Enrollment, Benchmarking, and Financial Sustainability

Transcription

1 Enrollment, Benchmarking, and Financial Sustainability OASBO Annual Workshop April 19, 2012 Presenters: Matt Bunting, Athens City Schools Stacy Overly, Teays Valley Local Schools Mike Sobul, Granville City Schools Ernie Strawser, Norwood City Schools Tanya Hahn, Robert W. Baird & Co. Public Finance Resources, Inc. Serving the Public s Financial Leaders 1

2 Overview Using Census data and retention analysis to forecast enrollment Using financial benchmarking and enrollment projections to analyze sustainability 2

3 Forecasting Enrollment The trickiest part of forecasting enrollment is determining the number of incoming kindergartners Other grades can be forecasted using long-term retention trends 3

4 Forecasting Enrollment - Granville *Projected 4

5 Forecasting Enrollment Those age five at the Census are the kindergarten class that fall You may see a gap between the Census and K enrollment because parents may choose full-day elsewhere if your district does not offer that option 5

6 Forecasting Enrollment - Granville 2000/ / / / / / / / / / / /12 1st Grade nd Grade rd Grade th Grade th Grade th Grade

7 Forecasting Enrollment - Granville Indexed So First Grade = / / Grade 7

8 Forecasting Enrollment 2011/ / / / /16 Capacity Elementary School Intermediate School Middle School High School

9 Forecasting Enrollment 700 Granville Elementary School Enrollment by Year Number of Students / / / / /2016 School Year 9

10 Benchmarking & Sustainability Use the enrollment forecasts to look at ADM for formula purposes Also look at the forecasts for management purposes The latter may be more critical because you can control management 10

11 Benchmarking & Sustainability Elementary School Per Pupil Expenditures, Granville and 4 Most Like Districts $14,000 $13,321 $13,000 $12, % increase $11,000 $10,000 $9,000 $9,235 $8,792 $9,488 $8,000 $8,179 $7,805 $7,000 $6,000 Granville Elementary School Chagrin Falls Elementary Canfield Elementary Highland Elementary Mariemont Elementary Granville Elementary School (14/15) 2010/11 school year PPE and 2014/15 for Granville with flat spending and expected enrollment drops. 11

12 Enrollment Also Key to Expenditure Projections District s enrollment key element in projecting expenditures, not just potential revenue District s quick to add staff as enrollment increases, but not make reductions as enrollment declines Evident in per pupil expenditures (PPE) The following chart depicts 3 possible forecast projections: 1. Using FY11 enrollment for each year going forward 2. Using district s projected enrollment 3. Using projected enrollment with planned budget reductions CPI (consumer price index) average line has also been added for comparison 12

13 Forecasting Enrollment - Expenditures 13

14 Enrollment Identifying Reductions Using projected enrollment alone shows the need for significant adjustments now, and continual smaller adjustments in future years Next chart shows the annual reduction necessary based ONLY on declining enrollment projections Black line indicates the five-year average of the reductions 14

15 Necessary Budget Response for Enrollment Changes 15

16 Building Level PPE Analysis Looking at district total PPE is imperative Building-by-building PPE analysis can further identify individual building outliers Building level analysis reveals data not uncovered in district total PPE and total PPE for all elementary buildings combined Shows potential areas for reductions by building District responded by closing a building 16

17 Building Level PPE Analysis PPE History by Building 17, High School Middle School Chauncey East Morrison The Plains West 17

18 Forecasting Enrollment - Athens ENROLLMENT: 1978 TO ,800 3,700 3,713 3,600 3,500 3,400 3,300 3,200 3,100 3,000 2,900 2,800 2,700 2,600 2,741 2,500 2,400 2,300 2,452 2,200 2,100 2, (1) (2)

19 FTE Trends STAFFING: 1978 TO 2011

20 CFO Leadership 10% 20% Debt Profile 30% Management & Governance 40% Financial Strength Economic Strength 20

21 S&P Financial Management Assessment Score (FMA) Transparent assessment of ability to implement timely & sound financial and operations decisions in response to economic and fiscal demands 7 Key Factors reviewed: Revenue & expenditure assumptions Budget amendments & updates Long-term financial planning Long-term capital planning Investment management policies Debt management policies Reserve and liquidity policies Overall assessment scores: Strong: practices are strong, well embedded and likely sustainable Good: practices are good, but not comprehensive Standard: finance department maintains adequate policies in most, but not all, key areas Vulnerable: entity lacks policies in many areas deemed most critical to supporting credit quality 21

