Preliminary Budget independent school district 196 Rosemount-Apple Valley-Eagan Public Schools Rosemount, Minnesota

2013-14 Preliminary Budget # 196 independent school district 196 Rosemount-Apple Valley-Eagan Public Schools Rosemount, Minnesota Educating our students to reach their full potential

2013-14 Preliminary Budget Fiscal Year Ending June 30, 2014 Independent School District 196 Rosemount-Apple Valley-Eagan Public Schools Rosemount, Minnesota

INDEPENDENT SCHOOL DISTRICT 196 Rosemount-Apple Valley-Eagan Public Schools Educating our students to reach their full potential TABLE OF CONTENTS SCHOOL BOARD AND ADMINISTRATION 1 2013-14 BUDGET MESSAGE 3 SUMMARY INFORMATION Projected Revenues, Expenditures, and Fund Balance by Fund 25 Summary of Revenues by Source Category and Fund 26 Revenue Charts 29 Summary of Expenditures by Object Category and Fund 30 Expenditure Charts 32 REVENUE BUDGET SCHEDULES General Fund, General Account 35 General Fund, Magnet Program 35 General Fund, Special Education Account 36 General Fund, Quality Compensation Account 36 General Fund, Pupil Transportation Account 36 General Fund, Capital Expenditure Account 36 Food Service Fund 37 Community Service Fund 37 Alternative Facilities-Levy Account Fund 15 38 2004 Facilities Referendum Fund 56 38 Cedar Valley Learning Center 38 Debt Service Fund - Regular 38 Debt Service Fund - OPEB... 38 Expendable Trust Fund 08 - Scholarship Funds 38 Trust Fund 18 - Employee Flexible Spending Plan 39 Agency Fund 09 - District Graduate Credits 39 Agency Fund 39 - Local Collaborative Time Study 39 Internal Service Fund 20 - Severance Pay.. 39 Internal Service Fund 22 - OPEB Revocable Trust 39 Internaal Service Fund 23 - Self-Insured Health Plan 39 Internaal Service Fund 24 - Self-Insured Dental Plan 39 EXPENDITURE BUDGET SCHEDULES General Fund, General Account 43 General Fund, Magnet Program 45 General Fund, Special Education Account 46 General Fund, Quality Compensation Account 48

EXPENDITURE BUDGET SCHEDULES - continued General Fund, Pupil Transportation Account 48 General Fund, Capital Expenditure Account 50 Food Service Fund 50 Community Service Fund 51 Alternative Facilities-Levy Account Fund 15 53 2004 Facilities Referendum Fund 56 53 Cedar Valley Learning Center 53 Debt Service Fund - Regular 53 Debt Service Fund - OPEB... 54 Expendable Trust Fund 08 - Scholarship Funds 54 Trust Fund 18 - Employee Flexible Spending Plan 54 Agency Fund 09 - District Graduate Credits 54 Agency Fund 39 - Local Collaborative Time Study 54 Internal Service Fund 20 - Severance Pay.. 55 Internal Service Fund 22 - OPEB Revocable Trust 55 Internal Service Fund 23 - Self-Insured Health Plan 55 Internal Service Fund 24 - Self-Insured Dental Plan 55 ADDITIONAL INFORMATION 2013-14 Operating Funds Budget Timetable - Preliminary Budget... 59 Student Enrollment - Actual or Projected October 1 Student Counts. 60 Students - Average Daily Membership 61 Special Education Unduplicated Child Count 62 Employee Head Counts 63 2013-14 Preliminary Budget School Staffing Allocation Table 64 2013-14 Preliminary Budget Special Education Staffing Allocation Table 65 2012-13 Preliminary Budget Special Education Program Support and Student Support Assistant Allocation 66 General Fund Actual or Projected Fund Balance History 67 2013-14 Preliminary Budget General Fund Expenditure by Program with Object Series Totals 68 GLOSSARY Revenue Codes 71 Expenditure Codes 76

INDEPENDENT SCHOOL DISTRICT 196 Rosemount-Apple Valley-Eagan Public Schools SCHOOL BOARD Rob Duchscher Jackie Magnuson Gary Huusko Art Coulson Joel Albright Mike Roseen Bob Schutte - Chairperson - Vice Chairperson - Clerk - Treasurer - Director - Director - Director ADMINISTRATION Jane Berenz Khia Brown Jill Coyle Kim Craven Mary Kreger Julie Olson Mark Parr Tom Pederstuen Jeff Solomon Tony Taschner Steve Troen - Superintendent - Director of Community Education - School District Attorney - Administrative Assistant to the Superintendent - Director of Special Education - Director of Elementary Education - Director of Secondary Education - Director of Human Resources - Director of Finance and Operations - Director of Communications - Director of Teaching and Learning Stella Y. Johnson - Coordinator of Finance 1

INDEPENDENT SCHOOL DISTRICT 196 Rosemount-Apple Valley-Eagan Public Schools MISSION Educating our students to reach their full potential BELIEFS * Students come first * All students can learn * High expectations inspire students and staff to excel * Learning is maximized in a safe, respectful and inclusive environment * A well-rounded education includes opportunities in academics, the arts and athletics * Learning is a lifelong pursuit * Effective management of resources is critical * Partnerships and collaboration enhance educational programming * A culture of innovation and continuous improvement prepares students to be college or career ready * An informed and engaged community guides effective decision-making 2

INDEPENDENT SCHOOL DISTRICT 196 Rosemount-Apple Valley-Eagan Public Schools Educating our students to reach their full potential TO: FROM: Jane Berenz, Superintendent Jeffrey M. Solomon, Director of Finance and Operations Stella Y. Johnson, Coordinator of Finance DATE: June 24, 2013 SUBJECT: 2013-14 Preliminary Budget This report summarizes the district s proposed preliminary budget for the 2013-14 school year. The budget reflects and supports the district s goals, initiatives and policies set by the School Board. The purpose of this memorandum is to briefly explain the assumptions used to develop this proposed budget and provide an overview of the budget for each fund. This budget has been developed with considerable input from the School Board, the district s Budget Advisory Council, members of the superintendent's cabinet and the district s administrative council. It was prepared in accordance with budget planning guidelines reviewed by the district s Budget Advisory Council and School Board in January and February of 2013. It was also reviewed by the School Board at the June 10, 2013 budget workshop. The general fund is used to account for all revenues and expenditures related to educational activities, district instructional and student support programs, expenditures for the superintendent, district administration, normal operations and maintenance, pupil transportation, capital expenditures, and legal school district expenditures not specifically designated to be accounted for in other funds. The 1995 Legislature dissolved the pupil transportation fund and the capital expenditure fund, and merged them with the general fund, effective July 1, 1996. For ease of comparison, we have continued to segregate the funding for pupil transportation and capital expenditures from the general fund. The district receives categorical funding (health and safety and operating capital) for its capital expenditure account and is required to report amounts of revenues over expenditures in separate restricted/reserved fund balance accounts. The district uses the general account of the general fund to account for all the activities related to providing pre-kindergarten through 12 th grade education, except pupil transportation and capital expenditure, and other areas as summarized below. The number of students in need of special services and the costs of educating and serving these students have continued to present financial pressure each year. To fully understand its impact on the district s overall finances (specifically the general account of the general fund), we began to report special education revenues (excluding general education aid generated by students with disabilities) and expenditures in a separate account called the special education account on July 1, 2005. The district s application to participate in the Minnesota Quality Compensation program was approved by the Minnesota Department of Education on March 20, 2007. To ensure funding integrity, the district has established a separate account called the quality compensation account within the general fund to account for all financial activities of the program. The five separate accounts within the general fund are listed below. a) General Account All financial activities of the district that are not accounted for in any other account or fund; 3

