S PRING 2010 B UDGET UPDATE AND PROJECTION FOR THE P UBLIC S CHOOLS OF P ETOSKEY Kent Cartwright, CPA Chief Financial Officer Public Schools of PetoskeyMarch 18, 2010

S YMPTOMS AT THE NATIONAL AND S TATE L EVEL

S TATE BUDGET PICTURE

FY SAF R EVENUE 18 House Fiscal Agency : January 2009 State sales tax, state income tax, and state education property tax are the three largest sources of SAF revenue. Millions of Dollars Source: January 2009 Revenue Estimating Conference.

GF/GP C ONTRIBUTION TO S CHOOLS 19 House Fiscal Agency : January 2009 FY GF/GP contribution to schools remains at a very low level compared to past years.

B ACK AT THE HOME RANCH – WHAT THINGS LOOK LIKE AT PSP

E VERY Y EAR ITS G LOOM AND D OOM, YET EVERYTHING SEEMS TO TURN OUT OK. W HAT ’ S UP WITH THAT ? A budget is the financial roadmap for the District. If you don’t like the destination, you make changes so you end up where you want to be on that map.

S O WHAT CHANGES HAVE BEEN MADE TO OUR BUDGET ROADMAP ? The District has cut $6.5 million out of the budget over the past 10 years. $6.5 million is the equivalent of 70 teachers, 100 busses, or a normal sized elementary school. Fund Balance has still declined from its high of $3.7 million to $1.6 million. Employees have taken less than inflationary wage increases and have absorbed more of their own health care costs. Last spring’s budget cuts were designed to get the district through before additional cuts had to be enacted. That plan has been derailed due to much higher than expected cuts in State Aid funding.

E NROLLMENT D ATA 1999 THRU 2012

G ENERAL F UND - A LL R EVENUE S OURCES – Property Taxes State Sources Local Sources Federal Sources ISDTransfers In

G ENERAL F UND E XPENDITURES –

S O W HAT ? Salaries and Fringes make up 80% of any school district budget. Revenue is fixed; State Aid does not fluctuate significantly without legislative action We are not factories, where we can just crank out a few dozen more kids and dump them on the market to make quick cash.

C URRENT P ROJECTIONS WITH N O C HANGES Revenue$25,969,864$24,212,751$23,693,155 Expenses$25,575,155$26,052,080$26,564,846 Profit / (Loss) $394,709($1,839,329)($2,871,691) Expected Fund Balance $2,030,091$190,762($2,680,929)

W HAT A BOUT …. State Aid? Student count? Health Insurance Rates? Salaries & Wages Revenue Sharing Projected $265 decrease in and $-0- increase in Budgeted decline of 12 kids both years. Cumulative loss since of 163 students. Increase for all health care of 10% each year. Steps included in projection. No other pay increases included. 2 years of payment in revenue figures. Drops to $575,000 each year thereafter.

W HAT A BOUT ….G RANT FUNDING AND FEDERAL STIMULUS Grant funding reduced by 1/3 rd starting in This will impact our At Risk and Title I programs significantly. State funding for includes $117 per pupil of ARRA funds that will need to be replaced in just to stay even. There is some discussion about the State trying to capture unused ARRA funds for 11-12, but it is too early to estimate any chance of success on this proposal.

M ORE ABOUT F EDERAL STIMULUS We are scheduled to receive approximately $2.1 million in federal stimulus funds. As a result of the $2.1 million, the state is reducing their normal funding to PSP by $1.9 million. The difference of these two, $200,000 can be considered “new” money. However, it has significant restrictions on its use. It also brings a significant increase in reporting responsibilities at all levels (classroom, building, and District).

R ACE TO THE T OP The grant amount for PSP is expected to be $125,000. if the grant is awarded in the second round. The Board has passed the resolution agreeing to participate in the grant, pending final grant documents being acceptable. There are concerns that the eventual total costs incurred due to the requirements of the grant will exceed the grant amount. We have not budgeted anything for this grant.

W HAT A BOUT ….R ETIREMENT R ATE AND PROPOSED RETIREMENT INCENTIVE PLAN Projection includes increases in retirement rate by 2.47% and 1.16% in & respectively. Projection assumes retirement incentive is not enacted. If incentive is enacted, approximately 41 staff members are eligible. If incentive is enacted, the retirement rate will increase an additional 3.0% each year for five years. The annual cost will be approximately $450,000 more than projected.

P UBLIC S CHOOLS OF P ETOSKEY Financial Results – 2002 through 2012

S UMMARY C ONTINUED For the current year, the Governor has rescinded the announced $127 per pupil cut; However, the initial cut of $165 per pupil will remain. That equals about $500,000 for PSP. Current forecasts indicate next year we will receive an additional cut up to $268, which will be on top of the above $165. That equals loss of an additional $800,000 for PSP. Lower State aid cut amounts have been discussed, but they all require some sort of tax increase. For this budget projection, we have conservatively assumed there will not be any additional revenue found for schools, and that a decrease of $265 will be enacted.

L OOKING F ORWARD Continued State economic struggles will keep school funding increases low. Annual cost increases at or above State school funding increases. Result – Annual trimming of the budget. The impact to the budget of a Federal Health Care system is unknown.

H OW T O O FFSET O UR C HALLENGES In the short term, maintain high MEAP scores = more students under Schools of Choice. Long-Range, make ourselves the Lighthouse District of the area. Do what you can to support your District Stay Positive, with yourself and with your co- workers, neighbors, and friends. Write letters to State legislatures regarding your opinion on school funding issues.

T IMELINE April 15: May 20: June 17: No later than June 30 Board Meeting – Possible discussion of budget projection. Revised Projection to Board. Budget reduction plan recommended. Board reviews and possibly approves budget reduction plan. Due date for Budget approval by Board.

Q UESTIONS

Q UICK F ACTS ABOUT PSP: Total Revenues – $26.5 million in General Fund $1 million in Food Service $0.6 million in Athletics $1.9 million in Capital Projects Funds (Sinking Fund) $2.6 million in Debt Service

Q UICK F ACTS ABOUT PSP: Current Fund Balances – $1.6 million in General Fund (3 weeks expenses) $17,500 in Food Service (1 weeks expenses) $83,000 in Athletics (7 weeks expenses; Accumulating for bleacher replacement) $3.1 million in Capital Projects Funds (Set asides for land contract payoffs & remaining Sinking Fund Projects) $259,000 in Debt Service (Set aside for Bond payments = $1.6 million)

Q UICK F ACTS ABOUT PSP: Average teachers salary: $61,000 Average teachers total cost:$93,075 Average years of service:14.5 years First year teachers salary (BA degree):$37, Year Teacher with Ph.D: $71,154 # of Teachers with: BA:13 BA+20:27 MA:80 MA+15:23 MA+30:16 Ed.S / Ph.D:4