State of Michigan A Decade of School Funding and Finance The Effect on the Huron School District Dr. Rodney Green, MASB Consultant February 29, 2016
State of Michigan
A Decade of School Funding and Finance
The Effect on the Huron School District
Dr. Rodney Green, MASB Consultant
February 29, 2016
Introduction• Michigan Association of School Boards – MASB
• Representing the interest of boards of education and public school students for more than 60 years
• Offer a variety of services to local Boards of Education: Member Development, Board Self Evaluation, Negotiations and Bargaining, School Law and Policy
• Dr. Rodney Green, MASB consultant working with various districts since 2013. Former teacher, principal and administrator for 34 years in Durand, Greenville, Reese, Norway-Vulcan Area Schools, Grant Public Schools and East China School District
What has happened in the State of Michigan over the last several years?
• The Great Recession
• Decreased or Minimal Public School Funding
• Laws affecting Public Schools, Teachers, Employees and Unions
• Rising Employee and Employer Costs
• State Trends in Student Enrollments
The Great Recession
December 2007
to
Is it really over?
The Great Recession Began December 2007
⦿ Housing Mortgage Bubble Burst
⦿ Collapse of Financial Institutions
⦿ Stock Market Crash• Standard and Poor’s 500 Index fell 57%
⦿ Home and Property Values Plummet
⦿ Home Foreclosures
⦿Michigan Unemployment 50% Higher National Average
American Recovery and Reinvestment Act of 2009Invested $831 billion into the US economy
Michigan Property Values PlummetedHome prices fell approximately 30%Net worth dropped approximately $69 trillion dollars in 2007
Unemployment Rate SoaredNationwide, it peaked at 10% in October 2009 Michigan unemployment peaked at 15% in May 2009
The Great Recession Continues
Michigan Unemployment rate shown in blue
National Unemployment rate shown in gray
Recessions shown in gray bar
Michigan Unemployment Rate Compared to U.S.
CoreLogic's January 2015 National Foreclosure Report
U.S. foreclosure inventory declined 33.2 percent from January 2014Completed foreclosures have declined 22.5 percent from January 2014.
43,000 completed foreclosures nationwide in January 201555,000 completed foreclosures nationwide in January 2014
Completed foreclosures have declined every month for the past 37 consecutive months. But, before decline in the housing market in 2007, completed foreclosures averaged 21,000 per month nationwide between 2000 and 2006.
September 2008, there have been approximately 5.5 million completed foreclosures. Foreclosures now make up 1.4% of homes with mortgage (back to 2008 levels and in January 2014 it was 2%)
Home Foreclosure Crisis
Decreasing and MinimalIncreases to
Public School Funding in
The State of Michigan
Public School Funding
• State of Michigan controls school funding levels since the passage of Proposal A in 1994
• Revenues come into the state school aid fund mainly through sales and use tax, income tax, property tax, and lottery
• State controls Student Foundation Allowance • Pupil Count greatly determines the majority of
the district's funding• Student Foundation Allowances vary enormously
depending on location
YearFoundation Allowance
Percentage-/+
Difference2009-2010 Pupil Count Result
2008-09 $7,841 .60% $47 2,500 +$117,500
2009-10 $7,841 .00 $0 2,512 0
2010-11 $7,841 .00 $0 2,531 0
2011-12 $7,276 -7.21% -$565 2,442 -$1,379,730
2012-13 $7,180 -1.32% -$661 2,467 -$1,630,678
2013-14 $7,237 .79% -$604 2,541 -$1,534,764
2014-15 $7,287 .69% -$554 2,546 -$1,410,484
2015-16 $7,426 1.91% -$415 2,567 -$1,065,305
Total -$7,020,970
Huron School District Foundation Allowance
HURON SCHOOL DISTRICTFOUNDATION ALLOWANCE
HURON $7,426
Should the State of Michigan’s
investment in a child’s education
depend on where the child lives?
Yes or No ?
ROMULUS $8,542 RIVER ROUGE $8,505
DEARBORN $8,482 GROSSE ILE $8,474
TRENTON $8,426
RIVERVIEW $7,991
TAYLOR $7,873 FLAT ROCK $7,754
ECORSE $7,642
VAN BUREN $7,554
WOODHAVEN $7,492 HURON $7,426
ALLEN PARK $7,421 SOUTHGATE $7,391
WYANDOTTE $7,391
GIBRALTAR $7,391
LINCOLN PARK $7,391
That is exactly what occurs in Michigan
2015-2016 Student Foundation Allowance by area school districts
Downriver Area
GROSSE POINTE $9,864
ROMULUS $8,542 RIVER ROUGE $8,505
DEARBORN $8,482 GROSSE ILE $8,474
TRENTON $8,426 LIVONIA $8,169
NORTHVILLE $8,169 RIVERVIEW $7,991
TAYLOR $7,873 FLAT ROCK $7,754
ECORSE $7,642 CRESTWOOD $7,578
VAN BUREN $7,554 GARDEN CITY $7,517
WOODHAVEN $7,492 HURON $7,426
ALLEN PARK $7,421 SOUTHGATE $7,391
WAYNE-WESTLAND $7,391 WYANDOTTE $7,391
PLYMOUTH-CANTON $7,391 GIBRALTAR $7,391
DEARBORN HGTS #7 $7,391 LINCOLN PARK $7,391
Wayne County School Districts
BLOOMFIELD HILLS $12,004 BIRMINGHAM $11,924
SOUTHFIELD $10,971 FARMINGTON $10,045
GROSSE POINTE $9,864 WEST BLOOMFIELD $8,796
ROMULUS $8,542 RIVER ROUGE $8,505
DEARBORN $8,482 GROSSE ILE $8,474
TRENTON $8,426 LIVONIA $8,169
NORTHVILLE $8,169 RIVERVIEW $7,991
TAYLOR $7,873 FLAT ROCK $7,754
ECORSE $7,642 CRESTWOOD $7,578
VAN BUREN $7,554 GARDEN CITY $7,517
WOODHAVEN $7,492 HURON $7,426
ALLEN PARK $7,421 SOUTHGATE $7,391
WAYNE-WESTLAND $7,391 WYANDOTTE $7,391
PLYMOUTH-CANTON $7,391 GIBRALTAR $7,391
DEARBORN HGTS #7 $7,391 LINCOLN PARK $7,391
Additional School Districts: North of 8 Mile Road
The State of Michigan
New Laws
Impacted Public Schools,
Teachers, Support Staff
and
Boards of Education
PA 103 of 2011Prohibited Subjects of Bargaining for Teachers
This law prohibits Boards of Education to negotiate any of the following items;
• Teacher Assignment or Placement
• Teacher Layoff
• Teacher Recall Rights from Layoff
• Teacher Classroom Observation
• Teacher Performance Evaluation
• Teacher Discipline
• Teacher Discharge
• Teacher Performance-Based Compensation
• Limit Parent Notification of Teacher’s Performance
PA 152 of 2011
• Publicly Funded Health Insurance Contribution Act
• Caps annual employer payments for health insurance to
• $5,500 for single subscribers
• $11,000 for two person/couple subscribers
• $15,000 for full family subscribers
• Adjusted annually for inflation
•OR
• 20% of Total Health Insurance Costs
PA 54 of 2011Deals directly with any salary increases for
years of experience, salary increases for advanced educational degrees earned and increasing costs
for health insurance premiums
After a contract expires and until a successor contract is in place
⚫Wages and benefits are no greater than those in effect at the contract expiration
⚫Employees must bear the increased cost of health, dental, vision, prescription or other insurance benefits after the contract expires
⚫Payroll deductions are authorized for the increased cost of these benefits
Right to Work Law Employees now have right to not join
union
Association and Union Duescannot be collected through payroll
deduction
Public Acts 109-116 Financially Distressed School Districts and Early Warning Signs
● Signed into law by Governor Snyder in July 2015
● 171 School districts and charter schools are Financially Distressed
● Increased Financial Reporting to the State of Michigan
● Moves control from the Department of Education to the Treasury Department
● Can withhold state aid payments to school district who do not comply
● Less than 5% fund equity triggers new reporting
● Expanded and Mandatory Deficit Elimination Plans
● Treasury can stop payments and appoint Emergency Financial Manager, this would trigger loss of local control by the Board of Education
● This new law is viewed in Lansing as a proactive approach so that students are not negatively impacted
A total of 41 Michigan school district ended 2015 in deficit
A total of 13 Districts have been in deficit for 5 or more fiscal
years
Southgate Community Schools
Lincoln Consolidated Schools
Westwood Community Schools (Dearborn Heights)
Mt. Clemens Community School District
Hazel Park City School District
New Haven Community Schools
Clintondale Community Schools
Vanderbilt Area Schools
Mackinaw City Public Schools
Flint Community Schools
Bridgeport Spaulding Community School District
Detroit Public Schools
Pontiac Public Schools
Inkster and Buena Vista Schools were dissolved for poor fiscal management
What is Fund Equity?
