BUSINESS AFFAIRS

Business Affairs Office, 610-775-1461, Ext. 1108

Mark Naylon, Business Manager- mnaylon@gmsd.k12.pa.us

The District and its Facilities

The Governor Mifflin School District serves an area of approximately 42 square miles.  It is located in Berks County and consists of Brecknock Township, Cumru Township, Kenhorst Borough, Mohnton Borough and Shillington Borough. The population of this area is 28,925. 

The School District is comprised of two (2) Grades K to 3 buildings (Brecknock and Cumru Elementary Schools), one Grades 4 to 6 building (Intermediate School), a Grade 7 and 8 building (Middle School) and a Grades 9 to 12 building (High School).  The School District also has an administration building, a transportation/maintenance facility and a prefab eight-room building which houses the special education offices, early intervention classrooms and gifted program. 

Over the last few years, enrollment at the Governor Mifflin School District has increased to approximately 4,291 students. Due to increased enrollment and a change in curriculum, the District approved various building projects. In June 2006, installation of synthetic turfs in the stadium and multi-purpose fields was completed. The District also began work on a natural turf project in October 2006. Funds resulting from the savings obtained in the 2003 refinancing of the 1996 bond issue covered the costs of the athletic fields. Renovations and construction of an addition to the High School began June 2006 and was completed in March, 2008. The District borrowed $29.8 million to fund this project. The bond issue, completed June 27, 2006, was subsequently refinanced November 2006. On June 19, 2006, the District also entered into three swap agreements (which allows additional borrowing of $15,000,000 each in April 2007, January 2008 and $8,000,000 in January 2009) to finance the construction of a new elementary school and the renovation of the Intermediate School. The new Elementary School broke ground in August 2007. Land was obtained through eminent domain on the Armory site located adjacent to the Intermediate School. The site now houses a tennis court, a soccer field and parking lot. Renovations of the Intermediate School began in January 2008. As of the 2006-07 school year, the District has increased its millage incrementally over the past several years to reach the projected millage required to fund the above construction projects. 

Employee Relations

The School District currently has 459 full-time and 133 part-time employees. There are two organizations representing School District employees. The Governor Mifflin Education Association (GMEA) represents certified employees, including teachers, librarians, guidance counselors, nurses and other educational specialists, for collective bargaining purposes. Classified employees, including clerical staff, custodians, maintenance, food service and miscellaneous positions are represented for collective bargaining purposes by the American Federation of State, County and Municipal Employees, AFL-CIO, District Council 88 and its Local 1332 (AFSCME).  The current GMEA contract expires June 30, 2010 and the current AFSCME contract expires June 30, 2009.

The GMEA wage agreement for the period of September 1, 2005 through June 30, 2010, includes raises of 5% for the first year, 4.75% for 2006-2007, 4.5% for 2007-2008, 4.25% in the fourth year and 4% in the last year of the contract. The AFSCME agreement for the period of July 1, 2006 through June 30, 2009, calls for hourly increases of 50¢, 55¢ and 60¢, respectively, for the life of the contract.

Economic Outlook

During 2006-2007, Berks County experienced slow growth of the economy. Although interest rates have decreased, the housing boom is over. Home prices continue to fall, and new home construction and sales remain stagnant. Crude oil prices have skyrocketed. The effect of this increase will be felt by the District in fuel, heating and electrical costs. The District entered into a three year agreement with Capital Blue Cross beginning July 1, 2008 through June 30, 2011. The first year the rates decrease by .05% and the next two years are capped at a maximum of 9%. The School District anticipates interest income to decrease over the next 12 months. The impact of higher energy costs, lower interest rates on investments and the stagnant housing market may have a significant impact on future budgets due to the taxpayers’ ability to pay property taxes and the amount of money received from property transfer tax. 

The School District actively monitors the change of projected taxes and assessments.  These factors are considered in the calculation of future projections and the budgeting process.

Financial Highlights

• Net assets of the School District’s governmental activities increased by 26%. The major component leading to this increase was higher than expected revenues received for real estate taxes, interim taxes, real estate transfer taxes and delinquent taxes.
• Net assets of the business-type activities increased by approximately $46,000. Note that depreciation expense is included in the operating expenses in the approximate amount of $47,000. Due to participation in the lunch program, revenues exceeded expenditures.
• Program-specific revenues in the form of grants, entitlements and investment earnings accounted for $6.7 million or 13.4% of total governmental activities revenue, and the general revenue for taxes accounted for $36.6 million or 72.7% of total governmental activities revenue.
• Governmental activities expenditures totaled $47.3 million, of which $25.9 million was spent on instructional services, $16.2 million was spent on supportive services, $1 million was spent on non-instructional services and $4.2 million was used for interest payment on debt and depreciation expenses.
• The School District’s budget is prepared according to Pennsylvania law and is based on accounting for certain transactions on a basis of cash receipts, disbursements and encumbrances.

