Blairsville-Saltsburg Deconsolidation Report

BLAIRSVILLESALTSBURG DECONSOLIDATION REPORT

Report as directed

by Act 85 of 2016 March 2017

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Blairsville-Saltsburg Deconsolidation Report Pursuant to Act 85 of 2016

I. INTRODUCTION Technological advances, budgetary pressures, and other forces have led to a steady increase in consolidation of key programs and services among Pennsylvania’s local education agencies (LEAs). Against this backdrop, Act 85 of 2016 poses a different question: Whether the Blairsville-Saltsburg School District in Indiana and Westmoreland counties should dissolve and form two separate and independent school districts, a Blairsville Independent School District and a Saltsburg Independent School District.

Specifically, Act 85 directs the Pennsylvania Department of Education (PDE) to analyze “the effect of the proposed separation on student academic and extracurricular opportunities, the immediate and long-term financial stability of the regions into which the school district would be separated, student transportation, and any other information the Department of Education determines is relevant to the proposed separation.”1 The Act requires the Department to issue its report within six months of a written request from the district.

The following study responds to this directive by drawing on a range of sources including demographic, financial, and school personnel data elements; qualitative data gleaned from a two-day site visit; consideration of earlier analysis of a proposed dissolution of the district; and survey data. Each section of the report includes a summary methodology to provide detail on data sources and key assumptions informing the Department’s analyses.

One assumption is constant across analyses: the current Blairsville-Saltsburg School District would be divided, and school buildings allocated between two independent districts, consistent with the approach utilized in the 2015 study conducted by the Pennsylvania Economy League Central Division (PEL). This allocation of municipalities and school buildings is depicted in Table 1, below.

Table 1: Distribution of Municipalities2 Blairsville Portion Black Lick Township Blairsville Borough Burrell Township

Saltsburg Portion Conemaugh Township Loyalhanna Township Saltsburg Borough Young Township

The report begins with a summary profile of the district that includes demographic and student enrollment data.

Next, the report analyzes the prospect of dissolution from two vantage points—the first examines business, finance, and operational considerations; the second, academic, extracurricular, and community programs. The report concludes with overarching findings that reflect the Department’s philosophy that a district’s financial and structural health are inextricably linked with the provision of high-quality educational programming.

II. DISTRICT PROFILE The Blairsville-Saltsburg School District traverses six municipalities in Indiana County along with Loyalhanna Township in Westmoreland County. The National Center for Education Statistics (NCES) identifies the district

1

Act 85 of 2016.

Pennsylvania Economy League Central Division, Independent Review and Evaluation of a Study of the Separation of the Blairsville-Saltsburg School District (Wilkes-Barre, PA, 2015), 2.

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Blairsville-Saltsburg Deconsolidation Report Pursuant to Act 85 of 2016

as rural fringe.3 The total district population is roughly 14,200, with 61.7 percent of residents residing in the Blairsville portion of the district; the distribution is a bit more skewed in terms of the community’s younger residents, with 63.8 percent of residents below the age of 18, and 63.5 percent of public school students residing in Blairsville. Table 2, below, provide additional detail on the district’s student enrollment, by grade, school building, and community.

Table 2: 2016-17 October 1st Enrollment Count by Grade4 Grade SES5 SMHS3 BES3 BMS3 BHS3 K (Full Day) 35 0 70 0 0 1 40 0 78 0 0 2 39 0 58 0 0 3 43 0 82 0 0 4 41 0 79 0 0 5 44 0 73 0 0 6 0 47 0 66 0 7 0 39 0 66 0 8 0 50 0 72 0 9 0 34 0 0 70 10 0 40 0 0 79 11 0 46 0 0 80 12 0 42 0 0 68 Total 242 298 440 204 297 Blairsville Saltsburg

Total 105 118 97 125 120 117 113 105 122 104 119 126 110 1,481 941 (63.5%) 540 (36.5%)

III. FINANCIAL ANALYSIS In this section of the report, we examine the impact of the possible dissolution based on the financial health of the two resulting independent districts. Analysis was led by Public Financial Management, Inc. (PFM), a financial and investment advisory firm that works with state and local governments both nationwide and in Pennsylvania, including several of the state’s financially distressed school districts. PFM’s work on this project was guided by the basic assumption that a successful dissolution is one that would allow both the Blairsville Independent School District and the Saltsburg Independent School District to avoid adverse financial impacts, fairly manage existing resources as well as long-term debt, and continue current educational programming. Senior PDE staff reviewed PFM’s findings – both independently and in relation to the academic impact review discussed in Section IV. It is important to understand the financial position of the district as currently constituted, and the relative financial impact of the deconsolidation on both communities. For this reason, PFM focused its analysis on the allocation of school district revenues and expenditures among the component municipalities that would make up the independent school districts. Various sources of demographic and financial information were utilized to generate assumptions of the new distribution of students and financial resources among the independent school districts, as well as the estimated cost structure to maintain current academic programming. In general, PFM’s analysis included the following elements:

NCES – https://nces.ed.gov/ccd/districtsearch/district_detail.asp?Search=2&details=1&ID2=4203750&DistrictID=4203750 Blairsville-Saltsburg School District, 2016-17 October 1st Enrollment Count.

5 SES: Saltsburg Elementary School: SMHS: Saltsburg Middle-High School; BES: Blairsville Elementary School; BMS: Blairsville Middle School; BHS: Blairsville High School.

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Blairsville-Saltsburg Deconsolidation Report Pursuant to Act 85 of 2016

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Analysis of the impact of deconsolidation on the Market Value/Personal Income Ratio (MV/PI ratio) that affects the amount of state aid provided to school districts; Two-year budget projections for the consolidated school district and the separated entities; and, Analysis of financial indicators for the consolidated school district and the separated entities including: o Changes in the Act 1 Index limitation; o Changes in the Equalized Millage Rate; and, o Changes in revenues and expenditures per weighted average daily membership.

Assumptions Used in the Financial Analysis Analysis of the MV/PI Ratio As a core component of its analysis of the separation of the Blairsville-Saltsburg School District, PFM estimated the potential impact of the possible deconsolidation on the MV/PI ratio, a major factor in calculating the amount of state aid available to a Pennsylvania school district. This ratio is driven by the relationship between a school district’s per student real estate market value and personal income and statewide averages. Significant changes in the student enrollment or the relative wealth of a given school district will have an impact on the calculation of the MV/PI ratio.

Personal income data summed by the municipality of residence was provided by the Pennsylvania Department of Revenue for the 2014 calendar year (the most recent year available) which was used by PDE in the estimation of the MV/PI ratio for the current 2016-17 school year. PFM allocated personal income among the Blairsville and Saltsburg portions of the combined school district by reviewing the boundaries of the component municipalities.

Using this approach, approximately 9.5 percent of the taxable personal income remained unallocated due to residents who had moved to new municipalities during the 2014 calendar year.

To allocate that remaining personal income data to the Blairsville and Saltsburg portions of the school district, PFM used the proportion of the employed working age population based on 2015 five-year estimates from the U.S. Census American Community Survey.6 The proportions of the employed working age population were used to allocate the number of tax returns to the Blairsville and Saltsburg portions of the deconsolidated school district.