Fund Equity is an indicator of the financial health of a school district. A
common misconception is that fund equity is surplus cash and therefore
should correspond to the district’s bank balance. Very simply stated, Fund
Equity represents the excess of a district’s assets over its liabilities.
Generally, the more equity a district has, the less short-term borrowing a
district has to do for cashflow purposes. The less borrowing, the less money
needed for interest payments. It is the goal of most Boards to maintain a
fund equity balance of between 10%-15%.
Currently, Huron Schools fund equity is 8%. Fund equity is best spent on
one-time expenses because it will deplete if spent on ongoing expenses.
The fiscal year for the school district runs from July 1 to June 30 of each
year. However, the school district does NOT receive funding for each fiscal
year until October 20th of that fiscal year. Therefore, funds are needed to
cover all expenses such as wages, insurance, supplies, equipment,
maintenance and so forth for July, August, September and October each
year.
What About the District Fund Equity?
Year Deficit or Surplus Fund Equity
2007-08 $ 98,624 $1,798,684 8.0%
2008-09 $ 189,770 $1,988,454 8.7%
2009-10 $ (33,468) $1,954,986 8.4%
2010-11 $ 33,032 $1,988,018 8.4%
2011-12 $ (256,629) $1,731,390 7.6%
2012-13 $ (47,583) $1,683,806 7.6%
2013-14 $ 48,356 $1,732,162 7.4%
2014-15 $ 116,064 $1,848,226 7.7%
It is Crucial to the Stability of the District to keep Annual Deficit Spending Under Control
HURON SCHOOL DISTRICT FUND EQUITY
HURON SCHOOL DISTRICTFUND EQUITY AND EXPENSES
Fund Balance
Huron Cannot Become a Deficit District
● 8% fund equity is a reasonable level of fund equity
● Huron Schools is able to save funds on interest borrowing
● The district should not consider qualifying as a Financial Stressed District
● The district finances should remain in control of the school district not the Department of Treasury
● The Board has a duty and responsibility to protect educational programs in and out of the classroom
Rising Employee and
Employer Cost
Rising Employee and Employer CostsTeachers/Staff• 20% of health insurance or Hard Cap • 3% of wages mandated by law for employee
contribution for retirement health insurance• Increased contribution to MPSERS• Higher health insurance deductibles, prescriptions and
office visit copays•School District• Pension cost for every district employee has increased
from 11% to 26%• Health insurance premiums continues to increase• Salary increases: step increases on years of experience • Salary increases: advanced educational degrees earned
YearSalary
ScheduleSteps
GrantedDegreeGranted
2007-08 2% entire scale Yes Yes
2008-09 2% entire scale Yes Yes
2009-101.75% steps 10 + above
1% Steps 0-9 Yes Yes
2010-11 1% entire scale Yes Yes
2011-12-2.5% steps 0-9
steps 10-25 no reduction Yes Yes
2012-13-3% steps 0-9
-2.1% steps 11-14 -1.25% steps 15 + above
Yes Yes
Review of Teacher Contract
YearSalary
ScheduleSteps
GrantedDegreeGranted
2013-14 No decreases No Yes
2014-15steps 0-14: +1.25% off scalestep 15 + above 1% off scale No Yes
2015-16 No decreasesstep 0 full
steps 1-25 ½ step
Yes
Review of Teacher Contract
School district pays pension cost for every employee including teachers,
principals, secretaries, custodians, bus drivers, cooks and aides
How much does FICA and retirement cost?
