Aggregate Overview of Extension District Finances in Iowa * FYE16 Actual Revenue and Expenditure Data * FY 17 Projected Taxation Data December 20, 2016 By Craig Hertel

Presentation includes: Financial Insight into this $52 Million Combined Operation State of the Extension Districts on Revenues Comparison of District Expenses and its Components Introducing a Financial Health Index

Revenues -- Actuals FYE 2016 Total State Mean Median Maximum Minimum Total Tax Revenue 61.2% 67.1% 70.1% 95% 28% Other Revenue 2.1% 1.9% 1.2% 12% 0% Program Fee Revenue 21.9% 20.6% 18.6% 66% 3% Grant & Contract Revenue 14.8% 10.4% 4.1% 61% Total Revenue all Sources 100.0% 100%

Extension Law Taxation Caps FY 17 & 18 The Double Cap Issue: 2010 Population Dollar Cap Increases Each Year by Levy Rate   FY 2017 FY 2018 Less than 30,000 $6,000 0.3000 $ 231,000 $ 237,000 30,000 to 49,999 $7,000 0.2025 $ 272,000 $ 279,000 50,000 to 89,999 $9,000 0.1350 $ 346,500 $ 355,500 90,000 to 199,999 $15,000 $ 540,000 $ 555,000 More than 200,000 $25,000 0.0500 $ 800,000 $ 825,000

Tax Law – Effective Valuations: Translates into the aggregate District Taxable Valuation needed to avoid the double cap, the Levy cap: FY 2017 FY 2018 Less than 30,000 0.3000   $ 770,000,000 $ 790,000,000 30,000 to 49,999 0.2025 $ 1,343,209,877 $ 1,377,777,778 50,000 to 89,999 0.1350 $ 2,566,666,667 $ 2,633,333,333 90,000 to 199,999 $ 4,000,000,000 $ 4,111,111,111 Greater than 200,000 0.0500 $ 16,000,000,000 $ 16,500,000,000

Where Do Districts Stand in FY17 Tax Revenue? 59 Districts currently have a single cap - $ only 41 Districts now have the “double cap” – both $ and levy cap 22 of those districts can not raise even 75% of the dollar cap 10 of those districts can not raise even 50% of the dollar cap Another 12 Districts vulnerable to levy cap within 3 years if no significant valuation changes in their county Almost all of the Districts with these double cap challenges are in the “below 30,000 population bracket” with majority of counties below 11,000 in population NOTE: only 21 Districts have a $100,000+ cushion this yr.

Are Real Estate Taxable Values Increasing? Budget Year Total Valuation in State % Change FY 17 $ 153,537,709,312 4.4% FY 16 $ 147,057,683,315 2.3% FY 15 $ 143,812,456,827

Summary on Tax Revenues 1/3 ---of the counties levy 100% for Extension Education fund as well as levy for either Tort, Unemployment, or both 1/3 ---of the counties levy 100% of the Extension Education fund but did not levy for Tort Liability fund or the Unemployment Compensation fund this past year 1/3 ---of the counties did not levy to their first their cap -- $600,000 left just in the Extension Education fund

“Tax” Expenses – Actuals FY16 District Expenses as a Percent of Tax Sub-Fund Revenue Mean Median Maximum Minimum Standard Deviation Personnel Expense 72.4% 71.6% 109% 44% 12.4% Facility Expense 9.9% 8.7% 42% 0% 6.3% General Office Expense 12.8% 12.1% 24% 7% 3.8% Non-Fee Expense 2.9% 1.3% 23% 4.3% Residual: Net Gain or Loss 2.0% 4.1% -35% 10.7% Note: Tax sub-fund includes interest, rental, resale & other revenues too

What about the Double-Capped Counties Rev & Exp Structure? Hypothesis: As their taxation is limited, there would be a difference in the expenditure category mix Nope! Percentages in each category nearly identical to the whole set Implies good financial management – “We Make Do with What We Have”

Extension District Workforce District Employees Working with: Identified Working as: 100% Responsibility as: 100% Responsibility & Full-Time: Youth & 4-H 202* 137 92 Human Sciences 98 51 12 Agriculture & Natural Resources 76 24 15 Support Staff 186 168 75 Extension Educators 127 101 58 Associate Extension Educators 154 135 79 * Reviewing data, many front counter staff not identified working with youth. Therefore, this is a low number. As of 12.7.2016

Analysis of Wages & Salaries Medium 1/3 Low 1/3 High 1/3 Full & Associate Educators $4.6 Million 40%   49% 41% 36% Executive Director, County Manager $2.4 Million 21% 11% 20% 26% Support Staff $4.1 Million 37% 35% Other 3% 4% FY '16 All Districts Wages $ 11,529,000

What do Districts Spend to Staff the Front Counter & Phone? Support Staff $4.1 Million 36%   Coverage: 100 Districts x 40 Hours/Week x $ 14.00/Hr. Est. Average = $2.8 million (68%) Other Staff are Covering too: 100 Districts x 10 Hours/Week x $ 14.00/Hr. = $700,000 NOTE: This is wage expense only. Does not include employee benefits, travel or professional development expense.

New Ways – Example $ Ratios Ending Operating Account Balance FYE 16 Mean Median Maximum Minimum Standard Deviation As a % of Actual Tax Revenue for the Year 82.3% 75.3% 274% 30% 34.0% As a % of all Actual Expense for the Year 54.8% 53.5% 138% 23% 20.6%

Time for a Financial Health Index? Reasons For: Could be our equivalent to the bank’s stress test Early warning system Objective measure to help council members Natural next step of collected data and our financial system Accreditation metric Debt… Reasons Against: Agreeing on the criteria Would it be used? Do we need to know if a district is having financial issues? Would it ultimately lead to improved performance?

Financial Health Categories? “SEVERE” Use of Warrants to pay bills -or- Projection for year shows using warrants -or- Total Operating Account at FYE is 10% or less of budgeted expenses Implications – Considerations: Dissolving discussions Merger options MOU stipulations Authority to offer programs revoked (4-H, PPAT, etc) Mandatory financial SWAT team

Next Category of Concern “VULNERABLE” FYE operating account is 10-25% of projected expense -and- Decreasing % Operating Account carryover 1-2 years -and- Decreasing % Tax Sub-Fund balance -and- Personnel expenses shows lack of sustainability Rapidly draining Program Fee balances

One more level of concern… “Watch List” ?? Double-capped taxation -and- ?? Leveraged with debt Decreasing FYE operating account balances 3 straight years Other objective measures

AND – Other End of Spectrum! “Under-investing notation” Districts with good financial ability and capacity, BUT: Do not demonstrate investing in at least 3 of the 4 program areas, either hiring their own staff or working with multiple Field Specialists No plan to offer a comprehensive educational program plan within their financial means Easy, objective measures such as Extension Calendar indicates a lack of educational offering against set standards

Summary Taxation Revenue Source – What to Monitor Non-Taxation Revenue Sources – Closer Examination Expenses To Purposely Manage: Human Resources – Increased Skill Development of our: Educators/Associate Educators group Front Counter (Support Staff) group Management & Leadership group Facilities Continue to Improve All our Systems Impacting the $52 Million Field Operation