The returns were then multiplied by the per capita taxable personal income of the remaining 9.5 percent of taxable personal income to distribute the amount. Finally, PFM used the proportion of the total taxable personal income from Pennsylvania Department of Revenue data to distribute the total taxable income used by PDE to calculate the 2016-17 MV/PI ratio. Although the differences between the two data sources amounted to approximately $1.4 million, or less than one percent of total personal income, due to the timing of the generation of the figures, this method was chosen in order to draw from the same sources of information that will be used by PDE to calculate the actual ratio.

Market value data for the 2014 calendar year was obtained from the Pennsylvania Department of Community & Economic Development’s State Tax Equalization Board Tax Equalization Division. The report for the 2014 calendar year provided sufficient detail to identify the market value for each of the component municipalities.

Student enrollment was allocated among the Blairsville and Saltsburg portions of the possible deconsolidated school district using October 1 enrollment figures from the 2016-17 school year provided by the BlairsvilleSaltsburg School District. Enrollment in the Blairsville-Saltsburg School District pre-kindergarten programs was excluded from the analysis because this student population is not used in the Commonwealth’s calculation of the Average Daily Membership (ADM) or the Weighted Average Daily Membership (WADM). It was assumed that As noted in PFM’s analysis of the demographics of the deconsolidated school district, Young Township was excluded from the analysis because the American Community Survey did not provide sufficient detail to identify the proportion of residents that attend the Blairsville-Saltsburg School District.

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Blairsville-Saltsburg Deconsolidation Report Pursuant to Act 85 of 2016

the proportion of the student populations was the same for the 2016-17 school year as in the 2014-15 school year, which was used to calculate the MV/PI ratio for the current school year. PFM allocated the enrollment among the district-operated schools that would remain within the boundaries of the new independent school districts under the possible deconsolidation scenario.

In addition, the Blairsville-Saltsburg School District provided enrollment figures for the student population enrolled in charter schools, vocational education programs, and out-of-district placements. Student enrollment in charter schools and out-of-district placements were allocated to the possible new districts using the proportion of total enrollment in district-operated schools for the Blairsville and Saltsburg portions of the current school district, and the proportion of students enrolled in the major categories included in the calculation of ADM (e.g., Kindergarten, Elementary, and Secondary). This method was chosen to equally distribute students among the portions of the possible deconsolidated school districts, and to account for differences in student populations in the calculation of WADM. Enrollment in vocational education programs was allocated by the actual number of students who would have attended Blairsville High School and Saltsburg Middle/High School.

The PDE’s aid ratio calculation methodology was used to estimate the changes in the MV/PI ratio based on changes in the allocation of school district resources and enrollment in the deconsolidation scenario.

Revenue Projections Local revenues as categorized in the School District’s chart of accounts were distributed based on a variety of demographic and financial information for the Blairsville and Saltsburg portions of the district. Current real estate tax revenues were allocated based on municipality using the detailed account codes provided by the Blairsville-Saltsburg School District. Related taxes were assumed to be delinquent real estate taxes, public utility taxes, payments in lieu of taxes, and realty transfer taxes. These taxes were allocated based on the proportion of current real estate tax collections. Per capita taxes were allocated by municipality using the detailed account codes. Delinquent per capita taxes and both current and delinquent occupational privilege taxes were allocated using the proportion of the employed working age population. Current and delinquent earned income taxes were allocated using the proportion of taxable personal income. All other Local Sources were allocated using the proportion of ADM. Revenues from all local sources were held flat in each of the projected years of PFM’s analysis.

State revenues, including Basic Education Funding and Special Education Funding, were allocated based on the proportion of ADM. The transportation subsidy was allocated based on the proportion of direct contracted transportation expenditures allocated to each portion of the school district as identified by the BlairsvilleSaltsburg School District during the 2015 analysis conducted by the Pennsylvania Economy League. The subsidy for property tax relief was allocated using the proportion of current real estate tax collections, and the subsidy for rental and sinking fund payments was allocated using the proportion of building square footage. Reimbursements for school district contributions for Social Security and Medicare taxes and contributions to the Public School Employees’ Retirement System (PSERS) were allocated using the proportion of salaries and estimated changes in reimbursement rates from PFM’s MV/PI ratio analysis. All other State Sources were allocated using the proportion of ADM. Basic Education Funding was assumed to grow at 2.37 percent, and Special Education Funding was assumed to grow at 1.11 percent annually based on PFM’s review of the 10-year trend in statewide allocations for these subsidies. State reimbursements for district contributions for Social Security and Medicare taxes and to retirement (PSERS) were grown in sync with growth in salary expenditures. State reimbursements for debt service payments were adjusted to match projections provided by PDE. All other categories of State Sources were held flat in each of the projected years of PFM’s analysis. It should be noted that the Blairsville-Saltsburg School District’s 2016-17 adopted budget included an amount of $495,000 in “Other State Grants.” After contacting the School District, PFM determined that this line item included $400,000 for a 21st Century Community Learning 4

Blairsville-Saltsburg Deconsolidation Report Pursuant to Act 85 of 2016

Centers grant, and amounts for the Community Innovation Zone and Safe Schools Initiative. For the purposes of PFM’s analysis, the total amount of $495,000 was held flat because the 21st Century Community Learning Center grant is for a three-year period based on PFM’s review of the grant terms on the PDE. The remaining amount budgeted for grants was assumed to be replaced with new grant sources if any expired in the projected years of PFM’s analysis.

Federal revenues were allocated based on the proportion of ADM, and were held flat in each of the projected years of PFM’s analysis. Readers should note that the current District budget includes over $700,000 for the Keystones to Opportunity grant to improve literacy outcomes, which appears to be a five-year grant. Due to uncertainties around the timing of the termination of the grant, the revenues and corresponding expenditures were included in the two projected years.

Finally, PFM’s analysis included both the committed and unassigned portions of the fund balance as shown in the District’s annual financial statements. Available committed and unassigned fund balances at the end of the 2016-17 school year were allocated between the possible independent school districts based on the proportion of ADM. PFM’s analysis did not include an allocation of the committed fund balance in the District’s Capital Projects Fund (see further discussion below).

Expenditure Projections In PFM’s two-year financial projections, expenditures were allocated under the assumption that the possible independent school districts would continue to offer the academic programming currently provided by the Blairsville-Saltsburg School District, and that this would require a full staffing component for school administration and teaching.

Direct expenditures for the schools located in each possible independent school district were identified using the detailed account codes provided by the Blairsville-Saltsburg School District. Indirect expenditures were identified as those included in categories 1430 (Homebound Instruction) and 2240 (Computer-Assisted Instruction Support Services) for the operation of elementary and secondary facilities. These expenditures were allocated using the proportion of ADM. For administrative staffing, we assumed that the current administrative structure would be replicated in both possible independent districts, and that salaries and benefits for the central administrative staff would be unchanged from the budgeted amounts for the 2016-17 school year. The administrative positions needed in each district would include the following:  Superintendent of Schools;  Assistant Superintendent of Schools;  Director of Special Education;  Business Manager;  Transportation/Child Accounting Coordinator; and,  Building and Grounds Supervisor.

In addition, it was assumed that each school district would be required to maintain a proportionate share of current levels of spending for contracted central administration services and utilities. Under this assumption, expenditures for the following categories were included at the full amounts in the 2016-17 adopted budget, with the exception of centrally allocated salaries and operating expenditures; these expenditures were allocated based on the percentage of building space located in the independent school districts.  2310 – Board Services;  2320 – Board Treasurer Services;  2330 – Tax Assessment and Collection Services; 5

Blairsville-Saltsburg Deconsolidation Report Pursuant to Act 85 of 2016

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2340 – Staff Relations and Negotiations Services; 2350 – Legal and Accounting Services; and, Centrally allocated salaries and operating expenditures in 2600 (Operation and Maintenance of Plant Services).

