Independent School District No Oak Street, Brainerd, MN

Transcription

1 Brainerd Public Schools Preliminary Budget Independent School District No Oak Street, Brainerd, MN

2 Brainerd Public Schools Preliminary Budget Independent School District No Oak Street Brainerd, MN Kindergarten Grade 4 Lowell Elementary School Garfield Elementary School Harrison Elementary School Riverside Elementary School Baxter Elementary School Nisswa Elementary School Grades 5 8 Forestview Middle School Grade 9 Brainerd High School South Campus Grades Brainerd High School Early Education and Alternative Education Sites Lincoln Education Center Brainerd Learning Center Washington Educational Services Building Tom Haglin Bob Nystrom Chris Robinson Reed Campbell Ruth Nelson Sue Kern School Board Chair Vice Chair Clerk/Treasurer Director Director Director Administration Robert L. Gross Superintendent of Schools William Severson Director of Schools Tim Murtha Director of Teaching & Learning Steve Lund Director of Business Services 2

3 Introduction Based on student enrollment in the 332 school districts in the state of Minnesota, Brainerd Public Schools is the 31 st largest district in the state and is the 5 th largest school district outside of the seven-county Twin Cities metro area. The school district s student population composition is as follows: Ethnicity Brainerd State American Indian/Alaskan Native 1.70% 2.40% Asian/Pacific Islander 0.80% 7.40% Hispanic 1.20% 8.70% Black, not of Hispanic Origin 2.50% 12.00% White, not of Hispanic Origin 93.80% 69.50% Special Population Brainerd State English Language Learner 0.10% 8.30% Special Education 19.40% 15.10% Free/Reduced Lunch 41.30% 38.10% Source: Minnesota Department of Education The school district is located in Crow Wing County in central Minnesota and covers approximately 516 square miles. It serves approximately 6,500 students on a resident base of approximately 43,000 in the communities of Brainerd, Baxter, East Gull Lake, Fort Ripley, Garrison, Lake Shore, Merrifield, and Nisswa. The most recent census data will show that while resident population in the school district increased by 11% from 2000 to 2010, student population in the school district declined by approximately 8 percent during the same time period. This is largely a result of a growing retiree population attracted to the region's lakes and recreational land. The school district s enrollment has stabilized in recent years, primarily driven by changing economic conditions in the region. Current enrollment projections reinforce the continuation of this stable trend into the foreseeable future. Although tourism is a prime component of the region's economy, the Brainerd Lakes Area also offers employment opportunities in manufacturing, construction, services, health care, and retail. While above Minnesota s unemployment rate of 3.7 percent, yet slightly lower than the national unemployment rate of 5.3 percent, Crow Wing County s unemployment was 5.2 percent in 2015, down from 5.8 percent in 2014 (DEED, 2016). For real estate taxes payable in 2016, the estimated market value of property in the school district was approximately $4.9 billion, or approximately $115,000 per capita, which is considered extremely strong. This high level reflects the district's prevalence of second homes and seasonal commercial properties, which make up about one-third of the tax base. The remainder of the tax base is residential homestead (38%) and commercial-industrial (22%). This total market value increased by 3.5 percent over taxes payable in For property taxes payable in 2016, the average residential market value is $167,300 and the average commercial property market value is $487,000. 3

4 Budget Fundamentals Brainerd Public Schools operates a fiscal year from July 1-June 30. The preliminary budget is presented for approval by Brainerd School Board each June. At its core, the preliminary budget authorizes the school district to begin fiscal operations for the year. The preliminary budget is constructed examining the previous year s budget and making planned and calculated changes in both revenue and expenses. These changes can be based on facts and calculated estimates. Management of the school district s budget is a process that includes important steps that occur throughout the year. Our School District s Financial Year June July September November December January April May June The preliminary budget is presented for approval by the school board. The Food Service Fund is reviewed for approval of meal prices for the school year. The school board reviews and approves preliminary property tax levy for next calendar year, next fiscal year (FY18), and school year ( ). The school district s completed audit (FY16) is reviewed for approval by the school board. The school board holds a truth-in-taxation hearing for the approval and certification of the final property tax levy for the next fiscal year (FY18) and school year ( ). The school board approves the first budget revision for the current school year. The school board approves the second budget revision for the current school year. Review of the school district self-insurance fund is completed and health insurance premiums are established by approval by the school board for the following school year. The district administration closes district s financial year and begins audit process. Minnesota school districts, charter schools, cooperative districts, area learning centers, private alternative schools, and non-public schools are required by law to prepare financial reports and annual budgets. For all public entities these financial reports include the detailed tracking of revenues and expenditures within Uniform Financial Accounting and Reporting Standards (UFARS) fund classifications to meet legislative requirements for school districts and provide financial accountability for public fund allocations. A school district s operating budget is comprised of four main revenue and expense categories called funds. Each fund maintains its own separate revenues, expenses, and fund balances. 4

5 Fund Number Fund Title Common Purpose 01 General Revenue and expenses for the general operating costs, such as teacher salaries, administrative costs, and to purchase textbooks and equipment 02 Food Service Revenue and expenses for nutrition programs primarily school lunch and breakfast 04 Community Service Revenue and expenditure activity related to the district s community education, early childhood and family education, school readiness, and preschool screening programs. 07 Debt Service Money from local tax levy for repayment of school district general debt obligations (bonds) 09 Agency Fund Agency fund used for the accounting of the revenue and expenses for the Paul Bunyan Cooperative Special Education District # OPEB Revenue and expenditure activity related to funds held in a trust account for the specific purpose of paying the retirement health insurance benefits for those employees who remain eligible for the benefit 47 OPEB Debt Service Revenue and expenditure activity related to funds received from the district s local tax levy to repay the 2009 bond issued to fund the OPEB Trust account to pay the benefits for remaining eligible employees A budget for each of these funds is presented within this document. Revenues for the budget are presented by source, which provides for a separation of revenues by source of funding. This identifies revenues of a general nature (such as property tax levies or General Education Aid) or for specific categorical programs. It best serves as a means of summarizing by major revenue classifications (e.g., local, state, or federal). Revenues by source are subdivided into the following categories: Local Revenues State Revenues Federal Revenues (received through the MDE and other state agencies) Federal Revenues (received directly from federal sources) Local Sales, Insurance Recovery, and Judgments The graphs below show a comparison of revenue sources for the fiscal year 2015 audit results. Source: Minnesota Department of Education adapted by SchoolFinances.com 5

6 The local portion is lower for Brainerd due to the level of local operating revenue lower than that of the state average for fiscal year The higher federal revenue is a result of the district s percentage of free and reduced and special education student populations higher than the state average. Expenses for the budget are presented by object, which provides expenditure detail as to the service or commodity purchased (e.g., salaries, bond interest, and technology equipment. Expenses by object have eight major categories: Salaries and Wages Employee Benefits Purchased Service Supplies and Materials Capital Expenditures Debt Service Other Expenditures Other Financing Uses The graphs below show a comparison of expense object categories for the fiscal year 2015 audit results. Source: Minnesota Department of Education adapted by SchoolFinances.com The most significant of these funds for the operation of the school is the general fund (Fund 01). The general fund is the heart of the financial life of the school district. The school district uses the general fund to cover the daily costs of educating approximately 6,500 students with a staff of nearly 900 across its 12 schools The mechanics of the budgets being presented for each of the four funds is the same. The total revenue and expense numbers from each fund s recent fiscal year 2016 budget revision completed in May 2016 is adjusted for items in which are known or expected to change for fiscal year These changes then allow us to calculate the projected income and expenses for each fund for fiscal year We have many tools available that allow us to complete as accurate of projections as possible. These tools include Minnesota Department of Education supported revenue forecast models and many independent and locally designed and supported forecast models for staffing and instructional expenses. 6

7 In broad terms, the fiscal year 2017 general fund budget includes: Increase in general education formula aid of 2 percent Increase of approximately 2 percent in state funding for reimbursement of special education costs Increase in state special education reimbursement funding for additional costs proposed. An increase in enrollment of approximately 82 more students than A planned addition of approximately 13.5 FTE of staffing Estimated increase in employee costs for the current labor agreements An overall net increase in revenues of 2.8 percent An overall net increase in expenses of 3.7 percent An increase in the overall net operating deficit from approximately $700,000 to $1.47 million. A reduction of the unassigned fund balance to a level equal to 7.4 percent of general fund expenses General fund revenue and expenses are separated into reserved and unassigned sources and purposes. The budget tables show the detailed separation of the general fund budget into the various unassigned and reserved accounts. A portion approximately 80 percent of the school district budget is without formal restrictions in how the funding is spent. These unassigned funds are what the district has the most local flexibility to spend on achieving the student-centered priorities. Thus, much of the local management of the budget becomes reliant on the more flexible unassigned area. Forestview Middle School Photo Courtesy of Jim Reed STEM Instructor 7

8 Below is the budget summary table by fund for year-end audited actual results for fiscal year Fiscal Year 2015 (School Year ) - AUDITED GENERAL FUND (FUND 1) Beginning Balance Revenue Expense T ransfer - In/(Out) Excess/(Deficit) Ending Balance Unassigned $7,567,746 $65,586,440 $65,016,781 ($684,605) ($114,946) $7,452,800 Q-Comp $288,126 $1,702,870 $1,684,136 $0 $18,734 $306,861 Staff Development $634,191 $817,833 $376,949 $440,884 $1,075,075 Safe Schools $254,555 $235,815 $217,504 $0 $18,311 $272,866 Learning & Development $230,787 $1,474,973 $1,456,158 $0 $18,816 $249,603 Gifted & T alented $0 $91,166 $381,598 $290,431 $0 $0 Technical Education $0 $289,469 $576,066 $286,598 $0 $0 Basic Skills $0 $3,779,094 $3,787,479 $8,385 ($0) ($0) Alternative Learning $0 $1,168,835 $1,268,025 $99,190 $0 $0 Deferred Maintenance $416,559 $417,007 $355,300 $0 $61,707 $478,267 Operating Capital $615,476 $1,689,119 $1,542,547 $0 $146,572 $762,048 Health & Safety ($12,522) $446,320 $564,607 $0 ($118,287) ($130,809) Non-Spendable $119,427 $3,424 $0 ($3,424) $116,004 Total Reserved $2,546,600 $12,112,500 $12,213,791 $684,605 $583,314 $3,129,914 Total General Fund $10,114,346 $77,698,940 $77,230,572 $0 $468,368 $10,582,714 FOOD SERVICE FUND (FUND 2) Beginning Balance Revenue Expense T ransfer - In/(Out) Excess/(Deficit) Ending Balance Restricted -$82,809 $3,542,654 $3,459,845 $0 $82,809 $0 Non-Spendable $73,772 $17,276 $0 $0 $17,276 $91,048 Total Food Service Fund -$9,037 $3,559,930 $3,459,845 $0 $100,085 $91,048 COMMUNITY EDUCATION FUND (FUND 4) Beginning Balance Revenue Expense T ransfer - In/(Out) Excess/(Deficit) Ending Balance Adult Basic Ed $91 $84,182 $84,273 $0 ($91) $0 Community Service $782,614 $1,680,264 $1,555,647 $0 $124,617 $907,231 Early Childhood Family Ed $219,821 $438,907 $322,025 $0 $116,882 $336,703 School Readiness $12,847 $301,323 $305,677 $0 ($4,354) $8,493 Restricted $1,599 $76,929 $75,225 $0 $1,704 $3,303 Non-Spendable $6,000 $6,000 $0 ($6,000) $0 Total Community Ed Fund $1,022,973 $2,581,605 $2,348,847 $0 $232,758 $1,255,731 DEBT SERVICE FUND (FUND 7) Beginning Balance Revenue Expense T ransfer - In/(Out) Excess/(Deficit) Ending Balance Total Debt Service Fund $1,555,481 $6,208,530 $6,388,520 $0 -$179,990 $1,375,491 OTHER POST EMPLOYMENT BENEFITS TRUST FUND (FUND 45) Beginning Balance Revenue Expense T ransfer - In/(Out) Excess/(Deficit) Ending Balance Total OPEB Trust Fund $26,836,664 $637,303 $1,523,531 $0 -$886,228 $25,950,436 OTHER POST EMPLOYMENT BENEFITS DEBT SERVICE (FUND 47) Beginning Balance Revenue Expense T ransfer - In/(Out) Excess/(Deficit) Ending Balance Total OPEB Debt Service $339,605 $2,647,395 $2,557,965 $0 $89,430 $429,036 Beginning Balance Revenue Expense T ransfer - In/(Out) Excess/(Deficit) Ending Balance TOTAL ALL FUNDS $39,860,032 $93,333,703 $93,509,280 $0 -$175,577 $39,684,456 8

9 Below is the budget summary table by fund for the current fiscal year 2016 budget, last revised in May This serves as the starting point for the fiscal year 2017 preliminary budget. Fiscal Year 2016 (School Year ) - Budget (Second Revision) GENERAL FUND (FUND 1) Beginning Balance Revenue Expense T ransfer - In/(Out) Excess/(Deficit) Ending Balance Unassigned $7,452,800 $63,593,515 $62,873,927 ($1,005,596) ($286,008) $7,166,792 Q-Comp $306,861 $1,720,688 $1,720,688 $0 $0 $306,861 Staff Development $1,075,075 $839,827 $1,121,125 $0 ($281,298) $793,777 Safe Schools $272,866 $243,310 $243,310 $0 $0 $272,866 Learning & Development $249,603 $1,497,835 $1,497,835 $0 $0 $249,603 Gifted & T alented $0 $91,777 $403,750 $311,973 $0 $0 Technical Education $0 $248,565 $684,350 $435,785 $0 $0 Basic Skills $0 $3,578,599 $3,578,599 $0 $0 $0 Alternative Learning $0 $1,153,953 $1,411,791 $257,838 $0 $0 Deferred Maintenance $478,267 $432,432 $432,432 $0 $0 $478,267 Operating Capital $762,048 $1,602,172 $1,793,817 $0 ($191,645) $570,403 Health & Safety ($130,809) $668,142 $636,025 $0 $32,117 ($98,692) Non-Spendable $116,004 $0 $0 $0 $0 $116,004 Total Reserved $3,129,914 $12,077,300 $13,523,722 $1,005,596 ($440,826) $2,689,088 Total General Fund $10,582,714 $75,670,815 $76,397,649 $0 ($726,834) $9,855,880 FOOD SERVICE FUND (FUND 2) Beginning Balance Revenue Expense T ransfer - In/(Out) Excess/(Deficit) Ending Balance Restricted $0 $3,445,920 $3,330,196 $0 $115,724 $115,724 Non-Spendable $91,048 $0 $0 $0 $0 $91,048 Total Food Service Fund $91,048 $3,445,920 $3,330,196 $0 $115,724 $206,772 COMMUNITY EDUCATION FUND (FUND 4) Beginning Balance Revenue Expense T ransfer - In/(Out) Excess/(Deficit) Ending Balance Adult Basic Ed $0 $86,329 $132,244 $45,824 ($91) -$91 Community Service $907,231 $1,465,147 $1,590,973 -$45,824 ($171,650) $735,581 Early Childhood Family Ed $336,703 $415,402 $400,220 $0 $15,182 $351,885 School Readiness $8,493 $385,546 $321,720 $0 $63,826 $72,319 Restricted $3,303 $86,371 $86,690 $0 ($319) $2,984 Non-Spendable $0 $0 $0 $0 $0 $0 Total Community Ed Fund $1,255,730 $2,438,795 $2,531,847 $0 ($93,052) $1,162,678 DEBT SERVICE FUND (FUND 7) Beginning Balance Revenue Expense T ransfer - In/(Out) Excess/(Deficit) Ending Balance Total Debt Service Fund $1,375,490 $6,421,628 $6,491,830 $0 ($70,202) $1,305,288 OTHER POST EMPLOYMENT BENEFITS TRUST FUND (FUND 45) Beginning Balance Revenue Expense T ransfer - In/(Out) Excess/(Deficit) Ending Balance Total OPEB Trust Fund $25,950,436 $259,500 $1,812,311 $0 ($1,552,811) $24,397,625 OTHER POST EMPLOYMENT BENEFITS DEBT SERVICE (FUND 47) Beginning Balance Revenue Expense T ransfer - In/(Out) Excess/(Deficit) Ending Balance Total OPEB Debt Service $429,036 $2,595,494 $2,549,165 $0 $46,329 $475,365 Beginning Balance Revenue Expense T ransfer - In/(Out) Excess/(Deficit) Ending Balance TOTAL ALL FUNDS $39,684,453 $90,832,152 $93,112,998 $0 ($2,280,846) $37,403,607 9

