Superintendent's Message

Leadership Focus and Strategic Direction

Wake County has been designated as one of the top ten places for families to live in the United States. The Wake County Public School System is a major reason the area received this recognition. Located in the heart of the Research Triangle Park, WCPSS serves children from some of the most educated families in the nation. Parents have very high educational expectations for their children. In addition, business leaders expect a world-class education system to fuel continued economic development. Taxpayers and those elected to represent them want to be sure they are receiving high value for their tax dollars.
Our mission is to educate each student to be a responsible and productive citizen who can effectively manage future challenges.

We are committed to academic excellence. We will pursue this goal in the spirit of openness, integrity, and accountability through active communication and collaboration with parents and a demanding and caring community. Student performance is the number one priority in all schools in the Wake County Public School System.

In pursuit of this goal, we will:

o *Attract and retain a high quality workforce,

o Ensure safe, inviting, optimal learning environments,

o Provide comprehensive instructional technology,

o Seek and secure sufficient funding.

*including compensation that is market-sensitive and individually responsive.

The human and financial resources are allocated in the budget to achieve the mission and goal of the district. We value student success, excellence, diversity, character (courage, good judgment, integrity, kindness, perseverance, respect, responsibility, and self-discipline), communication and collaboration with all stakeholders, teamwork, and continuous improvement. All must be attended to if we are to succeed in accomplishing our mission.

The board, superintendent, and senior leaders assess system performance on an annual basis in strategic planning retreats, which lead to setting goals and measures. Student/stakeholder needs, our mission, and values are the core of the process and guide all stages of strategic planning. Strategies to accomplish goals are based on the analysis of gaps between current performance and desired future results. Once strategies have been developed, senior leaders determine how to implement strategies. This includes identifying and communicating improvement priorities, organizing work systems, and allocating resources to align the work of central-level and school processes to support goal attainment.

The system goal and strategies cascade through cabinet members to schools and departments that in turn develop objectives, strategies, measures, and action plans. The cabinet, principals, and school staffs review results during the evaluation stage. Improvement needs are then funneled back into the strategic process to begin the cycle again.

Trends/Events/ Initiatives

The Wake County Public School System is the second largest school district in North Carolina and the 27th largest in the nation (1998-99). Our customers judge the school systemÕs performance by how well our 98,000 students are learning. The system is one of the fastest growing districts in the nation, with roughly 3,000 additional children entering the system each year, about 4% a year over the last seven years.

Budget Process

The budget represents the 2000-2001 financial plan for the Wake County Public School System. This document culminates a dynamic process involving input from many groups. Wake County Public School System exists in a highly regulatory environment. The system is charged with the responsibility for implementing federal and state education laws and mandates from the legislature, state board of education, and local board of education.

Budget development is a year-round process, which begins in the fall and continues until the official budget is adopted by the Wake County Board of Education in June. Participation at all levels is evident in this ongoing process. Schools and central office departments review their budget needs and submit their requests. The superintendent’s management team develops the board of education’s budget request and prioritizes all requests based on the system’s goals, mission, and the delicate balance between instructional and supporting service needs. The board holds a public hearing as it considers the budget, and finally the board of education submits its budget request to the county commissioners by May 15 of each year.

Total Budget

The total budget proposed for 2000-2001 is $706,593,909. This is composed of current expense, capital outlay, and capital improvement dollars. The current expense budget includes items of a recurring nature covering salaries, services, and supplies. The capital outlay budget includes the purchase of property; the purchase, construction, or renovation of buildings; and the purchase or replacement of furniture, equipment, and vehicles. Capital improvement dollars include local funds identified solely for the building program.

Where Do Funds Come From?
Operating Budget	Total Budget

Where Are Funds Spent?

State Funding

State allotments are funded on a formula basis. The state funds schools with three basic types of allotments: position allotments, dollar allotments, and categorical allotments. Due to our phenomenal growth rate, we continue to receive additional state funding. The state budget is expected to increase by 7 percent. Ninety-four percent of state funding is spent on salaries and employee benefits. We anticipate new state positions based on growth in student projections:

• 7 Principals
• 2 Assistant Principals
• 126 Regular Education Teachers
• 4 Teacher Assistants
• 14 Clerical Assistants
• 7 Guidance Counselors
• 7 Librarians
• 13 Vocational Education Teachers
• 30 Exceptional Children Teachers
• 20 Exceptional Children Assistants
• 10 Bus Drivers
• 11 Custodians
• 2 In-school Suspension Teachers
• 4 Minimum Competency Teachers

County Appropriation

Wake County Public School System exists in a highly regulated environment. The system is charged with the responsibility for implementing federal and state education laws and mandates from the legislature, state board of education, and local board of education. However, state and federal funding do not adequately support the delivery of the programs to meet all student needs. It is only through county funding that Wake County Public School System is able to meet mandates as well as provide the quality programs that our community expects.