b) Special Education All financial activities associated with providing special education services to students with disabilities; c) Quality Compensation Track revenues and expenditures associated with providing additional compensation to licensed teachers and nurses who successfully participate in the Quality Compensation program; d) Pupil Transportation All financial activities of the former pupil transportation fund are recorded under the pupil transportation account of the general fund, and e) Capital Expenditure All financial activities of the former capital expenditure fund. The combined fund balance of these five accounts will be reported to the state as the general fund balance on June 30, 2014. We believe reporting by separate accounts, like we do; gives the users of this budget document a better look at the major expenditure categories impacting the general fund. BUDGET OVERVIEW The table below shows the budgeted revenues and expenditures by fund, and the projected fund balances at the end of the fiscal year. Projected Fund Revenues Expenditures Difference Fund Bal. General Fund Gen. Fund-General Account 225,983,628 215,622,450 10,361,178 N/A Gen. Fund-Special Education Account 33,417,645 60,131,435 (26,713,790) N/A Gen. Fund-Quality Compensation Account 7,041,357 7,334,650 (293,293) N/A Gen. Fund-Pupil Transportation Account 16,607,293 17,387,261 (779,968) N/A Gen. Fund-Capital Expenditure Account 10,088,459 9,972,512 115,947 N/A Total General Fund 293,138,382 310,448,308 (17,309,926) 21,038,686 Food Service Fund 10,684,005 10,912,726 (228,721) 1,990,911 Community Service Fund 9,442,369 9,933,453 (491,084) 198,433 Building Construction Fund Alternative Facilities-Levy Account 6,020,675 6,878,096 (857,421) 15,645 2004 Facilities Referendum Account - - - - Cedar Valley Learning Center Account - - - - Total Building Construction Fund 6,020,675 6,878,096 (857,421) 15,645 Debt Service Fund - Regular 16,055,414 16,366,775 (311,361) 3,219,044 Debt Service Fund - OPEB 2,499,039 2,500,188 (1,149) 457,004 Expendable Trust - Scholarship Funds - 1,000 (1,000) 21,616 Agency Fund (LCTS) 73,039 100,300 (27,261) 62,894 Internal Service Fund Severance Pay (GASB #16) 466,000 450,000 16,000 (3,265,597) OPEB Revocable Trust 1,168,755 668,755 500,000 29,903,361 Self-Insured Health Plan 40,100,116 32,000,000 8,100,116 14,564,186 Self-Insured Dental Plan 335,000 270,000 65,000 186,613 Total Proprietary Fund 42,069,871 33,388,755 8,681,116 41,388,563 Total - All Funds 379,982,794 390,529,601 (10,546,807) 68,392,796 4

BUDGET PROCESS AND ASSUMPTIONS The processes and major assumptions used to develop the budgets for all funds, except the capital expenditure account, are briefly summarized below. The School Board approved the 2013-14 budget for the capital expenditure account on April 22, 2013. The administration is recommending a few minor changes to that budget. The budget-planning process for the 2013-14 school year was less complicated than previous budget years. Preliminary and updated budget forecasts released by the state in November 2012 and February 2013 both showed a slight increase in state revenues and stable funding for K-12 education. The district s five-year financial forecast, using the budget planning guidelines recommended by the district s Budget Advisory Council and reviewed by the School Board in February 2013, indicated that the district would not have to make any significant budget adjustments for the 2013-14 school year. This preliminary budget was prepared in accordance with these budget planning guidelines. The following is a list of some of the major budget planning guidelines: One percent, or $52, increase in the per pupil unit basic general education aid. The per pupil unit general education allowance is $5,224 for the current year; the 2013-14 allowance is projected to be $5,276; Continuance of Integration revenue; assume integration levy for 2013-14 school year will be the same as current school year estimate and integration aid will be 90 percent of current year s estimate; Staffing guidelines approved by the School Board at its March 11, 2013 regular meeting; Inflationary increases to wages for groups that do not have approved contracts in place for the next school year; A 2 percent inflationary adjustment factor for non-salary budgets, and A performance to budget savings of $6.00 million for the current school year. The 2013 Legislature adjourned on May 20, 2013; the administration will be reviewing the E-12 Education Finance bill to determine its impact on the district s budget for the 2013-14 school year. All budget items that will be affected by the E-12 Education Finance bill will be adjusted this fall when the district normally updates its budget to reflect current laws and actual October 1 enrollment. Salary budgets are based on the staffing ratios and guidelines approved by the School Board on March 11, 2013, and the enrollment projections reviewed by the School Board on November 19, 2012. For employee groups that have an approved contract for 2013-14 (food service workers, principals, vehicle technicians and non-union employees), salaries and related expenditures are estimated based on current approved contracts. For other groups, (teachers, secretarial and clerical employees, building chiefs, custodians, bus drivers, chaperones and crossing guards), salaries and related expenditures are estimated based on specific budget guidelines as determined by the School Board in February 2013. Benefits are estimated using a variety of techniques. Retirement benefits, social security and workers compensation premium budgets are calculated as specified percentages of salaries. Budgets for health, dental, life insurance and tax sheltered annuity match are estimated based on projected number of employees reported by school principals and other budget administrators, premium information provided by the insurance carriers and current employee contracts. For groups that have no contract but for which there is a limit on the district contribution, increase in the maximum district contribution is based on budget guidelines as determined by the School Board in February 2013. Non-salary budgets for schools are based on a system of allocation formulas. Instructional allocations Consistent with the School Board budget planning parameters, the 2013-14 instructional allocations to the schools have been increased by 2 percent over the 2012-13 amounts. 5

Staff development In addition to the instructional allocations, schools also receive $8 per pupil for staff development activities. Cocurricular staffing and supplies - Middle and high schools receive cocurricular staffing and supplies allocations to support their cocurricular programs. Cocurricular staffing allocations for 2013-14 have been held at the 2012-13 amounts, with an additional allocation to cover a 0.50 percent increase in the Teacher Retirement Association contribution. Cocurricular supplies allocations for 2013-14 have been increased to reflect a 2 percent inflationary adjustment. Compensatory Education Allocations for 2013-14 are based on estimates prepared by the Minnesota Department of Education dated January 17, 2013. These estimates are based on the district s actual enrollment and actual free and reduced-price school meal counts on October 1, 2012. Basic Skills per pupil unit allocations for grades K-8 remain at the 2012-13 level: $40.50 per pupil unit for non-title I elementary and middle schools and $20.25 for Title I elementary schools. Learning and Development Program funds are provided by the increase in the elementary pupil unit weighting factor. For 2013-14 (per 2007 legislation), the weighting factor for kindergarten students remains at 0.612; the weighting factor for grades 1-3 students remains at 1.115, and the weighting factor for grades 4-6 students remains at 1.06. School districts are required to reserve the portion of the general education formula revenue attributable to the increased pupil weighting factors to reduce and maintain class size in elementary grades, with first priority on kindergarten, first-, second- and third-grade class sizes. The allocations for each school are based on enrollment projections presented to the School Board on November 19, 2012. Administrative and support department non-salary budgets are determined by each budget administrator based on parameters established by the School Board, and then reviewed and approved by the superintendent or the director of finance and operations. For 2013-14, the inflationary adjustment is 2 percent except for budget items, such as heating fuel and electricity, that are beyond the district s complete control. Revenue estimates are prepared by the Finance Department based on 2011 legislation, using the November, 19 2012 enrollment projections, and a $52 increase in the per pupil unit general education formula allowance. The per pupil unit allowance of $5,224 for the current school year has been increased to $5,276 for 2013-14. Of this amount, $255.89 is set aside for pupil transportation. This is consistent with the budget planning guidelines reviewed by the School Board in February 2013. Many aspects of 2013-14 budget are still unknown. For example, we do not yet know our actual enrollment for 2013-14. Any variance from projections will affect our revenues and expenditures. Other factors affecting expenditures include working agreements with teachers, secretarial and clerical employees, building chiefs, custodians, bus drivers, chaperones and crossing guards. If these agreements result in wage and employee benefits different than the assumptions used, district expenditures will change from the amounts in the preliminary budget. When the School Board approves this budget, it will become the official authorization for expenditures for the 2013-14 school year. During fall 2013, the administration will again examine all of the factors behind the budget, consider additional information that is available then, including actions taken by the 2013 Legislature, and bring a revised final budget to the School Board for review and approval. 6

