BOARD OF EDUCATION Finance Presentation Thursday, February 9, 2012

Agenda Budget Amendment Budget Discussion Summary 2

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 3

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 4

2011/2012 Revenues 5

2011/2012 Expenses 6

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 7

Budget - History 8

2011/2012 Budget Amendment Summary 9

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

2012/13 Budget Timeline 11

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

Generated for each student and accounts for over 83% of all revenue Comprised of three components 1.Non-Homestead Millage 2.Hold Harmless Millage 3.State of Michigan 13

Enrollment Projections Projected student head 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 14

Blended Count History and Projections 15

Declining Enrollment Impact 16

Retirement Rate Increases Note: * Rate for Pension Employees hired prior to July 1, 2010 ** Rate for Pension Plus Employees hired after July 1, 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. 17

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

2012/ 13 Kindergarten Programming Beginning 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. 19

Elimination of One Time Money 20

Summary of Significant Impact Items 21

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 22

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. 23

Facility Needs 24 Funding Options 1. 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 2. Property Sales  Market dependent  Finite source

Facility Needs 25 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

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

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

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 28

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

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

Possible Action Steps Initiate Process to Develop Significant Expenditure Reductions for 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 31