State of Michigan A Decade of School Funding and Finance Decad… · State of Michigan A Decade of School Funding and Finance The Effect on the Huron School District Dr. Rodney Green,

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



TRENTON $8,426 LIVONIA $8,169

NORTHVILLE $8,169 RIVERVIEW $7,991


ECORSE $7,642 CRESTWOOD $7,578

VAN BUREN $7,554 GARDEN CITY $7,517



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



TRENTON $8,426 LIVONIA $8,169

NORTHVILLE $8,169 RIVERVIEW $7,991


ECORSE $7,642 CRESTWOOD $7,578

VAN BUREN $7,554 GARDEN CITY $7,517



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


2009-101.75% steps 10 + above

1% Steps 0-9 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


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


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!

Thank You!

Dr. Rod GreenMASB Consultant

[email protected]

mailto:[email protected]

Documents

State of Michigan A Decade of School Funding and Finance Decad… · State of Michigan A Decade of School Funding and Finance The Effect on the Huron School District Dr. Rodney Green,