2012-13 F INANCIAL STATE OF THE DISTRICT

P R E PA R E D B Y: B R E N D A N WA L S H , T R E A S U R E R , B O A R D O F E D U C AT I O NN O V E M B E R 2 6 , 2 0 1 2

Grosse Pointe Public School SystemFinancial Transparency Series

2

Key General Concepts

Source Data

Michigan Dept. of Education, Bulletin

1014

GPPSS Budget Modeling Utility

2008 through 2011 agrees to audit. 2012

and on are projections.

Compensation

Direct compensation is salary and any

additional payments made to employees, governed by contract

Indirect compensation is net health care, FICA

and state mandated retirement (MPSERS)

School Funding

State dictates per pupil operating revenue

Health care is negotiated locally, but

state laws affect

Retirement rate (MPSERS) and FICA are non-negotiable locally.

3

Employee contracts – Key Concepts

Theme & IntentEmphasizes total

compensation rather than just direct compensation

Shares risk and reward proportionally across all

employees

Ties total compensation to school funding variables

beyond our control

Triggers & Effect

Agreement with employees that a 10% Fund Equity level

is necessary

If Fund Equity drops below 10%, compensation is

reduced proportionally.

If Fund Equity exceeds 15%, compensation increases

Implications & Benefit

The district’s financial health is protected by the contracts not Fund Equity

itself

Allows the district to make investment decisions guided

first by best interests of students, not compensation

or budgets

4

GPPSS and statewide proportional investment by function

Basic Instruction Added Needs Instruction

Instructional Support

Business & Admin.

Operation Maint.

Transport. 0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

47.4%

55.9%

Statewide Avg. GPPSS

Basic Instruction costs are a function of teacher cost AND ratio of teachers to

students

(Source: Michigan Dept. of Education)

5

Per Pupil GPPSS Statewide Rank

2004 20112004

(of 744)2011

(of 788)Enrollment 8,915 8,391 32 29

Operating RevenuesLocal $ 3,087 $ 3,362 82 114 State $ 7,524 $ 7,728 23 84 Federal $ 212 $ 557 555 655

Total $ 11,028 $ 11,647 42 76

Expenditures*Basic Instruction $ 5,658 $ 6,507 28 33Added Needs Instruction $ 1,033 $ 1,453 218 160Instructional Support $ 1,014 $ 1,371 86 56 Administration $ 1,160 $ 1,294 300 470Operations & Maintenance $ 1,458 $ 1,125 91 206 Transportation $ 45 $ 76 571 608

Total $ 11,043 $ 12,012 42 62

Revenues less Expenditures ($ 15)

($ 365)

Per Pupil Revenue and Expenses from 2004 to 2011

(Source: Michigan Dept. of Education)

*Not all expenses are listed, but total is complete

6

GPPSS Statewide Rank

2004 20112004

(of 744)2011

(of 788)

Total Operating Revenue per Pupil $ 11,028 $ 11,647 42 76Instructional Salaries per Pupil $ 6,536 $ 7,448 18 26Support Services Salaries per Pupil $ 2,645 $ 2,918 90 60

Average Teacher Salary $ 66,799 $ 80,566 7 5Combined Retirement and FICA Rate 20.64% 28.1%

General Education Pupil to Teacher RatioStatewide Average 22.0 23.0GPPSS Average and Statewide Rank 18 20 144 211GPPSS Rank among same sized districts (47 total) 3 3

Good news, bad news story of salary compensation and pupil to teacher ratios

In 2010, the 76th ranked teacher salary in Michigan was $67,380 (Lakeshore Schools) which is 16% lower than our $80,566 average.

(Source: Michigan Dept. of Education)

7

Total Revenue and Expenses per Pupil

2008 2009 2010 2011 2012 2013 2014 2015$10,000

$10,500

$11,000

$11,500

$12,000

$12,500

$13,000

Total Expenditures Per Pupil Total Revenue Per Pupil

8

2008 2009 2010 2011 2012 2013 2014 2015$80,000,000.0

$85,000,000.0

$90,000,000.0

$95,000,000.0

$100,000,000.0

$105,000,000.0

$110,000,000.0

($10,000,000.0)

($8,000,000.0)

($6,000,000.0)

($4,000,000.0)

($2,000,000.0)

$0.0

$2,000,000.0

$4,000,000.0

$6,000,000.0

$8,000,000.0 $107,157,294

$96,023,500 $1,995,095.5

($87,727.3)

($3,246,014.6)($3,059,067.7)

($7,630,129.7)

($3,916,676.5)

$5,049,451.3 $6,894,008.2

Total Revenue Total Expenses Annual Delta

General Fund Annual Revenue and Expenses

9

Projected Total compensation by employment group as percentage of total General Fund expenditure

2012 2013 201450.0%

55.0%

60.0%

65.0%

70.0%

75.0%

80.0%

85.0%

90.0%

95.0%

65.7% 66.1% 66.8%

4.0% 4.1% 4.2%4.4% 4.6% 4.6%3.1% 3.0% 3.1%5.5% 5.2% 5.4%

TechnologyExec AdminNISParaprosTA'sClericalPlantBldg AdminTeachers

10

Ratio of Employees to Blended Student Enrollment8% workforce reduction from 2008 through 2012