GENERAL FUND The following table summarizes budgeted totals of the combined general fund revenues, expenditures and fund balances for the 2012-13 and 2013-14 school years. 2012-13 2013-14 General Fund - Combined Revised Final Preliminary Amount of Percent Budget Budget Change Change Beginning Fund Balance 41,374,013 38,348,612 (3,025,401) Revenue 297,746,273 293,138,382 (4,607,891) -1.55% Expenditure 306,771,674 310,448,308 3,676,634 1.20% Revenue less Expenditure (9,025,401) (17,309,926) (8,284,525) Est. Ending Fund Balance 38,348,612 * 21,038,686 (17,309,926) -45.14% Est. Ending Fund Balance as % of Exp. 12.50% 6.78% * FY2013 year-end projected fund balance includes a projected $6.0 million performance to budget savings. For 2013-14, general fund total revenues are projected to be $293.14 million, a reduction of $4.61 million or 1.55 percent less than our revised estimate for the current school year. The proposed general fund expenditure budget for 2013-14 is $310.45 million. This represents an increase of $3.68 million, or 1.20 percent more than our revised final budget estimate. The June 30, 2014 fund balance is estimated to be $21.04 million, or 6.78 percent of projected expenditure budget. This fund balance estimate assumes that the projected June 30, 2013 fund balance will include a $6.00 million performance to budget savings which will carry forward to the 2013-14 school year. Details of some of the key factors that have contributed to the change between 2012-13 and 2013-14 are highlighted in the following sections dedicated to the five separate components of the general fund. GENERAL ACCOUNT Overview - The table below shows budgeted totals of general account (including magnet program) revenues and expenditures for 2012-13 and 2013-14. 2012-13 2013-14 General Fund Revised Final Preliminary Amount of Percent General Account Budget Budget Change Change Revenue 229,479,654 225,983,628 (3,496,026) -1.52% Expenditure 213,411,443 215,622,450 2,211,007 1.04% Revenue less Expenditure 16,068,211 10,361,178 (5,707,033) The estimates show a 1.52 percent decrease in revenues, from $229.48 million in 2012-13 to $225.98 million in 2013-14, and an increase of 1.04 percent in expenditures, from $213.40 million in 2012-13 to $215.62 million in 2013-14. It is important to note that the projected general account revenue includes general education aid generated by our special education students. State and federal special education revenues, tuition reimbursements from other school districts and expenditures directly associated with services provided to special education students are reported under the special education account of the general fund as summarized in the next section of this report. The primary source of revenue in the general account is general education revenue, which is provided by the state to all public school districts based on each district s marginal cost pupil unit of its students and a per pupil unit formula allowance set by the Legislature. 7

Due to the different needs of students at different levels, the state weights the ADM as follows: 0.612 for kindergarten, 1.115 for grades 1 3, 1.06 for grades 4 6 and 1.3 for grades 7 12. The 2000 Legislature created the adjusted marginal cost pupil unit (AMCPU) calculation to increase funding for districts with declining enrollment. 1) The sum of 77 percent of the pupil units in the current school year and 23 percent of the pupil units in the prior year, or 2) 100 percent of the pupil units in the current school year. The use of the greater of 77 percent of current year s pupil units and 23 percent of the prior year s pupil unit or 100 percent of the current year s pupil units to compute revenues has been in effect since the 2000-01 school year. For the purpose of preparing this preliminary budget, we use the 77 percent of current year s pupil units and 23 percent of the projected pupil units for 2012-13 school year. The projected October 1, 2013 enrollment is 27,111 and the estimated adjusted marginal cost pupil units for revenue calculations is 31,029. Revenues (Comparison of 2012-13 to 2013-14) The total projected revenues in the general account for 2013-14 totaled $225.98 million. This is $3.50 million or 1.52 percent less than the final estimate for 2012-13. This net decrease is primarily due to a combination of the following factors: 1) A net increase of $0.92 million in general education aid as a result of a projected $52 per pupil unit increase in the formula allowance and a small decrease in the pupil units used to calculate the aid. 2) An increase of $1.13 million in compensatory education aid. This increase is mainly due to more of our students becoming eligible for free- and reduced- lunch assistance. 3) A reduction of $2.96 million in state aid. This is chiefly due to the sunset of the one-time compensatory education pilot aid in 2013-14 school year. This one-time aid was approved by the 2011 Legislature for 2012-13 school year only. 4) A decrease of $0.87 million in property tax revenue. This decrease is mainly due to a reduction in the district s alternative facility levy. Alternative facility property tax levy is determined by the state, based on approved projects for the district. 5) The schools budgets for gifts, donations and fees show a reduction of $815,628. This is primarily due to conservative budgeting practices in our schools. Historically, our schools do perform better than budget in these areas; these revenue budgets will be adjusted this fall when we revise our estimates based on updated information. 6) A reduction of $489,731 in miscellaneous revenues for the district. The district received $489,731, a one-time Medical Loss Rebate, from its health insurance provider (HealthPartners) in 2012-13 school year; the district is not expecting more rebates in the 2013-14 school year. Expenditures (Comparison of 2012-13 to 2013-14) The total recommended general account expenditure budget is $215.62 million. This is $2.21 million, or 1.04 percent, more than the final estimate for 2012-13. There are many factors, both positive and negative, that have contributed to the increase. The major factors are listed below. 1) A projected increase of $3.68 million in the salary budget to reflect salary adjustments as approved by the School Board for groups that have approved contracts. For groups that do not have approved contracts, the estimates include adjustments in accordance with the budget planning guidelines reviewed by the School Board in February 2013. 2) A projected increase of $2.85 million in the budgets for employee benefits to reflect employee benefits adjustments per current contract and current statutory withholding rates. These budgets 8

include retirement contributions, health insurance, dental insurance, life insurance and tax sheltered annuity match. The district s contribution to Teacher Retirement Association (TRA) is scheduled to increase by 0.50 percent, from 6.5 percent for the current year to 7.0 percent for 2013-14 school year.. 3) A decrease of $1.51 million in the budgets for purchased services, supplies and materials. The current year s budgets for purchased services, supplies and materials include carryover of unspent 2011-12 allocations; schools were allowed to increase their final 2012-13 budget by the amount of their unspent allocations from 2011-12 school year. This preliminary budget for 2013-14 school year does not include any anticipated unspent 2012-13 allocations. 4) A decrease of $1.35 million in the budgets for technology equipment and other equipment. 5) A decrease of $1.32 million in the budget for permanent transfer to other funds. This decrease is mainly due to the following two items: a) A decrease of $612,225 in the amount of alternative facilities property tax levy transfer from the general account to alternative facilities account of the building construction fund. The certified property tax levy earmarked for 2013-14 alternative facilities projects is $612,225 less than the 2012-13 amount. b) The 2012-13 permanent transfer to other funds budget includes one-time transfer of funds received under the Medical Loss Rebate Program (from HealthPartners) and Early Retiree Reinsurance Program (ERRP) to the district s internal service fund for self-insured health plan. These two transfers totaled $706,518; the district does not expect this for the 2013-14 school year. Summary - The net result of all of the items described above is that the 2013-14 estimated revenues in the general account budget exceed estimated expenditures by $10.36 million. SPECIAL EDUCATION ACCOUNT Overview The special education account is used to report special education revenues and expenditures. Over the past decade, the number of students in need of special services and the costs of educating and serving these students have grown steadily and it is the administration s belief that this segregated reporting of special education activities will provide users of this budget document a better financial picture of the program and its impact on the district s overall financial operations. Total revenues as reported in this account include only state and federal aids received by the district specifically for special education services, medical assistance reimbursements and compensatory education revenue. General education aid generated by students receiving special services, estimated to be around $3.30 million for 2012-13 school year, is included in the general account as described above. This estimate is calculated based on the 2010-11 actual general education aid of $3.11 million (as calculated by the Minnesota Department of Education) adjusted for changes in the total number of students in need of special services and increase in the per pupil unit general education aid. The table below shows budgeted totals of the special education account revenues and expenditures for 2012-13 and 2013-14. 2012-13 2013-14 General Fund Revised Final Preliminary Amount of Percent Special Education Account Budget Budget Change Change Revenue 34,158,675 33,417,645 (741,030) -2.17% Expenditure 58,211,910 60,131,435 1,919,525 3.30% Revenue less Expenditure (24,053,235) (26,713,790) (2,660,555) 9

