Order 2015-EMJIH-11

ORDER ADOPTING THE SECOND AMENDED FISCAL YEAR 2014-2015 BUDGET

FOR THE SCHOOL DIS1'RICT OF THE CITY OF DETROIT

BY THE POWER AND AUTHORJTY VESTED IN THE EMERGENCY MANAGER FOR THE

SCHOOL DISTRJCT OF THE CITY OF DETROIT, MICHIGAN ("EMERGENCY MANAGER") THROUGH MICHIGAN COMPILED LAWS

("MCL") §§ 380.1 - 380.1853, 388.160-388.1772, 141.1541 et. seq., 423.201 - 423.217 AND 38.71-38.191, THE EMERGENCY MANAGER, JACK MARTIN

HEREBY ISSUES THE FOLLOWING

Whereas on March 28, 2013, the Local Financial Stability and Choice Act, Public Act 436 of 2012, ( "Public Act 436") became effective and was enacted to, among other matters, safeguard and assure the financial accountability of local units of government and school districts; to preserve the capacity of local units of government and school districts to provide or cause to be provided necessary services essential to the public health, safety, and welfare; to provide for review, management, planning, and control of the financial operation of local units of government and school districts and the provision of services by local units of government and school districts; to provide for the appointment and to prescribe the powers and duties of an emergency manager for a local unit of government or school district; and to provide for the modification or termination of contracts under certain circumstances; and

Whereas, pursuant to that certain contract titled Contract For Emergency }.1anager Services dated July 15, 2013, between Governor Rick Snyder and Jack Martin ("Martin"), Nlmtin was appointed as the Emergency Manager under Public Act 436 for the School District of the City ofDetroit (the "District"); and

Whereas, pursuant to Public Act 436, the Emergency Manager acts in place of the governing body, specifically the Detroit Board of Education (the "Board") and the Chief Administrative Officer of the District, and unless the Emergency Manager delegates specific authority, the Emergency Manager is empowered to exercise any powers of the Chief

Administrative Officer and/or the Board under the Revised School Code, State School Aid Act or any other law which prescribes authority to the local Superintendent or school board; and

WHEREAS, the District's Fiscal Year 2014- 2015 Budget was approved as of June 30, 2014 by the Emergency Manager, to be effective as of July 1, 2014 (the "FY 2015 Budget"); and

WHEREAS, the 2015 Budget may be revised and/or amended to more accurately reflect the changes in revenues and/or expenditures as deemed necessary by the Emergency I\1anager in accordance with MCL § 141.1552(1)(b); and

WHEREAS, the 2015 Budget was previously amended by that eertain Order 2015 -EMJM-05 Adopting the Amended Fiscal Year 2014-2015 Budget for the School District of the City ofDetroit dated August 13, 2014 (the "First Amended FY 2015 Budget"); and

WHEREAS, the Emergency Manager has deemed it necessary to further revise and amend the First Amended FY 2015 Budget as patticularly set forth in the Second Amended FY 2015 Budget for the School District of the City of Detroit attached hereto as Exhibit "A" (the "Second Amended FY 2015 Budget").

NOW, THEREFORE IT IS HEREBY ORDERED THAT:

1. Pursuant to the powers granted under Public Act 436, the Emergency Manager hereby adopts the Second Amended FY 20 15 Budget in the form attached hereto as Exhibit "A".

2. Pursuant to Public Act 436, this Order is issued and directed to the Board, all administrators of the District and all employees of the District.

3. All District executives, board members, administrators, staff, consultants, parents, students and or contractors shall abide by the Orders and directives of the Emergency Manager as it relates to District finances, operations and educational initiatives. Failure to abide by the Orders and directives of the Emergency Manager may result in discipline and suspension, as well as the consequences set forth in Public Act 436, including, but not limited to, restricted access to the District' s facilities, electronic mail and internal information systems, coll1t action, or other appropriate action or remedy provided by law.

