BOARD OF EDUCATION Finance Presentation

1. BOARD OF EDUCATION Finance Presentation Thursday, February 9, 2012

2. Agenda • 2011-12 Budget Amendment • 2012-13 Budget Discussion • Summary

3. 2011/2012 Budget Amendment - Revenue • Decrease in projected property tax revenue. • Increase assumption of prior year adjustment from state aid. • Federal grant revenue increased to reflect approved grant awards. • Increase Tuition revenue charged for non-resident Special Education students to reflect amount collected to date. • Increase in state foundation allowance to account for greater than anticipated student count. • Total amendment increases revenues by $439,220

4. 2011/2012 Budget Amendment - Expenditures • Wages and fringe benefits adjusted to better reflect current staffing levels. • Federal grant expenditures were increased to reflect approved grant awards. • Increase in tax abatement line item as we have spent 95% of our budget to date. • Transfer $1,750,000 to Property Maintenance Fund • Total amendment increases expensed by $1,927,709

5. 2011/2012 Revenues

6. 2011/2012 Expenses

7. 2011/2012 Fund Balance • Fund Balance assumes 100% use of carryover money. • Carryover added as expense with Budget Amendment #1 in the amount of $2,188,683

8. Budget - History

9. 2011/2012 Budget Amendment Summary

10. 2012/13 Budget Development • Budget Timeline • Significant Impact Items • Negative • Positive • Fund Balance

11. 2012/13 Budget Timeline

12. Significant Impact Items • Foundation Allowance • Enrollment • Retirement Rate • Kindergarten • ARRA Edu-Jobs • Best Practice Money • MPSERS Categorical • Compliance Costs • Collective Bargaining • Facility Needs

13. Generated for each student and accounts for over 83% of all revenue • Comprised of three components • Non-Homestead Millage • Hold Harmless Millage • State of Michigan

14. EnrollmentProjections Projected studenthead count (Sept. – Sept.)increase/ (decrease) is a follows: Projected student blended count increase (decrease)is as follows: • 10/90 Blended Count • 10% previous February Count • 90% of current September Count

15. Blended Count History and Projections

16. Declining Enrollment Impact

17. Retirement Rate Increases Note: * Rate for Pension Employees hired prior to July 1, 2010 ** Rate for Pension Plus Employees hired after July 1, 2010. Both rates will be adjusted down by 3 percentage points if the injunction in McMillan et al. v. MPSERS et al. preventing the use of the 3% employee contribution is lifted.

18. Retirement Rate Impact • Assuming Wages stay the same, the retirement rate increase for 2012/2013 will cost an additional $780,000

19. 2012/ 13 Kindergarten Programming • Beginning 2012-2013 school year, Kindergarten will be funded with a full foundation allowance for a full day program and ½ the foundation allowance for a ½ day program. • The decision to move to a full day Kindergarten program will cost an additional $650,000 • Maintaining the currently Kindergarten program would result in a loss of $1,227,000 of revenue.

20. Elimination of One Time Money

21. Summary of Significant Impact Items

22. Other Impact Items – Unknown Costs • Compliance Costs • P.D, Software, Evaluation, etc… • Contract Expiration/Collective Bargaining • Unclassified Employees • ROEA – Teachers • ROESA – Support Personnel • Facility Needs • 2011 Facility Assessment identified $20 million worth of projects

23. Facility Needs • Facility assessment estimated the cost of the many building as site needs: • The District has no funding source to address the identified building and site projects.

24. Facility Needs Funding Options • Sinking Fund Millage • Voter approval required • Legally can levy up to 5 mills for 20 years • Royal Oak Schools would only seek no greater than 1 mill for 10 years. • Provides stream of tax revenue with no interest costs • Used for major building renovations and repairs • Property Sales • Market dependent • Finite source

25. Facility Needs Funding Options 3. Bond Issue • Voter approval required • Provides a one-time influx of funding • Interest costs are incurred • Used for major building renovations and repairs • Millage levied to pay principal and interest 4. Find Funding Within General Fund Budget • No millage election • Deeper program cuts must happen to free up funding • Will be insufficient to address needs

26. The Flip Side – Positive Impact Items * Savings is subject to legal interpretation of PA 152 of 2011

27. Positive Speculation* * Based on comments from Lansing suggesting no additional cuts to K-12 education will occur for fiscal year 2012-12

28. Fund Equity • Importance • Cash Flow • Prevents borrowing • Interest revenue • Emergencies • Target Goal • Auditor’s recommendation of 15% • Board of Education established target of 15% • Appropriate Use • One-time money • Designated for specific purposes • Not for on-going expenditures

29. Summary Scenario – A* * Does not include Positive Speculation amount. ** Assuming $53 million in revenue, fund balance would be 9.8%

30. Summary Scenario – B* * Includes Positive Speculation amount. ** Assuming $53 million in revenue, fund balance would be 16.6%

31. Possible Action Steps • Initiate Process to Develop Significant Expenditure Reductions for 2012-2013 • Continue to look at line items savings, but do not develop potential significant expenditure reductions • Decide to use a defined amount of fund equity to address most critical capital need(s) • Other