY18 FY19 Contra FY19 FY19 Change
REVENUES
Local Sources: 320,828,024 334,776,263 334,776,263 13,948,239
State Sources: 138,422,674 126,800,334 126,800,334 (11,622,340)
Federal Sources: 801,000 570,000 570,000 (231,000)
Total Revenues 460,051,698 462,146,597 0 462,146,597 2,094,899

EXPENDITURES
Expenditures: 433,952,398 433,945,751 (9,600,671) 424,345,080 (9,607,318)
Other Uses: 48,825,962 47,331,835 47,331,835 (1,494,127)
Total Expenditures 482,778,360 481,277,586 (9,600,671) 471,676,915 (11,101,445)

Structural Deficit (22,726,662) (19,130,989) 9,600,671 (9,530,318) 13,196,344

Recommended Budget Reductions 4,578,729

Budget Deficit After Budget Reduction Recommendations (4,951,589)

Other Budget Considerations:

Teacher Incentive Fund (TIF) IV costs for PGS (593,052)
Teacher Incentive Fund (TIF) IV costs for 21st Century (400,704)
IT Network Analysts (2) - security risk (187,323)
FingerprintTechnician (60,394)
Adjust Bond Funded Employees (102,448)
Total Other Budget Considerations: (1,343,921)

Budget Deficit With Other Budget Considerations (6,295,510)

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ATTACHMENT A
The District made some very difficult decisions in identifying recurring budget reductions for FY18
to get the structural deficit down to $17 million. However, that amount will continue to move
forward to the subsequent year until it is offset by recurring increased revenues or recurring
decreased expenditures. The major factors causing the structural deficit to grow are new
recurring revenues (DSA per pupil funding and ad valorem taxes mostly) not keeping pace with
new recurring costs (employee experience increments on salary schedules, negotiated salary
increases, health insurance cost increases and inflationary increases for textbooks, property and
casualty insurance, utilities and other costs) as well as enrollment being relatively flat.

In the past, the District has strongly relied on prior year budget savings to assist in balancing the
budget. The use of budget rebasing and contra accounts essentially recognizes these savings up
front and therefore will result in significantly less, or no, savings from one fiscal year to carry into
the next fiscal year Therefore, more difficult decisions must be made to reduce costs as the
District does not have the ability to increase its revenue sources other than by retaining and
attracting additional students.

Budget reductions beyond those recommended have been identified but they would appear to
result in severe impacts if implemented. The District is still in the process of trying to identify
additional reductions. Some of those, such as further reductions to teachers on special
assignment, implementation specialists and consulting teachers would result in savings for FY19.
Others, such as reducing costs through negotiations, reconfiguring services for English learners,
review of high school gifted and talented programs, consolidation of special education self-
contained programs, alternative approaches to 1:1 special education aides and assistants and the
retention and attraction of students are longer term solutions. In addition, the District has started
the process of Priority Based Budgeting which will assist in prioritizing the way the District
allocates its resources.

Attachment D provides additional insight as to how the District allocates resources. The report
details the departments and schools related each Executive Cabinet member is responsible for.
The summary on page 1 provides the budgets over the last three years and the changes thereon
by member as well as the changes by functional programs for the General Fund. Page 2 provides
a summary by member of the FY19 base budget, base budget reductions, recommended
reductions, total reductions amount and percentage and proposed budget.

Pages 3 through 40 detail for each member the total budget by responsible department (similar
to the summary on page 2), the benchmarking comparisons used, the items for further review,
and the recommended and not recommended budget reduction lists with descriptions of the
reduction and the impact. Page 41 through 43 provides the detail and rationale for the additional
budget requests.

General Fund Resources and Applications

As shown above, revenues are projected to increase by $2.1 million as compared to the prior
year (please note the prior year budget reflects the Amended Final Budget augmented for $1.6
million for additional per pupil funding promised by the Department of Education). The changes
to each revenue category are shown on Page 10 and a description for each category is provided
below.

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ATTACHMENT A
Expenditures as shown above are to decrease by $11.1 million. Most of this is due to rebasing
and contra accounts of $9.6 million and a reduction of a one-time cost for property tax lawsuit of
$6.1 million but there were increases to other costs as follows:

Employee Salary Increments, Health Insurance

Increase 9.5
Salary & Benefit Basis Adjustment (4.9)
Operating Budget Increases 1.8
Special Education Transfer/Other (1.8)
Increase to Recurring Expenditures 4.6
Property Tax Settlement (6.1)
Net Decrease after one-time expense reduction (1.5)
Budget Rebasing (5.6)
Contra Accounts (4.0)
Net Decrease to Expenditures ($11.1)

GENERAL FUND RESOURCES (Page 10):

Local Sources:

 Ad Valorem Tax - Property tax assessed at $ .75 per $100 of assessed valuation,
adjusted for tax cap abatements. The projected increase is about 4% above the prior
year pro-forma amount. The Department of Taxation will provide certified ad valorem
amounts at the end of March and the amount will be adjusted accordingly. Any change
to ad valorem tax is offset by a 1/3rd adjustment to the Distributive School Account.
Source data: Washoe County Assessor and certified by State Department of Taxation.

 Local School Support Tax (LSST) – Sales tax assessed at $0.026 for every $1.00 of
gross retail sales in Washoe County (the rate was $0.225 but the last legislature made
permanent a temporary additional $0.0035 from the last two biennium’s making the
ongoing rate $0.026). Preliminary sales tax Sales information provided by the Department
of Taxation indicate the tax will increase by over 5%, however any increase is offset by a
decrease to the Distributive School Account as part of the K-12 education funding
methodology for Nevada. Source data: State Department of Taxation.

 Franchise Taxes - Tax of 2% of net proceeds of public utilities business outside of the
incorporated cities in Washoe County.

 Government Services Tax - District’s portion of the tax of $ .04 for every $1.00 of value
of all of the vehicles licensed in Washoe County. The increase is about 12% as the prior
year was estimated to be flat. Source data: State Department of Taxation.

 Revenue in Lieu of Taxes – 50% of Washoe County motorboat registration fees

collected by the State Division of Wildlife.

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ATTACHMENT A
  Tuition – Amounts paid for students enrolled in our schools who reside outside Washoe
County; amounts paid for students enrolled in summer school; and amount paid for adult
continuing education.

 Earnings on Investments - Interest earned from investing the District’s cash.

 Other Local Revenue – Other local revenues such as transportation reimbursements

for field trips, rental income from use of school facilities, indirect costs from grants, salary
reimbursements and miscellaneous income. The indirect cost projection reflects a change
by the State disallowing our ability to charge indirect cost to their categorical grants.

State Sources:

 Distributive School Account (DSA) - This represents the per-pupil funding provided
by the State. The amount may be subject to change based on the final property tax
adjustment.

Enrollment is based on the FYF18 count day. Although some slight growth is projected,
a conservative approach is necessary as the last two years have seen relatively flat growth.

The state-wide per-pupil funding amount will increase by $60 from $5,677 to $5,737 but
may be adjusted revised ad valorem projections for the second year of the biennium.

Source Data: State Department of Education per Pupil Calculation.

 Special Appropriations – For FY18 this represents the $5 million allocated to the District
per AB550 of the 2017 legislature. An addition of $1.6 million has been added to FY18 to
reflect the State’s promise to make us whole regarding our per-pupil funding in
relationship to the oversight made in the DSA equity allocation model. The amount for
FY19 represents the State’s promise to make us whole regarding our per-pupil funding in
relationship to the oversight made in the DSA equity allocation model.

Federal Sources:

 Forest Reserve - Washoe County’s portion of the revenue received from the Federal
government for the sale of forest products, minerals, and land use for national forests
that are located in our state.

 National Energy PL 95-619 (E-Rate Refund) – Federal program that provides

discounts in telecommunications services to schools and libraries.

 Impact Aid – Public Law (P.L.) 81-874 provides revenue to the District from the Federal
government for Federal properties located within Washoe County that are exempt from
county property taxes. The distribution of funds is based upon the number of children
enrolled in our District whose parents are employed by and work on those exempt
properties.

Other Sources:

 Sale of Fixed Assets – Proceeds from sale of District surplus vehicles and equipment.
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ATTACHMENT A
Opening Fund Balance:

 Nonspendable – Non-monetary balances. The District maintains an inventory for the

warehouse. This represents the year end cost for the inventory.

 Assigned – These accounts represent funds earmarked in the prior year for use in the
current year and include the assignments for subsequent year’s expenditures, outstanding
and unresolved lawsuits and balancing the subsequent year’s budget (FY17).

