Making Sense of School Finance Janet Roberts, APR Community Relations Director Huron Valley Schools

1. Making Sense of School Finance Janet Roberts, APR Community Relations Director Huron Valley Schools Money Talk

2. Prior to Proposal A • Districts received most of their money from property taxes. • You could determine a district's financial position by looking at 1) the number of mills a district levied, 2) the size of the district's tax base, and 3) the number of pupils the money had to support. • Because districts varied in their ability to pass millages and how developed their community was, each school district had a different level of funding per pupil, ranging thousands of dollars. • Taxpayers were overburdened by their property taxes each year. Proposal A was designed to change this.

3. Proposal A Enacted 1994/95 • The state calculated each district's 1993/94 per pupil revenue. The state's commitment was to guarantee that each district received the same per pupil dollars as the prior year plus a small increase for inflation. • To receive this guarantee, a district must levy 18 mills on industrial and commercial property (no levy was required for residential property). After the district collects the 18 mills, the state supplies the difference to bring the district to the total guaranteed amount.

4. Hold Harmless Millages • A significant problem with this plan was that all the districts were at such different per pupil funding levels and some districts were so high the state could not afford to guarantee the full amount. • In order to make this plan work, the state modified the guarantee for certain high spending districts. • For these high spending districts, the state made the same guarantee of the per pupil spending from the prior year plus a small increase for inflation, but only up to $6,500 per pupil. • If a district was above $6,500, they were given the authority to ask their voters for a millage to bring them up to their full per pupil spending levels—HoldHarmless Millages

5. Inequities Exist Today • Unfortunately, the inequity in funding noted before Proposal A still exists today. • This is because a snapshot was taken in 1993/94. If a district was above $6,500, they were able to ask residents for a millage, those below $6,500 were not.

6. Quick Guide to Proposal A • Passage of Proposal A in 1994/95 resulted in significant changes in funding for school districts • Funding is on a per pupil basis • Per pupil allocation is called the "Foundation Allowance" • Foundation Allowance varies by school district • State guarantees the Foundation Allowance in 94/95 up to $6,500 if district levies 18 mills on commercial /industrial property • School districts whose Foundation Allowance was greater than $6,500 in 93/94 are allowed to levy millages against residential property • Current law does not provide a mechanism to allow districts with lower Foundation Allowances to catch up to districts with higher Foundation Allowances

7. Example from Huron Valley of Property Taxes Comparison • Note: Separate from the above, the district does levy 4.9773 mills for repayment of the construction debt.

8. Pre & Post Proposal A Millage Huron Valley Schools’ Example

9. Definitions & Calculations • A mill equals one dollar of tax per $1,000 of taxable value. • Taxable value is the lower of the State Equalized Value or the capped value (the taxable value times the lessor of the rate of inflation, or 5%). The State Equalized Value is one-half the market value. • To find the amount of tax, multiply the taxable value by the millage rate and divide by 1,000.

10. More Information • The Foundation Allowance consists of the locally raised property taxes plus state aid. • The sources of revenue for the state’s contribution to the Foundation Allowance is derived from a mix of taxing sources, including but not limited to, a statewide property tax of 6 mills on all property (homestead and non-homestead), a state sales and use tax, a real estate transfer tax and a tobacco tax. • The statewide millage has moved to a 100% summer collection instead of a summer and winter collection.

11. Funding Realities • Cost of doing business continues to increase in excess of revenue increases • Districts have minimal ability to significantly increase revenue • The state controls 85-90% of a District’s revenue

12. Huron Valley Schools’ ExampleRevenue / Expenditure History Revenue/Expenditure History Years Ended June 30 (In Thousands) *ESTIMATED

13. Huron Valley Schools’ ExampleProjected Revenue 2006/2007 General Fund 83.1% of our revenue controlled at the state level *Funded through State and Local sources

14. Huron Valley Schools’ ExampleFoundation Allowance – Source of Funds

15. Foundation Allowance Growth • Districts must manage their general fund budget based upon the growth on this allowance as dictated by the state. • The growth in taxable value has no impact on the total revenue growth in a district’s general fund. • Taxable value growth does assist in increasing revenue for Building and Site Sinking Funds, Bonds and in the repayment of long-term debt in the Debt Retirement Fund, however.

16. Huron Valley Schools’ Example2006/2007 General Fund Expenditures by Object Other 2.9%

17. Huron Valley Schools’ ExampleSTABILIZATION FUND BALANCE • The Stabilization Fund Balance plays a critical role of ensuring the District’s financial stability. This fund was developed: • to provide a temporary safety net in the event of unanticipated shortfalls; these funds could allow us an opportunity to complete the semester, year… while we give thoughtful consideration on how to permanently offset an unanticipated shortfall, • to help reduce the cash flow borrowing required each year, thereby reducing interest expense, and • to enhance financial credit ratings, further reducing interest expense.

18. Huron Valley Schools’ ExampleStabilization Fund’s Effect on Borrowing Stabilization Fund’s Effect on Borrowing Year Ended June 30 *Estimated 9% for 2005/2006 **Estimated 7% for 2006/2007 ***Estimated need for borrowing in 2006/2007

19. Huron Valley Schools’ ExampleBudget Cuts Over 7 Years

20. PR Strategies • Why should your audience care? • Quantify the issues of funding for your district • Develop a communications plan • Revise as needed • Evaluate • Explain it again!

21. Get out the toolkit • Communications Tools • Publications • District and building newsletters • Letters home and letters to the editor • Articles in area newsletters • Library • Township • Chambers of Commerce • Video and educational/community cable • Web site, email and listserv • Parent groups • Ambassadors

22. Develop A Communications Plan • What is the goal of the plan? • To proactively address the issue of funding and its impact; counter any negative impact • Under riding theme • Commitment to accountability—we take our role as stewards seriously

23. The Communications Plan • Issues • How, what & when to communicate • To whom • How to show we have and will continue to be fiscally responsible • How to demonstrate we preserve teaching and learning • How to continue to enhance our image • What does the future hold

24. The Communications Plan • Actions • General Actions • Designate spokespersons • All media go through Communications Office • Continue current/planned PR

25. The Communications Plan • Actions • Staff • Create “7 Questions” document for Admin/Board • Superintendent messaging • Notify leadership team and supply talking points • Ask leadership to monitor, evaluate reactions • Notify all staff (staff presentations) and regular updates • Encourage all staff to counter misinformation

26. The Seven Questions • Provide leadership with “Seven Question” review of the issue • Allows you to create concise, factual overview • Think in terms of who, what, how, why, etc.

27. Huron Valley Schools’ Example7 SAMPLE BUDGET QUESTIONS • Are we using fund balance to address budget shortfalls? • Is there a reduction in Administration? • How has the new construction impacted the budget? • Can we close schools? • Have we taken advantage of savings in the year-round program? • What have we done to prepare ourselves for the financial challenges we face? • How will we continue to provide a quality teaching and learning environment?

28. The Communications Plan • Actions • Community • Inform key stakeholders of overview and steps • Superintendent Guest Column in local papers • Article in District newsletter • Articles for building newsletters • Video messaging

29. The Communications Plan • Actions • Parents • Reaching parents with your message • How does this affect me/my kids? • Explaining the classroom impact • Class size increases • Text books and supplies budgets trimmed • Changes in schedules, start times • Programs cut • Staff reduced • Transportation and other services decreased

30. Telling Key Stakeholders • Reassure them Huron Valley Schools is committed to its accountability to the community—we take our role as stewards of the public trust very seriously. • In talking to community members, share the goals and direction district will pursue this year.

31. Reaching other stakeholders • Key communicators • Community • Business • Religious • Municipal and other local government • Vendors

32. Revisions Along the Way • Inform key leaders/spokespeople and staff of any changes as new information arises. Let buildings share with parents. • Communications Dept. shares with community. • Integral to this plan is sticking to the talking points, referring all media inquiries to the Communications Department and reinforcing the positive attributes of the District. • Consistent messaging.