Expenditures for the following categories were allocated based on the proportion of ADM for the independent school districts:  Personnel and non-personnel expenditures unrelated to the Assistant Superintendent and administrative support in 2260 (Instruction and Curriculum Development Services);  Benefit expenditures for other post-employment retirement benefits (OPEB) and centrally allocated expenditures labeled “Self-insurance Other Health Benefits;”  2660 (Safety and Security Services); and,  Expenditures for services provided by the Armstrong-Indiana Intermediate Unit in categories 2140 (Psychological Services) and 2900 (Other Support Services).

Expenditures in 2700 (Student Transportation Services) for contracted transportation services and other operating costs were allocated proportionally to each portion of the school district as identified by the Blairsville-Saltsburg School District during the 2015 analysis conducted by the PEL. PFM also reviewed the Official Statements for the district’s current outstanding debt. The Official Statements indicated that the district conducted renovations of the middle and high school facilities on both the Blairsville and Saltsburg campuses in approximately 2007. The bonds issued to conduct the renovations were refunded in 2015. In the deconsolidation scenarios, existing debt service costs were allocated based on the square footage of buildings in the new independent school districts. PFM’s analysis did not assume any new issuance of debt, refunding of existing debt, or restructure of existing debt. The 2015-16 District audit shows almost $3.8 million in fund balance in the Capital Projects fund, negating any short-term need for borrowing. Readers should note that the PEL report suggested a possible restructuring of the Saltsburg portion of the debt service to lower recurring costs; however, since most of the debt has already been refunded, and any extension would continue repayment terms by many years, PFM’s analysis assumed that further restructuring was undesirable.

Expenditures for professional employees represented by the Blairsville Education Association were increased based on step movement described in the collective bargaining agreement, which covers the period from August 2015 to August 2019. PFM did not assume any savings from attrition. All other bargaining units were assumed to receive inflationary salary increases.

Healthcare expenditures were grown annually as follows based on PFM’s review of the 2017 Segal Sibson Health Plan Cost Trend Survey and the plan types offered by the Blairsville-Saltsburg School District:  Medical Insurance – 7.60 percent average growth;  Dental Insurance – 4.05 percent average growth; and,  Vision Insurance – 2.60 percent average growth.

Contributions to PSERS were increased by the projected rates published by the PSERS Board of Trustees on December 9, 2016. Changes in expenditures for Social Security and Medicare taxes and PSERS contributions were adjusted based on estimated increases in salaries.

Charter school tuition expenditures were estimated using the formulas in the Commonwealth’s PDE-363 form, which generally calculates a tuition rate based on prior year district expenditures and current year ADM. Total school district ADM and enrollment in charter schools were assumed to remain flat in each of the projected years of the analysis. Charter school tuition payments were allocated to the schools located in the possible independent school districts using the identifiable school codes in the district’s chart of accounts. Readers should note that the 6

Blairsville-Saltsburg Deconsolidation Report Pursuant to Act 85 of 2016

2016-17 budgeted charter tuition amounts may understate the actual payments for the school year. In the district’s adopted budget, charter tuition payments were nearly $200,000 lower than the audited amounts for the previous school year, although there does not appear to have been a commensurate drop in charter school enrollment.

During PFM’s review of the Blairsville-Saltsburg School District’s audited financial statements, a recurring operating deficit was identified in the Food Service Fund. If a deficit occurs in the 2016-17 school year, the District may exhaust the fund balance in the Food Service Fund and further deepen the structural deficit. PFM assumed that the District would use funds from the budgeted contingency to increase the annual transfer from the General Fund to cover the operating loss. In the out-year projections, PFM assumed that the fund balance in the Food Service Fund would be completely exhausted, and the transfer from the General Fund was increased to $185,000, which is the mid-point of the range of operating deficits for the prior three years. In the deconsolidation scenarios, the transfers to the Food Service Fund were allocated based on enrollment.

PFM referred to the Blairsville-Saltsburg School District debt schedule to project expenditures for interest and principal payments for General Fund debt. A general inflationary rate of 2.13 percent was used for all other nonpersonnel costs, including tuition payments to other Local Education Agencies, vocational education programs, and placements in Approved Private Schools. Inflation assumptions were taken from headline CPI projections for the period between 2016 and 2020 in the 2016 Fourth Quarter Survey of Professional Forecasters released by the Federal Reserve Bank of Philadelphia.

Results of the Financial Analysis For the proposed dissolution of the Blairsville-Saltsburg School District, PFM focused on understanding the underlying enrollment and financial trends (both revenue and expenditures) in the combined school district, and a comparison of the relative impact of the deconsolidation scenario.

As can be inferred through a comparison using a simple division, a combined school district will have greater amount of resources, derived from a larger tax base, to support academic programs compared to smaller independent school districts. However, the distribution of the tax base among the component jurisdictions will determine whether one independent school district has a larger base from which to draw.

In addition, a simple division of the combined school district would indicate that the operating expenditures should roughly correspond with the distribution of enrollment among the independent jurisdictions. However, the relative needs of students in the independent school districts may require investment of additional resources to maintain current academic programs.

Further, all school districts will have fixed costs and core services that do not vary with the level of enrollment in the short term, such as a central administrative staff, debt service, and general transportation. A combined school district will be able to spread these fixed costs across a greater number of students, thus reducing the average cost per pupil. Smaller independent school districts will have fewer opportunities to achieve efficiency for these fixed costs, and there are a limited number of positions and responsibilities that can be combined before salary schedules need to be increased.

The following analysis below takes these concepts into consideration when framing the impact of the deconsolidation scenario.

Analysis of the MV/PI Ratio In general, the deconsolidation scenario will impact the calculation of the MV/PI ratio for the possible independent school districts by affecting the three main components of the ratio: 1. market value of real estate; 2.

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Blairsville-Saltsburg Deconsolidation Report Pursuant to Act 85 of 2016

taxable personal income; and 3. the Weighted Average Daily Membership (WADM). Each of these components would not be evenly distributed among the newly-created independent school districts. Therefore, differences in the economic characteristics and enrollment of the independent school districts could vary significantly from those of the combined school district. Further, the MV/PI ratio will change more dramatically if there are meaningful differences between the averages for the independent school districts and the Commonwealth as a whole. Finally, due to the structure of the MV/PI ratio calculation, changes in the market value are weighted more heavily than changes in the taxable personal income.

As shown in Table 3 below, the MV/PI ratio for the Blairsville Independent School District would increase compared to the Blairsville-Saltsburg School District under the deconsolidation scenario. The results of PFM’s analysis indicate that the Saltsburg portion of the combined school district contains a higher proportion of total market value and taxable personal income than a simple distribution based on student enrollment. The average market value and personal income per WADM decrease for the proposed Blairsville Independent School District, causing an increase in the total MV/PI ratio.

