June 2, 2014 Public Hearing on the 2014-15 General Fund Budget “Tradition of Excellence”

June 2, 2014

Public Hearing on the2014-15 General Fund Budget

“Tradition of Excellence”


Budget Presentation· 2013-14 Final Proposed Budget Amendment

· Variances since December· Proposed 2014-15 General Fund Budget

· Budget Assumptions & State Budget update· Revisions since last month’s update

· Proposed Sinking Fund and Debt Retirement Fund budgets· Future Forecast (2015-16 and 2016-17)

· Budget Assumptions· Financial Information

· Historical review of revenues· Historical review of expenses

· Wages, health benefits, retirement· Historical use of fund balance and budget reductions· Bulletin 1014

· Looking towards future years· State Aid – what is possible?· MPSERS and related School Aid Fund support of MPSERS

· Discussion/Questions


2013-14 Final Amendment


2013-14 Final Budget Amendment

Amended FinalRevenue $28,085,558 $28,134,097Expenses $28,466,270 $28,617,232Net Change ($380,712) ($483,135)Net Chg. (Unreserved) ($324,712) ($427,135)Net Chg. (IB Reserve) ($56,000) ($56,000)

Ending Fund Balance $2,514,444 $2,412,021Fund Balance 8.8% 8.4%

Ending IB Reserve $324,606 $324,606


Variances from Amended· Change in Revenues: Increase of $48,539

· KISD Itinerant funding: $54,000· Medicaid reimbursements: $18,000· Early Childhood Revenues: ($25,000)· Others: $1,539

· Change in Expenses: Increase of $150,962· Increase in Utilities: $129,000

· Heat: $74,000· Electric: $55,000

· Security Purchases: $26,000· Purchase of additional access controls, two way radios, replacement

of some security cameras· Others: ($4,038)


2014-15 Proposed Budgets


2014-15 Budget Proposals

Governor’s House SenateFoundation Increase $104 $115 $257Foundation Allowance $7,554 $7,565 $7,707Best Practices $52 $52 $0 Performance Funding $70 $70 $0MPSERS Credit $0 $0 $0Total Funding $7,676 $7,687 $7,707 MPSERS Liability % 19.76% 19.76% 20.96%

Net Impact $208,926 $241,706 $112,132


Other Budget Assumptions· 2% increase to Act 18 Special Education funding· $150,000 in EGRNOW! funding· No increase in wages/salaries (scale or step increment)· Health Insurance:

· MESSA increase: 6.07% + Approximate 2% for PPACA fees· WMHIP: 1.5% decrease in premiums, PPACA fees included· As a district, expenses are still less than the state “cap”

· Retirement:· “All in” retirement rate of 34.09% · “All in” expenses offset by $1,611,347 of School Aid Fund support· Net retirement rate: 24.68%

· Enrollment: 2,980 FTE students· Kindergarten/Young 5’s almost at budgeted amount· FTE count up 11 since the fall (2,994 to 3,005)

· Utilities:· Kept 50% of the 2013-14 overage in the 2014-15 budget to account for

higher per unit prices and another potential cold winter· Have not budgeted for any cost savings from bond program


2014-15 Proposed Budget2013-14 2014-15 Fav./(Unfav.)

Revenues $28,134,097 $28,799,028 $664,931

Expenses $28,617,232 $29,234,012 ($616,780)

Change in Fund Bal ($483,135) ($434,984) $48,151

Chg. in Unreserved Fund Bal ($427,135) ($122,984) $304,151

Chg. in Joint Facilities Fund Bal $0 ($250,000) ($250,000)

Chg. in Int’l. Bacc. Fund Bal ($56,000) ($62,000) ($6,000)

Ending Unreserved Fund Bal $2,412,021 $2,289,037 ($122,984)

Ending Unreserved Fund Bal % 8.4% 7.8% (0.6%)

Ending Joint Facilities Fund Bal $287,095 $37,095 ($250,000)

Ending Int’l Bacc. Fund Bal $324,606 $262,606 ($62,000)


2014-15 Budget changes from last month

· Last month projected a $89,000 deficit· Proposed budget is a $123,000 deficit· Changes since last month:

· Utilities: Increased expenses by approximately $50,000 to reflect rising per unit prices and potential for another cold winter

· No energy savings from bond projects budgeted at this time· Other 2013-14 adjustments rolled forward to 2014-15

· Approximate $40,000 negative impact· Retirement Expenses/Stabilization payment:

· Increase in “all in” expense: Approximately $737,000· Increase in stabilization payment: $782,000· $45,000 positive variance


2014-15 vs. 2013-14

· Revenues: Increase of $664,931· MPSERS Stabilization payment: $782,000· State Funding: $176,000· Reduction in students (3,000 to 2,980): ($149,000)· EGRNow!: ($280,000 to $150,000): ($130,000)· Others: ($14,069)

