The estimated cost of step increases for eligible certified and classified employees amounts to approximately $2.95 million and $0.90 million, respectively.

A 2% salary increase was approved in FY08-09 for all employees at mid-year and budgeted accordingly. This item represents the additional amount that must be programmed into the FY09-10 budget in order to reflect the full year.

The Knox County Retirement Board informed the Board of Education that employer contributions to the old Defined Benefit Pension Plan must be increased approximately $2 million due to poor economic conditions. This retirement plan relates to covered certified teachers who became employees of the Knox County Schools as a result of the abolition of the Knoxville City Schools. To mitigate the negative impact to the FY09-10 budget, half of the increase could possibly be funded from existing fund balance sources. Thus, $1 million will be programmed into the FY09-10 budget.

It appears that poor economic conditions have contributed to an increased participation rate in health insurance coverage, resulting in an increased employer cost to the Board.

The Knox County Schools has implemented energy management initiatives such as contracting with Trane and hiring in-house energy managers, allowing budgetary savings to be invested in equipment upgrades. Nevertheless, an increase of $1.50 million will be programmed into the FY09-10 utility budget in an effort to safeguard against increased utility costs.

The annual KCS debt service requirement for FY08-09 is $24.93 million. Approximately $5.13 million of this amount is subsidized by the General Purpose budget. Based on approved appropriation levels in the Capital Improvement Plan, FY09-10 annual debt is expected to increase to $26.46 million. This estimate is based on existing debt plus $15 million of FY09-10 capital initiatives. As a result, the amount subsidized by the General Purpose budget for FY09-10 is estimated to be approximately $6.66 million, representing an increase of $1.53 million. The amount of the subsidy could potentially decrease if existing bonds are re-financed at lower interest rates and/or additional sales tax dollars are budgeted into the School Construction Fund effective FY09-10.

Increases are needed in the areas of security, operations/maintenance, and fee waiver allocations. An amount of $0.10 million in security relates to an expected increase for communications costs and three security guard positions added from FY08-09 security enhancement funds.  An additional $0.15 million is programmed into the FY09-10 budget for waste management services in operations and maintenance. Fee waiver allocations account for $0.12 million of budgetary increases.

Twenty-two (22) positions will be eliminated at the elementary school level resulting from the implementation of the staffing formula. The reductions consist of a net reduction of 20 elementary school teaching positions and two (2) assistant principal positions. However, a reallocation of resources will allow for the implementation of parallel block scheduling at all of our elementary schools.

Twenty-four (24) positions will be eliminated at the middle school level resulting from the implementation of the staffing formula. The reductions consist of a net reduction of 20 middle school teaching positions and four (4) clerical positions.

Thirty (30) positions will be eliminated at the high school level resulting from the implementation of the staffing formula. The reductions consist of a net reduction of 23 high school teaching positions and seven (7) clerical positions.

Seven (7) other positions will be eliminated at the school level. The reductions consist of four (4) TAG teaching positions, two (2) positions in the alternative schools (Ridgedale and Yoakley), and a CTE educational assistant.

An amount will be retained within the budget in the event that BEP requirements would necessitate the hiring of additional teachers. The amount reserved would be sufficient to fund approximately 16 teaching positions. To the extent that additional positions are not needed, the amount not utilized would be unspent and thus close into fund balance at year-end.

Seventy-one (71) positions will be eliminated at the central office and district wide level. The reductions will occur in the following areas: 38 custodians, 10 clerks/secretaries, 10 maintenance positions, six (6) data processors, four (4) supervisors, one (1) nurse (administrative), one (1) truck driver, and one (1) position in facilities.

Reductions to contracted services include such areas as $0.89 million in transportation contracts ($0.70 million related to change in school start times at some of the high schools), $0.24 million in Project GRAD, $0.13 million in Board of Education, $0.06 in Office of the Superintendent, and $0.04 million in Operations/Maintenance, and $0.03 in Public Affairs.

Reductions to supplies, materials, and minor equipment occur throughout the budget and include areas such as $0.37 million in operations/maintenance (gasoline, construction supplies, repair parts), $0.05 million in general school allocations, $0.06 million in libraries/audio-visual and materials center, $0.04 million in CTE and Business Education, $0.04 million in basic elementary support, $0.03 million in fiscal services, $0.03 million in transportation, $0.03 million in Project GRAD, $0.02 million in athletics, and $0.02 million in health services.

The E-rate contribution has been reduced $0.25 million, accounting for most of the reduction in this area.

This item represents a reduction of $0.04 million in instructional/data processing equipment in the general school allocations account, a $0.02 million reduction in equipment in fiscal services, a $0.02 million reduction in the security vehicles account, and a $0.02 million reduction to equipment in public affairs.