Table 3: MV/PI Ratio Analysis Blairsville-Saltsburg School District Value 2014 Market Value $502,443,348 2014 Personal Income $267,887,783 2014-15 WADM 1,956.775 2016-17 MV/PI Ratio 2016-17 MV Aid Ratio 2016-17 PI Aid Ratio

0.6526 0.6920 0.5935

Blairsville Independent School District Value $310,205,463 $160,401,502 1,241.540

Difference ($192,237,886) ($107,486,281) (715.235)

% Difference (38.3%) (40.1%) (36.6%)

0.6666 0.7003 0.6164

0.0140 0.0083 0.0229

2.1% 1.2% 3.9%

In contrast to the previous table, Table 4 shows that the MV/PI ratio for the proposed Saltsburg Independent School District would decrease under the deconsolidation scenario. As indicated in the earlier analysis, the Saltsburg portion of the combined school district contains higher proportions of total market value and taxable income; as average market value and personal income per WADM move closer to the statewide averages, the MV/PI ratio decrease.

Table 4: MV/PI Ratio Analysis Blairsville-Saltsburg School District Value 2014 Market Value $502,443,348 2014 Personal Income $267,887,783 2014-15 WADM 1,956.775 2016-17 MV/PI Ratio 2016-17 MV Aid Ratio 2016-17 PI Aid Ratio

0.6526 0.6920 0.5935

Saltsburg Independent School District Value $192,237,885 $107,486,281 715.235

Difference ($310,205,463) ($160,401,502) (1,241.540)

% Difference (61.7%) (59.9%) (63.4%)

0.6279 0.6776 0.5537

(0.0247) (0.0144) (0.0398)

(3.8%) (2.1%) (6.7%)

As noted in the “Assumptions Used in the Financial Analysis” section above, most categories of state revenue were allocated on the basis of enrollment under the deconsolidation scenario. If the financial projections include adjustments to account for the relative wealth as represented by the MV/PI aid ratio of the potential independent

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Blairsville-Saltsburg Deconsolidation Report Pursuant to Act 85 of 2016

school districts, state revenues and total revenues would be higher, per WADM, for the Blairsville Independent School District than for the Saltsburg Independent School District.

Financial Projections PFM’s analysis focused on the financial impact of the formation of separate independent school districts under the deconsolidation scenario. The results from this analysis were compared to the baseline scenario where the Blairsville-Saltsburg School District remains intact. The growth rate and allocation assumptions described in the “Assumptions Used in the Financial Analysis” were used to develop the financial projections discussed below.

In order to provide a focus for the measurement of the financial status of the combined district versus the deconsolidation scenario, PFM has elected to use the annual Surplus/Deficit (difference between annual revenues and expenditures) and the Fund Balance in the General Fund (a cumulative measure of differences between revenues and expenditures over time). The term “structural deficit” refers to a recurring negative variance between revenues generated in a fiscal year and the expenditure attributed to a fiscal year.

As shown in Table 5, the baseline results of the financial projections for the current district show a slight deficit in the 2017-18 school year, which increases in the 2018-19 school year. The structural deficit is driven by higher growth in expenditures for personnel services, especially healthcare benefits and retirement contributions. In contrast, revenue sources are expected to be relatively flat, with the exception of State Sources for Basic Education Funding, Special Education Funding, and reimbursement for retirement contributions.

Under the deconsolidation scenario, the Blairsville Independent School District would be projected to have a surplus in the 2017-18 school year; however, the surplus is expected to be nearly halved by the following school year. In comparison, the Saltsburg Independent School District is projected to have a deficit of more than $2.8 million in the 2017-18 school year, which is estimated to increase to nearly $3.2 million in 2018-19.

Table 5: Summary of Financial Projections 2016-17 Blairsville-Saltsburg School District Total Revenues $32,729,076 Total Expenditures $32,729,076 Surplus / (Deficit) $0 Fund Balance $10,228,437

2017-18

2018-19

$33,214,317 $33,698,447 ($484,129) $9,744,308

$33,723,808 $34,969,889 ($1,246,081) $8,498,227

Blairsville Independent School District Total Revenues ― Total Expenditures ― Surplus / (Deficit) ― Fund Balance ―

$21,201,622 $20,367,024 $834,599 $7,327,073

$21,520,464 $21,132,317 $388,148 $7,715,221

Saltsburg Independent School District Total Revenues ― Total Expenditures ― Surplus / (Deficit) ― Fund Balance ―

$12,227,382 $15,065,207 ($2,837,825) $898,138

$12,431,256 $15,630,945 ($3,199,689) ($2,301,551)

The projected annual deficits for the Saltsburg Independent School District would represent a significant proportion of the total budget. In the 2017-18 school year, the estimated deficit is the equivalent of nearly 18.8 9

Blairsville-Saltsburg Deconsolidation Report Pursuant to Act 85 of 2016

percent of total expenditures, and this amount is expected to increase to 20.5 percent in 2018-19. If the Saltsburg Independent School District opted to close the structural deficit by eliminating professional staff, the school district would need to reduce personnel by approximately 27.8 full-time equivalent positions in 2017-18, and an additional 2.1 full-time equivalent positions in 2018-19. The cumulative reduction of 29.9 positions would amount to approximately 66.6 percent of the 44.9 full-time equivalent professional staff positions currently assigned to the Saltsburg Elementary School and the Saltsburg Middle-High School.

The structural deficit and annual shortfalls for the current configuration of the district are caused by revenue and expenditure trends, further detailed in Table 6, below. The current combined district can only expect meaningful revenue growth from state education subsidies and PSERs reimbursement. Without local revenue increases, overall revenue growth and revenue growth per WADM will be 3.0 percent. Similarly, after deconsolidation, the two independent districts would see revenue growth only in state funds unless local taxes are raised. Revenues per WADM are up only a small amount, a bit more than in the current configuration due to the distribution of local sources among the component municipalities of the independent school districts, and relative changes in the MV/PI ratio, which is used to estimate changes in the reimbursement rate for retirement contributions.

Table 6: Comparison of Revenue Sources 2016-17 Blairsville-Saltsburg School District Local Sources $13,046,974 State Sources $18,137,182 Federal Sources $1,544,920 Total Revenues $32,729,076 Revenue per WADM $17,173

2017-18

2018-19

% Difference

$13,046,974 $18,622,423 $1,544,920 $33,214,317 $17,428

$13,046,974 $19,131,914 $1,544,920 $33,723,808 $17,695

0.0% 5.5% 0.0% 3.0% 3.0%

Blairsville Independent School District Local Sources $13,046,974 State Sources $18,137,182 Federal Sources $1,544,920 Total Revenues $32,729,076 % Difference 0.0%

$8,505,464 $11,715,524 $980,634 $21,201,622 (36.2%)

$8,505,464 $12,034,366 $980,634 $21,520,464 (36.2%)

(34.8%) (33.6%) (36.5%) (34.2%) ―

$17,534 0.6%

$17,797 0.6%

3.6% ―

$4,541,510 $7,121,586 $564,286 $12,227,382 (63.2%)

$4,541,510 $7,325,460 $564,286 $12,431,256 (63.1%)

(65.2%) (59.6%) (63.5%) (62.0%) ―

$17,553 0.7%

$17,845 0.8%

3.9% ―

Revenue per WADM % Difference

$17,173 0.0%

Saltsburg Independent School District Local Sources $13,046,974 State Sources $18,137,182 Federal Sources $1,544,920 Total Revenues $32,729,076 % Difference 0.0% Revenue per WADM % Difference

$17,173 0.0%

Table 7, below, summarizes the trends in expenditure categories in the baseline scenario and the deconsolidation scenario. Under the baseline financial projections, overall expenditures and expenditures per WADM are estimated to increase by approximately 6.8 percent. These increases are largely driven by growth in salaries and

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Blairsville-Saltsburg Deconsolidation Report Pursuant to Act 85 of 2016

benefits for employees, and increases in charter tuition payments as total school district expenditures drive the tuition formula higher.