Revenues (Comparison of 2012-13 to 2013-14) The revenue estimate for 2013-14 shows a decrease of 2.17 percent, from $34.16 million in 2012-13 to $33.42 million in 2013-14. For the 2013-14 school year, 82.52 percent of the special education account revenue comes from state special education aid and 16.28 percent from the federal government. The main reasons for the increase are listed below. 1) A decrease of $220,310 in regular special education aid. The calculation is based on current formula and projected eligible expenditures for 2013-14. Based on the most current data, we assume that the statewide adjustment factor to be 88.81 percent and that there will be no additional proration of aid. 2) Special education excess cost aid is projected to be $348,836 less than our 2012-13 revised estimate. The calculation is based on current formula and projected eligible expenditures. The statewide adjustment factor, based on current legislation, is 64.88 percent. This district assumes that there will be no additional proration of aid. 3) Federal funding for special education is projected to decrease by $269,368. The estimate for 2013-14 is based on preliminary entitlement; it does not include any projected carryover funds from the current school year. Final federal special education aid is based on actual expenditures; an increase in expenditures will result in an increase of the same amount in revenue. Expenditures (Comparison of 2012-13 to 2013-14) The expenditure estimate for 2013-14 is $60.13 million. This is a 3.30 percent or $1.92 million more than our final estimate of $58.21 million for the current school year. There are many factors, both positive and negative, that have contributed to the projected increase. The major reasons are listed below. 1) An increase of $1.09 million in the budgets for licensed and support staff salary. This projected increase is mainly due salary adjustments for employee groups per School Board approved contracts. For employee groups that do not have approved contracts, salary adjustments were based on budget planning guidelines reviewed by the School Board in February 2013. 2) An increase of $1.06 million in the budgets for employee benefits. This increase is mainly due to a 0.5 percent TRA rate increase and other non-retirement employee benefits adjustments per School Board approved contracts. For employee groups that do not have approved contracts, employee benefits adjustments were based on budget planning guidelines reviewed by the School Board in February 2013. 3) A decrease of $366,598 in the budgets for contracted services, supplies and materials and capital expenditure based on prior years actual spending trends. Summary The net result of the budget items described above is that the estimated expenditures for the special education account exceed estimated revenues by $26.71 million. Projected revenues in this account do not include general education aid generated by our special education students. QUALITY COMPENSATION ACCOUNT Overview Fiscal year 2013-14 is the seventh year that the district will be participating in Minnesota s Quality Compensation (Q Comp) program. For the 2013-14 school year, the district will receive $7.04 million to implement the program. Of this amount, $4.97 million or 70.58 percent will be state aid, and $2.07 million or 29.42 percent will be from local tax levy. The proposed Q Comp expenditure budget for the 2013-14 school year totaled $7.33 million. The funds will be used to support the following initiatives: 10

a) Additional compensation to those teachers who have successfully completed all of the requirements of the program; b) Stipends for site team members Site team members will review participating teachers individual growth plans to check alignment with school and district goals, plan professional development in the building, and conduct Q Comp orientation; c) Costs of 29 (27.075 FTE) peer leaders (teachers on special assignment) to support probationary teachers; assist with performance appraisal; observe teachers three times a year, etc.; and d) Q Comp program implementation and administration costs and professional development activities for participants. The following table shows revenue and expenditure projections for 2012-13 and 2013-14 school years. 2012-13 2013-14 General Fund Revised Final Preliminary Amount of Percent Quality Compensation Account Budget Budget Change Change Revenue 7,213,528 7,041,357 (172,171) -2.39% Expenditure 7,217,694 7,334,650 116,956 1.62% Revenue less Expenditure (4,166) (293,293) (289,127) PUPIL TRANSPORTATION ACCOUNT Overview For 2013-14, the district has set aside $255.89 per pupil unit from the per pupil unit general education allowance for pupil transportation. The 2013-14 per pupil unit allocation for pupil transportation represents 4.85 percent of the per pupil unit general education formula allowance of $5,276. The district also receives additional categorical funding for transporting disabled and non-public school students. The disabled transportation funding has been incorporated with special education funding formula since 1998-99 school year. To maintain funding integrity, the district continues to report disabled transportation aid in the pupil transportation account. The 2013-14 budget for the pupil transportation account includes all revenues and expenditures related to providing transportation service to our students. The table below shows budgeted totals of pupil transportation account revenues and expenditures for 2012-13 and 2013-14. 2012-13 2013-14 General Fund Revised Final Preliminary Amount of Percent Pupil Transportation Account Budget Budget Change Change Revenue 16,645,508 16,607,293 (38,215) -0.23% Expenditure 16,756,525 17,387,261 630,736 3.76% Revenue less Expenditure (111,017) (779,968) (668,951) Revenues (Comparison of 2012-13 to 2013-14) For 2013-14, revenues for the pupil transportation account are projected to be $16.61 million. This is $38,215 less than the final estimate for 2012-13. The projected decrease is mainly due to the following factors: 1) A net increase of $44,706 in the amount of general education aid set aside for pupil transportation; the increase is chiefly due to a $2.53 per pupil unit increase in the amount set aside for pupil transportation and the number of pupil units used for the calculation. The projected pupil units for 2013-14 school year is 132.28 less than the estimate for the 2012-13 school year 2) An increase of $10,000 in fees collected for transportation services. The projection for the 2013-14 school year is based on current year s billing experience and estimated receipts for magnet schools and extended time program transportation needs. 11

3) A projected reduction of $93,166 in the budgets for special education transportation aid and bus depreciation aid. This is calculated based on 2011 laws that govern special education funding. Expenditures (Comparison of 2012-13 to 2013-14) Total expenditures for 2013-14 are estimated to be $17.39 million. This is $0.63 million more than the final estimate for the current school year. There are many factors that have contributed to the increase; however, a majority of the increase is due to the following factors: 1) An increase of $323,836 in the budgets for salary and employee benefits to reflect approved contracts. For employee groups that do not have approved contracts, adjustments were based on budget planning guidelines reviewed by the School Board in February 2013. 2) An increase of $169,000 in the budget for bus purchases. 3) An increase of $83,000 in the budgets for fuel for buses. 4) The budgets for purchased serviced also increased by $57,000, mainly due to projected increases included in the budgets for vehicle and liabilities insurance and payments for contracted transportation. Summary The net result of all the budget items described above is that the estimated expenditures exceed estimated revenues by $779,968. CAPITAL EXPENDITURE ACCOUNT Overview The School Board approved the preliminary 2013-14 capital expenditure budget on April 22, 2013. Expenditure budget has been adjusted since that time to reflect more current estimates. Revenues The administration is not proposing any changes to the revenue budget as adopted by the School Board in April 2013. Expenditures The expenditure budget as approved by the School Board in April 2013 has been reduced by $19,359. This net decrease is mainly due to the following factors: 1) A decrease of $17,331 in the salary and employee benefits budgets for the district s health and safety staff to reflect updated estimates. 2) An increase of $3,708 in the actual amount allocated to the schools; this is mainly due to a guaranteed minimum allocation to Dakota Ridge School. The initial allocation to Dakota Ridge School is $2,792; the guaranteed minimum per building is $6,500. 3) A decrease of $5,736 in the budgets for copier leases; the revisions are based on updated estimates.. Details of the district s 2013-14 capital expenditure revenue sources and spending plans can be found in the Capital Expenditure Budget document as approved by the School Board on April 22, 2013 The table below shows the budgeted totals of capital expenditure account revenues and expenditures for 2012-13 and 2013-14. 2012-13 2013-14 General Fund Revised Final Preliminary Amount of Percent Capital Expenditure Account Budget Budget Change Change Revenue 10,248,908 10,088,459 (160,449) -1.57% Expenditure 11,174,102 9,972,512 (1,201,590) -10.75% Revenue less Expenditure (925,194) 115,947 1,041,141 12