Final Analysis of the School District as a Whole - Revenue

• For the General Fund, the revenue generated from real estate taxes was $3 million more than last year.  The School District’s increase in millage was the major contributor towards the increase in real estate taxes.
• The School District exceeded its budget expectation in real estate taxes, real estate transfer taxes, interim taxes, delinquent real estate taxes and interest on investments.
• State and other aid went up as a result of increased funding for the Basic Instructional Subsidy and Special Education programs.
• The large increase in other revenue was attributable to the increase of interest income, which is included in this income category.  The steady rise in interest rates over the past year has significantly increased the School District’s ability to earn a reasonable return on its investments.  This trend is not expected to continue, as interest rates have already begun to level off and are projected to remain relatively consistent for the next year. As a result, it is anticipated that the stagnant economy will have an adverse effect on the housing industry, causing a future decrease in the amount received in interim and transfer taxes.

Expenditures

The majority of the increase in expenditures for the 2006-07 school year is tied to the contractual raises for the support, professional and administration staff. Two other expenses to the District that affected all areas were a 12% increase in health care costs and an increase of the retirement rate from 4.69% to 7.13%.

In the instructional services area, the School District created 7.5 new teaching positions. Other costs associated with these new positions include health care, social security, retirement and workers’ compensation.

In addition to the increase in salaries and benefits expenses in the support services area, the District increased hours and benefits for six different positions including expenses for health care, social security, retirement and workers’ compensation.

Governmental Activities

Governmental activities consist of the General Fund, the Debt Service Fund, the Capital Improvement Fund and Special Revenue Funds. The amount in pooled cash, cash equivalents and investments remained at approximately the same amount.  This was due to payment of bills of approximately $15 million for the High School project and a new bond issue in April of $15 million for the New Elementary School project. However, Construction in Progress increased by $15.4 million due to the High School construction. Long-term liabilities, including lease obligations and bonds payable, increased by almost $3.5 million as a result of the $15 million bond issue, and the unrestricted fund balance decreased by almost $2.3 million.

The School District depends heavily on real estate taxes that make up approximately 72.6% of revenues.  Other revenues consist of investment earnings, rent, interfund transfers and revenues from other sources.

Business-Type Activities

Business-type activities include the Food Service Program, but the Enterprise Fund is operated separately. The programs are designed to operate at a break-even point so that the cost for the services offered will benefit the School District residents. Business activities received no support from tax revenues.

The Food Service Program provides approximately 2,760 lunches per day and 211 breakfasts per day, as well as additional catering for the School District’s many meetings and gatherings. Food Service receives both federal and state subsidies for milk, lunch and breakfast programs and also receives some government commodities on a routine basis. The majority of revenues come from the students and other users of the services.

Capital Asset and Debt Administration Capital Assets

For the Governor Mifflin School District, capital assets include land, buildings, furniture and equipment, vehicles and other items that meet the following criteria:

A. The individual asset must have a useful life greater than one year.
B. The individual asset cost is equal to or greater than $2,500 or was purchased with debt proceeds.

In 2006-07, the School District spent approximately $800,000 in technology initiatives, including a lease payment for computer equipment in the approximate amount of $300,000. The District concentrated its efforts on purchasing computer software for instructional programs, computer hardware for remedial programs and the creation of an intranet portal where the District established sites for curriculum, Special Education, Business, IST, ESL and Human Resources.

Regular improvements to the buildings of the School District are ongoing. In 2006-07, the School District spent over $2 million on various maintenance projects and renovations. The majority of the expense was incurred for architectural fees for the Intermediate School project, purchase of land and completion of the Education Center project.

Factors Bearing on the School District's Future

The Pennsylvania School Employee Retirement System (PSERS) is projecting rate increases for the next four years.  The State and School District share in the cost of the retirement system.  In 2006-07, the rate was 6.46%, and the projected rates are 7.13%, 6.78% and 5.83% for the years 2007-08, 2008-09 and 2009-10, respectively.  The School District will have to contend with these mandated increases during the budgeting process.

In July 2006 the District issued General Obligation Notes, Series of 2006, in the amount of $909,500, for the purpose of the acquisition of computer and technology equipment. The note matures four years from the date of settlement with an interest rate of 4.03%. 

On June 27, 2006, Governor Rendell signed the Taxpayer Relief Act (also known as Act 1) into law. The purpose of this law is to ease the financial burden of home ownership by providing school districts the means to lower property taxes to homeowners, especially senior citizens, via funding provided by gaming revenue and shifting the tax base. The voters rejected the tax shifting capability. It is projected that, ultimately, gaming will generate $1 billion each year towards local property tax relief, although Districts may elect to opt out of the receipt of gaming revenues. For School Districts, the Act limits tax increases to an inflationary index, unless the district qualifies for an exception or has received voter approval at a “back end” referendum. For certain taxpayers, the new law presents the opportunity to make installment payments on property taxes and provides property tax and rent rebates for low income citizens. The new legislation furthermore requires the establishment of an accelerated budget process statewide so as to ensure compliance with the limitations on tax increases in the Act.