Unlike the revenue side of the equation, the two deconsolidated independent districts fare differently on expenditure projections. Under the deconsolidation scenario, the Blairsville Independent School District would experience a small increase in expenditures per WADM. In contrast, the Saltsburg Independent School District is projected to have a much larger increase in expenditures per WADM as its total expenditures are spread over a smaller base of enrollment after deconsolidation. This is especially true with respect to overhead costs.

Table 7: Comparison of Expenditures 2016-17

2017-18

2018-19

% Difference

Blairsville-Saltsburg School District Salaries and Benefits Purchased Professional and Technical Services Tuition and Other Purchased Services Debt Service Other Expenditures Total Expenditures Expenditures per WADM

$21,333,616 $1,377,230 $4,431,529 $2,994,463 $2,592,238 $32,729,076 $17,173

$22,517,731 $1,406,565 $4,571,598 $2,676,895 $2,525,657 $33,698,447 $17,682

$23,582,969 $1,436,525 $4,692,319 $2,680,881 $2,577,195 $34,969,889 $18,349

10.5% 4.3% 5.9% (10.5%) (0.6%) 6.8% 6.8%

Blairsville Independent School District Salaries and Benefits Purchased Professional and Technical Services Tuition and Other Purchased Services Debt Service Other Expenditures Total Expenditures % Difference

$21,333,616 $1,377,230 $4,431,529 $2,994,463 $2,592,238 $32,729,076 0.0%

$13,678,086 $865,264 $2,648,176 $1,585,667 $1,589,831 $20,367,024 (39.6%)

$14,322,203 $883,694 $2,716,083 $1,588,028 $1,622,309 $21,132,317 (39.6%)

(32.9%) (35.8%) (38.7%) (47.0%) (37.4%) (35.4%) ―

$17,173 0.0%

$16,843 (4.7%)

$17,476 (4.8%)

1.8% ―

$21,333,616 $1,377,230 $4,431,529 $2,994,463 $2,592,238 $32,729,076 0.0%

$10,291,870 $697,049 $1,989,171 $1,091,228 $995,888 $15,065,207 (55.3%)

$10,766,711 $711,896 $2,043,385 $1,092,853 $1,016,099 $15,630,945 (55.3%)

(49.5%) (48.3%) (53.9%) (63.5%) (60.8%) (52.2%) ―

$17,173 0.0%

$21,627 22.3%

$22,439 22.3%

30.7% ―

Expenditures per WADM % Difference Saltsburg Independent School District Salaries and Benefits Purchased Professional and Technical Services Tuition and Other Purchased Services Debt Service Other Expenditures Total Expenditures % Difference Expenditures per WADM % Difference

PFM’s analysis of overhead costs drew on 18 categories of expenditures, as listed in Appendix A. In Table 8, below, the overhead costs, both in total and per WADM, are shown for the baseline scenario (current district) and the deconsolidation scenario. Under the baseline scenario, overhead costs per student are projected to decline slightly as total debt service payments, including principal and interest, decrease from the budgeted 11

Blairsville-Saltsburg Deconsolidation Report Pursuant to Act 85 of 2016

amounts in the 2016-17 school year. These changes partially offset the increases in personnel costs for central administrative services, and inflationary growth in operating expenditures. Overhead costs per student then rebound slightly as costs increase in 2018-19.

Under the deconsolidation scenarios, differences in the total overhead costs for the independent school districts are largely driven by the allocation of expenditures for contracted transportation services and debt service payments. Also, in each independent school district, the proportion of overhead costs to total expenditures is affected by expenditures for central administrative services, which are maintained at the current levels of the combined school district as described below. In particular, the relationship between overhead costs and total expenditures significantly impacts the Saltsburg Independent School District, with an increase of approximately 34.4 percent per student by 2018-19 compared to the baseline year of 2016-17.

Table 8: Comparison of Overhead Costs 2016-17 Blairsville-Saltsburg School District Overhead Costs $10,211,146 Total Expenditures $32,729,076 % of Total 31.2% Overhead Costs per WADM

$5,358

Blairsville Independent School District Overhead Costs $10,457,711 Total Expenditures $32,729,076 % of Total 32.0% Overhead Costs per WADM % Difference

$5,487 2.4%

Saltsburg Independent School District Overhead Costs $10,457,711 Total Expenditures $32,729,076 % of Total 32.0% Overhead Costs per WADM % Difference

$5,487 2.4%

2017-18

2018-19

% Difference

$10,269,051 $33,698,447 30.5%

$10,500,765 $34,969,889 30.0%

2.8% 6.8% (3.8%)

$5,388

$5,510

2.8%

$6,418,659 $20,367,024 31.5%

$6,559,010 $21,132,317 31.0%

(37.3%) (35.4%) (2.9%)

$5,308 (1.5%)

$5,424 (1.6%)

(1.1%) ―

$5,024,164 $15,065,207 33.3%

$5,137,580 $15,630,945 32.9%

(50.9%) (52.2%) 2.9%

$7,212 33.9%

$7,375 33.9%

34.4% ―

More specifically, a key driver of costs for the independent school districts will be administrative overhead.

While some positions will be unique to each district (for example custodial and maintenance personnel mostly assigned to existing buildings), the independent districts will also need to replicate some positions that are now shared in the combined District, such as a Superintendent and Business Manager. As shown in Tables 9 and 10, next page, where the current combined District has 39.4 full time equivalent overhead positions, two separate districts would require 12 additional staff, with a combined impact of over $900,000 in additional spending across the two independent districts.

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Blairsville-Saltsburg Deconsolidation Report Pursuant to Act 85 of 2016

Table 9: Projected 2017-18 Salary Expenditures Included in Overhead Costs, Blairsville ISD Blairsville-Saltsburg Blairsville Independent School District School District FTE Salaries FTE Salaries Superintendent 1.0 $147,862 1.0 $147,862 Assistant Superintendent 1.0 $110,517 1.0 $110,517 Director of Special Education 1.0 $98,553 1.0 $98,553 Business Manager 1.0 $115,724 1.0 $115,724 Administrative Assistants and Clerical Staff7 5.0 $234,309 5.0 $234,309 Tax Collection 1.0 $57,193 1.0 $57,193 Child Accounting / Transportation Coordinator 1.0 $78,706 1.0 $78,706 Building & Grounds Supervisor 1.0 $55,753 1.0 $55,753 8 Custodians and Maintenance Personnel 24.4 $860,048 14.0 $467,012 Security 3.0 $61,278 2.0 $40,852 Stipends9 ― $368,029 ― $187,824 Total 39.4 $2,187,971 28.0 $1,594,304 % Difference ― ― (28.9%) (27.1%) Table 10: Projected 2017-18 Salary Expenditures Included in Overhead Costs Blairsville-Saltsburg Saltsburg Independent School District School District FTE Salaries FTE Salaries Superintendent 1.0 $147,862 1.0 $147,862 Assistant Superintendent 1.0 $110,517 1.0 $110,517 Director of Special Education 1.0 $98,553 1.0 $98,553 Business Manager 1.0 $115,724 1.0 $115,724 Administrative Assistants and Clerical Staff7 5.0 $234,309 5.0 $234,309 Tax Collection 1.0 $57,193 1.0 $57,193 Child Accounting / Transportation Coordinator 1.0 $78,706 1.0 $78,706 Building & Grounds Supervisor 1.0 $55,753 1.0 $55,753 Custodians and Maintenance Personnel8 24.4 $860,048 10.4 $393,036 Security 3.0 $61,278 1.0 $20,426 Stipends9 ― $368,029 ― $186,333 Total 39.4 $2,187,971 23.4 $1,498,411 % Difference ― ― (40.6%) (31.5%) Financial Indicators In addition to the financial projections for the baseline and deconsolidation scenarios, PFM also considered changes to the Act 1 Index and equalized millage rate to determine the relative ability of the independent school districts to support academic programs with local revenue sources. To the extent that each school district could 7

Includes three Administrative Assistants for the Superintendent, Assistant Superintendent, and the Business Manager. In addition, this category also includes the Payroll/Accounts Payable clerical staff member, and an additional budgeted clerical position in the Business Office.