Summary The projected June 30, 2014 reserve for operating capital is a deficit of $261,469 and the reserve for health and safety projects is $169,201. FOOD SERVICE FUND Overview At its regular meeting on May 13, 2013 the School Board approved the administration s recommendation to increase school lunch prices for 2013-14 school year by 10 cents per lunch and 5 cents per breakfast for elementary and high school students and adults. The most recent breakfast and lunch prices increase was in the 2012-13 school year when the price of lunch was increased by 10 cents at all levels. Breakfast and milk prices were not increased in 2012-13 school year; they remained at the 2011-12 prices. The increases are necessary to comply with federal mandate, as explained below, and to response to increasing food costs. The federal Healthy Hunger-Free Kids Act of 2010 requires that more fresh fruit and vegetables, wholegrain items and low-fat dairy be served on all school menus. The district s food and nutrition services has been proactive in voluntarily switching to healthier products, including the use of more organic grown fruits, vegetables and other items. The increases to school lunch prices for the 2013-14 school year are driven by the federal mandate to improve the nutritional standards of school lunches nationwide. The Healthy Hunger-Free Kids Act also has implications on the National School Lunch Program, to ensure that schools are providing the same level of financial support for meals served to all students. The intended result is equity in school-lunch pricing. Beginning with the 2013-14 school year, elementary lunches are priced at $2.30, middle school students will pay $2.35 per lunch, the per lunch price for high school students will be $2.45 and adult lunches will be priced at $3.50. Elementary breakfast is priced at $1.45, middle school students will paid $1.50 per breakfast, the per breakfast price for high school students will be $1.50 and adult will pay $1.95 per breakfast. The table below shows the budgeted totals of food service fund revenues, expenditures and fund balances for 2012-13 and 2013-14. 2012-13 2013-14 Food Service Fund Revised Final Preliminary Amount of Percent Budget Budget Change Change Beginning Fund Balance 2,565,805 2,219,632 (346,173) Revenue 10,644,788 10,684,005 39,217 0.37% Expenditure 10,990,961 10,912,726 (78,235) -0.71% Revenue less Expenditure (346,173) (228,721) 117,452 Est. Ending Fund Balance 2,219,632 1,990,911 (228,721) -10.30% Est. Ending Fund Balance as % of Exp. 20.20% 18.24% Revenues (Comparison of 2012-13 to 2013-13) The preliminary 2013-14 food service revenues are projected at $10.68 million, which is 0.37 percent or $39,217 more than the 2012-13 final estimate. The projected increase is mainly due to a combination of the following factors: 1) A net decrease of $35,783 in sales to pupil, state and federal reimbursements. This reduction is mainly due to the factors listed below. 13

a) The school lunch program participation rate has been trending downward since 2009-10 school year, mainly due to local economic conditions. The number of students paying full-priced meals decreased by 2 percent in 2010-11 school year; ala carte meals also experienced the same decline. Based on sales and participation information through April 2013, the administration expects that this declining trend will continue in 2013-14 school year. For budget planning, our food and nutrition staff are anticipating another 3 percent decrease in the full-priced meals served. b) For budget planning, the administration assumes that the state and federal reimbursement rates will remain at the 2012-13 level. Any changes to the reimbursement rates will be incorporated into the district s 2013-14 final budget this fall. 2) A projected increase of $80,000 in the amount of USDA commodities assistance; this increase is offset by the same amount in the budget for commodities used reported in the expenditure budget. Expenditures (Comparison of 2013-14 to 2013-14) The projected expenditures for 2013-14 totaled $10.91 million. This is $78,235 or 0.71 percent less than our 2012-13 revised final budget estimate. The chief reasons for the decrease are listed below. 1) An increase of $65.847 in the budgets for food and commodities. This is mainly due to rising food costs, the district s intent to continue to use more fresh fruits and vegetables, whole-grain items and low-fat dairy products. 2) A net increase of $38,525 in the budgets for salary and employee benefits to reflect approved employment contracts or budget planning guidelines reviewed by the school board in February 2013, and adjusted staffing needs based on projected school lunch program participation trends. Summary - As a result of the items described above, food service fund expenditures are projected to exceed revenues by $228,721. The June 30, 2014 projected food service fund balance is $1.99 million. COMMUNITY SERVICE FUND Overview Revenues in the community service fund are driven by per capita allowances and include four basic categories: General community education revenue of $5.42 per capita; Youth service revenue of $1.00 per capita; Early Childhood Family Education revenue of $120.00 for each 0-5-year-old child (based on 2007 legislation), and Home visiting levy revenue of $1.60 for each 0-5-year-old child. Besides these four categories of revenues, the district also receives revenues to support programs for adults with disabilities, Adult Basic Education programs, School Readiness programs, Preschool Screening program, aids for non-public schools and youth after-school enrichment program. Another major source of revenue for the community service fund is tuition and fees. The table, at the top of the next page, shows the budgeted totals of community service fund revenues, expenditures and fund balances for 2012-13 and 2013-14. 14

2012-13 2013-14 Community Service Fund Revised Final Preliminary Amount of Percent Budget Budget Change Change Beginning Fund Balance 1,344,623 689,517 (655,106) Revenue 9,055,947 9,442,369 386,422 4.27% Expenditure 9,711,053 9,933,453 222,400 2.29% Revenue less Expenditure (655,106) (491,084) 164,022 Est. Ending Fund Balance 689,517 198,433 (491,084) -71.22% Est. Ending Fund Balance as % of Exp. 7.10% 2.00% Revenues (Comparison of 2012-13 to 2013-14) The proposed 2013-14 community service fund revenue budget totaled $9.44 million, an increase of $386,422 over the current year s revised final budget. There are many factors that have contributed to the increase. They are listed below: 1) The budgets for tuition and fees from patrons increased by $378,287. This increase is mainly due to the community education department taking over the planning and financial aspects of sports camps. These camps were previously offered and managed by the district s schools. 2) A reduction of $79,700 in federal aid as a result of the expiration of two federal Civics grants. 3) A net increase of $51,004 in the state aids budget. Two programs contributed to this increase, they are listed below. a) An increase of $21,959 in state aid for the district s School Readiness Program. b) State aid for the non-public schools program for the 2013-14 school year is projected to be $323,306, or $28,501 more than the final estimate for the current school year. Non-public school aids are based on number of students enrolled in the private schools or being home schooled. Expenditures (Comparison of 2012-13 to 2013-14) The proposed 2013-14 expenditure budget for the community service fund totaled $9.93 million. This is $222,400, or 2.29 percent, more than the final estimate for 2012-13. There are many factors, both positive and negative, that have contributed to the net increase, however, the three main reasons for the increase are listed below. 1) A projected decrease of $21,586 in the salary and employee benefits budgets based on School Board approved contracts or budget planning guidelines reviewed by the School Board in February 2013. 2) A net increase of $241,631 in the budgets for purchased services. Purchased/contracted services budget is closely tied to our program offerings. However, a majority of the increase is due to salary and employee benefits adjustments for our kindergarten plus teachers based on budget planning guidelines reviewed by the School Board in February 2013. The district s kindergarten plus program is offered and managed by the district s community education department; community education department contracts with the district s general fund for kindergarten teachers. Salary and employee benefits for these teachers are reported in the district s general account of the general fund; community education fund reimburses the general account of the general fund for the actual costs. These reimbursements are classified as contracted services in the community education fund. Summary - As a result of the explanations noted above, community service fund expenditures are projected to exceed revenues by $491,084. We anticipate that the combined June 30, 2014 community service fund balance will be $198,433. Of this amount, $183,674 is restricted/reserved for Adult Basic Education, $15,909 is restricted/reserved for Early Childhood Family Education, a negative 15