4. This Order may be amended, modified, repealed or terminated by any subsequent Order issued by the Emergency Manager.

By: ~)pi n'ck Ma in 'Emergency Manager School District of the City of Detroit

Dated: December 15, 2014

EXHIBIT A

TO: Jack Martin, Emergency Manager

FROM: William E. Aldridge, CPA, Chief Financial Officer and Chief Administrative Officer

SUBJ ECT: Fiscal Year 2015 Budget Amendment No. 2

DATE: December 15, 20 14

CC: Kevin A. Smith, Esq., Chief of Staff

Delores A. Brown, Deputy Chief Financial Officer/Chief Accounting Officer

Marc Ingram, Acting Executive Director, Office of Management & Budget

INTRODUCTION

The Fiscal Year 201 4-2015 (FY 20 15) budget amendment No. 2 is based on a comprehensive review of actual and projected financial data and analysis. The following is a summaty of the significant changes to the General Fund budget by function since budget amendment No. I. Significant changes are defined as variances greater than or equal to I 0% or variances greater than or equal to $1,000,000.

As additional data and information is received by the District there may be a need to adjust and realign budgets impacted by this amendment as well as other budgets.

REVENUES

Property Taxes - FY 20 14 actual property tax revenues were higher than expected and budgeted. Therefore, DPS increased the FY 2015 prope1ty tax budget to $7 1.8 mill ion, an increase of $9.1 million, to be in line with FY 2014 actual revenues.

Other Local Sources- The Educational Achievement Authority (EAA) owes the District $ 1.9 million for services provided during the 20 13-20 14 fiscal year.

The District entered into lease agreements to provide Pre-K services with in six school buildings. These agreements wi II generate $260,000 in FY 201 5 revenue. Various other min or adj ustments totaling $350,000

account for the total change in this functional category.

State Sources- The following grant budgets increased by $2.7 million since budget amendment No. I:

• Great Start Readiness Program (GSRP)- $1.4 million

• Section 3 I a - $770,000

• Tec hnology Readiness Infrastructure - $490,000

Page 1

Per budget amendment No. I, the FY 2015 Fall pupil FTE count was anticipated· to be 47,189. Based on the preliminary results of the Fall Count, the District anticipates an additional 262 pupil FTE. As a result, the District anticipates receiving $1.9 million more in State Aid (Foundation Allowance).

Budget amendment No. I did not include the Section I 07 deferred revenue. However, per the Michigan Depm1ment of Education, the Section I 07 deferred revenue of $1.6 million has to be included in Fund 13

operation budget for FY 2015. All deferred must be expended before the new revenue is allocated to DPS can be utilized. Various other revenue increases totaling $150,000 account for the total change in this functional category.

Federal Sources- The budgets relating to the following grants increased since budget amendment No I:

• School Improvement Grant (SIG)- $8.0 million

• Title I - $3.6 million • School Climate Transformation - $7 10,000

• Workforce Investment Act (WIA)- $450,000

• Title lla - $280,000

EXPENDITURES

Instruction- Budget amendment No. I provided for the District to institute a I 0% wage concession. The District rescinded the wage concession, resulting in an increase to the instructional budget by $18.4 million.

Due to additional funding, the instructional budgets for the following grants increased by a cumulative $7.6

million:

• School Improvement Grant - $2.0 million

• Section 31 a- $1.2 million • Title I - $ 1.2 million

• Title lla - $1.2 million • Great Start Readiness Program - $ 1.1 million • Technology Readiness Infrastructure - $490,000

• Workforce Initiative Agency- $360,000

The Section 51 c Special Education instructional budget increased by $2.2 million which was primarily attributed to increased purchased services. Various other budget reductions totaling $ 100,000 account for the total change in this functional category.

Pupil Support - Budget amendment No. I provided for the District to in stitute a 10% wage concession. The District rescinded the wage concession, and this resulted in an im~rease to the pupil support budget by

Page 2

$3.8 million. Various other budget reductions totaling $400,000 account for the total change in this functional category.

Instructional Staff- Due to additional fu nding, the instructional staff budgets of the following grants increased by a cumulative $7.8 million:

• School Improvement Grant- $4.1 million

• Title I - $2.4 million

• Great Start Readiness Program - $580,000

• School Climate Transformation- $490,000

• Classroom Technology Read iness- $200,000

Various other budget increases totaling $400,000 account for the total change in this functional category.

School Administration - Budget amendment No. I provided for the District to institute a I 0% wage concession. The District resc inded the wage concession, resulting in an increase in the pupil support budget of $2.2 million.

The Adult Education budget increased by $ 1.3 million primarily attributed to supplies and equipment. Various other budget increases totaling $400,000 account for the total change in this functional category.

Operations and Maintenance - Per an agreement, DPS will transfer 77 properties to the City of Detroit Land Bank. In exchange, the City of Detroit will forgive $11.6 million of DPS electric charges.