8 The number of custodians includes the assigned personnel to each building, and an estimated number of part-time personnel based on the division of the centrally-allocated salaries.

9 Stipends include payments for the Board Secretary, stipends for curriculum development, and salaries for student activities.

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Blairsville-Saltsburg Deconsolidation Report Pursuant to Act 85 of 2016

provide additional revenues through these local sources, initiatives to save operating costs could be avoided, therefore preserving the current structure of academic programming.

Table 11: Estimated Changes in the 2017-18 Act 1 Index Base MV/PI Index Ratio 2.5% 0.6526 Blairsville-Saltsburg School District

Adjusted Index 3.5%

Blairsville Independent School District Value Difference (Percentage Point)

2.5% 0.0%

0.6666 ―

3.5% 0.0%

Saltsburg Independent School District Value Difference (Percentage Point)

2.5% 0.0%

0.6279 ―

3.4% (0.1%)

Table 11, above, summarizes the estimated change in the 2017-18 Adjusted Act 1 Index for the BlairsvilleSaltsburg School District and the independent school districts. Although the deconsolidation scenario results in differences in relative wealth and enrollment in the independent school districts, the Adjusted Act 1 Index remains largely unchanged. As indicated in the table, the Saltsburg Independent School District is expected to have a slight decrease in the adjusted index.

Under the deconsolidation scenario, the distribution of assessed value between the independent school districts has a greater impact on the ability to raise real estate taxes than relative changes in the Adjusted Act 1 Index. The tax base for each independent school district is reduced, which results in less revenue for similar changes in the millage rate. According to PFM’s analysis, raising the millage rate to the Adjusted Act 1 Index in the 2017-18 school year would generate approximately $248,762 for the Blairsville Independent School District, and $123,535 for the Saltsburg Independent School District. If the Saltsburg Independent School District were to close the 2018-19 year-end deficit through real estate tax increases alone, the school district would be required to raise the millage rate by 85.3 percent, assuming no changes in the collection rate. These results indicate that, in all likelihood, the Saltsburg Independent School District would not be able to sustain operations through increased revenues from local sources, and that the school district would be required to seek deep reductions in expenditures to achieve a balanced budget.

Table 12, below, shows the estimated changes in the equalized millage rate under the baseline scenario and the deconsolidation scenario. As noted in the “Assumptions Used in the Financial Analysis” section, PFM did not assume growth in local sources of revenue in the two-year financial projections. Differences in the total local sources for the independent school districts are due to the distribution of revenues described previously.

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Blairsville-Saltsburg Deconsolidation Report Pursuant to Act 85 of 2016

Table 12: Estimated Changes in Equalized Millage Rate 2016-17 2017-18 Blairsville-Saltsburg School District Total Taxes Collected $12,830,615 $12,830,615 Total Market Value $504,180,543 $504,180,543 Estimated Equalized Mills 25.4484 25.4484

$12,830,615 $504,180,543 25.4484

Blairsville Independent School District Total Taxes Collected $12,830,615 Total Market Value $504,180,543 Estimated Equalized Mills 25.4484 % Difference 0.0%

$8,368,131 $312,389,151 26.7875 5.3%

$8,368,131 $312,389,151 26.7875 5.3%

Saltsburg Independent School District Total Taxes Collected $12,830,615 Total Market Value $504,180,543 Estimated Equalized Mills 25.4484 % Difference 0.0%

$4,462,484 $191,791,392 23.2673 (8.6%)

$4,462,484 $191,791,392 23.2673 (8.6%)

2018-19

As indicated in the table above, the equalized millage rate will increase for the Blairsville Independent School District under the deconsolidation scenario. In contrast, the Saltsburg Independent School District is expected to have a reduction in the equalized millage rate under the deconsolidation scenario. If the Saltsburg Independent School District were required to achieve parity with the equalized millage rate for the combined school district, it would need to increase revenues from local sources by approximately $420,000. As indicated by PFM’s analysis of the Act 1 Index, this would exceed the Adjusted Act 1 Index available to the Saltsburg Independent School District in the 2018-19 school year.

Key Considerations The proposed deconsolidation presents challenges for both communities and the component municipalities within each. Some of these challenges impact both Blairsville and Saltsburg in similar ways. This is especially true with respect to arraying administrative operations and other overhead costs over smaller student enrollment bases, apportioning long-term debt fairly across both sides of the district, and managing declining surplus and fund balance in the face of externally-mandated costs such as charter school tuition.

However, PFM’s analysis indicates that other challenges bear most heavily on the Saltsburg portion of the school district – and raise significant questions about its viability even in the immediate wake of a deconsolidation. For example, Saltsburg would face a deficit in excess of $2.83 million in the 2017-18 fiscal year, an amount that would equate to roughly 23 percent of the new independent district’s total revenues. Without significant increases in local, state, or federal revenue, Saltsburg’s modest fund balance would be fully depleted by 2018-19 as its projected deficit pushes towards $3.2 million.

In addition, under a deconsolidation scenario, Saltsburg would see a slight reduction in its adjusted Act 1 index, casting doubt on the availability of local revenue to keep pace with rising costs. Under one scenario, in the absence of increased revenue, the independent district would need to reduce professional staff levels by nearly 67 percent by 2018-19.

Finally, it is important to note that this analysis was based on the assumption of a basic division of the current school district. It is possible that the resulting independent districts would pursue opportunities to share resources 15

Blairsville-Saltsburg Deconsolidation Report Pursuant to Act 85 of 2016

– including facilities, programs, and staff – with nearby school districts, the intermediate unit, and other entities.

While such partnerships could offer opportunities to preserve economies of scale, this exploration was beyond the scope of our study.

IV. ACADEMIC ANALYSIS As noted above, a district’s financial health and its ability to provide and sustain high quality academics are interrelated. For example, our financial analysis indicates that, absent significant local revenue generation or unanticipated increases in state or federal aid, the Saltsburg Independent School District would be forced to reduce professional staffing by nearly two-thirds.

Other possible impacts are less clear-cut based on a quantitative analysis of publicly-available financial data elements. To provide additional context for the possible academic impacts of a deconsolidation, the Department conducted a two-day site visit10 to Blairsville- Saltsburg to meet with district staff, tour district facilities, and gather primary source material.

The following section summarizes the results of this site visit and provides a perspective on the current organization and operation of academic programs within the district and how district programming would likely be administered in the event of a dissolution into two separate school districts.

We begin by building on the demographic detail summarized in Section II. Total enrollment in the current district configuration was 1,494 as of December 15, 2016, up slightly from 1,481 in the October 1 headcount (see Table 2). However, the broader trend of declining enrollment is pronounced: in 2012-2013, enrollment stood at 1,727.