restricted/reserved balance of $28,417 for School Readiness and a negative restricted/reserved balance of $24,925 is attributable to community service which includes Preschool Screening and Non-public School Aid. The remaining $52,192 is restricted/reserved for community education which includes after school youth enrichment and youth development programs, Kindergarten Plus program and adult and youth enrichment programs. BUILDING CONSTRUCTION FUND Since 2012-13 school year, the district maintains the alternative facility levy account within the building construction fund. All projects related to the 2004 facilities referendum account and Cedar Valley Learning Center account have been completed and the district is no longer required to maintain these two accounts. ALTERNATIVE FACILITIES LEVY ACCOUNT For 2013-14, the School Board adopted an alternative facilities levy of $6.02 million in December 2012 to fund state-approved major maintenance projects for the 2013-14 school year. A detailed list of all of the state-approved major maintenance projects can be found in Appendix B of the district s 2013-14 capital expenditure budget, which was approved by the School Board on April 22, 2013. The table below shows budgeted totals of the alternative facilities-levy account revenues, expenditures and fund balances for 2012-13 and 2013-14. 2012-13 2013-14 Building Construction Fund Revised Final Preliminary Amount of Percent Alternative Facilities - Levy Account Budget Budget Change Change Beginning Fund Balance 873,265 873,066 (199) Revenue 6,637,900 6,020,675 (617,225) -9.30% Expenditure 6,638,099 6,878,096 239,997 3.62% Revenue less Expenditure (199) (857,421) (857,222) Est. Ending Fund Balance 873,066 15,645 (857,421) -98.21% Est. Ending Fund Balance as % of Exp. 13.15% 0.23% DEBT SERVICE FUND - REGULAR Overview The table below shows the budgeted totals of regular debt service fund revenues, expenditures and fund balances for 2012-13 and 2013-14. 2012-13 2013-14 Debt Service Fund - Regular Revised Final Preliminary Amount of Percent Budget Budget Change Change Beginning Fund Balance 3,875,768 3,530,405 (345,363) Revenue 16,395,687 16,055,414 (340,273) -2.08% Expenditure 16,741,050 16,366,775 (374,275) -2.24% Revenue less Expenditure (345,363) (311,361) 34,002 Est. Ending Fund Balance 3,530,405 3,219,044 (311,361) -8.82% Est. Ending Fund Balance as % of Exp. 21.09% 19.67% Revenues Revenues for the regular debt service fund are directly tied to the district s bond principal and interest payment needs. For the 2013-14 school year, 100 percent of the revenue budget comes 16

from property taxes. Due to the historically low rate of return for short-term investments, the district did not prepare a budget for interest income. Expenditures The projection for 2013-14 debt service expenditures is $0.34 million less than our final estimate for 2012-13. As indicated above, these expenditures are based on the district s actual bond principal and interest repayment schedules. Summary The projected June 30, 2014 debt service fund balance of $3.22 million is $311,361 less than our projection for the current fiscal year. DEBT SERVICE FUND OPEB Overview In 2008, the Minnesota Legislature enacted Minnesota Statutes Section 471.6175 which authorized a Minnesota political subdivision that has created an actuarial liability to pay other postemployment benefits (OPEB) to employees to establish a trust to pay those benefits and to finance those other post-employment benefits in advance. The School Board awarded the sale of $37.44 million general obligation taxable OPEB bonds in January 2009. The annual principal and interest payments for these bonds are funded by a new OPEB debt service levy. The district is required by the Minnesota Department of Education to maintain a separate debt service fund for the reporting of OPEB debt service. The table below shows the budgeted totals of OPEB debt service fund revenues, expenditures and fund balances for 2012-13 and 2013-14. 2012-13 2013-14 Debt Service Fund - OPEB Revised Final Preliminary Amount of Percent Budget Budget Change Change Beginning Fund Balance 474,320 458,153 (16,167) Revenue 2,987,871 2,499,039 (488,832) -16.36% Expenditure 3,004,038 2,500,188 (503,850) -16.77% Revenue less Expenditure (16,167) (1,149) 15,018-92.89% Est. Ending Fund Balance 458,153 457,004 (1,149) -0.25% Est. Ending Fund Balance as % of Exp. 15.25% 18.28% Revenue The projected revenue for the 2013-14 school year is $2.50 million. Similar to the regular debt service fund, revenues for the OPEB debt service fund are directly tied to the district s OPEB bond principal and interest payments. Similar to the regular debt service fund, 100 percent of the OPEB debt service fund revenues come from property taxes. The district did not prepare a budget for interest income as the rates for short-term investment have been at their historically low level. Expenditure The projected expenditure for the 2013-14 school year totaled $2.50 million. This represents OPEB bond principal and interest payments for the next school year. Summary The projected June 30, 2014 fund balance for this debt service fund is $457,004. 17

EXPENDABLE TRUST - SCHOLARSHIP FUNDS The expendable trust - scholarship funds was established to account for gifts and scholarship contributions to the district. The main sources of income for this fund are donations and interest revenue, which are used to fund the annual awards to recipients selected by the appropriate committees. The table below summarizes the budgets for 2012-13 and 2013-14. 2012-13 2013-14 Expendable Trust - Revised Final Preliminary Amount of Percent Scholarship Funds Budget Budget Change Change Beginning Fund Balance 23,616 22,616 (1,000) Revenue 0 0 0 N/A Expenditure 1,000 1,000 0 0.00% Revenues less Expenditures (1,000) (1,000) 0 Est. Ending Fund Balance 22,616 21,616 (1,000) -4.42% Est. Ending Fund Balance as % of Exp. 2261.60% 2161.60% AGENCY FUND The district maintains two agency funds and serves as their fiscal agent. The two agency funds are: 1) District Graduate Credit, and 2) Local Collaborative Time Study (LCTS). The District Graduate Credit program provides opportunities for our teachers to acquire additional education/credits; credits for successful completion of classes are offered by Hamline University. Program participants are responsible for their cost of attendance. The district does not budget for this fund. Local Collaborative Time Study funds are federal funds administered at the Dakota County level by a governing board of representatives from school districts and local agencies within the county. This board reviews and directs funding for each collaborating group within Dakota County. Funds are determined at the federal level based on time study data collected from participating school districts and agencies within Dakota County. The district participates in the time study and serves as its fiscal agent. At the local level, applications for funds are reviewed by a committee which consists of representatives from local school districts and community groups/agencies. As fiscal agent, the district is responsible for the receipt and disbursements of all LCTS funds and reporting to the governing board. The table below shows budgeted totals of the LCTS agency fund revenues, expenditures and projected fund balances for 2012-13 and 2013-14. 2012-13 2013-14 Agency Fund - LCTS Revised Final Preliminary Amount of Percent Budget Budget Change Change Beginning Fund Balance 129,589 90,155 (39,434) Revenue 60,866 73,039 12,173 20.00% Expenditure 100,300 100,300 0 0.00% Revenue less Expenditure (39,434) (27,261) 12,173-30.87% Est. Ending Fund Balance 90,155 62,894 (27,261) -30.24% Est. Ending Fund Balance as % of Exp. 89.89% 62.71% 18

The projected revenues and projected expenditures as shown in the table reflect the committee s estimate of funds available from Dakota County and grants to be awarded by the committee. Consistent with generally accepted accounting principles related to the reporting of agency funds, fiscal year-end fund balance for this fund will be reclassified as account payable. INTERNAL SERVICE FUND Overview The district maintains four separate accounts with its internal service fund. They are: Severance Pay (GASB #16) Other Post-Employment Benefits (OPEB) Revocable Trust Self-Insured Health Plan, and Self-Insured Dental Plan INTERNAL SERVICE FUND 20 SEVERANCE PAY (GASB #16) The district uses this account to pre-fund severance or retirement pay for eligible retirees. Eligibility for these benefits is based on years of service and/or minimum age requirements. The amount of the severance or retirement benefit is calculated by converting a portion of unused accumulated sick leave, by computing a benefit based solely on years of service, or a combination of both. No retiree can receive severance benefits that exceed one year s salary. The 2013-14 revenue estimate includes projected interest income of $16,000 from short-term investments and $450,000 estimated severance payments (unused sick leave and vacation days) to be paid from the general account of the general fund. The district is required to report severance payments paid from the general account of the general fund as revenue and expenditure in this internal service account. The table below summarizes budgeted totals of the severance pay (GASB #16) account revenues, expenditures and projected fund balances for 2012-13 and 2013-14. 2012-13 2013-14 Internal Service Fund Revised Final Preliminary Amount of Percent Severance Pay Budget Budget Change Change Beginning Fund Balance (3,297,597) (3,281,597) 16,000 Revenue 466,000 466,000 0 0.00% Expenditure 450,000 450,000 0 0.00% Revenue less Expenditure 16,000 16,000 0 Est. Ending Fund Balance (3,281,597) (3,265,597) 16,000-0.49% Est. Ending Fund Balance as % of Exp. N/A N/A INTERNAL SERVICE FUND 22 OPEB REVOCABLE TRUST On January 12, 2009, the School Board awarded the sale of general obligation taxable OPEB bonds in the amount of $37.44 million. On February 9, 2009, the School Board approved the establishment of a revocable trust for reporting activities related to all eligible other post-employment benefits. For eligible employees that meet certain age and/or length of service requirements, the district is required to pay health insurance premiums upon retirement until the employee reaches the age of eligibility for Medicare. The maximum monthly district contribution per retiree for post-employment health insurance premiums is set forth in the contracts for each eligible bargaining group. 19