The District would like to install an Advanced Boiler Monitoring System (ABMS) in the 78 schools currently requiring a licensed boiler operator and provide one boiler operator for every fi ve schools. This will reduce the number of licensed boiler operators by 6 1 at a net savings of$ 1.3 million for FY 20 15. After the first year, annual savings are estimated at $3 million.

Various other budget increases totaling $150,000 account for the total change in this functional category.

Other Suppo•·t - The Office of School Nutrition (OSN) has an annual survey used to identify income eligible students qualifying for Title I and other supplemental programs. According to the OSN, it costs $100,000 annually to process the survey, and these costs are ineligible to be covered by Fund 25. OSN is seeking payment for the prior three fi scal year cost of $300,000.

Various other budget increases totaling $20,000 account for the total change in this functional category.

Community - The Title lla budget increased by $830,000 attributed to purchased services for the Department of Curriculum. Various other budget increases tota ling $3 5,000 account for the total change in this functional category.

Facilities Acquisition - The Department of Adu lt Education decided to use $455,000 of the Section I 07 deferred revenue for site improvements resulting in an expenditure increase.

Page 3

OTHER FINANCIAL SOURCES (USES)

Proceeds from the Sale of Capital Assets - Based on the best available information, DPS anticipates

receiving $ 10.4 million from the Sale of Capital Assets. This is a reduction of $6.8 million from budget

amendment No. I.

Prior Year Adjustments- Per the November State Aid Financial Status Report, the Prop A Obligation

Prior-Year Adjustment increased by $8.2 million over the amount included in budget amendment No. I.

Page 4

DETROIT PUBLIC SCHOOLS GENERAL FUND

BUDGETAMENDMENT#2 YEAR ENDING JUNE 30, 2015

Revenue: Local sources

Special education millage Property Taxes Other

Total local sources State sources Federal sources

Total Revenue

Expenditures:

Instruction

Support services Pupil sef""\Aces Instructional staff support General administration School administration Business office Operations & maintenance Transportation Central support service Other support service

Total support services

Community service

Facilities acquisitions and impro-..ement

Debt service

Total Expenditures

Other Financial Sources (Uses) Sources

Proceeds from sale of capital assets Transfers In

Total Sources Uses

Transfers Out Prior Year Adjustments

Total Uses

Total Other Financial Sources (Uses)

Excess (deficiency) of Revenue and Other Sources Over (Under) Expenditures and Other Uses

Beginning Fund Balance

Ending Fund Balance

FY 2015- Amended

$

$

40,731,764 62,707,655 33,297,385

136,736,804 354,939,361 156,156,530

647,832,695

301,866,952

56,916,710 52,902,896

6,659,402 33,158,634 12,409,389 81,518,181 26,783,987 26,013,334

1 ,306, 771

297,669,304

3,679,110

53,005,586

656,220,952

17,204,461 87,091,137

104,295,598

(84,691, 137) (5,656,844)

(90,347,981)

13,947,617

5,559,360

(169,460,307)

{163,900,947)_

Pages

Budget Amendment# 2

Increase (Decrease)

$ 9,072,852

6,353,793 13,011,210

30.917,999

28,090,387

3,446,519 8,227,901

(314,434) 3,918,211

116,312 (12, 754,932)

(330,935) 992,700 277,175

3,578,517

864,059

455,346

-----------___ __E,988,309

(6, 768,289) 69,198

(6,699,091)

69,198 (8,238,050) (8,168,852)

1,469,761

(600,549)

$

FY 2015-Amended

40.731,764 71,780,507 35,777,529

148,289,800 361,293,154

_______ _:!69,!67.7~

678,750,694

329,957,339

60,363,229 61,130,797

6,344,968 37,076,845 12,525,701 68,763,249 26,453,052 27,006,034

1,583,946

301,247,821

4,543,169

455,346

------ 53,005,58§__

689,209,261

10,436,172 87,160,335 97,596,507

(84,760,335) 2,581,206

(82,179,129)

___ 1_5,417,378

4,958,811

{169,460,307)

$ (164,501,496)