ARIN Intermediate Unit 28 reports that this declining enrollment is a regional trend.11 Table 13, next page, provides additional detail on Blairsville-Saltsburg enrollment trends since 2012-13, including enrollment levels for each building. The data reveal that enrollment decline is a district-wide phenomenon; every building recorded a loss since the 2012-13 school year, with four of five buildings recording a double-digit drop in student enrollment over that same period. Enrollment declines are especially sharp for the Saltsburg buildings, with a 22 percent decline in enrollment since 2012-13. Notably, both Saltsburg schools have recorded more than eight percent enrollment losses since the end of the last school year (2015-16).

10

Upon request from the Pennsylvania Department of Education, Drs. Jean Dyszel and Jerry Johnson visited the BlairsvilleSaltsburg District. The December 15-16, 2016, visit commenced with a half-day session with Jeff Soles, acting superintendent. Mr. Soles responded to a multitude of questions regarding the many aspects of academics. Subsequent to the interview, Soles accompanied Dyszel and Johnson on a district tour of both the Blairsville and Saltsburg campuses.

11 Personal communication, J. Wagner, January 30, 2017.

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Blairsville-Saltsburg Deconsolidation Report Pursuant to Act 85 of 2016

Table 13: Blairsville-Saltsburg School District – Enrollment by School Year and Building, 2013 - present) School SY1213 SY1516 Net Percent 10/03/16 Net Percent Name change change change change (SY1213(SY1213(SY1213(SY1213SY1516) SY1516) 10.03.16) 10.03.16) Blairsville ES Blairsville MS Blairsville SHS Saltsburg ES Saltsburg MHS Totals:

456

458

2

0.4%

440

-16

-3.5%

238

222

-16

-6.7%

204

-34

-14.3%

341

309

-32

-9.4%

297

-44

-12.9%

276

272

-4

-1.4%

242

-34

-12.3%

416

327

-89

-21.4%

298

-118

-28.4%

1,727

1,588

-139

-8.0%

1,481

-246

-14.2%

Blairsville schools Saltsburg schools

1035

989

-46

-4.4%

941

-94

-9.1%

692

599

-93

-13.4%

540

-152

-22.0%

As noted in the previous section, both communities would experience challenges associated with arraying overhead and other fixed costs over reduced enrollments in the independent school district scenarios; this same challenge would present with respect to academic offerings and the ability to sustain diversity of programming in the face of a declining student base.

Having established context concerning overall and building level student enrollments, we turn now to specific components of the district’s academic infrastructure, including staffing organization, curriculum (including secondary level offerings), professional development, special education and pupil services, and extra-curricular offerings. We conclude with an assessment of the degree to which a deconsolidation might impact quality or equity of access to academic programming.

Staffing According to PDE’s Professional Staff Summary Report, the Blairsville-Saltsburg School District employed 143 professional personnel in the 2015-16 school year. The average salary for full-time professional personnel was $69,724, slightly below the Indiana County average of $72,371 and slightly above the Westmoreland County average of $66,690. Armstrong and Indiana (ARIN) Intermediate Unit 28 provided additional verification confirmed that the district’s salaries are competitive for the intermediate unit and surrounding region. There is little staff turnover, and when staff reductions are necessary, retirements have generally negated the need for furloughs. Notably, the district has maintained strong staffing despite having had no tax increase in eight years.

Owing to the distance between the Blairsville and Saltsburg campuses, there is limited opportunity to share professional staff in specific, lower-enrolled secondary level courses. Taken together with this district’s commitment to provide appropriate and challenging coursework for every student, this results in very small class 17

Blairsville-Saltsburg Deconsolidation Report Pursuant to Act 85 of 2016

sizes in some instances, including two courses at Blairsville High School (Advanced Algebra II, Calculus) with six students and a College Chemistry course at Saltsburg with five students.

Curriculum Over the last several years, primarily under the direction of acting superintendent Jeff Soles and his predecessor, a concerted effort has been made to develop a cohesive curriculum that can support increased student achievement.

The written curriculum has defined classroom instruction in a systematic manner, supporting consistent implementation district-wide.

In addition, a curriculum cycle is in place for all curricular areas. The second round of the cycle is set to begin with a review of English Language Arts this year. The textbook adoption cycle has been seamless over the last six years. Curriculum rewrites have been adequately addressed via the Friday professional development time.

The course selection guide for high school students is a singular document for both high schools. Thus, students in both schools have identical options from which to select courses. While actual scheduling of courses is a function of staff availability and student enrollment, a review of the master schedules for both high schools indicates that classes are scheduled in a comparable manner. Both schools, as noted above, run classes even at low numbers to accommodate student requests.

The district offers a virtual academy to provide additional choice to its families and to provide an alternative to cyber charter schools; Soles reported payments of approximately $800,000 to cyber charters in the 2015-16 school year. The district worked with IU 7 to establish an agreement whereby each participating district builds courses and posts to the moodle site. School counselors monitor students. While the district provides hardware at no cost, many students are challenged by a lack of internet access; an agreement with Comcast to provide lowcost access is intended to remedy this.

More generally, Keystones to Opportunity (KtO) funding has assisted tremendously with technology and specifically with the rollout of Blairsville Saltsburg’s 1:1 initiative. One of the KtO goals is to integrate technology and instruction seamlessly. With Chromebooks at middle level and the purchase of 3-D printers, the district has made substantial strides in this regard, at every level. The district received an award as a KtO Success Story for its technology integration to enhance middle school literacy.

At the secondary level, Career and Technical Center (CTC) participation is fairly equal in both schools. CTC is a three-year, half-day program; approximately 10 percent of high school students enroll in a CTC pathway (35 from Blairsville, and 24 from Saltsburg in 2016-17). Student performance on the NOCTI is generally high; however, the number of students earning NOCTI credit is too small to establish a valid and reliable score for purposes of School Performance Profile calculation).

Blairsville-Saltsburg also provides a strong base of college readiness and access programming. The district participates in the College in the High School initiative, and has agreements with Penn Highlands, Indiana University of Pennsylvania, Westmoreland County Community College, and Seton Hill University to provide dual enrollment – both on site and on college campuses.

Graduation rates for both high schools are satisfactory: the 2015-2016 cohort graduation rate for Blairsville was 90.7 percent; Saltsburg’s rate stood at 94 percent. The district offers summer credit recovery – both online and in-building.

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Blairsville-Saltsburg Deconsolidation Report Pursuant to Act 85 of 2016

Professional Development District administrators emphasize professional development to support teacher growth; thus, teachers participate in professional growth activities every Friday afternoon. These sessions have been particularly valuable in supporting the work of curriculum revisions and updates. Despite the self-contained staffing complement in each secondary school, educators meet as district-wide departments; this approach is intentional, and helps ensure systemic implementation of programming and strategy.

Pupil Services/Special Education Pupil services programming is under the supervision of a director of pupil services who is committed to ensuring that students are properly assessed and addressed with appropriate interventions.12 Overall, the district is seeing more multiple diagnoses and a rise in autistic placements. Learning support, life skills, and emotional support placements are fairly consistent. Four therapeutic foster homes have also increased district need for special education services. While all schools have a range of special education supports, Saltsburg hosts the district’s emotional support classrooms.