The amount assigned for subsequent year’s expenditures of $10.1 million represents the
District’s policy for an ending balance of 8-10% of expenditures. The increase is $407,457
and will simply be applied to the ending fund balance. These funds would not be available
for use unless the Board overrides the minimum fund balance policy.

$6.1 million is assigned for unresolved Incline Village lawsuits for FY18 and built to be
utilized in the FY18 budget.

A significant decrease in resources is for the amount assigned for balancing the
subsequent year’s budget (FY17). All of the $17 million for FY18 was utilized to balance
the FY18 budget deficit and $2 million was assigned from FY17 savings and is being placed
into the ending fund balance.

GENERAL FUND APPLICATIONS (Page 11):

All existing programs for fiscal year 2018-19 are provided for in the preliminary budget. The
increases and decreases to each of the expenditure categories are due to the various expenditure
changes described above.

A brief description of the expenditure categories utilized in the budget follows.

 Instruction - Expenditures associated with providing direct regular instruction to

students consisting mostly of salaries and benefits for teachers, teacher aides and
assistants, as well as other direct instruction costs for supplies, textbooks and equipment.
The category also includes costs for teacher substitutes, ROTC teachers, Early Separation
Incentive Program (ESIP) costs and sick leave payout.

 Special Programs - Expenditures associated with activities for elementary and

secondary students receiving special services for gifted and talented instruction and
related support services.

 Vocational Programs - Expenditures associated with providing learning experiences to

individuals to develop the necessary knowledge, skills, and attitudes needed for
employment in an occupational area.

 Other Instructional Programs – Expenditures for the cost of operating the District’s
English as a Second Language (ESL), summer school and remedial instruction programs.
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ATTACHMENT A
  Co/Extra-Curricular Programs - Expenditures for activities that typically take place
outside the traditional classroom. Included are costs for athletics; including coaches,
officials, dues, administration and transportation; band, choir and other extra-curricular
activities.

 Student Support Services – Expenditures to assess and improve the well-being of

students and to supplement the teaching process, including counselors, psychologists,
nurses & clinical aides, attendance, and related supplies and equipment.

 Instruction Support Services - Expenditures associated with assisting the instructional

staff with the content and process of providing learning experiences for students including
costs for curriculum support, instructional coaches, librarians, library assistants, student
assessment, staff training and related supplies and equipment.

 General Administration – Expenditures concerned with establishing and administering

policy for operating the district including costs for the superintendent, assistant
superintendents, Board of Trustees, legal counsel, community/state/federal relations and
related supplies and equipment.

 School Administration - Expenditures for the overall administrative responsibility for a

school including salaries and benefits for school principals, assistant principals, school
secretaries, clerks, registrars, bookkeepers and related supplies and equipment for the
school offices.

 Central Services – Expenditures that support other administrative and instructional

functions including fiscal services, human resources, planning and administrative
information technology. Other costs include purchasing, warehouse, printing, risk
management, grant services, public information services, internal audit, mail services,
research and evaluation, liability insurance, software licenses, and the related supplies
and equipment.

 Operations and Maintenance - Expenditures related to keeping the physical plant

open, comfortable and safe including the costs for custodians, groundskeepers,
maintenance workers, school police, building maintenance, grounds maintenance,
equipment repair, all utilities and the related supplies and equipment.

 Student Transportation - Expenditures for the costs related to pupil transportation

including bus drivers, mechanics, support personnel, vehicle repair and maintenance,
gasoline, bus replacement and related supplies and equipment.

 Interfund Transfers – Funds that are transferred from the General Fund to other funds
such as the Insurance Trust Fund, Debt Service Fund, Special Education Fund and Capital
Projects Fund.

 Contingency – Funds reserved for future use for unforeseen circumstances.

Ending Fund Balance:

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ATTACHMENT A
  Nonspendable Inventory – The District maintains an inventory for the warehouse.
This represents the year end amount.

 Assigned For: – These represent balances set aside for various obligations or
commitments. The subsequent year’s expenditures ($10.5 million) represents the
District’s policy for an ending balance of 8-10% of expenditures and the $2.0 million may
be utilized to increase the policy reserve or use in the current or subsequent year.