DETROIT PUBLIC SCHOOLS REVENUES, EXPENDITURES, SOURCES AND USES -GENERAL FUND

BUDGETAMENDMENT#2

YEAR ENDING JUNE 30, 2015

Budget Amendment# 2

FY 2015- Increase FY 2015-Amended (Decrease) Amended

Fund 11 -General Purpose Fund

Revenues and Sources $ 241 ,483,035 $ (177, 139) $ 241 ,305,896

Expenditures and Uses 235,923,675 423,410 236,347,085

Surplus (Deficit) $ 5,559,360 $ (600,549) $ 4,958,811 Fund 13- Adult Education

Revenues and Sources 4,405,063 1,599,501 6,004,564

Expenditures and Uses 4,405,063 1,599,501 6,004,564

Surplus (Deficit) $ - $ - $ -Fund 14- Grants

Revenues and Sources 127,727,220 16,184,217 143,911,437

Expenditures and Uses 127,727,220 16,184,217 143,911,437

Surplus (Deficit) $ - $ - $ -Fund 19- Consolidated Funds

Revenues and Sources 211 ,291 ,059 6,612,329 217,903,388

Expenditures and Uses 211 ,291 ,059 6,612,329 217,903,388

Surplus (Deficit) $ - $ - $ -Fund 16 Special Education

Revenues and Sources 90,772,347 - 90,772,347

Expenditures and Uses 90,772,347 - 90,772,347

Surplus (Deficit) $ - $ - $ -Fund 22- Special Education

Center Based Programs

Revenues and Sources 76,449,569 - 76,449,569

Expenditures and Uses 76,449,569 - 76,449,569 -Surplus (Deficit) $ - $ - $ -

Page 6

DETROIT PUBLIC SCHOOLS REVENUES AND OTHER SOURCES -GENERAL FUND

BUDGET AMENDMENT# 2 YEAR ENDING JUNE 30, 2015

Budget Amendment# 2

FY2015- Increase Fund Amended (Decrease)

I Fund 11 General Purpose Fund State Aid

22a Prop A Obligation $ 42,455.803 $ (5, 1S2 536\ 22b Discretionary Payment 51,677,367 448,255 152a Headlee Obligation -Adair & 94a. 9 1,179,387 26a Renaissance Zona 4,511,048 -22f Best Practice Incentive 2.479,943 147a MPSERs Cost Offset 4,458,349 -147c MPSERs UAAL Rate Stabilization 16,409,187 -61 a Vocational Education 518,981 -Pupil Transfer Adjustment 574,881 -20f Hold Harmless Guarantee 1,098,805

Local Property Tax Net 62,707,655 9,072,852 Earnings on Investments 31,892 -Medicaid Reimbursement 11,593.043 -JROTC 1,035,481 Charter School Administration Fee '159,256 -Services to Other Schools 3,303,574 Payment from EAA ~ Debt Service Offset 6.988,269 Payment from EAA - Services 2.070,804 1 ,874,060 Other 5,511,450 279,321

Federal Indirect Cost Revenue 2,513,399 69,198

Financmg Sources Proceeds from sale of capital assets and other 11,204,461 ; '/RR,?Rq\

· fcom Fund 25 otal Fund 241,

Fund 13 Adult Education State Aid 4,197,063 -Deferred Rewnue 1,599,501 Other- Local Sources ono,cnn -otal Fund 13 1,599,501

Fund 14 Grants Title 1 56,603,130 3.571,893 31a At Risk 18,644,029 766,714 IDEA 12,890,327 -Tille II 18,507,704 , 1'. 'nR,RO" Great Start Readiness 16,994,000

2~~~;~ Othec Gcants 4,nRR,n3n

rota I Fund 14

Fund 16 Special Education State Aid 42,870,698 -Transfer from Fund 11 40,667,572

· rrom Fund 22 7,n,n· -Total Fund 16 -

Fund 19 Consolidatocl Funds Prop A Obligation 145,524,896 6,612,329 Title I 63,631.739 Title lla 944,500 Section 31a 1,100 q?4

Total Fund 19

FLmd 22 Special Education Center Based Programs Act 18 40,731,764 1,441 ,'/16 Follow That Child 1.441 '716 (1,441,716) Transfer from Fund 16 34,276~ -

-

Total $ 752.128 293 $ 24 218,908

Page 7

FY2015~

Amended

$ 37,303,267 52,125,622

1.179,387 4,511,048 2,479,943 4,458,349

16,409,187 518,981 574,881

1,098,805

71,780,507 31,892

11,593,043 1,035.481

759,256 3,303,574 6,988,269 3.944,864 5,790,771

2,582,597

10,436,172

241,

4,197,063 1,599,501

208,000

60,175,023 19,410,743 12,890,327 3,000.819

18,430,370

30~

42,870,698 40,667,572

7 234,077

152,137,225 63,631,739

'~~~~0

42,173,480

34,276,089

$ 776,347,201

DETROIT PUBLIC SCHOOLS EXPENDITURES AND OTHER USES· GENERAL FUND

BUDGET AMENDMENT# 2 YEAR ENDING JUNE 30, 2015

Budget Amendment# 2

FY 2015 • Increase Amended (Decrease)

