East Lansing Public Schools Financial Strategies Past, Present and Future

State Budget Crisis Michigan continues to lose jobs. 60% of the jobs lost are in the manufacturing sector. The State’s economy and revenue picture will not improve until the State’s job performance begins to turn around. Income and sales tax collection estimates continue to decline as a result of the economy and job loss.

Michigan’s Economy

Impact On State Revenues Due to the downward revision in revenue estimates, the State’s General Fund and School Aid Fund have been adversely affected. The FY General Fund Budget is in deficit by $598.1 million The FY School Aid Fund is in deficit by $349.6 million

History of Foundation Allowance In the Foundation Allowance increased from $6,500 to $6,700 In the Foundation Allowance stayed at $6,700 then a midyear cut resulted in a loss of $43 per student. In the Foundation Allowance remained at $6,700 with a potential cut of $200 per student, taking Michigan Schools back to Foundation Allowance With a stagnant Foundation Allowance and rising costs, our district doesn’t have many options left to handle these reductions.

State Budget Crisis The State needs to address the structural deficit if it’s going to solve the schools problems. The current budget crisis is not a spending problem, it’s a revenue problem. Proposal A created tax reform. Revenue is now based on per pupil allocation and limited local tax authority. Revenues erode quickly with declining student enrollment.

What Happens Next? The Constitution provides that the Governor shall recommend to the Legislature a plan to eliminate the deficit. The school aid fund deficit would be eliminated by a pro-rata reduction in state aid. The Governor triggered a reduction on November 5 th. The Legislature now has 30 days, until December 5 th to enact an alternative method to eliminate the deficit. The announcement has now been delayed until December 10 th.

What are the Choices? $196 per student pro-ration = $700,000 Some reduction of 20j money and a $60 per student pro-ration = $509,000 Reduction of some categorical and a $70 per student pro-ration = $250,000 Pause in the income tax reduction? Program cuts – Laptops for 6 th graders?

When Will This Happen & What Is the Impact? If the Legislature does not override the Governor’s executive order cut, the reduction will begin with the December 20 th state aid payment. The estimated loss is between $250,000 and $700,000 and six months into our fiscal year. We have planned for a $575,000 reduction

What Should We Do? Stay Tuned!

How Will School Districts Cope? The Legislature knows that school districts have over $850 million in accumulated fund equity – use it – that’s what it’s there for – the “rainy day” is finally here. ELPS has 8% fund equity, far below recommended amounts. The Legislature is also concerned with the size of pay raises granted school employees – 3% and more in some school districts. In other words, there is not much sympathy

Quadruple Whammy? Declining Enrollment 20j categorical reduction Per pupil pro-ration of the foundation allowance Minimal Fund Equity

East Lansing Public Schools Response? The District has been systematically reducing it’s budget over the past several years The budget needed to be reduced by $4.2 million Reorganized the district which included closing an elementary school Privatized custodial staff Reduced Administrative costs by 18.35%

First Revision of the Budget Review of the December Revision to the Budget

Review of the Budget Cuts Administrative Reductions

Budget Cuts Continued… Instructional Reductions

Budget Cuts Continued… Operational Support Reductions

Budget Cuts Continued… Pupil Support Reductions

Budget Cuts Continued… Revenue Enhancements

Budget Cuts Summarized

Planning vs. Actual

What About ? For FY 04-05, school aid revenues must grow by $440 million to just reach 2004 levels. If this happens, there will be no new revenues but just enough to fund at a flat foundation level. For this to happen, the economy needs to improve soon. The BEST CASE SCENARIO for 2005 is that there will be no new money and another year of austerity.

Budget Planning Revenue Assumptions Foundation Allowance : $200 per student pro-ration reduction continues Enrollment – 70 Student Decline Maintain Fund Equity at 5% - 10% Range Successful Renewal of Existing Millages

Budget Planning Expenditure Assumptions Salary & Wage Increases – Step Only Health Insurance – 15% increase Other Benefits – 10% increase Retirement Rate: 15% of Payroll, an increase from 12.99% Utilities – 10% Increase All other costs remain fixed – capital outlay

Forecasting of Revenue vs. Expenses Expenses are increasing while revenues are decreasing

General Fund Budget

Budget Reductions

FY Where Do We Go From Here? Enrollment and Schools of Choice Revenue Enhancements Level of Fund Equity Where do cuts come from?  Administration  Instruction  Pupil Support  Operations  Athletics

June 2004 Annual Election

Ballot Election of three school board members Renewal of Hold Harmless Mills on Homestead and Non-Homestead Property Renewal of 18 Mills Operating Millage Non-Homestead Property Renewal of Sinking Fund Mills

And Finally….. Questions …… Comments ……. Direction …….