22 Dashboard Indicators Strong Evidence of independent revenue forecasting; updated regularly o Assumptions are validated Changes & solutions to possible problems are implemented Management has and adheres to a formal operating reserve balance o Strong schools have GF balances as % of Expenditures > 25.5% Good/Standard Optimistic assumptions used; little evidence of validating assumptions Management merely identifies budget to actual variances No discussion of pending issues in the forecast Less defined reserve policy; no support to how derived; historically adhered to Vulnerable Assumptions neglect likely shortfalls or other issues Little attention to LT consequences of budget issues/fixes Absence of basic policies and usually not followed, if exist 22

23 Key Metrics of Highly Rated Schools S&P Growing Tax Bases Wealth Indicators Strong Management & Multiyear Focus Always planning 3-5 years out with REALISTIC assumptions Strong policies that direct spending, debt, and finances Build strong reserves in spite of caps or limits on property taxes or fund balances Manageable Debt Burdens Well-developed multiyear capital plans with focus on future budgets, annually reviewed/updated Comprehensive plan => sophisticated management team Overall Financial Position Key metric: general fund balances and policies guiding their establishment, use, and funding demonstrate strong management skills, especially when strictly adhered to in good and difficult economic climates 23

24 Fitch Ratings: Ohio Schools Under Continued Financial Strain, February 2012 Constrained revenue growth Fiscal Sustainability Depends on Continued Expenditure Reductions Reserve levels need to be 5-10% of general fund expenditures => further cost reductions 65% of districts surveyed by Policy Matters Ohio face a budget gap or deficit Prudent Financial Management is Essential Proactive cost reduction Develop contingency spending plans Budget REALISTICALLY 5 year forecast is critical to financial success 24

25 Execution of the Plan! Perhaps the greatest mistake I ve seen executives make is to confuse expectations with inspection..... But, alas, too often the executive does not understand that people do what you inspect, not what you expect. Execution is all about translating strategies into action programs and measuring their results. It s detailed, it s complicated and it requires deep understanding of where the institution is today and how far away it is from where it needs to go. Proper execution involves building measurable targets and holding people accountable to them. Who Says Elephants Can t Dance? Louis Gerstner, Jr., Chairman and CEO of IBM

26 For More Information: Debra Kelbaugh Chief Operating Officer Public Finance Resources, Inc. PO Box 1822 Columbus, OH Phone: Cell: Tanya Hahn Managing Director Robert W. Baird & Co. 10 W Broad Street, Suite 2500 Columbus, OH thahn@rwbaird.com Phone: Cell:

27 Building a Better Forecast One Assumption at a Time OASBO Annual Workshop April 19, 2012 Matt Bunting, Consultant Mike Sobul, Consultant Stacy Overly, Consultant Ernie Strawser, Consultant Public Finance Resources, Inc. Serving the Public s Financial Leaders

28 ADDITIONAL TAXPAYER SUPPORT + RIGHT SIZING = SUSTAINABILITY 2

29 Operating Margin Sustainability is a critical assessment that CFO s must analyze and critically disclose What is our operating margin? Revenue vs. Expenditures - Line

30 Significant Factors Existing income tax levy increased in 2012 FY10 through FY12 buoyed by significant Federal support Stagnate State revenue Overall revenue (prior 3 vs. forecasted 5) 4

31 Our Sustainability Message After Levy Passage and Before Budget Reductions We asked our taxpayers to invest and at the same time we continued aligning our costs with resources to minimize new tax request. 5

32 Details Additional Income Tax Without Budget Reponse TEAYS VALLEY LOCAL SCHOOL DISTRICT - - PICKAWAY COUNTY SCHEDULE OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES ACTUAL AND FORECASTED OPERATING FUND Prev 3 Yr Projected Projected Projected Projected Projected Five-Year Avg Annual Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Avg. Annual Change Change Revenue: Income Tax -0.71% 4.31% 5.89% 54.91% 15.81% 4.00% 16.99% Unrestricted Grants-in-Aid -3.76% 6.17% -0.09% 1.72% 2.73% 3.24% 2.75% Restricted Grants-in-Aid 94.33% % % 0.72% 0.74% 0.00% % All Other Revenues -8.38% 30.81% 2.04% 3.51% 4.49% 4.46% 9.06% Total Revenues 1.04% 3.95% -0.81% 7.25% 4.91% 3.52% 3.76% Expenditures: Personal Services 4.43% -2.45% 2.87% 4.43% 4.50% 4.40% 2.75% Employees' Retirement/Insurance Benefits 3.29% 2.83% 7.06% 6.41% 6.97% 6.83% 6.02% Total Expenditures 4.92% -1.10% 3.97% 4.77% 4.96% 4.88% 3.50% 6