Additional student services are staffed in an equivalent fashion in both the Blairsville and Saltsburg schools. Both secondary schools have full-time registered nurses, with LPNs in each elementary school. The district employs five counselors (one for each school), and five Title I reading specialists provide services at the elementary level (three in Blairsville and two in Saltsburg). Both sides of the district have a gifted coach, with the Blairsville coach bearing a higher caseload. School Police Officers (retired State Police) are stationed at each secondary school.

In terms of contracted services, ARIN IU 28 provides psychologist services for each campus (Blairsville, five days per week; Saltsburg, four days per week) and occupational and physical therapy services as needed.

Student Assistance teams are in operation at all levels.

Extracurricular The district’s athletic program includes separate football teams for each high school. Saltsburg has its own football field, while Blairsville leases a community field from the borough for $1 on an annual basis.

Participation is relatively small; however, both programs are competitive – both locally and with one another.

In other cases (e.g., boys and girls soccer, volleyball, wrestling, golf, cross country, and softball), teams are comprised of students from both secondary schools. In these instances, students are bussed to and from to the appropriate sites for practices.

Key Considerations The likely impact of a deconsolidation of the Blairsville-Saltsburg School District on academics turns on the fact that significant components of current programming are, already, largely self-contained. More specifically, the distance between the two sides of the district, along with the district’s commitment to appropriate and challenging coursework for every student, obligates both secondary campuses to operate independently with respect to staffing; course offerings; and, to a lesser extent, athletics. From this vantage point, a basic division of the district would not necessarily alter academic quality in the immediate term.

12

Meeting with district staff, December 15, 2016.

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Blairsville-Saltsburg Deconsolidation Report Pursuant to Act 85 of 2016

Longer term impacts, however, could be substantial for both communities but especially for Saltsburg. As noted in the financial analysis, a Saltsburg Independent School District could be forced to reduce staffing by roughly two-thirds absent significant increases in local, state, or federal revenue streams. These reductions would lead to sharply reduced academic offerings and higher class sizes.

In both communities, more subtle impacts are likely in the areas of curriculum design and professional development. Blairsville-Saltsburg’s administrative team has made a concerted effort to situate these programs at the district, rather than school, level. A deconsolidation would compromise capacity and economy of scale for curriculum and professional development, and potentially require each independent district to turn to other external sources of support for work that has been mainly district-driven.

A related concern are the district-level agreements with the local CTC, area postsecondary institutions, the local ARIN IU, and other service providers such as the partnership with IU 7 to offer online courses. The virtual academy environment is a critical component of the district’s educational programming. The need to maintain a robust virtual school for students who elect an alternative pathway to graduation must be addressed. With a possible dissolution, minimally the IU7 agreement would require a renegotiation with each entity. Each entity would then have to ensure that courses align to graduation requirements. Both Blairsville and Saltsburg would need to renegotiate other agreements (potentially under less favorable terms), identify new providers, or both. In any event, the independent districts would confront the challenge of managing and monitoring a greater array of external partnerships and services in the face of reduced enrollment bases.

These enrollment trends are especially concerning with respect to the Saltsburg portion of the district: Saltsburg enrollment has dropped by more than one-fifth in just the past five years, and secondary level enrollment is down nearly nine percent since last year. The Department and its technical assistance partners are well acquainted with the challenges many of the state’s smallest school districts face in preserving rich academic offerings in the face of declining student enrollment. While it is feasible that partnerships with other nearby districts or blended offerings could support Saltsburg in this regard, the financial analysis raises questions about the availability of resources to support such arrangements.

Other key considerations include the need to:  Establish emotional support infrastructure in Blairsville, given that all existing programming is situated in Saltsburg facilities;  Determine the impact of the deconsolidation on athletic programs that are currently constituted at the district level; and  Fairly allocate resources and supports from multi-year grants awarded at the district level.

Finally, it is important to note that the PDE is in receipt of a resolution adopted by two of the district’s bargaining units – the Blairsville Saltsburg Education Association and the Blairsville Saltsburg Education Support Professionals – in opposition to the proposed deconsolidation; the resolution was signed by more than 145 district staff between January 25 and February 6, 2017 and is included as Appendix B. While the concerns and questions outlined in the resolution are beyond the scope of this research project, it is important to acknowledge the difficulty of implementing a complex deconsolidation without the active support of such a significant portion of district staff.

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Blairsville-Saltsburg Deconsolidation Report Pursuant to Act 85 of 2016

FINAL CONCLUSIONS The financial health of a school district and its ability to provide and maintain high quality academic programming are interrelated. A process to dissolve the Blairsville-Saltsburg School District would encounter challenges from both vantage points. Both communities would be faced with maintaining core administrative services (e.g., superintendent, business manager, director of pupil services) and overhead costs over smaller student enrollment bases, absorbing a fair proportion of the current district’s long-term debt, and managing declining surplus and fund balance in the face of externally-mandated costs.

Other challenges weigh most heavily on Saltsburg portion of the school district. Saltsburg would face a deficit in excess of $2.83 million in the 2017-18 fiscal year, an amount that would equate to roughly 23 percent of the new independent district’s total revenues. Without significant increases in local, state, or federal revenue, Saltsburg’s modest fund balance would be fully depleted by 2018-19 as its projected deficit pushes towards $3.2 million.

In addition, under a deconsolidation scenario, Saltsburg would see a slight reduction in its adjusted Act 1 index, reducing its ability to keep pace with rising costs. Under one scenario, in the absence of increased revenue, the independent district would need to reduce professional staff levels by nearly 67 percent by 2018-19.

Beyond the potential of large scale staffing reductions, the dissolution presents concerns from an academic programming prospective. While significant components of current programming are, already, largely selfcontained, a deconsolidation would further compromise capacity and economy of scale for curriculum and professional development, and potentially require each independent district to turn to other external sources of support for work that has been mainly district-driven.

Other existing district-level agreements with the local CTC, dual enrollment partners, and intermediate units will need to be renegotiated or developed anew. Virtual academy offerings would be especially important components of a dissolution and any effort to maintain diversity of course offerings. Each entity would be required to forge new agreements and ensure that courses align to local graduation requirements.

Perhaps most importantly, the long-term viability of both independent districts would be threatened by declining enrollment levels. This is especially true for Saltsburg, where enrollment has dropped by more than one-fifth in just the past five years and secondary level enrollment is down nearly nine percent since last year. As districts across the state struggle with low and declining enrollments, their fiscal and academic challenges serve to underscore the concerns regarding the viability of a Blairsville-Saltsburg deconsolidation.

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Blairsville-Saltsburg Deconsolidation Report Pursuant to Act 85 of 2016

Appendix A Cost Categories Attributed to Overhead                  

2140 – Psychological Services; 2170 – Student Accounting Services; 2310 – Board Services; 2320 – Board Treasurer Services; 2330 – Tax Assessment and Collection Services; 2340 – Staff Relations and Negotiations Services; 2350 – Legal and Accounting Services; 2360 – Office of the Superintendent; 2390 – Other Administrative Services; 2511 – Supervision of Fiscal Services; 2611 – Supervision of Operation and Maintenance of Plant Services; 2660 – Safety and Security Services; 2711 – Supervision of Student Transportation Services; 2750 – Nonpublic Transportation; 2910 – Support Services Not Listed Elsewhere (withholding for contracted services with the ArmstrongIndiana Intermediate Unit); 3200 - Student Activities; 5100 – Debt Service; and, 5251 – Food Service Fund Transfers.

22