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ATTACHMENT A
 WASHOE COUNTY SCHOOL DISTRICT
GENERAL FUND BUDGET COMPARISON
FY 18 FINAL vs FY 18 AMENDED FINAL BUDGET 
Final Preliminary
FY18 FY19 Change
RESOURCES
Local Sources:
Ad Valorem Tax $        106,699,130 $        109,266,975 $        2,567,845
L.S.S.T. 192,019,989 201,620,988 9,600,999
Franchise Taxes 250,000 250,000 0
Government Services Tax 16,123,905 18,087,300 1,963,395
Rev In Lieu of Taxes 185,000 185,000 0
Regular Tuition 256,000 256,000 0
Summer School 61,000 20,000 (41,000)
Other Tuition 40,000 40,000 0
Transportation 565,000 620,000 55,000
Earnings on Investments 420,000 350,000 (70,000)
Student Activities Revenue 170,000 170,000 0
Other Local Revenue 838,000 1,000,000 162,000
Indirect Cost Revenue 1,700,000 1,410,000 (290,000)
Salary Reimbursements 1,500,000 1,500,000 0
$        320,828,024 $        334,776,263 $      13,948,239
State Sources:
DSA Apportionments $        131,826,554 $        120,190,572 $     (11,635,982)
Special Appropriations 6,596,120 6,609,762 13,642
$        138,422,674 $        126,800,334 $     (11,622,340)
Federal Sources:
Forest Reserve $                  31,000 $                  25,000 $               (6,000)
E‐Rate Refund 500,000 300,000 (200,000)
P.L. 81‐874 185,000 165,000 (20,000)
$               716,000 $               490,000 $          (226,000)
Other Sources:
Sale of Fixed Assets $                  85,000 $                  80,000 $               (5,000)
Lease Proceeds 0 0 0
$                  85,000 $                  80,000 $               (5,000)
Opening Fund Balance:
Nonspendable Inventory $            1,141,214 $            1,194,740 $              53,526
Assigned for:
Subsequent Year's Expenditures $            9,714,914 $          10,122,371 $            407,457
Outstanding & Unresolved Lawsuits 6,134,119 0 (6,134,119)
Balancing the Subsequent Year's Budget (15) 0 0 0
Balancing the Subsequent Year's Budget (16) 0 0 0
Balancing the Subsequent Year's Budget (17) 17,000,000 2,000,000 (15,000,000)
$          33,990,247 $          13,317,111 $     (20,673,136)

TOTAL RESOURCES $        494,041,945 $        475,463,708 $     (18,578,237)

ATTACHMENT A A10
 WASHOE COUNTY SCHOOL DISTRICT
GENERAL FUND BUDGET COMPARISON
FY 18 FINAL vs FY 18 AMENDED FINAL BUDGET 

Final Preliminary
FY18 FY19 Change

APPLICATIONS
Expenditures:
Instruction $        215,565,199 $        216,270,424 $            705,225
Special Programs 5,384,158 5,301,974 (82,184)
Vocational Programs 6,254,605 5,764,765 (489,840)
Other Instructional Programs 13,296,693 13,544,169 247,476
Co/Extra ‐ Curricular Programs 4,061,005 4,373,049 312,044
Student Support Services 33,275,047 32,753,139 (521,908)
Instruction Support Services 15,754,582 16,081,442 326,860
General Administration 14,428,194 6,317,204 (8,110,990)
School Administration 36,650,957 35,457,071 (1,193,886)
Central Services 23,919,765 24,258,975 339,210
Operation and Maintenance 48,928,163 47,958,418 (969,745)
Student Transportation 16,434,029 16,264,449 (169,580)
$        433,952,398 $        424,345,080 $       (9,607,318)

Other Financing Uses:
Debt Service Fund Transfer $            2,708,358 $            2,600,904 (107,454)
Insurance Trust Fund Transfer 1,640,019 1,640,019 0
Special Education Transfer 43,643,620 42,256,947 (1,386,673)
Capital Projects Fund Transfer 0 0 0
Contingency 833,965 833,965 0
Budget Deficit 0 (9,937,775) (9,937,775)
$          48,825,962 $          37,394,060 $     (11,431,902)

Ending Fund Balance:
Nonspendable Inventory $            1,141,214 $            1,194,740 53,526
Assigned for:
Outstanding & Unresolved Lawsuits 0 0 0
Subsequent Year's Expenditures 10,122,371 10,529,828 407,457
Balancing the Subsequent Year's Budget 0 2,000,000 2,000,000
$          11,263,585 $          13,724,568 $        2,460,983

TOTAL APPLICATIONS $        494,041,945 $        475,463,708 $     (18,578,237)

0 0

ATTACHMENT A A11