8
& “Whether it’s in rural Alaska or inner-city Detroit, everyone everywhere shares a common belief that education is America’s economic salvation. They see education as the one true path out of poverty – the great equalizer that overcomes differences in background, culture and privilege. It’s the only way to secure our common future in a competitive global economy.” -- Arne Duncan, U.S. Secretary of Education Compare Mr. Duncan’s hopeful message with the recent behavior of our Michigan lawmakers. Their actions this fall have undercut public education by imposing outrageous spending cuts on school districts that, by law, adopted balanced operating budgets six months ago. Thankfully, your friends and neighbors in Bloomfield have come together to urge our legislators to fix the school funding problem by addressing Michigan’s taxation system that we all acknowledge is broken. Still, little is changing in Lansing. Unfortunately, it seems that most of our elected officials care more about dogma, lobbyists and the 2010 political campaign than in creative problem-solving. Fortunately, in Bloomfield Hills Schools we have been forecasting and preparing for this economic doomsday scenario for years. Shared sacrifice and good fiscal stewardship – including $10 million in budget cuts just over the past two years – are protecting our instructional excellence. The latest $2.1 million revenue reduction from Lansing will be offset by new expense reductions that will allow us to protect programs and services to students this year. Many of you have expressed interest in knowing more about how school funding works. You may also be curious about what we have done to address past problems, and what we are doing to ensure a healthy financial and instructional future. Our five-year Deficit Prevention Project is key to our future stability. I invite you to take a look inside this issue of Dollars and Sense to learn more. As always, we welcome your input and appreciate your support. Warm regards, Steven A. Gaynor Superintendent WINTER 2009/2010 In this issue: Why is Proposal A bad for schools? ...............................2 Where do your education dollars go? ................................3 How does BHS spend operating dollars?......................4 What is a Sinking Fund?............4 An affordable solution to our facilities problems ...........5 Five-year Deficit Prevention Project......................6 BHS decision-makers.................7 DOLLARS SENSE Dear BHS Community:

DOLLARS SENSE - NSPRA › files › docs › dollars_sense_winter_0910.pdf · DOLLARS. SENSE. Dear BHS Community: 2. 1994’s Proposal A was not about funding education. Rather, it

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Page 1: DOLLARS SENSE - NSPRA › files › docs › dollars_sense_winter_0910.pdf · DOLLARS. SENSE. Dear BHS Community: 2. 1994’s Proposal A was not about funding education. Rather, it

&“Whether it’s in rural Alaska or inner-city Detroit, everyone everywhere shares a common belief that education is America’s economic salvation. They see education as the one true path out of poverty – the great equalizer that overcomes differences in background, culture and privilege.

It’s the only way to secure our common future in a competitive global economy.” -- Arne Duncan, U.S. Secretary of Education

Compare Mr. Duncan’s hopeful message with the recent behavior of our Michigan lawmakers. Their actions this fall have undercut public education by imposing outrageous spending cuts on school districts that, by law, adopted balanced operating budgets six months ago.

Thankfully, your friends and neighbors in Bloomfield have come together to urge our legislators to fix the school funding problem by addressing Michigan’s taxation system that we all acknowledge is broken. Still, little is changing in Lansing. Unfortunately, it seems that most of our elected officials care more about dogma, lobbyists and the 2010 political campaign than in creative problem-solving.

Fortunately, in Bloomfield Hills Schools we have been forecasting and preparing for this economic doomsday scenario for years. Shared sacrifice and good fiscal stewardship – including $10 million in budget cuts just over the past two years – are protecting our instructional excellence. The latest $2.1 million revenue reduction from Lansing will be offset by new expense reductions that will allow us to protect programs and services to students this year.

Many of you have expressed interest in knowing more about how school funding works. You may also be curious about what we have done to address past problems, and what we are doing to ensure a healthy financial and instructional future.

Our five-year Deficit Prevention Project is key to our future stability. I invite you to take a look inside this issue of Dollars and Sense to learn more. As always, we welcome your input and appreciate your support.

Warm regards,

Steven A. Gaynor Superintendent

WINTER 2009/2010In this issue:

Why is Proposal A bad for schools? ...............................2

Where do your education dollars go? ................................3

How does BHS spend operating dollars?......................4

What is a Sinking Fund?............4

An affordable solution to our facilities problems ...........5

Five-year Deficit Prevention Project......................6

BHS decision-makers.................7

D O L L A R SS E N S E

Dear BHS Community:

Page 2: DOLLARS SENSE - NSPRA › files › docs › dollars_sense_winter_0910.pdf · DOLLARS. SENSE. Dear BHS Community: 2. 1994’s Proposal A was not about funding education. Rather, it

2

1994’s Proposal A was not about funding education. Rather, it was about tax relief. While offering a significant property tax cut for homeowners, it imposed a new school funding method in Michigan.