Fund 11 General Purpose Fund Personnel $ 27,087,355 $ 21,950,002 Purchased Services 89,225,119 (1 ,480,435) Supplies 5,281,086 88,441 Equipment & Capital 6,634 1,000 Utilities 21,747,542 (11,600,000) Restricted (1,097,219) (8,535.598) Principal & Interest 53,005,586 . Transfers 40,667,572 .

Total Fund 11 235,923,675 423,410

Fund 13 Adult Education Personnel 2,959,368 32,647 Purchased Services 1,021,252 223,461 Supplies 352,556 206,286 Equipment & Capital . 1,137,107 Utilities 71,88"/ .

Total Fund 13 4,405,063 1,599,501

Fund 14 Grants Personnel 97,643,691 6,173,611 Purchased Services 20,620,278 7,881,556 Supplies 6,479,338 1,783,369 Equipment & Capital 463,713 276,483 Utilities 6,801 -Transfers 2,513,399 69,198

Total Fund 14 127,727,220 16,184,217

Fund 16 Special Education Personnel 52,723,958 (2,165,388) Purchased Services 2,858,100 2,155,3881 Supplies 854,200 10,000 Equipment & Capital 60,000 -Transfers 34,276,089 -

Total Fund 16 90,772,347 -

Fund 19 Consolidated Funds Personnel 198,143,815 6,716,821 Purchased Services 8,364,002 7,732 Supplies 4,559,608 (34,174) Equipment & Capital 223,634 (78,050

Total Fund 19 211,291,059 6,612,329

Fund 22 Special Education Center Based Programs Personnel 54,920,719 (78, 166) Purchased Services 2,524,722 77,515 Supplies 510,012 .

Equipment & Capital 217,444 651 Transfers 7,234,077 -

FY 2015-Amended

$ 49,037,357 87,744,684

5,369,527 7,634

10,147,542 (9,632,817) 53,005,586 40,667,572

236,347,085

2.992,015 1,244,713

558,842 1,137,107

71,887 61004,564

103,817,302 28,501,834

8,262,707 740,196

6,801 2,582,597

143,911,437

50,558,570 5,013,488

864,200 60,000

34,276,089 90,772,347

204,860,636 8,371,734 4,525,434

145,584 217,903,388

54,842,553 2,602,237

510,012 218 095

7,234,077 Restricted 11,04~~ 1------------"- ,__ ___ _!.:1_,042,595_ r.::-------· - ------- _________ , ____ ,_ ---

Total Fund 22 76,449,569 76,449,569

Total $ 746,568,933 $ 24,819,457 $ 771,388,390

Page 8

DETROIT PUBLIC SCHOOLS FOOD SERVICE FUND

BUDGETAMENDMENT#2 YEAR ENDING JUNE 30,2015

Revenue: Local sources

Other Total local sources State sources Federal sources

Total Revenue

Expenditures:

Support ser.1ces Personnel Purchased Ser\1ces Supplies Equipment & Capital

Total support ser.1ces

Total Expenditures

Other Financial Sources (Uses) Sources

Proceeds from sale of capital assets Uses

Transfers Out Prior Year Surplus

Total Uses

Total Other Financial Sources (Uses)

Excess (deficiency) of Revenue Over (Under) Expenditures

Beginning Fund Balance

Ending Fund Balance

FY 2015 - Adopted

$

1,638,850 1,638,850 1,016,641

44,484,145

47,139,636

17,392,731 2,369,886

24,486,358 490,661

44,739,636

44,739,636

(2,400,000)

(2,400,000)

(2,400,000)

10,498,385

10,498,385

Page 9

Budget Amendment# 2

Increase (Decrease)

$

FY 2015-Amended

1,638,850 1,638,850 1.016,641

44,484,145

47,139,636

17,392,731 2,369,886

24,486,358 490,661

44,739,636

44,739,636

(2,400,000)

(2,400,000)

(2,400,000)

10,498,385

10,498,385