33 Taxpayers Stepped Up Now it is our turn Personnel expenditure alignment with resources Our response 7

34 Budget Response Plan With New Levy Recap of Potential FY13 Budget Response Measures Annual Salary Subtotal Salary Driven Fringes Subtotal Insurances Total Savings Subtotal for Teaching Staff 1,087, , , ,421, Subtotal for Administrative Staff 72, , , , Subtotal for Classified Staff 138, , , , GRAND TOTAL SALARIES & FRINGES 1,298, , ,088 $1,720,561 FY13 Building Budget Reductions - Supplies FY13 Technology Budget Reduction $25,000 Savings Compound in Future Years $25,000 FY13 Purchased Service Reductions Reduce County Initiative Programs (Speech, Psych, Custodial) $101,063 Savings Compound in Future Years $101,063 FY13 Pay to Participate - Other Revenue $400,000 Revenue Compounds in Future Years $400,000 FY13 Total of Budget Response Measures $2,246,624 FY13 Impact on Foreca $1,959,864 8

35 Aligning Expenditures with Resources With Budget Reponse TEAYS VALLEY LOCAL SCHOOL DISTRICT - - PICKAWAY COUNTY SCHEDULE OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES ACTUAL AND FORECASTED OPERATING FUND Prev 3 Yr Projected Projected Projected Projected Projected Five-Year Avg Annual Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Avg. Annual Change Change Revenue: Income Tax -0.71% 4.31% 5.89% 54.91% 15.81% 4.00% 16.99% Unrestricted Grants-in-Aid -3.76% 6.17% -0.09% 1.72% 2.73% 3.24% 2.75% Restricted Grants-in-Aid 94.33% % % 0.72% 0.74% 0.00% % All Other Revenues -8.38% 30.81% 27.68% 3.20% 4.39% 4.37% 14.09% Total Revenues 1.04% 3.95% 0.03% 7.21% 4.91% 3.52% 3.92% Expenditures: Personal Services 4.43% -2.45% -3.12% 3.65% 4.54% 4.44% 1.41% Employees' Retirement/Insurance Benefits 3.29% 2.83% 1.73% 5.64% 7.03% 6.88% 4.82% Total Expenditures 4.92% -1.10% -1.58% 4.15% 5.01% 4.93% 2.28% 9

36 What is your sustainability Message? A FULL Partnership After Levy Passage and After Budget Reduction 10

37 EXISTING TAXPAYER SUPPORT + RIGHT SIZING = SUSTAINABILITY 11

38 Customer Support Some districts have 20 effective operating mills live there Some districts are in constant levy mode with many varieties from traditional, to emergency, to income Others can not seem to pass a levy At some point, even the best school supporters can say no more My district has received tremendous support from our taxpayers but there will always be limits 12

39 Taxpayer Response So Far 13

40 Respect for Taxpayers = Spending Analysis First Where did we look first? In the expenditure details Total PPE had grown above the state average and was in the upper half of our peer group Our PPE for administrators was in the bottom 5% of any peer comparison as was pupil support PPE for instruction was in the middle of the peer group, as was building operations Staff support was in the upper 5%. 14

41 3,800 3,700 3,600 3,500 3,400 3,300 3,200 3,100 3,000 2,900 2,800 2,700 2,600 2,500 2,400 2,300 2,200 2,100 2,000 3,713 ENROLLMENT: 1978 TO (1) Students Vs. Staff 2,741 2, STAFFING: 1978 TO Sustainable?

42 What Could We Have Done Differently? Where do we go from here? A review of our PPE and enrollment lead us toward data-driven expenditure recommendations: even if the decisions were not popular and even if it was a change from our ask-voters-first historical approach We recommended right sizing 16

43 Building Level PPE Analysis In February, the Board made the tough decision to close one of our elementary buildings and reduce staff. We held a series of administrative and public meetings to show the data and explain what happened what the hard data shows and why this made sense, even without a shrinking revenue stream and cash balance. Our administrative salaries were published in the local paper, retire-rehire administrators were marked in bold, we were asked why would we do this if it was only going to save $1million, why did we not sell the Administrative office to save the money, and even why did we not ask for a tax levy first? 17

44 No New Levy Until Without Rightsizing a Levy is Needed in 2012? With Rightsizing a Levy is Needed in 2014? 18

45 SUSTAINABILITY, SHOULD I ADD CASINO REVENUE TO MY FORECAST? 19

46 Casino Revenue - Background First casinos will open in Ohio in May Of the taxes collected from casinos, 34% are earmarked for school districts The money is allocated to all public school districts based on each school district s student population 20