A new teacher with a BA Degree earns $36,718$36,718 x 26% retirement plus 7.65% FICA rate=$49,360
Single Health Insurance $6,589
TOTAL COST = $55,949
A teacher with 25 years and a ED.S. degree earns $87,479 $87,479 x 26% retirement plus 7.65% FICA rate= $117,598
Full Family Health Insurance=$17,772
TOTAL COST = $135,370
A school custodian could earn $29,577 or higher$29,577 x 26% retirement plus 7.65% FICA rate=$39,760
Two Person Health Insurance $13,402
TOTAL COST = $53,162
A department secretary could earns $23,479 or higher $23,479 x 26% retirement plus 7.65% FICA rate=$31,653
TOTAL COST= $48,638
A teacher coaches Junior High basketball and earns $1,000 $1000 x 26% retirement plus 7.65% FICA rate=$1,344
TOTAL COST = $1,344
FICA and Retirement Cost
State Funding Up $1B Since 2011 But Mostly for MPSERS
Retirement Rate Factors
• Active public school workers have declined from 321,263 in 2004 to 214,906 in 2014
• Lawsuit over employee 3% charge for health care
• 2008 stock market meltdownUnfunded pension liability from negative investment proceeds
• Cost of the 2010 retirement incentive
• Increase in public school retirees as of 2014181,289 retirees collecting regular pension/benefits
23,023 collecting survivor or disability benefits204,512 collecting average pension of $21,500 per year
nn
Retirees2004
Active Employees
2014
204,512Retirees
214,906Active Employees
321,000
150,000
MPSERS SYSTEM
Retirement Cost Growth• Eats Up Funding Increases and Crowds Out Other
Spending• Primarily a problem for traditional public schools,
most charters not members of system• Increases in state funding have been eroded by growing
retirement contributions• Employer costs have stabilized because of various system
reforms• State picking up portion of the cost ($883M) –these funds
unavailable for other purposes
• Results in flat per-pupil classroom funding
Combined Contributions Add up to $2050 per pupil
Full Family Health Insurance
Year
MonthlyPremium
Employee Cost
DistrictPaid
2008 $1,203 $0 $1,203
2009 $1,290 $0 $1,290
2010 $1,327 $0 $1,327
2011 $1,827 $0 $1,827
2012 $1,713 $171 $1,542
2013 $1,543 $309 $1,234
2014 $1,624 $325 $1,299
2015 $1,652 $294 $1,359
2016 $1,778 $319 $1,460
Student Enrollment Trends
The State of Michigan and
Huron School District
Declining Enrollment
State of Michigan Public School Enrollment
2004 – 1,715,000
2014 – 1,523,300
2016 – 1,495,000 projected
Decline of 13%
Why Are There Fewer Students?
• Michigan had 148,795 live births in 1992 and 113,533 live births in 2013
• The 25 to 35 year old population has been relocating to other states for jobs
• This downturn in birth rate has not affected Huron like other districts, mainly due to schools of choice students choosing Huron Schools over other area schools
Enrollment
Why it Matters: It can be argued that there is a correlation between enrollment loss and fiscal health. Enrollment loss can be caused by many factors (economy, demographics, migration etc.,) and thus changes the amount of revenue provided by the state from their Foundation Allowance which is the major source of revenue for schools. This chart shows the trend relationship between the individual school district against various geographic groupings.
Huron School Student Enrollment
• It is important to note that having effective school programs, showing the positives about the district helps to attract students and keep students
• This has truly stabilized the district finances• A review of student enrollment in other
nearby districts and you can see this is not always the case
• Great services and educational programs promotes student attendance
Response to the Funding Crisis• All employees made sacrifices and concessions• Contracted teacher substitutes and non-staff coaches • Contracted Special Education Director, Student Data
Services and Food Management Services• Provide Bus/Vehicle Maintenance for Flat Rock Schools• Expanded Shared Time Programs at St. Stephen/ St. John • Fiscal Agent for Downriver Career and Technical
Consortium• Electricity/Natural Gas Purchased through Consortium• Building and Grounds County Bid for Services• Moved Head Start and Great Start Readiness Programs
into the school district• Reorganized busing and transportation services
Completely Committed to Kids
During this downturn, the Huron District has followed its mission and these are some of the results:● No “pay to play” for athletics● Cuts have stayed away from programs that affect
students ● AP classes have been added● LIteracy coaches added● Junior High Science Labs ● Enrollment has stayed stable, which is a far different
picture than most other districts● Enrollment stability and good management of finances
have allowed the district to keep staffing levels and class sizes very reasonable
● No layoffs of staff - which is really unusual for Michigan
What about the Future?● Governor’s budget proposes an increase for schools
$60 to $120 per pupil for 2016-17 school year● Will the funds really be there for an increase?● It is important to note that even if the House and
Senate agree, this increase still does not put the district back to previous funding levels
● School year goes to 180 days next year which will cost the district money to add the days
● Health insurance continues to increase and we certainly need the legislature to continue the funding for the retirement system
● Bottom line is that Michigan schools are still in a tough place financially for the near future
You Are In This Together⦿You have managed this financial crisis very well for
the past ten years⦿The Board and staff accomplishments are impressive
during such a difficult financial time⦿You will all need to work together and continue to be
proactive – addressing issues early will help you stay in position to continue to thrive
⦿No one should be discouraged, this is very important work and I believe everyone is valued by students, parents and community members
⦿Remember, 2500 students are counting on you and the staff! Never forget that!