On July 28, 1997, the county commissioners and board of education signed an agreement as a result of a mediation process regarding the budget. This was the first agreement of its kind in North Carolina and completely changed the previous fiscal relationship between the county commissioners and the board of education. The agreement will remain in effect for at least five fiscal years beginning in 1998-99. The commissioners and school board will review the agreement no later than September 30, 2002.

For each of the five fiscal years beginning 1998-99, the county appropriation to the school system for operating expenses will be a minimum of 35 cents per $100 of assessed property value. This agreement guarantees the school system a minimum budget tied to the county’s economic growth. The dollars will increase each year as long as there is growth in the tax base.

The county staff will provide to the board of education an estimated revenue projection based on anticipated collections for the upcoming year. This will become the beginning budget for the next fiscal year. If actual collections come in higher than the anticipated collections, additional funds will be allocated to the school system.

According to the agreement, the school board may wish to increase the 35 cents per $100 in order to generate higher levels of funding for the operating budget beginning in 1999-2000. The county commissioners could deny the tax increase if five of its seven members, or two-thirds, oppose it. If the county commissioners increase or decrease the overall property tax, and this does not originate due to school board request, the increase or decrease will not change the 35 cents per $100 allocated to the school system.

1999-2000 Update Agreement

The school board requested a two-cent increase, in accordance with the mediation agreement, from 35 to 37 cents for the operating budget in 1999-2000. The county commissioners approved this request.

2000-2001 Update to Agreement

The school board unanimously approved a motion to request an increase of two cents in the tax rate dedicated to WCPSS. This would have generated an additional $11.2 million. The school board also requested a shift of $5.5 million in funding from the building program to the operating budget for maintenance and operations.

The Wake County Commissioners denied the request for an increase of two cents in the tax rate dedicated to WCPSS. They approved a one-time shift of $3.5 million from land acquisition in the July 1 budget. Another $2.0 million will be shifted from building program projects to the operating budget in July 2000. The Wake County Board of Education may request $7,049,316 of one-time money be allocated to capital projects or to the operating budget. These dollars will not be recorded on the school system’s budget until requested from the county.

2000-2001 Revaluation

For 1999-2000 the general property tax rate in Wake County was $0.73 per $100 of assessed valuation. Of this total tax rate, $0.37 per $100 went to support school operating expenditures. As required by state statute, Wake County completed a revaluation of all property values effective January 1, 2000. It had been eight years since the last reappraisal of property values in the county. As a result of the reevaluation, the total tax base is projected to increase by 39% over the estimated actual 1999-2000 tax base.

In light of the increased real property values due to reevaluation, Wake County has developed a tax rate for 2000-2001 using a revenue neutral perspective. The effect of applying a revenue neutral tax rate effectively lowers the tax rate on all property to offset or "neutralize" the effect of higher real property values. As a result, the recommended budget for 2000-2001 includes a revenue neutral property tax rate of $0.564 per $100 valuation. Of this total revenue neutral property tax rate, $0.286 supports school operating expenditures.

Local Current Expense Fund

The local current expense budget includes all local revenues of the school system. The largest of these is the county appropriation. Others include fines and forfeitures, interest earned, indirect cost, fund balance appropriation, and categorical programs. The "Budget by Funding Source" section of this document shows budget line items by source of funds whether state, federal, enterprise, other local, or county appropriation.
The local current expense budget for 2000-2001 is $183,067,698, an increase of 2 percent from 1999-2000.
Ongoing, rapid growth continues to be the most significant fiscal challenge for our school system. Growth-related costs are a major portion of our budget needs. Revenue sources are not sufficient to cover growth-related increases.

Student membership projections from Wake County total 98,254 students (excluding 1,800 students currently enrolled in charter schools). We project we will lose 600 additional students to charter schools. Therefore, our net increase in students for 2000-2001 would be 2,872 students or 3 percent.

Requests for additional funds in the local operating budget originally exceeded $42.3 million. We will receive $16.7 million new dollars from the county as of July 1 including a one-time shift of $3.5 million from land acquisition. We have added expected revenues for advertising on the web site and systemwide vending contracts. We will be increasing parking fees by $20 per year. Interest earned has been increased based on projections. We have shifted our Print Shop to be a self-supporting enterprise fund. However, our beginning fund balance appropriation is decreasing by $7.7 million. Therefore, we expect a net increase of $3.5 million in the local noncategorical budget. Significant reductions were made to the base budget in order to balance the Official Budget. These reductions in base and unfunded expansion items are presented in the Deferred Needs section of this document.

• Some examples of growth-related increases:
• Local salary supplement for new state-funded positions = $945,634
• Local funds for costs related to opening new schools = $1,483,360
• Loss of funds to be paid to charter schools – increase of 600 students = $479,532

Base salaries have been increased an average of seven percent for teachers and school-based administrators, five percent for central office administrators, and three percent for remaining staff. The local cost of these salary increases is $2,249,413. The proposed salary schedule for teachers ranges from three percent to fourteen percent increases depending on one’s years of experience. Increases in supplementary pay due to base pay increases for teachers and school-based administrators totals $2,770,873. Increases in employer’s retirement, hospitalization, and dental rates have a local cost of $600,000.

We currently budget 17 custodians, 10 special education teachers, 17 regular education teachers, 16 clerical positions, and 40 teacher assistants to be paid through vacancies or lapsed salaries. In addition, we will budget 3 central office administrators to be paid through vacancies in 2000-2001. In order to balance the budget, we are shifting 73.5 existing local teachers to state funding to be paid by conversion of teacher assistant dollars.

We will continue the pilot program for maintenance and operations that began last year. Rather than restrain the department to a certain number of positions and a certain amount of nonpersonnel dollars, we will allow flexibility within the total dollars available to the department. Budget dollars should stretch farther, particularly since this is an area where there are consistently high numbers of vacant positions.

The expansion budget needs reflect requests consistent with the communityÕs goal. The total funded in the expansion budget is $11.8 million.

• Increases in supplementary pay due to base increases $2.8 million
• Maintenance and Operations $3.5 million
• Magnet Programs $1.1 million
• Accelerated Learning Program $1.7 million
• English as a Second Language $0.4 million
• Special Education $1.4 million
• Student Services $0.3 million
• Technology $0.6 million

Federal Funding

There are four types of federal grants. Direct federal grants have minimum flexibility and are appropriated by the Federal Government and allocations are based on federal formula. State application grants are based on applications for funding filed directly from the State Department and/or Governor. State plan grants are based on specific federal grant criteria. The State Board approves the State Plan. The State Board also approves the application and selection processes for competitive grants. We are estimating a reduction in funding of federal programs and will reduce staffing and other expenses covered by these funds.

Multiple Enterprise

The multiple enterprise fund includes the child nutrition program and other self-supporting programs such as Before- and After-School Care, Extended Day, Tuition Summer School, Summer Camp, Extended High School, and Preschool Programs. Tuition or fees solely support these programs. We charge indirect cost at the unrestricted maximum rate of 12.721% on all these programs.

The multiple enterprise fund budget for 2000-2001 reflects an decrease of $1,974,077 or 6 percent from 1999-2000. The budget includes $23,768,222 for the Child Nutrition program and $6,564,607 in tuition and fee-supported programs. The Print Shop will become an enterprise fund in 2000-2001.

The Child Nutrition budget includes salary increases of 3% and inflationary increases for food and supplies. Any reduction of federal funds for this program will require us to implement one or more of the following: reduce costs where possible, increase meal prices, reduce meal offerings, implement more satellite meal programs, and eliminate breakfast programs.

Capital Outlay

The proposed capital outlay budget for 2000-2001 totals $56,868,795. Of this amount, the county appropriation is $1,152,155, reflecting a 47 percent decrease from the current appropriation of $2,176,128. The remaining budget includes $200,000 interest earned, $1,516,640 fund balance appropriation, and $54,000,000 local capital improvement dollars.

Phase IIIB is only the current stage of the school system’s long- range building program. Despite its new schools and existing school expansions, the system needs more space to accommodate the influx of more than 3,000 new students each year and funding to address its aging facilities.

A $938 million Phase IV plan published in December 1998, included 15 new schools, 58 existing school improvements, technology, and other facilities needs through 2004. To fund Phase IV, Wake County Commissioners and the Wake County Board of Education agreed on a $650 million bond referendum for June 8, 1999. Although Wake County is growing and buildings are aging, the public defeated this referendum, the school system’s first bond defeat since 1971.

After the defeat of the June 8 bond referendum, the Wake County Commissioners and the Board of Education jointly announced the formation of a citizens advisory committee. Its charge was to study school needs, recommend an acceptable capital spending plan, and make such recommendations as it felt appropriate.
This committee, chaired by Jim Talton (retired managing partner of KPMG LLP), consisted of 31 members, with Talton choosing 10, the Wake County Board of Education choosing 10, and the Wake County Commissioners choosing 10 members. The Citizens Advisory Committee for School Facilities Planning and Funding submitted its findings to the Wake County Commissioners and the Wake Board of Education on April 12, 2000. These recommendations were taken under consideration, and a new PLAN 2000 was conceived and approved by the board of education September 1.

