1. 1 A Review of MCPS Budget Category 12 Office of Legislative Oversight Report 2012-2 Presentation to Montgomery County Board of Education Fiscal Management Committee January 9, 2012

2. 2 Category 12 Expenditures

3. 3

4. 4 Category 12 Expenditures As Percent of Total Operating Budget (Tax-Supported) FY0318% FY1223%

5. 5 FY12 Category 12 Expenditures Group Insurance Active 46% FICA 21% Group Insurance Retiree 10% Retirement 15% Other 8%

6. 6 Retirement Costs

7. 7 MCPS Employees’ “Core” Pension Benefit 77% (mostly teachers) in pension plan funded and administered by State 23% (mostly non-teachers) in pension plan funded by County and administered by MCPS

8. 8 MCPS Employees’ “Supplemental” Pension Benefit All permanent employees receive pension supplement funded by the County and administered by MCPS

9. 9 FY03$16.7 million FY12$77.8 million MCPS’ Share of Pension Contribution

10. 10 Increase in Pension Fund Contribution Caused By: Salary increases Growth in workforce size Lower than assumed investment performance 2006 plan enhancements

11. 11 Liabilities ($ obligated to pay) Assets ($ in the fund) = Funded Ratio

12. 12 MCPS Pension Fund Funded Ratio FY03102% FY1170%

13. 13 Decrease in Funded Ratio Investment losses Liabilities Assets 2006 plan enhancements

14. 14 Future Pension Costs MCPS’ actuaries project: Minimal change in FY13 Increased cost in FY14 and FY15

15. 15 Group Insurance

16. 16 Group Insurance Funds Revenue: primarily employer and employee premium contributions Expenditures: primarily health care claims

17. 17 MCPS Group Insurance Fund Expenditures FundFY03FY12 % Increase Active Employee $131.4 million $260.7 million 98% Retiree $39.9 million $84.6 million 112%

18. 18 Group Insurance Budgeting Challenges Changes in claims experience Calendar vs. fiscal year Time between budget development and start of fiscal year

19. 19 Active Employee Group Insurance Fund FY11 Beginning Fund Balance (July 1, 2010) $8.5 million Fund Activity During FY11 Revenue$263.4 million Expenditures$250.3 million Difference$13.1 million FY11 Ending Fund Balance (June 30, 2011) $21.6 million

20. 20 Active Employee Group Insurance Fund Surplus Monthly data show expenditures trending lower than projected Cumulative expenditures $7.6 million lower than projected midway through the fiscal year In February/March, actuaries advised MCPS that a significant year end surplus was likely

21. 21 Active Employee Group Insurance Fund Fiscal Year End of Fiscal Year Balance Balance as % of Expenditures FY08$11.8 million5.6% FY09$2.8 million1.2% FY10$8.5 million3.5% FY11$21.6 million8.6%

22. 22 Education Committee Recommendations

23. 23 Recommendations for Council Action Request BOE submit supplemental information to Council in April and October of each year Integrate information into annual budget decision making and ongoing oversight

24. 24 April Estimated future pension contributions Plan to achieve desired pension funding ratio Budgeted vs. actual group insurance data Projected year-end insurance fund balances October Budgeted vs. actual Category 12 expenditures Summary of intra-Category 12 transfers Explanation of need for transfers Additional Information

25. 25 Category 12 cost drivers and expenditures Status of pension “funded ratio” Fund balance policy for group insurance Education Committee Discussion Issues

26. 26 A Review of MCPS Budget Category 12 Office of Legislative Oversight Report 2012-2 Presentation to Montgomery County Board of Education Fiscal Management Committee January 9, 2012