Proposal A was a constitutional amendment that shifted much of school funding from stable local property taxes to the more-volatile state sales tax, which rose to 6%.

What is Proposal A, and why is it bad for schools?

Where does the money come from to achieve our mission?

K-12 enrollment determines the size of our budget: Impact of declining enrollment is declining revenue

2/3 of our residents’ school •taxes support outstate schools. 1/3 is returned to us.

The lowest-funded districts •received a 71.52% increase in their state revenue from 1994-95 to 2007-08. BHS received an increase of 18.5%, while the consumer price index rose 39.52%.

30 years ago, Michigan •collected 50% of its revenue from the sales tax. Today, it’s about 35%.

To be funded today as it was •

in 1994, BHS would need a

foundation grant providing

$2,300 more per student.

Yet BHS has not reduced

service levels since 1994.

Did you know. . .

The mission of Bloomfield Hills Schools is to enable learners to become architects of their futures, building on a foundation of scholarship, citizenship, service and integrity.

0

4,400

5,600

4,600

4,800

5,000

5,200

5,400

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Actual Enrollment Projected Enrollment

This subjected school districts to swings in sales tax collections, depending on purchasing behaviors of Michigan residents.

Proposal A’s effect is also that voters have no say about how they support their local schools, while the money we see from Lansing is, in real dollars, eroding.

For example, $1 in 1995 was worth 87 cents in 2009.

Proposal A depends on tax growth. It is unable to meet its most basic obligation, which is to fund public schools. There is widespread agreement that Michigan’s school funding system is broken, but no agreement on how to fix it.

K-1

2 I

n-D

istr

ict

Stu

de

nts

School Year

Property Taxes – 41.7%

Non-Resident Tuition – 1.3%

Investment Earnings – 0.3%

Other Local Revenue – 4.9%

State Categorical Revenue** – 2.4%

Federal Revenue – 3.5%State Membership Revenue – 40.2%

Interdistrict Revenue* – 5.7%

* Funds paid through other governmental units (primarily special education funds) ** Specially designated state funds

Page 3: DOLLARS SENSE - NSPRA › files › docs › dollars_sense_winter_0910.pdf · DOLLARS. SENSE. Dear BHS Community: 2. 1994’s Proposal A was not about funding education. Rather, it

www.discoverBHS.org 3

Structural problem with budget process: State can reduce payment anytime based on sales tax collections

Legislative Priorities: The State of Michigan’s •budget for K-12 education increased 4.3% from FY 2002-03 to 2008-09, while its Corrections (prisons) budget increased 20.9%.

Retirement costs are mandated by the state •as a percent of payroll, and have risen from 12.17% in 2002 to 16.54% in 2009.

School districts begin their fiscal year on July •1, but do not receive any money from Lansing until Oct. 20. A healthy fund balance allows us to pay bills without borrowing and paying interest.

Where do your education

dollars go?

Operating funds (Comparable to your cash and checking account for living expenses)FY 09-10 = $79 million

Fund balance (Comparable to your savings account)FY 09-10 value = $20 million

Capital funds (Comparable to the money you set aside to invest in a home or durable goods) FY 09-10 value = $12 million

Sinking funds (Fee for service) (Comparable to the money you set aside for maintenance of your property)FY 09-10 = $7.8 million (because of carryover)

Special funds (Food Service, Recreation, Special Education, Athletic/ Co-curriculars, Community Service, Cooperative Education)FY 09-10 = $23 million

$

Did you know. . .

What if you started getting bills July 1st but did not collect

a paycheck until Oct. 20? You’d need a savings account

or credit to tide you over. Smart districts use their fund

balance, or savings, to float the cost, instead of incurring more

costs by using credit.

How do budget timelines hurt

school districts?