The 2013-14 projected revenue includes an estimate of $500,000 in interest income and/or realized gains and $668,775 estimated OPEB payments for eligible retirees to be paid from the general account of the general fund. The district is required to report these OPEB payments paid from the general account of the general fund as revenue and expenditure in this internal service account. It is important to note that the projected fund balances do not include any capital appreciation. Gains and losses will be recognized when realized. The market value of the trust as of May 31, 2013 was $45.00 million. The projected expenditure for the 2013-14 school year includes $668,755 estimated OPEB payments to eligible retirees to be paid from the general account of the general fund. As mentioned above, the district is required to report these payments as revenue and expenditure in this internal service account. The district does not plan to draw from the trust during the 2013-14 school year. The table below shows budgeted totals of the other post-employment benefits revocable trust account revenues, expenditures and projected fund balances for 2012-13 and 2013-14. 2012-13 2013-14 Internal Service Fund Revised Final Preliminary Amount of Percent OPEB Revocable Trust Budget Budget Change Change Beginning Fund Balance 28,903,361 29,403,361 500,000 Revenue 1,168,755 1,168,755 0 N/A Expenditure 668,755 668,755 0 N/A Revenue less Expenditure 500,000 500,000 0 Est. Ending Fund Balance 29,403,361 29,903,361 500,000 1.70% Est. Ending Fund Balance as % of Exp. N/A N/A INTERNAL SERVICE FUND 23 SELF-INSURED HEALTH PLAN The district moved from a fully insured health plan with HealthPartners to a self-insured health plan with HealthPartners as the plan administrator on July 1, 2012. In spring 2013, the district, with assistance from the district s benefits consultant Corporate Health Systems, sought proposals from carriers for the plan administration and stop-loss insurance coverage for the self-insured plan. The district received three proposals; all provide significant savings over our current year fixed costs and provide multiple year rate caps for the plan administration and stop-loss insurance fees while limiting the district s maximum fiscal exposure by reducing aggregate stop-loss attachment point. At its regular meeting on April 22, 2013, the School Board approved the administration s recommendation to renew the agreement with HealthPartners to provide self-insured plan administration effective July 1, 2013. The self-insured health plan includes these features: 1) aggregate reinsurance level of 115 percent of expected claims, and 2) stop loss coverage of $300,000 for individual claims. Since the district assumes all the costs up to 115 percent of expected claims, the district is required to use an internal service fund to track the revenues/contributions, claims paid and claims to be paid to monitor the reserve amount, The district established this internal service fund to record all transactions related to this self-insured health plan. The following table shows the actual activities for the current school year and our projections for the 2013-14 school year. 20

2012-13 2013-14 Internal Service Fund Revised Final Preliminary Amount of Percent Self-Insured Health Plan Budget Budget Change Change Beginning Fund Balance 0 6,464,070 6,464,070 Revenue 37,147,769 40,100,116 2,952,347 7.95% Expenditure 30,683,699 32,000,000 1,316,301 4.29% Revenue less Expenditure 6,464,070 8,100,116 1,636,046 Est. Ending Fund Balance 6,464,070 14,564,186 8,100,116 125.31% Est. Ending Fund Balance as % of Exp. 21.07% 45.51% Projected revenues for the 2013-14 school year totaled $40.10 million. This represents the district s contributions, employees share of the premium costs, COBRA payments, payments from eligible retirees and employees who are on leave but have elected to stay with the district s health plan. Projected expenditures for the 2013-14 school year are estimated to be $32.00 million. This represents claims paid or to be paid during the year. The projected reserve for June 30, 2014 is estimated to be $14.56 million. INTERNAL SERVICE FUND 24 SELF-INSURED DENTAL PLAN The district uses this internal service fund to record all activities related to its self-insured dental plan. This self-insured dental plan was established in September 2011 (the start of the district s dental plan year) with Delta Dental as the third party administrator. This self-insured dental plan provides coverage for the superintendent, cabinet-level directors, principals, non-union administrators, special staff, nonlicensed specialists, assistant administrators, and vehicle technicians. The following table shows the budgeted totals of the self-insured dental plan revenues, expenditures and reserve balances for 2012-13 and 2013-14. 2012-13 2013-14 Internal Service Fund Revised Final Preliminary Amount of Percent Self-Insured Dental Plan Budget Budget Change Change Beginning Fund Balance 55,856 121,613 65,757 Revenue 334,700 335,000 300 0.09% Expenditure 268,943 270,000 1,057 0.39% Revenue less Expenditure 65,757 65,000 (757) Est. Ending Fund Balance 121,613 186,613 65,000 53.45% Est. Ending Fund Balance as % of Exp. 45.22% 69.12% Revenues for the 2013-14 school year are estimated to be $335,000. This represents the district s contributions and employees share of the premium costs if applicable. Expenditure for the 2013-14 school year is estimated to be $270,000. This represents claims paid or to be paid during the year. The projected reserve for June 30, 2014 is estimated to be $186,613. 21

ORGANIZATION OF THE REPORT The remainder of this report is organized in five major sections. The next section contains general summary information, including: a table showing totals of revenues, expenditures and fund balances by fund (page 25); revenues for each fund categorized in four major source categories (pages 26-27); charts depicting the sources of revenues for the general fund and all funds (page 29); tables showing expenditures for each fund categorized in six major object categories (pages 30-31), and charts showing the major objects of expenditures for the general fund and all funds (page 32). The second and third sections show more detailed budgets for each fund, listing revenues in each source category (pages 35-39) and expenditures in each object category (pages 43-55). The fourth section (pages 59-68) contains additional information related to the district s student enrollment, employee counts, staffing allocations to the schools, and general fund fund balance history. ACKNOWLEDGMENTS Preparation of the district s budget requires a great deal of work by many people, including all of the District Office administrators, school principals, assistant principals and administrative assistants, and many teachers and support staff in the schools and the District Office. Coordination of the budget process and preparation of the report were the responsibility of Jeffrey M. Solomon, Director of Finance and Operations, and Stella Y. Johnson, Coordinator of Finance. Additional assistance was provided by Joyce Peterson, Robin Sicoli, Beth Sullivan, Desiree Fleming and other Finance Department staff. 22