2008 2009 2010 2011 2012 2013 2014 201510.0 12.0 14.0 16.0 18.0 20.0 22.0 24.0 26.0 28.0 30.0

7,800

7,900

8,000

8,100

8,200

8,300

8,400

8,500

8,600

8,700

14.2 13.8 14.1 14.3 14.3 14.3 14.3 14.3

24.7 23.4

24.4 26.2 26.0 26.1 25.8 26.5

Student to Teacher Ratio Student to Non-Teacher RatioEnrollment

Ratio

of E

mpl

oyee

s to

Stu

dent

s

Stud

ent E

nrol

lmen

t

Includes General and Special Education Teachers

11

General Fund Equity total value and as % of General Fund Expenditures

2008 2009 2010 2011 2012 2013 2014 2015$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

0.0%

200.0%

400.0%

600.0%

800.0%

1000.0%

1200.0%

Value

Fund

Equ

ity a

s %

of E

xpen

ditu

res

12

Cost represented on Per Pupil basis by CategorySmall margin of expense over revenue is amplified by student count

2008 2009 2010 2011 2012 2013 2014 2015$0.0

$2,000.0

$4,000.0

$6,000.0

$8,000.0

$10,000.0

$12,000.0

$14,000.0

$7,448.2 $7,819.7 $7,683.2 $7,239.7 $7,412.9 $7,127.7 $6,506.5 $6,328.2

$1,178.8 $1,236.7 $1,216.2 $1,175.1 $1,201.3 $1,233.9$1,068.2 $1,067.3

$1,815.1 $1,891.6 $1,885.6 $2,004.2 $2,353.7 $2,324.2$2,065.6 $2,009.0

$1,723.8 $1,647.9 $1,736.5 $1,879.1 $1,745.9 $1,594.0$1,530.9 $1,539.1

Direct Comp. Health Care Retirement/FICAAll Other Revenue/Pupil

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Major expenses per pupil as a % of revenue per pupilRetirement cost escalation is clearly our biggest problem

2008 2009 2010 2011 2012 2013 2014 20150%

20%

40%

60%

80%

100%

60% 62% 63% 60% 63% 60% 55% 53%

9% 10% 10% 10% 10% 10%9% 9%

15% 15% 15% 17% 20% 20%17% 17%

14% 13% 14% 16%15% 13%

13% 13%

Direct Compensation Health CareMPSERS/FICA Other

Retirement costs are a function of state set rate applied to salaries. Salary reduction is only way to reduce retirement costs.

14

Average total compensation per employeeand average total compensation per employee % change from 2008

2008 2009 2010 2011 2012 2013 2014 2015$0.0

$20,000.0

$40,000.0

$60,000.0

$80,000.0

$100,000.0

$120,000.0

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

$67,278.5$67,995.5$68,720.0$66,898.6$68,377.3$65,991.2$59,985.3$58,879.9

$16,395.8$16,448.1$16,865.5$18,520.0$21,710.3$21,518.2$19,043.4$18,693.0

0.0%0.9%

2.3% 2.1%

7.3%

4.9%

-5.8%

-7.2%

Direct Comp. Health CareMPSERS/FICA Change from 2008

Diff

eren

ce fr

om 2

008

base

line

15

Change in per pupil revenue vs. change in average total compensation per employee against 2008 baseline

2009 2010 2011 2012 2013 2014 2015-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

-2.1%

-3.8%-4.9% -4.8% -4.8% -4.8%

2.3% 2.1%

7.3%

4.9%

-5.8%-7.2%

Revenue/Pupil Avg. Total Compensation

16

Potential Employee Compensation Changes in the Context of our Communities' Changing Economy

Change in Median Household Income

(2000 to 2010)

Change in Per Capita Income

(2000 to 2010)Grosse Pointe City -15.7% -30.9%

Grosse Pointe Farms -18.2% -16.5%

Grosse Pointe Park -7.8% -17.8%

Grosse Pointe Shores -18.0% -10.5%

Grosse Pointe Woods -16.4% -19.7%

Harper Woods -26.8% -32.1%

Source: U.S. Census Bureau, American Community Survey via Southeast Michigan Council of Governments (SEMCOG, www.semcog.org)

17

GPPSS: Striking the right balance

Current Path

Salaries scale proportionally to revenue

No change in student to teacher ratio

10% projected reduction in direct compensation over three yearsGrosse Pointe Public Schools operates at a structural surplus

Without…Large class sizes

Reduced programming

Outsourced custodians

Higher student fees

Schools of Choice

18

We should still investigate other options

•GPPSS loss of students is out of alignment with like districts, even those not reliant on School of Choice. Enrollment•GPPSS cost per pupil rising dramatically higher/faster than benchmark and state average.

Added Needs Instructional Costs

•GPPSS dramatically out of alignment; salaries, ratios/schedules, programs should be evaluated

Basic Instructional Costs

•Currently this is a $1M annual expense. There has got to be a better way.

Staff Development / Substitute Costs