2009-2010 Fiscal Year Timeline

7/1/09 8/1/09 10/20/09

2010

6/30/10 8/20/10 9/30/10S

tart

of s

choo

l bud

get y

ear

Pay

roll

oblig

atio

ns ri

se

Firs

t sta

te a

id p

aym

ent

from

Lan

sing

End

of fi

scal

yea

r 09-

10;

Beg

in F

Y 1

0-11

on

July

1

Fina

l sta

te p

aym

ent o

n FY

09-

10

End

of s

tate

fisc

al y

ear;

FY 0

9-10

pay

men

ts c

an

be re

calle

d, o

r “pr

o-ra

ted”

District uses cash reserves

State Categorical Revenue** – 2.4%

Page 4: DOLLARS SENSE - NSPRA › files › docs › dollars_sense_winter_0910.pdf · DOLLARS. SENSE. Dear BHS Community: 2. 1994’s Proposal A was not about funding education. Rather, it

4

Our fund balance, or savings, is critical because it helps us weather the gap between when we begin paying bills in any given fiscal year, and when we receive our first revenue from the state. The fund balance gives districts the flexibility to not borrow money and pay interest to pay bills due before Oct. 20. BHS is committed to maintaining the fund balance at a minimum of 15% of its operating budget.

BHS has been protecting its fund balance since 1995, when projections showed it would be depleted by 2000. Today, the fund balance is at more than $20 million.

Bloomfield Hills Schools has been regularly •

honored for budgeting and financial reporting

excellence. The Association of School Business

Officials International again recognized BHS

with its 2009 Meritorious Budget Award and

Certificate of Excellence in Financial Reporting.

Did you know. . .

Why is a fund balance important?

Our Board and administrators are committed to rigorous decision-making, and not simply spending down our savings account, known as the fund balance.

Like most school districts, the great majority of our revenue goes to salaries and benefits for our employees. This makes mid-year revenue reductions from the state especially difficult, because we obligate the money with our labor contracts. Budget cuts that are imposed on us mid-year then must come from the small fraction that we allocate for department budgets.

How do we spend operating dollars?

Salaries – 56.6%

Fringes & Benefits – 24.5%

Purchased Services – 4.7%

Facilities Improvements – 0.1% Supplies & Other – 9.7%

Capital Outlay – 1.9%

Transfers Out – 2.4%

Repayment of Loans – 0.1%

$3.5M

A Sinking Fund is voter approved tax money for renovations and repairs of District property. The funds are separate from the general fund, which provides

day to day operating money. Our general fund has been balanced, in part, by moving all eligible facility improvements to the Sinking Fund.

Voters approved 1.5 mills for 10 years ending in 2014, averaging $5 million annually. The Sinking Fund in BHS only partially addresses $123 million in facilities needs that were identified in 2003.

The money is providing updates and renovations to existing buildings that bring them into code, increase safety, allow compliance with the Americans with Disabilities Act, provide energy savings, and keep students “safe, warm and dry”. The administration presents a list of projects annually for Board approval.

However, the $50 million generated over 10 years was not intended nor sufficient to entirely address the serious and costly needs at our high school facilities.

What is a Sinking Fund?

2005-2006 2009-20102007-20082006-2007 2008-2009

DoyleConantEastoverHickory GrovePine LakeW

ayFox HillsLone PineBHMSEHMSW

HMSAndoverLahserIA Other

$3M

$2.5M

$2M

$1.5M

$1M

$0.5M

0

Sinking Fund Expenditures 2005-2009

Page 5: DOLLARS SENSE - NSPRA › files › docs › dollars_sense_winter_0910.pdf · DOLLARS. SENSE. Dear BHS Community: 2. 1994’s Proposal A was not about funding education. Rather, it

www.discoverBHS.org 5

Capital Outlay – 1.9%

Transfers Out – 2.4%

Facilities costs either loosen or restrict the funds we have available for teaching and learning. Moreover, smartly placing students and staff in buildings can create operational savings if we can reduce staff. We saved $2.3 million this year by consolidating schools, primarily through staff reductions and reallocations. We also look to reduce facilities expenses in utilities, grounds keeping and building maintenance.

On the revenue side, we can generate income as we are with the $250,000 lease to Waterford Schools for the Pine Lake building.

Facilities Master Planning is one of four objectives in our 2018 Strategic Plan. We are committed to keeping Bloomfield Hills Schools instructionally excellent while being in a trusting partnership with the community, sustaining our financial success, and providing “lighthouse” facilities.

Facilities Master Planning Phase 2

FMP2 has commenced and is addressing all District properties other than preschools, elementary schools and middle schools. This is a Board-directed study that has gained urgency since state funding is diminishing in an unprecedented and precipitous way. The Board is gaining the understanding that BHS will likely be unable to afford two comprehensive, small high schools in the near future.

Yet even before this fall’s state funding reductions, the Strategic Plan had suggested that the District should prepare for a one high school future because two schools could be unnecessary and a costly luxury given declining enrollment trends and rising budget pressures.

