The Verona Board of Education introduced a preliminary budget for the 2015-2016 school year this month and, thanks to changes to teacher contracts and a refinancing of the 2005 referendum debt, the increase could be held to about $110 per average homeowner.
BOE finance committee Chair Joe Bellino explains in the video below (speed ahead to the 20-minute mark), that the board is reaping the benefits of a carefully planned refinancing of the debt incurred for the 2005 referendum. In March 2006, Verona financed roughly $33 million at an interest rate of 4.375%. Interest rates have dropped so drastically since that, even though the BOE could only refinance part of the debt before its maturity, the new 2.7% interest rate will generate $2.4 million in savings through the life of the bond, or about $180,000 per year. The refinancing did not extend the term of the bond.
Bellino said that Verona’s business administrator, Cheryl Nardino, and the BOE’s bond counsel spent almost 24 months planning the refinancing. He also made a point of thanking Verona High School computer and statistics teacher Rich Wertz, who did analytical studies on bond refinancings for Goldman Sachs before entering education, for help in timing the move. “We were able to achieve significant savings,” Bellino said at the March 10 meeting. “A year ago, the savings would have been only half of what we achieved.”
Also helping the BOE’s budget: Changes to the teacher contract and the way teachers pay for their healthcare. BOE President John Quattrocchi said today that the “six-figure” savings on healthcare isn making it possible to add staff and more Chromebooks. Verona’s overall salary costs are only growing 2%.
Overall, the tax levy for the 2015-2016 budget is rising 2.49%, down from 2.78% last year and on par with the 2.5% increase for the 2013-2014 budget. While school budget increases are capped by the state at 2% per year, the state has granted so-called cap waivers when districts face high costs, like those for healthcare. These waivers allow school districts to spend more, but the extra spending must be paid by taxpayers and not the state. To prevent too great a hit on taxpayers, districts can elect to use some of the cap waivers, and hold the rest in reserve. Verona banked $389,521 in cap waivers in its 2012-2013 budget, and a further $137,067 in 2013-2014.
But banked cap waivers expire after three years and Verona has $70,000 that would expire during the 2015-2016 school year. The BOE is adding the $70,000 to the tax levy so that it can put the money into a reserve for maintenance, a budget line that took a huge hit from state aid cuts five years ago. The banked cap waivers could also help Verona in the years ahead, particularly since the BOE has done such a good job of holding down health costs that we didn’t get any waivers for 2014-2015, and won’t get any for 2015-2016 either. State budget watchers are casting a wary eye on 2016-2017, when Trenton will be under the gun to make up its pension shortfall. If it does that by reducing the already meager amount that Verona gets in state aide, we could need to rely more on the banked waiver funds.
Other than more Chromebooks and staff, we don’t yet know what the new budget will buy. The BOE will hold a detailed presentation on the budget next month before it is finalized in May.
