School Finance Answers For Board Members

Transcription

1 School Finance Answers For Board Members Mike Sobul & Ernie Strawser, Consultants April 29, Overview What financial information do you need to make decisions? Will state funding help your district? Why does our district need a levy? 2 1

2 Five-Year Forecast Required to be adopted by the BOE and submitted to the state twice per year End of May and October Should serve as the main financial planning tool for the district The required five-year forecast is only for operating funds, but good practice is for districts to also complete a five-year capital budget once per year 3 District Forecast Lets touch on a few important items first: The Forecast is a Board Adopted/Approved document. You, as Board Members, need to understand your district s Forecast and not just assume it is the property of the Treasurer and/or Superintendent. The Notes/Assumptions should hold the key information for the Forecast, not necessarily the large numbers on the front page of the document. The Forecast will need to be updated throughout the year as current information becomes available. You should ask for an explanation of significant changes. 4 2

3 Line 6.01 Are you spending more than you take in each year? That is line 6.01 on the Forecast. (It gets a bit more difficult to use that line when there are renewal levies in play) Avoid the natural tendency to drop to the bottom right hand corner of the Forecast You should concentrate on Year 3 of the Forecast for decision making. Why? 5 Simplified Version Income and Expense Simplified Statement Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Beginning Balance 7,259,723 6,803,584 5,497,704 3,235,602 (52,485) + Revenue 30,518,368 28,904,168 27,650,820 27,981,883 25,625,476 + Proposed Renew/Replacement Levies - 1,780,832 3,560,259 3,807,769 6,713,023 + Proposed New Levies Expenditures (30,974,507) (31,990,880) (33,473,182) (35,077,738) (36,766,442) = Revenue Surplus or Deficit (456,139) (1,305,880) (2,262,103) (3,288,086) (4,427,944) Ending Balance 6,803,584 5,497,704 3,235,602 (52,485) (4,480,429) Revenue Surplus or Deficit w/o Levies (456,139) (3,086,712) (5,822,362) (7,095,855) (11,140,967) Ending Balance w/o Levies 6,803,584 3,716,872 (2,105,490) (9,201,345) (20,342,311) 6 3

4 What s Important? Fiscal YTD through December Revenue Year-Over-Year & Cashflow Variance Real Estate Taxes 37.5% Public Utility PP Taxes 4.9% Income Tax 13.3% State-Aid 27.0% Restricted Aid 0.6% State Tax Reimb. 5.6% Other Revenue 10.5% Other Sources 0.7% Total Revenue Major Line Items = 88.3% Fiscal YTD through December Expenditures Year-Over-Year & Cashflow Variance Salaries 59.4% Benefits 26.2% Purchased Services 10.7% Supplies 2.1% Capital Outlay 0.1% Debt & Interest 0.0% Other Objects 1.4% Other Financing Uses 0.0% Total Expenditures Major Line Items = 96.4% Key Board Member Items However, all districts have certain key items that drive the majority of revenue and expenses in common. A Board Member should know their: State % vs Local % of Funding State Funding Outcome (Guarantee/Formula/Capped) Staffing FTE s Current Enrollment and how it s Trending (up or down) 4

5 Key Board Member Items: (Continued) Enrollment is the one item that is key to both revenue and Expenditures. It drives both the district s state funding and should be driving their staffing levels. Enrollment in Total determines State Funding: Trends: where have you been, where are you, and where are you likely to go? Enrollment by Grade Level should be used to determine staffing: Trends: where are you and where are you going? Key Board Member Items: (Continued) Enrollment Totals are used in the calculation of a district s state funding share. Enrollment increases or decrease by themselves can make a district Richer or Poorer in the new funding formula. And the change may seem counter-intuitive. Question: if your district is losing students (declining enrollment), are you getting Richer or Poorer? 5

6 Key Board Member Items: (Continued) The correct answer is that declining enrollment actually makes your district Richer in the new State Funding Formula. Richer = less State Funding. Example: A $1,000,000 property valuation with a funded enrollment of 1,000 students = a per pupil valuation of $1,000 per pupil. However, lose 50 students and the calculation is $1,000,000 / 950 = $1,053 per pupil. The loss of 50 students, under this formula, provides a Higher local amount per pupil and therefore LESS State Aid. State Funding Status Under the method since 2014, there are three distinct ways you could be receiving state funding. Formula Funded means that the amount calculated for your district is exactly what you are receiving. Guarantee Funded means the calculation was less than you received in 2015 but the state is providing money to guarantee you will not get less than A Capped district s calculation shows it should receive a higher funding amount but cannot because the yearover-year increase is capped at a 7.5% maximum. 12 6

7 How Do I Find Out My District s Funding Status? The Ohio Department of Education (ODE) calls their report showing district funding the School Finance Payment Report or SFPR. This report is created twice a month based on current data used by ODE to determine funding. It can, and generally does, change with each bimonthly SFPR. After October of each year, the changes are generally small but can sometimes be significant due to the latest data collected by ODE. 13 How to read the SFPR 14 7

8 What Should You be Asking Once you have the basics, what should you be asking about your Forecast? The number one driver of this funding model is Enrollment. You should ask where your enrollment has been, where is it today, and where is it projected to be five years down the road. Over the same time period, are staffing level changes consistent with enrollment? Are we budgeting for pay increases? Do we have major expenditures growing at unsustainable rates? 15 Is the Enrollment Forecast Consistent/Explainable? 16 8