· Expenses: Increase of $616,780· MPSERS Expense: $737,000· Joint Facilities: $250,000· Health Care: $75,000· Retirement Incentive in 2013-14: ($138,000)· Budget Reductions: ($125,000)· Utilities: ($80,000)· Tech Purchases in 2013-14: ($26,000)· Others: ($76,220)


Proposed Sinking Fund Budget

2013-14 2014-15Revenue $295,486 $302,986Expenses $250,000 $552,000Net Change $45,486 ($249,014)

Ending Fund Balance $1,286,299 $1,037,285


Long Term Sinking Fund Plan2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

Beginning Balance $1,286,299 $1,037,285 $682,492 $672,821 $680,263 $222,946 $444,578

Revenues $302,986 $335,207 $345,329 $362,442 $372,683 $364,632 $384,166

Athletic Turf Fund $40,000 $40,000 $40,000 $40,000 $40,000 $40,000 $40,000

Memorial Bleachers $250,000

Parking Lot Resurfacing $82,000 $60,000 $60,000

Back up Generators $300,000

Carpet Replacement $500,000 $275,000 $275,000 $500,000 $415,000

Others $130,000 $90,000 $40,000 $40,000 $40,000 $40,000 $40,000

Total Expenses $552,000 $690,000 $355,000 $355,000 $830,000 $140,000 $495,000

Ending Balance $1,037,285 $682,492 $672,821 $680,263 $222,946 $447,578 $336,744


Proposed Debt Fund Budget

2013-14 2014-15Tax Collections $4,774,955 $6,496,109School Bond Loan Fund $1,427,160 $1,069,819Total Revenues $6,202,115 $7,565,928Expenses $6,202,115 $7,407,274Net Change $0 $158,654

Ending Fund Balance $225,557 $384,211


Future Years Forecast


Budget Assumptions

· Per-Pupil Funding:· 2015-16: $125 increase ($7,679)· 2016-17: $150 increase ($7,829)

· $150,000 in EGRNOW! funding· 2,980 FTE students· Salaries: No scale increase, step increase in both years· Health Insurance: 3% increase· Retirement:

· Net retirement rate remains at 24.68% for both years· “All-in rate projected to grow to over 35% in 2015-16, level off for 2016-

17?· School Aid Fund support of MPSERS exceeds $2 million for both years

· Utilities: 5% price increase each fiscal year, offset by energy savings from bond program for a “net zero change” to utilities


2015-16 & 2016-17 Forecast2014-15 2015-16 2016-17

Revenues $28,799,028 $29,087,237 $29,563,163

Expenses $29,234,012 $29,597,628 $29,962,004

Change in Fund Bal ($434,984) ($510,391) ($398,841)

Chg. in Unreserved Fund Bal ($122,984) ($343,391) ($398,841)

Chg. in Joint Facilities Fund Bal ($250,000) $0 $0

Chg. in Int’l. Bacc. Fund Bal ($62,000) ($167,000) $0

Ending Unreserved Fund Bal $2,289,037 $2,048,069 $1,649,228

Ending Unreserved Fund Bal % 7.8% 6.9% 5.5%

Ending Joint Facilities Fund Bal $37,095 $37,095 $37,095

Ending Int’l Bacc. Fund Bal $262,606 $95,606 $95,606


Financial Information


State Foundation Grant History

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

$6,800

$7,000

$7,200

$7,400

$7,600

$7,800

$8,000 $7,554$7,476


Total State Funding History

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

$6,800

$7,000

$7,200

$7,400

$7,600

$7,800

$8,000

$8,200 $7,676$7,975

Total includes: Best Practices, Performance Funding, Federal StabilizationTotal does not include: MPSERS Credit, Change in Y’5/Kindergarten funding


Personnel Expense Trend(2008-09 to 2014-15 Budget)

Wages Health Total Retirement

Retirement Offsets

Net Retirement

2008-09 $15,773,478 $2,890,277 $2,594,430 $0 $2,594,430

2009-10 $16,001,020 $2,925,490 $2,634,789 $0 $2,634,789

2010-11 $15,792,998 $2,908,473 $3,101,768 $0 $3,101,768

2011-12 $15,824,414 $3,092,473 $3,734,246 $304,634 $3,429,612

2012-13 $15,764,475 $2,471,727 $4,145,622 $618,763 $3,526,859

2013-14 (Budget) $15,497,511 $2,455,810 $4,571,817 $1,054,645 $3,457,172

2014-15 (Budget) $15,309,379 $2,505,785 $5,206,957 $1,611,347 $3,595,610

Net Change since 2008-09 ($464,099) ($384,492) $2,612,527 $1,611,347 $1,001,180


Budget Reductions & Use of Fund Balance

Change in Fund Balance

Ending Fund Balance %

Budget Reductions

2007-08 $425,289 17.03% $40,000

2008-09 $23,934 16.91% $250,000

2009-10 ($332,283) 15.36% $686,000

2010-11 ($102,449) 15.07% $1,250,000

2011-12 ($661,107) 12.78% $680,000

2012-13 ($748,823) 9.99% $450,000

2013-14 (Budget) ($427,135) 8.43% $465,000

2014-15 (Budget) ($122,984) 7.83% $125,000

Total ($1,945,558) $3,946,000


Bulletin 1014 – 3 year trend2010-11 2011-12 2012-13

Total Sample 786 797 813

General Fund Revenues 282nd 186th 253rd

Expenses:

- Basic Program 101st 52nd 59th

- Added Needs 695th 703rd 706th

- Instructional Support 148th 147th 192nd

- Operations & Maintenance 303rd 309th 658th

- Business & Administration 386th 476th 482nd

Total GF Expenses 254th 202nd 236th

Avg. Teacher Salary 47th 44th 53rd

* 2012-13 drop in rankings for general fund revenues and operations & maintenance is the result of separating recreational millage revenue and related expenses from the General Fund


Looking ahead to future years


Key Variables for the future· Some key costs are stabilized:

· Health care – maximum contribution cap in place· Retirement – district’s contribution towards unfunded liability is capped

· Offset is lost funding opportunity through School Aid Fund support· Wages/Salaries:

· Local control· Wage scales frozen last three years

· EGRNOW!: Does it continue? At what level?· State Funding

· Biggest variable moving forward· $150 per year to offset a step increase and 3% health increase· 3% “Cost of Living” increase would be $225/pupil at today’s level· Does MPSERS support continue to increase, level off, or decrease

moving forward?· 3% employee contribution to MPSERS health insurance

· Contributions being held in escrow as legal challenge continues· Supreme Court recently agreed to hear arguments


State Aid Possibilities

(In Millions) 2013-14 2014-15 2015-16 2016-17

Revenue Growth % 2.0% 3.1% 3.4% 3.0%

Revenue Estimate $11,496.3 $11,863.2 $12,268.1 $12,636.1

Increase in Revenues $226.6 $357.1 $404.8 $368.0

Students 1,522,600 1,512,000 1,503,400 1,503,400

Increase per student $149 $236 $269 $245

Increase in MPSERS support $247.3 $277.0 $233.0 ?

Inc. in MPSERS support/student $162 $183 $155 ?

Net revenue increase per student ($13) $53 $114 ?

Budgeted increase per student $53 $104 $125 $150

2014-15 and 2015-16 are state estimates, 2016-17 is district estimate


State Aid – Use of “fund balance”

(In Millions), Based on House Bdgt. 2013-14 2014-15 2015-16

Beginning Fund Balance $466.0 $310.9 ($15.4)

Total Revenues $13,547.3 $13,851.4 $14,256.3

Total Expenditures $13,702.4 $14,177.7 $14,110.0

Change in Fund Balance ($155.1) ($326.3) $146.3

Ending Fund Balance $310.9 ($15.4) $130.9

Foundation Grant Increase $53 $115 $0

Ending Fund Balance per pupil $207 ($10) $87


MPSERS – Looking forward

· Although district “cost” is contained, overall cost of the program is not

· “All in” cost at 34%· Plan is about 60% funded as of 9/30/13

· Driving factors:· In 2004, 2 active members for every retiree, 2014: 1.06 active members

for each retiree.· Investment performance:

· Assumes 8% annual return· Plan uses 5 year average to measure actuarial gain or loss· 15% loss in 2008, 7% loss in 2009, but returns of 15.96% in 2012

and 13.27% in 2013· Actuarial investment loss which had averaged $3 billion from 2009

to 2012, was “only” $860 million in 2013.· Overall actuarial loss for 2013 was $400 million


MPSERS – Looking forward

· Possible positive variables going forward:· Improving actuarial investment experience· Stabilizing active member to retiree ratio· Eventual payoff of state early retirement incentive plan (1.36% of rate)· Supreme Court ruling in state’s favor on 3% employee contribution to

retirement health insurance ($600 million in escrow, plus ongoing benefit of 3% contribution)

· What to hope for:· Leveling off of school aid fund support for MPSERS· Decrease in school aid fund support for MPSERS· Additional alterations to the program to make it more cost efficient· Eliminate school aid fund support of MPSERS and begin to reduce the

unfunded liability, which would lower the employer contribution rate.


Summary· 2014-15 Budget Proposal

· Maintain all academic programs for students in 2014-15· Significant progress toward eliminating our structural deficit· Ability to continue the process to implementing the International

Baccalaureate program· School Aid Fund growth:

· Will the growth expand in future years?· How much of that growth will be consumed by support for MPSERS?· What type of legislative decisions will be made in Lansing?

· MPSERS:· Will the true cost of the program continue to grow?· Additional legislative changes to the program?· How does the Supreme Court rule on the 3% health care contribution

· Others:· How quickly can we leverage the bond to provide operational savings

(utilities)?· Employee compensation – How can we increase efficiency, recognizing

that pay scales are projected to be frozen for a 4th straight year.


Questions/Discussion?

Documents

June 2, 2014 Public Hearing on the 2014-15 General Fund Budget “Tradition of Excellence”