10 Below is the budget summary table by fund for the fiscal year 2017 preliminary budget. Fiscal Year 2017 (School Year ) - Preliminary Budget GENERAL FUND (FUND 1) Beginning Balance Revenue Expense T ransfer - In/(Out) Excess/(Deficit) Ending Balance Unassigned $7,166,792 $65,394,772 $65,699,868 ($1,004,158) ($1,309,254) $5,857,538 Q-Comp $306,861 $1,770,357 $1,770,357 $0 $0 $306,861 Staff Development $793,777 $868,154 $951,696 $0 ($83,542) $710,235 Safe Schools $272,866 $256,079 $256,079 $0 $0 $272,866 Learning & Development $249,603 $1,504,877 $1,504,877 $0 $0 $249,603 Gifted & T alented $0 $93,011 $402,625 $309,614 $0 $0 Technical Education $0 $237,789 $681,895 $444,106 $0 $0 Basic Skills $0 $3,580,605 $3,580,605 $0 $0 $0 Alternative Learning $0 $1,153,953 $1,404,391 $250,438 $0 $0 Long Term Fac. $478,267 $1,374,185 $1,473,549 $0 ($99,364) $378,903 Operating Capital $570,403 $1,610,375 $1,527,917 $0 $82,458 $652,861 Health & Safety ($98,692) ($63,488) $0 $0 ($63,488) ($162,180) Non-Spendable $116,004 $0 $0 $0 $0 $116,004 Total Reserved $2,689,088 $12,385,897 $13,553,991 $1,004,158 ($163,936) $2,525,152 Total General Fund $9,855,880 $77,780,669 $79,253,859 $0 ($1,473,190) $8,382,690 FOOD SERVICE FUND (FUND 2) Beginning Balance Revenue Expense T ransfer - In/(Out) Excess/(Deficit) Ending Balance Restricted $115,724 $3,465,920 $3,363,123 $0 $102,797 $218,521 Non-Spendable $91,048 $0 $0 $0 $0 $91,048 Total Food Service Fund $206,772 $3,465,920 $3,363,123 $0 $102,797 $309,569 COMMUNITY EDUCATION FUND (FUND 4) Beginning Balance Revenue Expense T ransfer - In/(Out) Excess/(Deficit) Ending Balance Adult Basic Ed $0 $86,329 $132,106 $45,777 $0 $0 Community Service $735,490 $1,553,126 $1,638,043 -$45,777 ($130,694) $604,796 Early Childhood Family Ed $351,885 $426,964 $398,743 $0 $28,221 $380,106 School Readiness $72,319 $304,396 $320,657 $0 ($16,261) $56,058 Restricted $2,984 $86,371 $86,581 $0 ($210) $2,774 Non-Spendable $0 $0 $0 $0 $0 $0 Total Community Ed Fund $1,162,678 $2,457,186 $2,576,130 $0 ($118,944) $1,043,734 DEBT SERVICE FUND (FUND 7) Beginning Balance Revenue Expense T ransfer - In/(Out) Excess/(Deficit) Ending Balance Total Debt Service Fund $1,305,288 $6,492,495 $6,465,830 $0 $26,665 $1,331,953 OTHER POST EMPLOYMENT BENEFITS TRUST FUND (FUND 45) Beginning Balance Revenue Expense T ransfer - In/(Out) Excess/(Deficit) Ending Balance Total OPEB Trust Fund $24,397,625 $731,930 $1,833,977 $0 ($1,102,047) $23,295,578 OTHER POST EMPLOYMENT BENEFITS DEBT SERVICE (FUND 47) Beginning Balance Revenue Expense T ransfer - In/(Out) Excess/(Deficit) Ending Balance Total OPEB Debt Service $475,365 $2,614,376 $2,572,965 $0 $41,411 $516,776 Beginning Balance Revenue Expense T ransfer - In/(Out) Excess/(Deficit) Ending Balance TOTAL ALL FUNDS $37,403,607 $93,542,576 $96,065,884 $0 -$2,523,308 $34,880,299 10

11 The table below shows the trend of the district s general fund revenue and expenses. Year-End Year-End Year-End Year-End Year-End Year-End Year-End Year-End Year-End Revised Preliminary Actual Actual Actual Actual Actual Actual Actual Actual Actual Budget Budget Local $10,602,159 $11,481,993 $11,499,128 $9,858,463 $11,909,248 $9,880,380 $10,579,854 $7,642,218 $12,894,996 $10,957,646 $11,025,656 State $50,720,749 $55,799,792 $55,846,357 $48,729,523 $51,292,279 $53,584,091 $54,801,165 $59,311,781 $60,422,778 $62,312,118 $64,353,962 Federal $4,427,387 $4,539,312 $4,742,626 $10,395,798 $7,311,965 $5,850,649 $5,048,086 $4,474,783 $4,381,166 $2,401,051 $2,401,051 Total Revenue $65,750,295 $71,821,097 $72,088,111 $68,983,784 $70,513,492 $69,315,120 $70,429,105 $71,428,782 $77,698,940 $75,670,815 $77,780,669 Salaries $38,684,326 $39,343,182 $37,528,411 $39,438,781 $39,828,760 $39,113,599 $40,068,352 $40,532,043 $41,940,997 $42,307,633 $44,825,041 Benefits $12,722,434 $13,139,910 $12,793,689 $13,287,045 $14,426,747 $14,278,650 $15,287,595 $15,684,888 $16,816,114 $16,526,390 $16,633,015 Purchased Services $9,444,429 $9,967,294 $9,859,471 $9,335,413 $9,919,987 $9,066,790 $8,906,868 $9,280,849 $9,089,710 $10,230,811 $10,291,096 Supplies & Materials $2,894,257 $2,978,264 $2,793,559 $2,828,736 $2,886,944 $2,998,380 $2,757,897 $3,050,127 $3,032,808 $3,102,136 $3,319,636 Capital Expenditures $1,630,842 $2,611,949 $3,111,338 $3,091,433 $3,617,256 $3,109,797 $3,343,251 $2,993,244 $3,575,928 $3,961,544 $3,906,241 Other Expenditures $1,098,697 $1,820,828 $1,579,783 $919,064 $838,650 $623,097 $247,785 $279,192 $2,775,013 $269,135 $278,830 Total Expenses $66,474,985 $69,861,427 $67,666,251 $68,900,472 $71,518,344 $69,190,313 $70,611,749 $71,820,343 $77,230,570 $76,397,649 $79,253,859 Excess/(Deficit) ($724,690) $1,959,670 $4,421,860 $83,312 ($1,004,852) $124,807 ($182,644) ($391,561) $468,370 ($726,834) ($1,473,190) The preliminary fiscal year 2017 budget has the school district s total general fund expenses exceeding revenues by $1,473,190. The unassigned segment of the budget has expenses exceeding revenues by $1,309,254, spending down the unassigned fund balance to approximately $5.8 million to a level that is approximately 7.4 percent of the annual expenditures. The Minnesota Department of Education calculates fund balance for the purposes of tracking school districts financial solvency. However, measurement of the fund balance for purposes of the school board fund balance policy slightly differs in how the fund balance percentage is calculated by the Minnesota Department of Education. For purposes of a measurement for monitoring the fund balance in terms of the school board fund balance policy, the unassigned fund balance is calculated as a percent of total annual budgeted general fund expenditures. School districts and charters schools are required to comply with Minnesota Statutes, section 123B.83 Expenditure Limitations, which requires that a district must limit its expenditures so that the calculated net unreserved general fund balance as of June 30 does not constitute Statutory Operating Debt (SOD). According to Minnesota Statutes, section 123B.81, subdivision 2, SOD exists if the district s operating debt is more than 2.5 percent of the most recent fiscal year s expenditure amount. If a school district reaches SOD as of June 30, by January 31 of the following year of SOD, the district and the school board are required to create and implement a Special Operating Plan, which is formally approved through a board resolution and submitted to the Minnesota Department of Education commissioner for approval. Simply put, a school district cannot freely operate with a negative unassigned fund balance in excess of 2.5 percent of its annual expenditures. The Minnesota Department of Education s SOD calculation factors the unassigned fund balance as a percent of only the unassigned expenditures. Because the expenditures that are funded with unassigned revenue are lower than the overall expenses for the school district, this fund balance percentage is slightly higher than the percentage used for purposes of measurement against the school board fund balance policy. The tables on the follow page are side-by-side comparisons of how fund balance percentage is calculated for each purpose as described above. 11

12 MN Dept of Ed Calculation Fund Balance Policy Calculation Actual Fiscal Year 2013 Actual Fiscal Year 2012 Unassigned Fund Balance $8,354,676 + Assigned for Q-Comp $483,623 + Non-Spendable Fund Balance $137,252 = Unreserved Fund Balance used of MDE Calc $8,975,551 Unassigned Fund Balance $8,354,677 Unreserved Fund Expenses $58,831,782 Total General Fund Expenses $69,190,313 Fund Balance % per MDE Calculation 15.26% Fund Balance % 12.07% Actual Fiscal Year 2013 Actual Fiscal Year 2013 Unassigned Fund Balance $8,331,924 + Assigned for Q-Comp $401,340 + Non-Spendable Fund Balance $187,793 = Unreserved Fund Balance used of MDE Calc $8,930,057 Unassigned Fund Balance $8,331,926 Unreserved Fund Expenses $60,508,364 Total General Fund Expenses $70,603,243 Fund Balance % per MDE Calculation 14.80% Fund Balance % 11.80% Actual Fiscal Year 2014 Actual Fiscal Year 2014 Unassigned Fund Balance $7,567,746 + Assigned for Q-Comp $301,150 + Non-Spendable Fund Balance $119,427 = Unreserved Fund Balance used of MDE Calc $7,988,323 Unassigned Fund Balance $7,567,746 Unreserved Fund Expenses $61,683,642 Total General Fund Expenses $71,820,344 Fund Balance % per MDE Calculation 12.95% Fund Balance % 10.54% Actual Fiscal Year 2015 Actual Fiscal Year 2015 Unassigned Fund Balance $7,452,800 + Assigned for Q-Comp $306,861 + Non-Spendable Fund Balance $116,004 = Unreserved Fund Balance used of MDE Calc $7,875,665 Unassigned Fund Balance $7,452,800 Unreserved Fund Expenses $66,618,474 Total General Fund Expenses $77,230,572 Fund Balance % per MDE Calculation 11.82% Fund Balance % 9.65% Revised Budget Fiscal Year 2016 Revised Budget Fiscal Year 2016 Unassigned Fund Balance $7,166,792 + Assigned for Q-Comp $306,861 + Non-Spendable Fund Balance $116,004 = Unreserved Fund Balance used of MDE Calc $7,589,657 Unassigned Fund Balance $7,166,792 Unreserved Fund Expenses $65,900,001 Total General Fund Expenses $76,397,649 Fund Balance % per MDE Calculation 11.52% Fund Balance % 9.38% Preliminary Budget Fiscal Year 2017 Preliminary Budget Fiscal Year 2017 Unassigned Fund Balance $5,857,538 + Assigned for Q-Comp $306,861 + Non-Spendable Fund Balance $119,427 = Unreserved Fund Balance used of MDE Calc $6,283,826 Unassigned Fund Balance $5,857,538 Unreserved Fund Expenses $68,363,745 Total General Fund Expenses $79,253,859 Fund Balance % per MDE Calculation 9.19% Fund Balance % 7.39% 12

13 Based on the Minnesota Department of Education calculation as shown above, below is the historical average fund balance percentage for all school districts in the state, compared to Brainerd Public Schools percentage, leading up to fiscal year 2015, which is the most recent year compiled by the Minnesota Department of Education Brainerd 13.6% 12.9% 9.8% 5.6% 4.4% 4.6% 11.6% 15.3% 13.9% 15.3% 14.8% 12.9% 11.8% State Average 10.7% 11.8% 11.3% 11.4% 12.2% 13.3% 14.3% 17.7% 20.8% 22.9% 22.1% 21.2% 20.6% Source: Minnesota Department of Education In comparison to school districts of similar size and in similar communities, Brainerd Public Schools fund balance is lower as a percent of annual unassigned expenses. The graph on the following page compares the actual year fund balance percentage to the board-approved fund balance policy minimum percentage for comparable school districts as of fiscal year-end

14 Source: Minnesota Department of Education Based on the fiscal year 2015 fund balances for all school districts in the state based on the SOD calculation described above Brainerd Public Schools is currently ranked in the bottom 20 percent (272 out of about 330), slightly dropping from a rank of 262 with the fiscal year 2014 balances. Whether operating a business or a school district, having adequate working capital and liquidity ensures financial solvency and operational stability. An adequate amount of reserves provides both the ability and time to best react to changes in an operating environment that have an effect on finances. As illustrated below, if the imbalanced trend in the increases in revenue and expenses continue into fiscal year 2018 and the unassigned fund balance continues to fund the deficit at the proportionate level of the fiscal year 2017 budget, the school district will be faced with a fund balance at a level that is at or near its policy minimum at the conclusion of fiscal year Change Revenue $77,780, % $79,958,528 Expense $79,253, % $82,186,252 Excess/(Deficit) ($1,473,190) ($2,227,724) Total Fund Balances $8,382,690 $6,154,966 Unassigned Fund Balance $5,857,538 $4,300,165 Unassigned % of T otal Expenses 7.4% 5.2% 14

15 Funding State Basic General Education Aid serves as the district s primary funding source, comprising about 65 percent of the general fund revenue. Factoring an increase of 2 percent in the basic aid funding formula per student, along with a projected increase of 82 students, the State Basic General Education Aid is budgeted to increase by approximately $1.4 million over The majority of the State Basic General Education Aid category is based upon the Basic Funding Formula. Within the omnibus education bill passed during the 2015 legislative session, the general education funding formula was authorized to increase by 2 percent to an amount of $6,067 in , up from $5,948 in Also factored into the projected overall increase in general education aid is the projected increase of approximately 82 students. This increase is detailed below in the enrollment section. The components of State Basic General Education Aid equal the total funding for each category, multiplied by the school district s number of students as measured by pupil units, as described in the enrollment section. In addition to general foundational formula aid, approximately 90 percent of Minnesota school districts have additional operating funding as part of their local property tax levies. These local levies provide additional revenues supported by increased real estate taxes for home and commercial property owners in their district. Legislation approved in the 2013 and 2014 sessions brought significant changes to local property tax revenue authority for school districts. State law was enacted allowing local school boards the authority to levy up to $724 per pupil for additional funding for general operating. This provided approximately $1.8 million in additional funding beginning with the fiscal year 2016 budget. Sources of the school district s funding can be divided into 3 main categories: State, Federal, and Local. State funding is the largest source and includes aid received from the state s general budget. Federal funds primarily consist of funding for special education and service for disadvantaged students, commonly referred to as Title I funds. Local funds are primarily comprised of funding received from the local property tax levy and any fees that are generated by the school district. Fiscal Year 2017 Budget Sources of Funds The composition of these three categories changed slightly in 2016, as the school district removed approximately $2.5 million of federal funding from its revenue as the school district ceased being the fiscal host for the Paul Bunyan Special Education Cooperative as it transition to becoming its own special education school district (#6050). This change continues forward into the fiscal year 2017 budget and beyond. 15

16 Enrollment Because nearly all of a school district s revenue is based on the number of students it serves, accurately projecting student population is critical in developing an accurate budget for the upcoming year. Brainerd Public Schools uses an enrollment projection model that takes into account the following historical data and assumptions to project the district s future enrollment trends: 5-year average of number of annual births that later enter kindergarten 5-year historical average of transition rates between grades 5-year historical average of fall physical enrollment to ADM percentages Below are the actual and projected trends in the comparison of our incoming kindergarten class sizes as a percentage to the number of birth that occurred 5 years prior within the zip codes the school district serves. Brainerd Baxter Merrifield Nisswa Garrison Ft. Ripley Zip Codes The kindergarten class is projected to be 2 students higher due to a higher birth count in 2011, however using a slightly lower birth rate to kindergarten enrollment percentage. Birth Rates to Kindergarten History Projections Birth Year Birth Count Kindergarten Year Kindergarten Enrollment % of Birth to KG 89% 89% 91% 80% 78% 75% 82% 86% 83% 81% 83% 82% 82% 82% In addition to this, below is the history of gains or losses of students as they transition between grades. Enrollment History Enrollment Projections PRE-K 7.5 (0.9) (5.4) (2.4) (2.7) (1.9) (1.1) Diff between Grad to KG (65.9) (73.5) (66.7) (21.8) (28.4) (14.1) 32.7 (13.6) (2.9) (42.6) (94.1) KG into 1st (20.3) (1.0) st into 2nd (13.5) (18.3) (11.1) (0.4) (5.4) (7.4) (6.0) (5.7) (5.7) (5.6) (5.4) 2nd into 3rd (9.7) (18.8) 8.6 (5.2) rd into 4th (20.8) (5.8) th into 5th (15.7) (1.0) th into 6th th into 7th (7.2) 6.0 (2.9) th into 8th (11.1) (2.8) (15.1) 6.8 (3.6) (3.8) (4.0) (4.1) (3.9) 8th into 9th (3.3) th into 10th (2.5) (0.8) (17.0) (4.3) (9.5) 0.4 (5.3) (5.8) (5.3) (5.5) (5.8) 10th into 11th (4.1) (17.8) (35.8) (30.2) (28.9) (26.5) (27.6) (29.5) (32.3) (29.1) (30.6) 11th into 12th Total Migration 1-12 (47.4) (5.6) (3.0) Total Enrollment Change by Year (105.8) (80.0) (54.1) (49.5) 16

17 The enrollment model uses the rolling average from the most recent two years to calculate the percentage of students lost or gained as they transition between grades to project future transition losses or gains in each grade. From there, the senior class is removed each year, producing the overall enrollment projections. Enrollment History Enrollment Projections Pre-K K K Pre K % Change K % -1.23% -1.09% 0.16% 0.42% 0.70% 1.28% 0.49% 0.63% 0.11% -0.74% The district has budgeted annual average daily membership (ADM) for preschool through grade 12 enrollment to be 6,564 for the budget year, an increase of approximately 82 students from the current forecast of 6,482 at the end of the school year. Reconciliation Summary of Projected Enrollment Change from to Forecast Enrollment for Year-End ,482.2 Plus projected increase in Pre-K (ECSE) Plus projected increase in transitioning between grades Plus difference between graduating senior class & incoming kindergarten ( ) Subtotal projected increase in enrollment = 82.1 Projected Enrollment for School Year 6,564.3 The district s ADM enrollment for state aid payment factors the ADM of 6,425.4 by the weighting for each grade-level category to determine the pupil unit count. This pupil unit count is then multiplied by the general education aid formula amount to determine the total amount of state aid. The table below illustrates the student weightings showing the change between and in terms of student enrollments in ADM converted to pupil units using the different weighting categories: 17

18 Student Weighting Structure for Student Weighting Structure for ADM Weighting Pupil Units ADM Weighting Pupil Units Pre-kindergarten Pre-kindergarten Kindergarten - Grade 6 3, ,490.7 Kindergarten - Grade 6 3, ,508.5 Grades , ,466.0 Grades , ,542.5 Total 6, ,059.8 Total 6, ,154.6 Factored into the estimated increase in general aid revenue (now $6,067 total per pupil unit for ), this slight increase in enrollment (82.1 average daily membership or 94.8 pupil units) will have a positive impact on the district s revenue by approximately $575,000 in fiscal year Although the school district s enrollment has shown historical growth, this growth contracted in the past 15 years, resulting in enrollment at a level very close to where it was 25 years ago, only growing by a net 1.7 percent over the past two and a half decades, settling at its current level of 6,436 students as of school year. As previous mentioned, statewide student population also experienced a similar expansion and contraction trend, yet experienced an overall growth trend higher than Brainerd, with net student population up more than 15 percent in the past 25 years. This contrast is not uncommon to school districts in outstate Minnesota, whereas the overall population trends have increased at higher rates in urban area. The following graph illustrates these contrasting trends. The ten year projection for enrollment for Brainerd Schools can be estimated in both an aggressive and conservative manner, when averaging these methods, the outlook for enrollment shows that the school district may increase by approximately 473 students or an average of about 0.7 percent per year over the next 10 years. Enrollment Trend Comparison Statewide Enrollment ,073 State-wide Trend 7, (1.0%) 2025 High Est. 6, (0.7%) 2025 Avg. Est. Brainerd Trend 6,436 6, (0.4%) 2025 Low Est. Brainerd Enrollment

19 Declining enrollment places further financial strain on school districts. Leading up to the stability in recent years, the school district s enrollment had declined an average of about 1 percent per year for the past 15 years, totaling nearly 1,000 students. Generally speaking, this decline is attributed to two main reasons. First, much of the declining pattern resembles that of which has happened with student population across the state, as shown in the graph on the previous page. However, in , in an effort to bring balance to the general fund budget, Brainerd implemented major reductions in programming and staff, which has a noticeable impact on its open enrollment position, which accentuated the decline beyond the state s trend. As a result, as the state-wide trend began reversing in , Brainerd s enrollment continued to decline. In its longer term history, Brainerd Public Schools has been a net gainer of open enrollment students. This net amount has been reduced in recent years and most significantly when open enrollment was temporarily closed after the failed operating levy in The graphs below illustrate the trends in enrollment options in and out for Brainerd for the past five years. Source: Minnesota Department of Education Resident Districts of Students Open Enrolling Into Brainerd Aitkin Crosby-Ironton Pillager Pequot Lakes Onamia Little Falls Pierz Staples-Motley Pine River-Backus Other Open Enrolled In

20 The chart and tables below show the detail of where students that are resident students of Brainerd are attending school elsewhere. This is a historical look at the trend of students open enrolling out of Brainerd to other public school options. Source: Minnesota Department of Education Online PSEO Charter School Public School Enrolled Out Districts Where Brainerd Resident Students Are Open Enrolling Into Aitkin Crosby-Ironton Pillager Pequot Lakes Onamia Little Falls Pierz Staples-Motley Pine River-Backus Other Open Enrolled Out

21 Staffing Because staffing accounts for approximately 80 percent of the budget and is mainly driven by student population number and needs, it is critical that the school district s staffing be actively managed to ensure appropriate service levels are maintained in a financially sustainable manner. The table below illustrates the planned changes in general fund staffing for the school year Additions Reductions Net Change T eachers (1.00) Educational Assistants Adminstrators Clerical Custodians Other (0.70) Interpreters Total (1.70) Below is the detail of the change in teacher FTEs that are included in the preliminary fiscal year 2016 budget. Reductions Secondary Warrior Academy Teacher 1.00 Secondary LPN 0.70 TOTAL REDUCTIONS 1.70 Additions Special Education Teacher at BHS 2.00 Special Education Teacher at FMS 1.00 Special Education Teacher at Harrison Elem Elementary KG at Nisswa 1.00 Elementary KG TBD 2.00 Elementary 4 st Grade at Lowell 1.00 FACS Teacher at BHS 1.00 Physical Education Teacher at BHS 0.60 Career/Tech Teacher at BHS 0.40 Visual Arts Teacher at BHS 0.40 Ag Education Teacher at BHS 0.40 Multi-Media Teacher at FMS 0.20 Music Teacher at FMS 0.20 Asst. Principal at Riverside Elementary 1.00 Behavior Mgt. Specialist at Riverside Elem SpEd Educational Assistant at Riverside Elem 1.00 Licensed School Nurse 1.00 TOTAL ADDITIONS

22 Based on the staffing levels above, the table below compares FTE staffing levels of other comparable districts based on respective student enrollment. Students Per Staff Ratios Enrollment SpEd % F & R % School Teachers Ed Assts. Admin. 3, % 30.2% Alexandria , % 58.1% St. Cloud , % 15.8% Sartell , % 34.4% Sauk Rapids , % 60.5% Willmar , % 39.5% Moorhead , % 43.1% Little Falls , % 34.1% Fergus Falls , % 39.3% Bemidji , % 39.4% AVERAGE , % 41.3% BRAINERD Source: Minnesota Department of Education adapted by SchoolFinances.com These ratios simply compare the number of students to the number of FTE for these three main staffing groups. For example, based on a projected FTE of teachers compared to enrollment, Brainerd has one certified teacher for every 16.8 students, which is slightly higher ratio / lower teacher staffing level than the group average. It is important to remember that student-to-staff ratios DO NOT reflect class sizes. School districts have certified teachers who also facilitate many specialized programs within special education and enhanced and individualized learning invention programs for disadvantaged students that make this number lower than what would be traditionally viewed as an average class size. Despite having over a 20 percent higher concentration of students receiving special education services and nearly a 5 percent higher concentration of students in poverty as measured by federal free and reduced meal guidelines Brainerd has nearly 10 percent more students per teacher comparatively. Given this dynamic, combined with the current projected deficit operating budget, signals a possible imbalance in the amount of funds being spent on the level of staff compensation versus the level of staffing. Even after a planned reduction in the level of EA staffing for the school year, the district still has a higher level of educational assistant staffing with a staffing ratio that is over 35 percent higher than the peer group with approximately one EA for every 33 students. Comparable districts are managing these levels closer to a range of one for every students, with an average of about 50. Much of this likely is attributed to the fact that our special education student population percentage at 19.4 percent is over 20 percent higher than the group average of 16 percent. 22

23 Capital Improvements and Facilities From two different sources operating capital and long-term facilities maintenance revenue, the school district receives annual funding of approximately $3.0 million for its capital needs. While these revenues and expenditures are contained within the reserved account area of the general fund budget, it is important to highlight this important financial area of our organization. The capital budget includes things such as maintaining our facilities, furniture, fixtures and equipment (F, F&E) purchases and technology equipment needs. The tables below show a summary of the school district s preliminary capital budget for , as well as projections for and Budget Projecton Projection Beginning Balances Operating Capital $570,403 $652,861 $638,210 Long Term Faciliites Maint. $478,267 $378,903 $398,092 TOTAL BEGINNING BALANCES $1,048,670 $1,031,764 $1,036,302 Revenue Operating Capital Revenue $1,610,375 $1,618,266 $1,628,461 Long Term Faciliites Maint. $1,374,185 $2,090,486 $2,720,496 TOTAL REVENUE $2,984,560 $3,708,752 $4,348,957 Expense Building Level Equipment $89,300 $89,300 $89,300 Media / Technology $350,000 $500,000 $500,000 BHS Athletics/Activites $40,000 $40,000 $45,000 FMS Athletics/Activites $12,000 $12,000 $15,000 Elem. Phy. Ed $6,000 $6,000 $6,000 Music Programs Equip $12,000 $12,000 $15,000 Health / Nurses $3,000 $3,000 $3,000 Food Service Equipment $25,000 $25,000 $30,000 District-wide Projects $350,000 $300,000 $250,000 District-wide F,F & E $55,000 $60,000 $60,000 Long Term Faciliites Maint. $918,549 $1,571,297 $2,243,381 Copiers/Printers $166,317 $166,317 $166,317 Computer Lease $136,000 $136,000 $136,000 Special Assessments $0 $0 $0 Comprehensive Facilities Plan $20,000 $0 $0 Lowell ADA Project Lease Payment $63,300 $63,300 $63,300 Non-Recurring Equip/Projects $200,000 $220,000 $225,000 Health and Safety $555,000 $500,000 $500,000 TOTAL EXPENSE $3,001,466 $3,704,214 $4,347,298 EXCESS / (DEFICIT) ($16,906) $4,538 $1,659 Ending Balances Operating Capital $652,861 $638,210 $662,754 Long Term Faciliites Maint. $378,903 $398,092 $375,207 TOTAL ENDING BALANCES $1,031,764 $1,036,302 $1,037,961 23

24 Other Post-Employment Benefits (OPEB) Other Post-Employment Benefits (OPEB) refers to employer-paid benefits for retirees, except for pension (hence, the other ), and normally includes health insurance. For our school district and many across the state, OPEB primarily included retirement health care benefits that existed in current labor agreements. Minnesota State Statute , Subd. 2b. states, A unit of local government must allow a former employee and the employee s dependents to continue to participate indefinitely in the employer-sponsored hospital, medical, and dental insurance group that the employee participated in immediately before retirement. This means the school district is mandated or obligated to provide employees with indefinite access to its health benefits plan after retiring. The Governmental Accounting Standards Board (GASB) establishes the rules that accountants follow for all state and local government entities, including school districts. Although OPEB has been part of school district and government finances for many years, beginning in fiscal year-end 2009, school districts are required to compute the sum of their current and future cost of providing these post-employment benefits and report this total as a liability on their financial statements. Other government entities already had existing levy authority to cover a portion of the cost associated with their OPEB from local taxes. Up until 2009, school districts had been forced to cover their entire OPEB costs on the pay-as-you-go method from their annual general funds. In the 2008, the Minnesota Legislature enacted a law (Minnesota Statutes, Section , Subdivision 6.) closing this inequity gap between other municipal government units and school districts. This law allowed school districts to compute their OPEB liability and have the ability to issue bonds for the liability, with the bond proceeds structured to pay the ongoing cost of the post-employment benefits. At this time, a separate reserved fund (fund 45) was established to account for this outside of the general fund financial operations of the school district. In June 2009 the school board approved the issuance of bonds to fund the current accrued liability and the bond proceeds were placed into a trust account. This trust account acts as a saving account in which the interest earnings and principal can only be distributed back to Brainerd Public Schools over time to pay for their OPEB costs, which have normally been funded from their general education operating funds. By funding its current liability, the district did not suffer negative impacts of the reporting the increased liability on its audit report. This increased liability will mostly likely negatively impact the district s credit rating. This will translate to borrowing money at a much higher rate. A funded liability has a zero effect on its statement of net assets and will not affect its credit rating. Because of Brainerd Public Schools size, an actuarial report must be completed every two years to assess any increases or decreases in its total liability. This report analyzes the employee and retiree bases and the district s benefit structure to calculate the total current and future cost of funding their OPEB commitments. This report speaks of two types of costs: direct and implicit subsidies. The implicit subsidy is the indirect cost the district incurs for the state s current mandate of allowing retirees indefinite access to their insurance pool. The direct subsidy is the amount the district currently pays in contributions toward retiree health insurance premiums according to the current provision in their employee labor agreements. These paid benefits have been historically bargained with its various employment groups since the school and labor unions have been in existence. 24