Initial estimates are that combining Lahser and Andover high schools could save about $3 million annually in operating funds. This savings could be key to keeping the District’s budget balanced in future years, preserving instructional excellence.

The Board has passed a resolution to ask the administration to develop a one high school plan for presentation by March 2010. However, high school consolidation has not been determined and the Andover and Lahser campuses will be operational as they are today in fall 2010.

What do facilities have

to do with our budget discussion?

What is an affordable solution to our high school

facilities problems?Reconstruction of a current •high school facility to house all high school students for 21st century learning is estimated to cost $80 million

The District has relatively little •debt at 2.17 mills (debt repayment of 0.67 mills and Sinking Fund at 1.50 mills)

The District has $20 million in •Sinking Funds available through the expiration of the current levy in 2014

The District has $12 million •on hand in the Capital Improvements Fund

Voter-approved debt will •expire in 2014

Replacing or upgrading high •school facilities may be possible without a new tax levy on homeowners

The Board will consider several scenarios in its facilities master planning. Among the facts are:

Page 6: DOLLARS SENSE - NSPRA › files › docs › dollars_sense_winter_0910.pdf · DOLLARS. SENSE. Dear BHS Community: 2. 1994’s Proposal A was not about funding education. Rather, it

6

Bloomfield Hills Schools is determined

to remain financially healthy, ensuring

a high service level for our students.

The 5-year Deficit Prevention Project is

a long-range planning effort to look at

budgeting challenges and opportunities,

to proactively plan rather than react.

Facilities Master Planning is one

important element of preventing future

budget deficits, and our fund balance (or

savings account) plays a role as well.

Good financial habits have allowed us to

build up our fund balance to about $20

million, or 25% of our operating budget.

The Strategic Plan says we should

maintain the fund balance at a minimum

of 15% of the operating budget.

If we do nothing differently, our fund

balance will be gone some time in the

2012-2013 fiscal year. Of course, this

is unacceptable.

We can take action now to prevent

a future operating deficit by using a

small portion of our fund balance over

several years while the state figures out

how to fix its broken taxation system.

In addition, we have choices to sell the

Wabeek property, lease closed schools,

and get operational savings from

consolidating central office locations.

Even if we consolidate high schools the

$3 million annual savings is not enough,

however, to keep our budget balanced.

We will still need to find $3.7 million in

reductions for 2011-12 and $2 million

in 2012-2013. With 85% of our budget

in salaries and benefits, it is clear that

we will need to challenge ourselves to

reduce labor costs and find new ways to

deliver service excellence to students.

The District has conducted extensive cost containment and cost avoidance measures, which have resulted in shared sacrifice by everyone in our school community. More than $10 million has been reduced in the past two fiscal years alone. The efforts include:

Despite these changes, BHS still offers equally excellent services and programs. Our creative, dedicated staff continues to put children first.

What have we done to reduce

the budget in the last five years? Renegotiated labor contracts, •

with the AFSCME union taking up to 25% pay reductions to avoid outsourcingTeacher contributions to health •care and limited raisesOutsourcing of substitute •teachers and coachesEfficientstudentbusroutes•Energy savings from window •and roof replacementsReduced operating budgets, •especiallyincentraloffice

Shared services with Oakland •Schools, including closing the BHS print shopCentralofficestaffreductions•Fewer administrators and •employees, and limited raisesElimination of summer •grounds and maintenance employeesSchool closings•Voice over IP phone systems•

Tuition students and employee children •

have generated about $25 million in

revenue for BHS since 1997.

BHS has made $10 million in budget cuts •

since 2008.

The BHS Foundation aims to use donor •

contributions to build a $40 million

endowment to offset the cost of athletics

and co-curriculars.

Did you know. . .

What is the 5-year Deficit

Prevention Project?

Page 7: DOLLARS SENSE - NSPRA › files › docs › dollars_sense_winter_0910.pdf · DOLLARS. SENSE. Dear BHS Community: 2. 1994’s Proposal A was not about funding education. Rather, it

www.discoverBHS.org 7

Who are the decisions-makers for Bloomfield Hills Schools?

Michigan job growth expected in mid-2011, with 16,500 new jobs in second half of that year, according to University of Michigan economists.

Without structural reform in the way Michigan collects and distributes tax monies, and without federal stimulus money to backfill the loss, the Foundation Allowance could be cut by $500 per pupil in 2010-2011. This is the “funding cliff” that analysts predict.

