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State of Michigan A Decade of School Funding and Finance

State of MichiganA Decade of School Funding and FinanceThe Effect on the Huron School DistrictDr. Rodney Green, MASB ConsultantFebruary 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 DistrictWhat 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?

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

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Transcription of State of Michigan A Decade of School Funding and Finance

1 State of MichiganA Decade of School Funding and FinanceThe Effect on the Huron School DistrictDr. Rodney Green, MASB ConsultantFebruary 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 DistrictWhat 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?

2 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 2009 Invested $831 billion into the US economyMichigan 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 ContinuesMichigan Unemployment rate shown in blueNational Unemployment rate shown in grayRecessions shown in gray barMichigan Unemployment Rate Compared to 's January 2015 National Foreclosure Report foreclosure inventory declined percent from January 2014 Completed foreclosures have declined percent from January 2014.

3 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 2008, there have been approximately million completed foreclosures. Foreclosures now make up of homes with mortgage (back to 2008 levels and in January 2014 it was 2%)Home Foreclosure CrisisDecreasing and MinimalIncreases to Public School Funding in The State of MichiganPublic 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 locationYearFoundation AllowancePercentage-/+Difference2009-201 0 Pupil CountResult2008-09$7, $472,500+$117,5002009-10$7, $02,51202010-11$7, $02,53102011-12$7, $5652,442-$1,379,7302012-13$7, $6612,467-$1,630,6782013-14$7, $6042,541-$1,534,7642014-15$7, $5542,546-$1,410,4842015-16$7, $4152,567-$1,065,305 Total-$7,020.

4 970 Huron School District Foundation AllowanceHURON School DISTRICTFOUNDATION ALLOWANCEHURON$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 Michigan2015-2016 Student Foundation Allowance by area School districtsDownriver AreaGROSSE 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 DistrictsBLOOMFIELD HILLS$12,004 BIRMINGHAM$11.

5 924 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 RoadThe State of MichiganNew LawsImpacted Public Schools, Teachers, Support StaffandBoards of EducationPA 103 of 2011 Prohibited Subjects of Bargaining for TeachersThis 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 PerformancePA 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 CostsPA 54 of 2011 Deals directly with any salary increases foryears of experience.

6 Salary increases for advanced educational degrees earned and increasing costs for health insurance premiumsAfter 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 benefitsRight to Work Law Employees now have right to not join unionAssociation and Union Duescannot be collected through payroll deductionPublic 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.

7 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 impactedA total of 41 Michigan School district ended 2015 in deficitA total of 13 Districts have been in deficit for 5 or more fiscal yearsSouthgate Community SchoolsLincoln Consolidated SchoolsW estwood Community Schools (Dearborn Heights)Mt. Clemens Community School DistrictHazel Park City School DistrictNew Haven Community SchoolsClintondale Community SchoolsVanderbilt Area SchoolsMackinaw City Public SchoolsFlint Community SchoolsBridgeport Spaulding Community School DistrictDetroit Public SchoolsPontiac Public SchoolsInkster 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.

8 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 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.

9 What About the District Fund Equity?YearDeficit or SurplusFund Equity2007-08$ 98,624$1,798,684 $ 189,770$1,988,454 $ (33,468)$1,954,986 $ 33,032 $1,988,018 $ (256,629)$1,731,390 $ (47,583)$1,683,806 $ 48,356 $1,732,162 $ 116,064 $1,848,226 is Crucial to the Stability of the District to keep Annual Deficit Spending Under ControlHURON School DISTRICT FUND EQUITYHURON School DISTRICTFUND EQUITY AND EXPENSESFund BalanceHuron 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 classroomRising Employee and Employer CostRising 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

10 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 earnedYearSalary ScheduleSteps GrantedDegreeGranted2007-082% entire scaleYesYes2008-092% entire steps 10 + above 1% Steps 0-9 YesYes2010-111% entire steps 0-9steps 10-25 no reductionYesYes2012-13-3% steps steps 11-14 steps 15 + aboveYesYesReview of Teacher ContractYearSalary ScheduleSteps GrantedDegreeGranted2013-14No decreasesNoYes2014-15steps 0-14: + off scalestep 15 + above 1% off scaleNoYes2015-16No decreasesstep 0 fullsteps 1-25 stepYesReview of Teacher ContractSchool district pays pension cost for every employee including teachers, principals, secretaries, custodians, bus drivers, cooks and aidesHow much does FICA and retirement cost?


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