47 Casino Revenue Estimates/Allocations Allocations are supposed to be made quarterly by the Department of Taxation, beginning at the end of July 2012 Based on data from ODT, opening schedules for the other two casinos, and adjustments for the phase-in of the Cleveland casino, the school share of the casino tax is estimated to be $74.1 million in FY 2013 and $167.7 million in FY 2014 Estimates are Credible 21

48 Casino Revenue A Case Study Granville, which is currently facing deficits, is doing significant cuts for FY 2013 and will likely be placing a levy on the ballot during 2013 If I don t recognize casino money in my forecast, what does that mean for my levy campaign? I am likely to be asked about casino money and why isn t that alleviating the need for the levy 22

49 Casino Revenue By my estimates, the revenue I could anticipate from the casino for Granville is $104,000 in FY 13, and $235,000 in FY 14 If I were to use those full amounts in my 5-year forecast, will it substantially change where I am headed? 23

50 Casino Revenue A Game Changer? $2,000,000 Granville Ending Balances Before Budget Corrections With and Without Full Casino Revenue $1,000,000 Year End Operating Balances $0 -$1,000,000 -$2,000,000 -$3,000,000 -$4,000,000 -$5,000,000 -$6,000,000 Without Casino Revenue With Full Casino Revenue -$7,000,000 -$8,000,000 FY 12 FY 13 FY 14 FY 15 FY 16 24

51 Casino Revenue Unresolved Issues Outstanding issues How are JVS/JVS students going to be treated? How are open enrollment students going to be counted? How are public community schools/public community school students going to be treated? Will there be supplanting of state funds, especially in FY 2014 and beyond? What impact might there be if video lottery terminals (slot machines) open at racetracks? 25

52 SUSTAINABILITY AND OHIO S SCHOOLS ONE DISTRICT AT A TIME 26

53 Sustainability Trends Is It Just Us or All the Rest Revenue Trends and Sources State of Ohio Schools State and Local Revenue Trends Who is Paying? What Does It Cost? Economic Challenges Direction of Revenue Local Revenue Levy Sustainability Factor

54 Cash Balance Trend Your District

55 Operating Revenue Your District Your SD is losing $1.6 Million in Revenue from its peak. Ohio Schools are losing $1.1 Billion in Revenue from their peak.

56 State Funding to Schools Your District Your SD is losing $1.1 Million in State Revenue from its peak. Ohio Schools are losing $1.0 Billion in State Revenue from its peak.

57 Who Is Paying?

58 Cost of Services This investor has spoken????

59 Local Support & Sustainability Your District Source: Ohio Department of Education 2011 CUPP Profile Report, Adj. PP Inc. Tax

60 Services Vs. Cost Ask Vs. Assume Significant State revenue losses Levy strategy kept tax rates low We re a low-cost provider of Services Bus ride is too long! Longer to get a PO! What do we keep? Why didn t you see this? What do we cut? Why did you add? Why are you cutting?

61 Find Your Voice Heard Understood Acknowledged HUA!!! -- May 4, 2012 Tolles Career Center 35

62 Employee Bios Debra Kelbaugh, Chief Operations Officer of Public Finance Resources, 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. 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. Matt Bunting, Consultant, has over 25 years of experience in the public finance sector. This includes 15 plus years as a school district treasurer, and 11 years with the Auditor of State where he lead financial, legal compliance, and Federal single audits of government entities. Matt has served as interim school treasurer several times, as well as worked with Ernie and Stacy to test their forecasting software and instruct at their yearly seminars. He holds an Associates Degree in Accounting from Hocking College, and is a Certified Government Financial Manager. 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. Public Finance Resources, Inc. Serving the Public s Financial Leaders 36

63 More Information: Debra Kelbaugh Chief Operating Officer Public Finance Resources, Inc PO Box 1822 Columbus, OH Phone: Cell: Ernie Strawser Consultant Public Finance Resources, Inc PO Box 1822 Columbus, OH Phone: Cell: Matt Bunting, Consultant Stacy Overly, Consultant Mike Sobul, Consultant Ernie Strawser, Consultant Debra Kelbaugh, COO Public Finance Resources, Inc. Serving the Public s Financial Leaders

64 Concluding Assumption Communicate the Main Thing 38

65 Matt Bunting, Consultant Mike Sobul, Consultant Updated Contact Information: Debra Kelbaugh Chief Operating Officer Public Finance Resources, Inc. PO Box 1822 Columbus, OH Phone: Cell: Debra Kelbaugh, COO Stacy Overly, Consultant Ernie Strawser, Consultant Public Finance Resources, Inc. Serving the Public s Financial Leaders 5