Public Hearing on the 2014 15 General Fund

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

2013 -14 Final Amendment “Tradition of Excellence”

2013 -14 Final Budget Amendment Amended Final Revenue $28, 085, 558 $28, 134, 097 Expenses $28, 466, 270 $28, 617, 232 Net Change ($380, 712) ($483, 135) Net Chg. (Unreserved) ($324, 712) ($427, 135) Net Chg. (IB Reserve) ($56, 000) Ending Fund Balance $2, 514, 444 $2, 412, 021 8. 8% 8. 4% $324, 606 Fund Balance Ending IB Reserve “Tradition of Excellence”

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) “Tradition of Excellence”

2014 -15 Proposed Budgets “Tradition of Excellence”

2014 -15 Budget Proposals House Senate $104 $115 $257 $7, 554 $7, 565 $7, 707 Best Practices $52 $0 Performance Funding $70 $0 $0 Total Funding $7, 676 $7, 687 $7, 707 MPSERS Liability % 19. 76% $208, 926 $241, 706 Governor’s Foundation Increase Foundation Allowance MPSERS Credit Net Impact 20. 96% $112, 132 “Tradition of Excellence”

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 “Tradition of Excellence”

2014 -15 Proposed Budget 2013 -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 $0 ($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) Chg. in Joint Facilities Fund Bal “Tradition of Excellence”

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 “Tradition of Excellence”

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) · · · · 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) · Expenses: Increase of $616, 780 “Tradition of Excellence”

Proposed Sinking Fund Budget 2013 -14 2014 -15 Revenue $295, 486 $302, 986 Expenses $250, 000 $552, 000 $45, 486 ($249, 014) $1, 286, 299 $1, 037, 285 Net Change Ending Fund Balance “Tradition of Excellence”

Long Term Sinking Fund Plan 2014 -15 2015 -16 2016 -17 2017 -18 2018 -19 2019 -20 2020 -21 $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 Beginning Balance Memorial Bleachers $250, 000 Parking Lot Resurfacing $82, 000 Back up Generators $300, 000 Carpet Replacement $60, 000 $500, 000 $275, 000 $500, 000 $415, 000 Others $130, 000 $90, 000 $40, 000 $40, 000 Total Expenses $552, 000 $690, 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 “Tradition of Excellence”

Proposed Debt Fund Budget 2013 -14 2014 -15 Tax Collections $4, 774, 955 $6, 496, 109 School Bond Loan Fund $1, 427, 160 $1, 069, 819 Total Revenues $6, 202, 115 $7, 565, 928 Expenses $6, 202, 115 $7, 407, 274 $0 $158, 654 $225, 557 $384, 211 Net Change Ending Fund Balance “Tradition of Excellence”

Future Years Forecast “Tradition of Excellence”

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 201617? · 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 “Tradition of Excellence”

2015 -16 & 2016 -17 Forecast 2014 -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 Ending Int’l Bacc. Fund Bal $262, 606 $95, 606 “Tradition of Excellence”

Financial Information “Tradition of Excellence”

State Foundation Grant History $8, 100 $7, 476 $7, 900 $7, 554 $7, 700 $7, 500 $7, 300 $7, 100 $6, 900 20 14 -1 5 4 -1 13 3 20 -1 12 2 20 -1 11 20 20 10 -1 1 0 -1 09 9 20 -0 08 8 20 -0 07 20 20 06 -0 7 6 -0 05 20 20 04 -0 5 4 -0 03 20 20 02 -0 3 $6, 700 “Tradition of Excellence”

Total State Funding History $8, 100 $7, 676 $7, 975 $7, 900 $7, 700 $7, 500 $7, 300 $7, 100 $6, 900 5 -1 14 4 20 -1 13 3 20 -1 12 2 20 -1 11 1 20 -1 10 0 20 -1 09 20 20 08 -0 9 8 -0 07 7 20 -0 06 6 20 -0 05 5 20 -0 04 4 20 -0 03 20 20 02 -0 3 $6, 700 Total includes: Best Practices, Performance Funding, Federal Stabilization Total does not include: MPSERS Credit, Change in Y’ 5/Kindergarten funding “Tradition of Excellence”

Personnel Expense Trend (2008 -09 to 2014 -15 Budget) Wages Health Total 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 ($464, 099) ($384, 492) $2, 612, 527 $1, 611, 347 $1, 001, 180 Net Change since 2008 -09 “Tradition of Excellence”

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 “Tradition of Excellence”

Bulletin 1014 – 3 year trend 2010 -11 2011 -12 2012 -13 786 797 813 282 nd 186 th 253 rd - Basic Program 101 st 52 nd 59 th - Added Needs 695 th 703 rd 706 th - Instructional Support 148 th 147 th 192 nd - Operations & Maintenance 303 rd 309 th 658 th - Business & Administration 386 th 476 th 482 nd Total GF Expenses 254 th 202 nd 236 th Avg. Teacher Salary 47 th 44 th 53 rd Total Sample General Fund Revenues Expenses: * 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 “Tradition of Excellence”

Looking ahead to future years “Tradition of Excellence”

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 “Tradition of Excellence”

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 $226. 6 $357. 1 $404. 8 $368. 0 1, 522, 600 1, 512, 000 1, 503, 400 $149 $236 $269 $245 $247. 3 $277. 0 $233. 0 ? Inc. in MPSERS support/student $162 $183 $155 ? Net revenue increase per student ($13) $53 $114 ? $53 $104 $125 $150 Increase in Revenues Students Increase per student Increase in MPSERS support Budgeted increase per student 2014 -15 and 2015 -16 are state estimates, 2016 -17 is district estimate “Tradition of Excellence”

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 ($155. 1) ($326. 3) $146. 3 $310. 9 ($15. 4) $130. 9 Foundation Grant Increase $53 $115 $0 Ending Fund Balance per pupil $207 ($10) $87 Change in Fund Balance Ending Fund Balance “Tradition of Excellence”

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 “Tradition of Excellence”

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. “Tradition of Excellence”

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 4 th straight year. “Tradition of Excellence”

Questions/Discussion? “Tradition of Excellence”