02/09/06 1 Shaker Heights City School District FINANCE FACTS 2006

02/09/06 2 The District: An Overview l People –5600 students PreK-12 –800 FTE employees –Teachers: average 16+ years of experience l Physical Plant & Operations –12 buildings (8 schools, 4 support) –900,000 square feet in buildings, 95 acres of grounds –50 buses transport public & private students/day l General Fund Budget –$82.1 million FY2006

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02/09/06 4 General Fund Expenses Total = $77.2 million

02/09/06 5 Program Allocation of Budget GENERAL ADMINISTRATION 1% BUSINESS SERVICES (includes physical plant operations, transportation & treasury) 21% SCHOOL BUILDING ADMINISTRATION 7% INSTRUCTION, PUPIL & TEACHER SUPPORT 67% CO-CURRICULAR ACTIVITIES 1% CENTRAL SUPPORT SERVICES 2% COMMUNITY & OTHER 1%

02/09/06 6 Detrimental Impacts on Revenue l House Bill 920 l Erosion of Tax Base l Tax Delinquencies l Phantom Revenue l House Bill No. 66

02/09/06 7 Revenue: House Bill 920 l Eliminates growth in school revenue from property taxes, even when property values rise. l Consequently, the District’s income remains flat.

02/09/06 8 Revenue: Tax Base Erosion l Deregulation of the Electricity & Natural Gas Industries (starting FY02) –Reduction of assessed value from % to 25% –Assessed valuation loss of $6.6 million –$946,000 in revenues lost per year –State reimbursement for 5 years (15 in some districts)

02/09/06 9 Revenue: Tax Base Erosion l House Bill No. 66 –Repeal of Tangible Personal Property Tax (starting FY06) »Phase-out over 4 years »Loss of $2 million/year in current dollars »Partial reimbursement for 4 yrs, then phased out

02/09/06 10 Revenue: Tax Base Erosion l Repeal of Inventory Property Tax (starting FY01) –Phase-out period accelerated from 25 to 13 years –Loss of $500,000/year in current dollars –No reimbursement l Repeal of Exempt Personal Prop.Tax (start FY04) –Reduction over 10 years –Loss of $300,000/year in current dollars –No reimbursement –Current year loss about $30,000

02/09/06 11 Revenue: State Support Decline l House Bill No. 66 –Elimination of Cost of Doing Business Factor (starting FY06) »6.26% supplement per pupil ($324/pupil in F06) »Phase-out over 2 years »Loss of $2 million/year in current dollars when fully implemented »Current Biennium Guarantee

02/09/06 12 Primary Cost Pressures l Salaries & Benefits l Unfunded & Underfunded Mandates l Energy Costs

02/09/06 13 Cost Pressures: Salaries & Benefits l Education is “people-intensive” vs. capital-intensive l District’s largest single expense l Negotiated contracts l Cost-of-living adjustments l Insurance

02/09/06 14 Cost Pressures: Mandates l Special Education –IDEA: Individuals with Disabilities Education Improvement Act –Out-of-District Tuition –Transportation –Tutors & Aides l No Child Left Behind –Testing –Recordkeeping and reporting –Intervention

02/09/06 15 Cost Pressures: Energy l Natural Gas –Supply & Demand Drive Price –Severity of Winter Drives Consumption – Monthly Bill Increase from $52,000 to $108,000 l Bus Fuel –Prices Fluctuate l Electricity –Growing Use of TechnologyIncreases Consumption

02/09/06 16 Revenues & Expenses (without reductions) (millions of $’s)

02/09/06 17 Alternative Revenue Sources Lottery State has used proceeds to supplant, not supplement revenue from other sources Property Reappraisal Triggers reduction in tax rate under HB 920; inside mills add less than 1% to school revenues Local Income Tax Traditionally the domain of City government Federal Government Not likely State Funding Not likely Increase in Tax Base Important, but revenue growth is long-range Modification of HB 920 Not likely DeRolph Decision A dead issue School Levy Last option

02/09/06 18 Operating Levy Cycles l Since HB 920 was enacted in 1976, the District has passed 12 operating levies. l From 1976 to 1983, the interval between levies was one or two years. l Since 1983, a three-year levy cycle has been the norm.

02/09/06 19 Taxable Value per Pupil $422,000 $345,000 $234,000 $230,000 $211,000 $196,000 $158, ,000 $158,000 Beachwood Orange Mayfield Solon Chagrin Falls Richmond Heights S. Euclid-Lyndhurst Shaker Heights CH-UH Warrensville Heights Source: Ohio Department of Taxation $516,000

02/09/ mills are needed in Shaker to yield the same amount of tax income per pupil as 1 mill yields in Beachwood 3.3 Shaker’s Taxable Value per Pupil Beachwood’s Taxable Value per Pupil $158,000 $516,000 Millage Yield Comparison

02/09/06 21 How much will the levy cost? $25.25 per month or $5.83 per week per $100,000 of market value

02/09/06 22 Effective Millage (Note-1977 through 1988 effective rates approximated) School taxes as a proportion of home values have remained constant for 30 years

02/09/06 23 Housing Values Schools are the #1 reason people move to Shaker Heights Since 1990, housing values have increased by 90%

02/09/06 24 Responsible Stewardship l Consistently “clean” annual audits –Numerous awards for excellence in financial reporting practices l Spending capped by Board since 1995 –All financial targets achieved through cost containment & reduction efforts l Aggressive pursuit of outside funding –Grants averaging $2.2 million/year –E-Rate funds: $500,000 cumulative –Special education reimbursements: $500,000/year

02/09/06 25 Cost Containment Measures l Cooperative Purchasing –Buses, supplies, food products, utilities, fleet insurance, vehicle fuel, computers l Energy Management –Window replacements, temperature controls, boiler improvements l Technology –Electronic distribution of data & documents, shift to fiber network, switch to state software for financial and student data l Efficient Operations –Ongoing savings from “right-sizing” in 1987, consortia for special and vocational education l Workers’ Comp & Health Insurance –Contingent premium Option: $1,100,000 savings –Implementation of PPO Health Insurance Plan –Workers’ Comp Retro Plan: $1,400,000 savings

02/09/06 26 Shaker Heights Households

02/09/06 27 Resources l  Finance & Audit Report  Auditor of State’s Report  FAQs  a question or report a rumor to