9 Are We Reserving Money for Salary Increases? Allocation of Prior Year Salary Expenditures Estimated Certified Annual Salary 9,543,637 9,828,661 10,250,763 10,687,982 10,828,940 11,204,397 Annual Percentage for Experience Steps 2.54% 2.60% 2.70% 2.70% 2.70% 2.70% Annual Percentage for Degree Change 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% Annual Percentage Change for Negotiations 2.00% 2.00% 2.00% 1.00% 1.00% 1.00% Annual Percentage Change for Merit Pay 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Total Percentage Change 4.79% 4.85% 4.95% 3.95% 3.95% 3.95% Dollar Change due to Percentage Change 457, , , , , , Personnel Services 3 17 Are their Expenditures Growing at Unsustainable Rates? 18 9

10 Once you ve asked the Questions: If there are issues, how are we addressing them? If there are opportunities, how are we taking advantage of them? Do we need more resources? Some Questions to Consider in Your Analysis 19 Do Projected Revenues Exceed Expenditures? 10

11 How Do Expenditures Compare? How Does Staffing Compare 11

12 Are Capital Funds Available? What Is The Pace of Expenditure Change? 12

13 Budget Recap Projected Expense Exceeds Revenue Spend (13.61%) Less Than Districts Like Yours Fewer Teachers Than Similar Districts (-7.82%) Expenses Grew Less Than Inflation (CPI) Who Pays? 26 13

14 How Much State Aid? Local Tax Rates (All-in) 14

15 Taxpayer Profile Who Pays Summary State Provides 65%+ of General Fund Revenue Local Tax Rates Are Lower Than Similar Taxpayer Capacity is Low 15

16 Relative Cost Value Drive Decision 16

17 One Final Thought Benchmarking: How do you compare to other similar districts? There is great value in looking at how you compare with others of very similar demographics. However, don t make the mistake of comparing your district to your neighbors unless they really share your key attributes. 33 Services Five Year Forecast Software à More than a compliance document Cash flow monitoring Modeling scenarios Graphics and dashboards Planning tool Consulting à Maximize your effectiveness Financial consulting and cash flow monitoring Forecast review and analysis, what if planning Presentations to key stakeholders Special Projects Data Interpretation à Data driven decision making Multi-year data sets to identify trends Benchmark analysis reports to see how you compare Graphics that are easy to read, understand and explain Data driven decision making 34 17

18 The Public Finance Resources Team Matt Bunting, Consultant, has over 30 years of experience in the public finance sector. This includes 20 plus years as a school district treasurer, and 11 years with the Auditor of State where he led financial, legal compliance, and Federal single audits of government entities. Matt has helped develop financial forecasting tools, and providing instruction and training opportunities attended and used by over two hundred of Ohio s public school treasurers. Matt works with clients to help determine a long-term operating strategy for the organization. He holds a Degree in Accounting from Hocking College, and is a Certified Government Financial Manager. Ryan Ghizzoni, Consultant, began his career with the Auditor of State s Office and has served as a school district treasurer for the past 10 years. During his career, he has been the recipient of six Association of School Business Officials International Meritorious Budget Awards and was the recipient of the Ohio Association of School Business Officials 2011 Outstanding Treasurer of the Year Award. Ryan holds a Bachelors of Business Administration from the Youngstown State University, and is a Certified Administrator of School Finance and Operations. Debra Hoelzle, Chief Operations Officer, provides direct services to clients, and oversees the day-to-day operations of PFR. She brings with her operational experience from both the public and private sectors, including a school district and multiple corporations in the financial services industry. Debra holds her Masters of Business Administration from Ohio University, and her Bachelors of Science in Business Administration from The Ohio State University. Stacy Overly, Consultant, provides direct financial services to clients. He has over 20 years of experience serving as school district treasurer, including 15 plus years of developing financial forecasting tools, and providing instruction and training opportunities attended and used by over two hundred of Ohio s public school treasurers. Stacy works with clients to analyze trends and review local economic data to help determine a long-term operating strategy for the organization. He holds his Masters of Business Administration and his Bachelors of Business Administration in Finance from Ohio University. Mike Sobul, Consultant, brings 30 years of experience in public finance and tax analysis. Currently a school district treasurer, Mike spent nearly 25 years with the Ohio Department of Taxation where he led revenue forecasting efforts and provided analysis, training, and fiscal services to schools and local governments. Mike holds a Masters Degree in Public Policy from the University of Michigan and a Bachelors Degree in Economics and Political Science from Wittenberg University. Ernie Strawser, Consultant, provides direct services to our public finance clients. He has over 30 years of public finance experience as a CFO, consultant, and developer and instructor of financial forecasting techniques and tools which have been used by over two hundred Ohio school district CFOs. Ernie works with clients to facilitate their understanding of local financial results, trends, and strategies. He holds both a Masters of Science in Administration from Central Michigan University and a Bachelor of Science in Finance from Ohio University. 35 PFR Contact Information Mike Sobul Consultant Public Finance Resources, Inc. PO Box 1822 Columbus, OH mike@pfrcfo.com Phone: Ernie Strawser Consultant Public Finance Resources, Inc. PO Box 1822 Columbus, OH ernie@pfrcfo.com Phone: