SPRING 2010 BUDGET UPDATE AND PROJECTION FOR THE PUBLIC SCHOOLS OF PETOSKEY

Kent Cartwright, CPAChief Financial OfficerPublic Schools of Petoskey March 18, 2010

SYMPTOMS AT THE NATIONAL AND STATE LEVEL

STATE BUDGET PICTURE

FY 2008-09 SAF REVENUE

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.

$238

$144

$415

$423

$700

$729

$1,990

$2,010

$4,720

Other

Real Estate Transfer Tax

Tobacco Taxes

Use Tax

Lottery Transfer

MI Business Tax

Income Tax

State Education Property Tax

Sales Tax

Millions of Dollars

Source: January 2009 Revenue Estimating Conference.

GF/GP CONTRIBUTION TO SCHOOLS

$665.0

$587.0

$378.0

$421.0 $421.0$385.0 $377.8

$62.7$35.0 $34.9 $40.8

$249.4

$165.2

$198.6

$283.0

FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09

Mill

ion

s

19

Hou

se F

iscal A

gen

cy

: January

20

09

FY 2008-09 GF/GP contribution to schools remains at a very low level compared to past years.

BACK AT THE HOME RANCH – WHAT THINGS LOOK LIKE AT PSP

EVERY YEAR ITS GLOOM AND DOOM, YET EVERYTHING SEEMS TO TURN OUT OK. WHAT’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.

SO 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 2010-11 before additional cuts had to be enacted. That plan has been derailed due to much higher than expected cuts in State Aid funding.

CURRENT PROJECTIONS WITH NO CHANGES

09-10 10-11 11-12

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)

WHAT ABOUT…. State Aid?

Student count?

Health Insurance Rates?

Salaries & Wages

Revenue Sharing

Projected $265 decrease in 10-11 and $-0- increase in 11-12.

Budgeted decline of 12 kids both years. Cumulative loss since 04-05 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 09-10 revenue figures. Drops to $575,000 each year thereafter.

WHAT ABOUT….GRANT FUNDING AND FEDERAL STIMULUS

Grant funding reduced by 1/3rd starting in 10-11. This will impact our At Risk and Title I programs significantly.

State funding for 10-11 includes $117 per pupil of ARRA funds that will need to be replaced in 11-12 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.

MORE ABOUT FEDERAL 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).

WHAT ABOUT….RETIREMENT RATE AND PROPOSED RETIREMENT INCENTIVE PLAN

Projection includes increases in retirement rate by 2.47% and 1.16% in 10-11 & 11-12 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.

PUBLIC SCHOOLS OF PETOSKEYFinancial Results – 2002 through 2012

SUMMARY CONTINUED 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.

LOOKING FORWARD

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.

HOW TO OFFSET OUR CHALLENGES 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.

TIMELINE 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 2010-11 Budget approval by Board.

QUESTIONS