Reasons for optimism, reasons for concern:

Trustees for the Board of Education

Members of the Superintendent’s Cabinet

Martin C. Brook, President [email protected]

Mary Ellen Miller, Vice president [email protected]

Ingrid Day, Secretary [email protected]

David Lubin, Trustee [email protected]

Ed Ford, Trustee [email protected]

Cynthia von Oeyen, Treasurer [email protected]

Kate Pettersen, Trustee [email protected]

Steven Gaynor, PhD, Superintendent [email protected]; 248-341-5407

Betsy Erikson, Director of communications and community relations [email protected]; 248-341-5422

Brian Goby, Director of physical plant services [email protected]; 248-341-5490

Timotheus Weeks, Assistant superintendent for business services; [email protected]; 248-341-5452

Chris Barnett, Assistant superintendent for human resources and labor relations [email protected]; 248-341-5428

Laurie McCarty, Assistant superintendent for instruction [email protected]; 248-341-6305

Ed Bretzlaff, Assistant superintendent for instruction [email protected]; 248-341-6315

Cheryl Zielinski, Executive assistant to the superintendent [email protected]; 248-341-5406

The administration and Board of Education develop the operating budget over a period of months, leading up to a June 30 deadline for a balanced budget, and make decisions guided by our 2018 Strategic Plan.

Small class sizes (even in larger buildings) and instructional excellence

are our guiding mantra, because our parents and community repeatedly say that they value these features most.

The District looks at 5- year budget scenarios to prevent deficits that would cause us to dip into our savings, as many other districts have been forced to do.

How does BHS determine budget priorities? What are our strategies to ensure a bright future for Bloomfield Hills Schools?

We aim for smart business practices to support our core values of small class sizes and instructional excellence. We have not reduced service levels in the Proposal A years, though to be funded as in 1994 we would need to gain 1,000 students.

Our three-pronged strategy is:

Creative revenue generation, 1.

such as our pay to participate for athletics, opening schools to tuition and employee students, and the BHS Foundation

Smart cost-cutting measures 2.

through shared sacrifice, such as renegotiated labor contracts; increased employee contributions to health care; staffing in line with enrollment; school consolidation; outsourcing substitute teachers and printing work; and self-insurance for employee health care

Enterprise operations which pay for 3.

themselves, such as food services, recreation, preschools, and our special education center programs

Page 8: DOLLARS SENSE - NSPRA › files › docs › dollars_sense_winter_0910.pdf · DOLLARS. SENSE. Dear BHS Community: 2. 1994’s Proposal A was not about funding education. Rather, it

2009-2010 Board of EducationMartin C Brook. . . . . . . . . . . . . . . . . . PresidentMary Ellen Miller . . . . . . . . . . . . Vice PresidentIngrid Day . . . . . . . . . . . . . . . . . . . . . SecretaryCynthia von Oeyen . . . . . . . . . . . . . . TreasurerEd Ford . . . . . . . . . . . . . . . . . . . . . . . . .TrusteeDavid Lubin . . . . . . . . . . . . . . . . . . . . . .TrusteeKate Pettersen . . . . . . . . . . . . . . . . . . .Trustee

Steven A. Gaynor, Ph.D. . . . . . SuperintendentEd Bretzlaff . . . . . . . . . .Asst. Supt., InstructionLaurie McCarty . . . . . . .Asst. Supt., InstructionChristine Barnett . . . . . . Asst. Superintendent, HR/Labor RelationsTimotheus Weeks . . . . . .Asst. Supt., Business

Produced by the BHS Communications and Community Relations Department, 248.341.5424

4175 Andover Rd., Bloomfield Hills, MI 48302 248.341.5400 • www.DiscoverBHS.org

Non-ProfitOrganization

U.S. Postage PaidPermit No. 27

Bloomfield Hills,Michigan

E C R W S SResidential Customer

What can you do to advocate for public education?Michigan’s Defining Moment

The Michigan’s Defining Moment Public Engagement Campaign is a multi-year effort to heighten public

awareness of the significant challenges and opportunities Michigan faces and tighten the focus of

statewide leaders on a common ground agenda best suited to help Michigan achieve a new era of

sustainable prosperity. More at www.thecenterformichigan.net

*NEW* - Two Defining Moment sessions at the Doyle Center

Jan26,2010•9:30-11a.m.or6-7:30p.m.

RSVP to (248) 341-5424

Contact your Legislators

Bloomfield Township or the City of Bloomfield Hills: [email protected][email protected]

West Bloomfield Township: [email protected][email protected]

Troy: [email protected]

[email protected]

Become involved in a grassroots group

Contact Board trustee Kate Pettersen at [email protected]

for more information about grassroots advocacy.