PLAN 2000 incorporated 21 of the 28 recommendations with six requiring further study or legislative approval. The one recommendation not included was to reduce the capacity of new schools to the lowest number feasible. This will be reconsidered when current schools are populated at the appropriate levels.

PLAN 2000 (2001-04) school building program, provides 14 new schools to accommodate more than 112,000 students expected in our schools by 2004. Additionally, 32 schools will receive major renovations and expansions. Another 64 schools will get much needed maintenance and repair. PLAN 2000 will cost $550 million. A $500 million bond referendum to finance this plan will be presented November 7, 2000, for public consideration. The remaining $50 million will be provided by Wake County government from general revenues, called "pay-as-you-go" revenue. No tax increase will be required to pay for this building program.

Competitive Factors

Wake County Public School System demonstrates exemplary practices in areas of financial management, growth management, and grant awards. More importantly, student achievement results in the areas of reading and math, as measured by state End-of-Course (EOC) and End-of-Grade (EOG) tests as well as SAT results, are exemplary. SAT scores for students rose for the fifth year in a row. Student performance has continued to improve while dropout rates have declined.

WCPSS students scored 1059 on the 1999 SAT, well above the state average of 986 and the national average of 1016. It should be noted that over three-fourths of Wake County students (77%) took the SAT in 1999, compared to 43% of students in the nation and 61% of students in the state. Wake scores were higher than any other large system in North Carolina and higher than several comparable school districts in the Educational Benchmarking Network.

More than 80% of WCPSS students taking end-of-grade tests in grades 3 and 8 scored at or above grade-level standards.

WCPSS students continue to demonstrate success in nearly all measures of student achievement required by the state and our system. The state accountability program (referred to as the ABCs) measures student achievement of elementary and middle school students statewide. In 1999, 93% of WCPSS schools were identified by the state as meeting expected growth standards; 75% were identified as exemplary; 50% as "schools of distinction"; and 8% as "schools of excellence."

The school system has faced many challenges over the past ten years. During this time, we have successfully managed a building program, which is one of the largest in the nation. We have received an "unqualified" audit opinion each of the last thirteen years.

For the past eleven years, we have received the Certificate of Excellence in Financial Reporting from both the American School Business Officials (ASBO) and the Government Finance Officers Association (GFOA). We have also received the Distinguished Budget Presentation Award from the Government Finance Officers Association for the past seven years. This award is the highest form of recognition in governmental budgeting. This year we received the Meritorious Budget Award from the Association of School Business Officials (ASBO) for the first time. In addition, last year we were the only school system in North Carolina to receive the State Treasurer’s Governmental Accounting/Financial Management Award. Last year our school system was the only one in North Carolina to receive the Advancement Award of the N.C. Quality Leadership Foundation – a process similar to the Malcolm Baldrige award criteria.

We have aggressively managed our budget and wisely invested available resources. These accomplishments are the result of a dedicated and competent staff, a supportive board, and a caring and supportive community. The end result of all this has been continued improvement of programs and outcomes for our students.

Conclusion

As we enter the first full fiscal year of the new millennium, we continue to perform at a level of excellence achieved by few school systems in the nation. The results of this year’s major initiative in the Accelerated Learning Program are not yet in, but early indications are showing that it will have made a significant contribution toward attaining the 2003 Goal.

The agreement with the county commissioners has provided a level of stability in the budgeting process that allows us to focus on our primary mission – improving student achievement. While the agreement for the county appropriation tied to property tax value has kept pace with growth in the county, we find that the rate was not initially indexed high enough. The thirty-five cent rate was derived at a time when the educational share of the county taxes was at its lowest level in many years – sixty-three cents per one hundred of valuation. The increase in the rate last year from thirty-five cents to thirty-seven cents helped, but we find that we are still not able to maintain current efforts and pay for the major initiatives required to attain the 2003 Goal.

The costs associated with an optimal learning environment were to have been heavily funded through a bond referendum, which failed. The expansion of instructional technology into all of our classrooms was also tied to the bond referendum. The cost of recruiting and retaining a high quality workforce has this year been shared with the board of education. Those costs associated with increasing teacher pay and providing market-sensitive pay for support employees appears overwhelming.

Simply stated, while our 2003 Goal is likely one of the boldest in the nation, it is also costly. We are concerned about our school system’s ability to fund the 2003 Goal. We fear that without additional funding for the operating budget, the goal may not be attainable by year 2003.

Bill McNeal, Superintendent

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