Grosse Pointe Public School System

Financial Transparency Series

2010-11 BUDGET DEVELOPMENT

PARAMETERS PRESENTATION

JANUARY 25, 2010

PREPARED BY BRENDAN WALSH
 Presentation Overview:
Define the Problem →Develop a Solution

Budget Dynamics Development Process

• Proposal A and Downward • Budget Development
revenue pressures Parameters Introduction
• Upward expense • Budget Development
pressures Timeline
• A word about Fund Equity • Public Engagement and
Involvement

2
 Downward Revenue
Pressures
3

• DYNAMICS OF PROPOSAL A
• FOUNDATION ALLOWANCE
• SCHOOL AID FUND
 Proposal A Basics

State is Primary State Foundation School Aid Fund

Revenue Source Allowance •Source of Foundation
•State is source for •Main Funding Source Allowance payments
65% of GPPSS Op. •Per Pupil revenue set •Managed by state
Revenue by the state •Highly susceptible to
•Local sources 22% •Ties operating state‟s economic
•School Property revenue to conditions
Taxes were Reduced Enrollment
and Capped •Varies by district

Financial Transparency Series – School Funding and Taxes 4

 Michigan School Aid Fund Revenue Sources
State Property, Income and Sales Tax Account for 78% of SAF Revenue
5
Business Tax Other Real Estate
Cigarette Tax 3% 2% Transfer
4% 2%
Use Tax
4%
Lottery
7%

Sales Tax
State Property 42%
Tax
18%

Income Tax
18% 2007-8 Budget Year

Financial Transparency Series – School Funding and Taxes

 GPPSS General Fund Revenue by Source
as Projected in June 2009
6

Local Non- Federal Other State law

requires local
Homestead 2.6% 1.9% school districts
7.1% to adopt a
Local Hold budget BEFORE
Harmless the state
finalizes theirs.
15.1%

State 20 J
1.6% State
Foundation
County Allowance
6.4% State 58.6%
Categorical
6.6% 2009-10 Budget Year - Planned

Financial Transparency Series – School Funding and Taxes

 Then Came Granholm Cuts of Oct. 2009
7

Local Non- Federal Other Loss of

Homestead 2.6% 1.9% $3MM of
7.1% Promised
Local Hold Revenue
Harmless
15.1%

State 20 J
1.6% State
Foundation
County Allowance
6.4% State 58.6%
Categorical
6.6% 2009-10 Budget Year - Actual
Financial Transparency Series – School Funding and Taxes
 GPPSS School Foundation Allowance
APR Change vs. Inflation Rate – Has Not Kept Pace
8

Inflation Rate Foundation Allowance

4%
Annual % Rate Change

3%
2%
1%
0%
-1%
-2%
-3%
-4%
1995

1997

1999

2001

2003

2005

2007

2009
Financial Transparency Series – School Funding and Taxes
 Declining Enrollment and Declining Foundation
Allowance Reduces GPPSS‟ Largest Revenue Source
9

$80,000
8,900

GPPSS Student Enrollment

$70,000
Annual Revenue in 000‟s

8,700
$60,000
8,500
$50,000
$40,000 8,300

$30,000 8,100

$20,000 7,900

$10,000 7,700
$0 7,500

2007-8 2008-9 2009-10 2010-11

State Found Allow Rev. Local Found Allow Rev Enrollment

 Upward Expense Pressures
10

• DIRECT EMPLOYEE COMPENSATION

• EMPLOYEE RETIREMENT COSTS
• EMPLOYEE HEALTH CARE COSTS
 Rising Direct Compensation Costs
In 2010, 35 fewer employees cost more than 950 in 2008
11

Employees Total Direct Compensation

970 $64,341 $64,500

GPPSS Compensation in 000‟s

Number of GPPSS Employees

$63,928
960 $64,000
961
950 $63,500
950
940 $63,000
$62,932
930 $62,500
$62,560
920 $62,000
916
910 $61,500

2007-8 2008-9 2009-10 2010-11

Projected
 Rising Health Care Costs Outpace Scaled
Reductions in Students and Staff
12

1,000 $11,831 $11,900

961
951 $11,700
950
# of Employees and Health

916 $11,500
900 $11,505
$11,300
Contracts

850 $11,221 $11,100

$10,900
800
806 $10,700
794 800
750 $10,500

2007-8 2008-9 2009-10

Employees # of Contracts Net Avg. Cost/Contract

 Employee Retirement Cost Escalation
Rate will be 58% higher than „99 - applied against rising salaries
13

Pension Unfunded Liability Health

21.0%
18.0%
15.0%
12.0%
9.0%
6.0%
3.0%
0.0%

Projected
Financial Transparency Series - Employee Indirect Compensation
Employee Total Compensation on a Per Pupil Basis Plotted Against
Foundation Allowance Per Pupil - $1,198 Increase in Four Years
14
$11,500
$602
$10,500 $584 $585
$1,431
$557
$9,500 $1,237 $1,334
$1,179
$8,500 $1,490
$1,263 $1,295
$1,218
$7,500

$6,500 $7,634 $7,679 $7,913

$7,284

$5,500
Projected
2007-8 2008-9 2009-10 2010-11
Direct Compensation Retirement Health Care FICA
Horizontal line is Foundation Allowance per pupil.
 Human Resources vs. Non-HR Costs
as Percentage of Total Budget
15
100%
16.4% 15.3% 15.2% 13.6%
80%

60%

40% 82.6% 84.0% 85.1% 85.7%

20%

0%

2007-8 2008-9 2009-10 2010-11

Projected
Human Resources Non-Human Resources
 Summary: Maintaining Budget Equilibrium
Balancing Opposing Structural Forces
16

Revenues Expenses
Downward Pressures

Reduced Foundation Increasing Employee Salary

Upward Pressures
Allowance Costs

Loss of 20J, State Categorical Increasing MPSERS

or Federal Funds Retirement Costs

Declining Enrollment Increasing Health Care Costs

Mandated All Day

Reduced County Funds
Kindergarten

Financial Transparency Series - Fund Equity

 GPPSS Investment Allocation Compared to the
Top 70 Largest Districts in State
17
Source: State of Michigan

Basic Instruction 50.3%

46.4%

Teacher Salaries 34.6%

29.2%

Added Needs Instruction 11.8%

12.3%

Ops and Maintenance 10.6%

10.6%

Instruct. Staff Support 10.2%

11.0%

Administration 9.9%
11.0%

GPPSS Top 70 Largest District Avg.

GPPSS in 30th Largest in State
Financial Transparency Series – Employee Direct Compensation
 A Word About Fund Equity
18

• WHAT IS FUND EQUITY

• HOW DOES GPPSS COMPARE TO OTHERS
• FUND EQUITY TRENDS AT STATUS QUO
 What is Fund Equity?
Most Common Reference is to the General Fund‟s Equity
19

The accumulated
revenue of a fund that Total Assets less Total
has not been allocated Liabilities.
for any expenditure

It is NOT a cash
account.

Financial Transparency Series - Fund Equity

 Fall 2008 Fund Equity Benchmark Data
Fund Equity Fund Equity
Total General
District Name Before as % of
Fund Revenue
Reserves Revenue
Bloomfield Hills School District $23,749,111 $91,195,105 26.04%
Farmington Public School District $35,015,827 $142,211,296 24.62%
Rochester Community School District $33,776,449 $153,665,046 21.98%
Troy School District $29,807,150 $135,868,002 21.94%
Birmingham City School District $22,065,027 $110,376,325 19.99%
Grosse Pointe Public Schools $20,236,956 $107,157,294 18.89%
East Grand Rapids Public Schools $4,992,310 $27,846,958 17.93%
City of Harper Woods Schools $1,957,883 $12,217,750 16.02%
Ann Arbor Public Schools $31,920,873 $200,656,832 15.91%
Grosse Ile Township Schools $2,681,955 $19,240,093 13.94%
Forest Hills Public Schools $13,294,343 $98,049,177 13.56%
Chippewa Valley Schools $16,444,437 $124,994,272 13.16%
West Bloomfield School District $5,215,000 $71,752,320 7.27%
Plymouth-Canton Community Schools $10,582,739 $165,339,891 6.40%
Northville Public Schools $3,860,696 $62,791,020 6.15%
Michigan School Business Officials (MSBO) organization recommends 15-20% General Fund Equity
Financial Transparency Series - Fund Equity 20
 GPPSS History of General Fund Equity
Granholm Cuts of Oct. 2009 Consume $2.6MM
21

20.0%

Percentage of Expenditures
$20,000 19.0%
Fund Equity in 000‟s

18.0%
$18,000
17.0%
16.0%
$16,000
15.0%
$14,000 14.0%
13.0%
$12,000 12.0%
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009
Fund Equity Value Fund Equity % of Expenditures

Financial Transparency Series - Fund Equity

 With No Corrective Action GPPSS
Will be in Deficit Position in Two Years
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$25,000 25.0%
$20,000 20.0%
$15,000 15.0%
$10,000 10.0%
$5,000 5.0%
$0 0.0%
$5,000 -5.0%
$10,000 -10.0%

2007
1999

2000

2001

2002

2003

2004

2005

2006

2008

2009

2010

2011
Fund Equity Value Fund Equity % of Expenditures

Financial Transparency Series - Fund Equity

 2010-11 Budget
Development Process
23

• WHERE WE ARE NOW

• D E V E L O P ME N T P A R A M E T E R S
• DISTRICT GOALS
• PROCESS AND SPECIFICATIONS
• TIMELINE
 Completed Activities Date
Board agreement on Staff Utilization and Allocation process for 2010-
September
1011.

Administration to deliver completed Distribution and Funding Sources

October
tabs of current year (2009-10) Staff Utilization Utility

Administration to deliver recommendations for how to increase

density in electives/specials at all levels and completed Utilization tab November
Staff Utilization Utility.

Administration to report on evaluation of current utilization rates of

all job functions and propose, with supporting logic, ideal utilization November
rates for 2010-11.

Administration to deliver to Board recommendation for class size

November
guidelines and any special program designations for 2010-11.

Deliver first 2010-11 budget projection using the Budget Modeling

December
Utility

Board Work Session on Budget Development Parameters January

24
 What is the purpose of Budget Development
Parameters policy (Policy 6220)?
25

Articulates “the preference of the Board in advance

of budget development to avoid ambiguity and to
allow the community to have a clear view of the
budget development process from its inception.”

Identify specific Be as specific as

Identify particular
goals and possible in terms
budget related
objectives for of the objectives,
strategies to
investment or but allow for
pursue or avoid
reduction flexibility
Budget Decisions Must Not Negatively Impact Ability
to Achieve District Goals
26

District Goals Are Clearly Stated in

Strategic Plan

Goals Are Non-Negotiable

• If budget and staff decisions
threaten achievement of goals
then our tactics must change.
 GPPSS District Strategic Plan Goals
27

Provide value to all community

stakeholders by offering
programs & services that meet Promote the achievement of
the needs of the district, are every student at the highest
cost effective and enhance the level of their individual
reputation of the district and the abilities.
community.

Continually improve
and optimize the Cultivate in each
Create a dynamic and
resources of the student a sense of
safe learning
district including: responsibility for
environment
people, processes, his/her own learning.
facilities and finances.
 Core Tenets of the Budget Process
28

Re-evaluate all Tactics to ensure

efficient achievement of Goals

No Consistent,
Articulated Transparency
investment logical,
decision logic and input
automatically prioritized
for all throughout
“rolls methodology
investments process
forward” of investment
 Budget Development Procedure
29

 Maintain established timeline.

 All budget proposals must be a
balanced, supported by a balanced
Budget Modeling Utility and Staff
Utilization Utility
 Each budget proposal should be
evaluated holistically by all parties (Board,
Administration, residents, employees,
etc).
 Specific Budget Parameter Call-Outs
30

Staffing to Enrollment and/or

In-Year Reductions
Caseload Methodology

Exemption from Zero-Based

Class Size Guidelines
Methodology (Extra-Curricular)

Other Class Size Related Items Special Program Designations

Elementary Program Offerings – General Operational Cost

Multi-Age, Stacking, Looping or Efficiencies or Revenue
Related Enhancements

District Bargaining Unit (Union) Building Administration Staffing

Agreements Levels
 Pending Activities Date

Board passes Budget Development Parameters Resolution January

Delivery of first Balanced Budget Proposal to Board February

If necessary and pending Board, Community or Administrative March -

feedback, deliver Revised Balanced Budgets June

Administration proposes any required Staff Layoff lists for

April
Board approval (agreement on staff call back procedure)

Budget Hearing and Board of Education Budget approval June

Update on enrollment and funding against projections July

Recommendation for approval of any call backs August

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 What Can You Expect and Do?
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 Inform yourself of the issues

 www.gpschools.org; Facebook; Twitter

 Financial Transparency Series

 Various Financial Reports

 Attend Meetings, Watch on TV, Listen on iPod

 Regular Board Meetings and Work Sessions

 I will Present at Any Event (PTO‟s, Booster Groups, etc.)

 Seminar and Group Meeting Sessions

 Share your opinions and ideas

 schoolboard@gpschools.org

 Ask for a meeting or attend a meeting

 Summary: Solving problems requires
identification of root cause. Finding root cause
is NOT synonymous with assigning blame.
Root Cause: Assigning Blame: Solutions:
Funding Resist the Will not come
mechanism not temptation to without pain and
keeping pace assign blame and sacrifice, but
with rising focus on must be
Human solutions approached
Resources Costs available to us constructively
locally

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