Summary Information

2013-14 PROJECTED REVENUES, EXPENDITURES, AND FUND BALANCES BY FUND Projected Fund 2013-14 2013-14 Projected Fund Balance Revenue Expenditure Balance Fund 7/1/2013 Budget Budget 6/30/2014 General Fund General Account N/A 225,983,628 215,622,450 N/A Special Education Account N/A 33,417,645 60,131,435 N/A Quality Compensation Account N/A 7,041,357 7,334,650 N/A Pupil Transportation Account N/A 16,607,293 17,387,261 N/A Capital Expenditure Account N/A 10,088,459 9,972,512 N/A Total General Fund 38,348,612 293,138,382 310,448,308 21,038,686 Food Service Fund 2,219,632 10,684,005 10,912,726 1,990,911 Community Service Fund 689,517 9,442,369 9,933,453 198,433 Total Operating Funds 41,257,761 313,264,756 331,294,487 23,228,030 Building Construction Fund Alternative Facilities-Levy Account 873,066 6,020,675 6,878,096 15,645 Total Building Construction Fund 873,066 6,020,675 6,878,096 15,645 Debt Service Fund - Regular 3,530,405 16,055,414 16,366,775 3,219,044 Debt Service Fund - OPEB 458,153 2,499,039 2,500,188 457,004 Total Debt Service Funds 3,988,558 18,554,453 18,866,963 3,676,048 Total Non-Operating Funds 4,861,624 24,575,128 25,745,059 3,691,693 Expendable Trust - Scholarship Funds 22,616 0 1,000 21,616 Total Fiduciary Fund 22,616 0 1,000 21,616 Agency Fund (LCTS) 90,155 73,039 100,300 62,894 Total Agency Fund 90,155 73,039 100,300 62,894 Internal Service Fund Severance Pay (GASB #16) (3,281,597) 466,000 450,000 (3,265,597) OPEB Revocable Trust 29,403,361 1,168,755 668,755 29,903,361 Self-Insured Health Plan 6,464,070 40,100,116 32,000,000 14,564,186 Self-Insured Dental Plan 121,613 335,000 270,000 186,613 Total Proprietary Fund 32,707,447 42,069,871 33,388,755 41,388,563 Grand Total All Funds 78,939,603 379,982,794 390,529,601 68,392,796 * Projected fund balances for June 30, 2013 have been adjusted to reflect all spring budget adjustments approved by the School Board at its May 13 and June10, 2013 meetings and a $6.0 million performance to budget savings. 25

SUMMARY OF REVENUES BY SOURCE CATEGORY AND FUND 2011-12 THROUGH 2013-14 2011-12 Pct. of 2012-13 Pct. of Percent 2013-14 Pct. of Percent Fund Source Category Audited Actual Total Final Budget Total Change Prel. Budget Total Change 01 & 11 General Account Property Taxes 46,314,430 19.94% 45,593,394 19.87% -1.56% 44,727,425 19.79% -1.90% State Aids & Credits 166,864,212 71.85% 171,361,460 74.67% 2.70% 170,195,712 75.31% -0.68% Federal Aid 8,324,506 3.58% 3,289,822 1.43% -60.48% 3,089,352 1.37% -6.09% Other 10,742,784 4.63% 9,234,978 4.02% -14.04% 7,971,139 3.53% -13.69% Sub-Total 232,245,933 100.00% 229,479,654 100.00% -1.19% 225,983,628 100.00% -1.52% 21 Spec. Educ. Account Property Taxes - 0.00% - 0.00% 0.00% - 0.00% 0.00% State Aids & Credits 25,317,786 82.69% 28,098,758 82.26% 10.98% 27,577,096 82.52% -1.86% Federal Aid 4,964,074 16.21% 5,709,917 16.72% 15.02% 5,440,549 16.28% -4.72% Other 335,848 1.10% 350,000 1.02% 4.21% 400,000 1.20% 14.29% Sub-Total 30,617,708 100.00% 34,158,675 100.00% 11.57% 33,417,645 100.00% -2.17% 31 Quality Comp. Account Property Taxes 2,380,848 33.17% 2,185,723 30.30% -8.20% 2,071,319 29.42% -5.23% State Aids & Credits 4,797,842 66.83% 5,027,805 69.70% 4.79% 4,970,038 70.58% -1.15% Federal Aid - 0.00% - 0.00% 0.00% - 0.00% 0.00% Other - 0.00% - 0.00% 0.00% - 0.00% 0.00% Sub-Total 7,178,690 100.00% 7,213,528 100.00% 0.49% 7,041,357 100.00% -2.39% 03 Pupil Transp. Account Property Taxes - 0.00% - 0.00% 0.00% - 0.00% 0.00% State Aids & Credits 15,171,809 92.39% 15,683,508 94.22% 3.37% 15,587,293 93.86% -0.61% Federal Aid - 0.00% - 0.00% 0.00% - 0.00% 0.00% Other 1,249,907 7.61% 962,000 5.78% -23.03% 1,020,000 6.14% 6.03% Sub-Total 16,421,716 100.00% 16,645,508 100.00% 1.36% 16,607,293 100.00% -0.23% 05 Cap. Exp. Account Property Taxes 7,078,738 69.65% 7,045,540 68.74% -0.47% 6,772,788 67.13% -3.87% State Aids & Credits 3,037,931 29.89% 3,203,368 31.26% 5.45% 3,315,671 32.87% 3.51% Federal Aid - 0.00% - 0.00% 0.00% - 0.00% 0.00% Other 46,350 0.46% - 0.00% -100.00% - 0.00% 0.00% Sub-Total 10,163,019 100.00% 10,248,908 100.00% 0.85% 10,088,459 100.00% -1.57% 01,11, 21, General Fund 31, 03 & 05 Property Taxes 55,774,016 18.80% 54,824,657 18.41% -1.70% 53,571,532 18.28% -2.29% State Aids & Credits 215,189,580 72.55% 223,374,899 75.02% 3.80% 221,645,810 75.61% -0.77% Federal Aid 13,288,580 4.48% 8,999,739 3.02% -32.27% 8,529,901 2.91% -5.22% Other 12,374,890 4.17% 10,546,978 3.54% -14.77% 9,391,139 3.20% -10.96% Total General Fund 296,627,066 100.00% 297,746,273 100.00% 0.38% 293,138,382 100.00% -1.55% 26

SUMMARY OF REVENUES BY SOURCE CATEGORY AND FUND 2011-12 THROUGH 2013-14 2011-12 Pct. of 2012-13 Pct. of Percent 2013-14 Pct. of Percent Fund Source Category Audited Total Final Budget Total Change Prel. Budget Total Change 02 Food Service Property Taxes - 0.00% - 0.00% 0.00% - 0.00% 0.00% State Aids & Credits 429,568 3.80% 422,462 3.97% -1.65% 398,967 3.73% -5.56% Federal Aid 3,858,337 34.10% 3,691,121 34.68% -4.33% 3,738,880 35.00% 1.29% Other 7,026,823 62.10% 6,531,205 61.36% -7.05% 6,546,158 61.27% 0.23% Total Food Service 11,314,729 100.00% 10,644,788 100.00% -5.92% 10,684,005 100.00% 0.37% 04 Community Service Property Taxes 1,592,020 16.34% 1,633,289 18.04% 2.59% 1,668,302 17.67% 2.14% State Aids & Credits 2,479,676 25.45% 2,211,870 24.42% -10.80% 2,262,874 23.97% 2.31% Federal Aid 134,377 1.38% 126,816 1.40% -5.63% 47,116 0.50% -62.85% Other 5,538,041 56.83% 5,083,972 56.14% -8.20% 5,464,077 57.87% 7.48% Total Community Service 9,744,114 100.00% 9,055,947 100.00% -7.06% 9,442,369 100.00% 4.27% 15, 56 & 57 Building Construction Property Taxes - 0.00% - 0.00% 0.00% - 0.00% 0.00% State Aids & Credits - 0.00% - 0.00% 0.00% - 0.00% 0.00% Other 7,719,445 100.00% 6,637,900 100.00% -14.01% 6,020,675 100.00% -9.30% Total Building Construction 7,719,445 100.00% 6,637,900 100.00% -14.01% 6,020,675 100.00% -9.30% 07 Debt Service - Regular Property Taxes 16,787,567 29.56% 16,392,833 99.98% -2.35% 16,055,414 100.00% -2.06% State Aids & Credits 39,996,686 70.42% 2,854 0.02% -99.99% - 0.00% -100.00% Federal Aid - 0.00% - 0.00% 0.00% - 0.00% 0.00% Other 15,056 0.03% - 0.00% -100.00% - 0.00% 0.00% Total Debt Service - Regular 56,799,309 100.00% 16,395,687 100.00% -71.13% 16,055,414 100.00% -2.08% 47 Debt Service - OPEB Property Taxes 1,718,732 95.51% 2,987,351 99.98% 100.00% 2,499,039 100.00% -16.35% State Aids & Credits 80,617 4.48% 520 0.02% -99.35% - 0.00% -100.00% Other 106 0.01% - 0.00% -100.00% - 0.00% 0.00% Total Debt Service -OPEB 1,799,455 100.00% 2,987,871 100.00% 66.04% 2,499,039 100.00% -16.36% 08 Trust - Scholarship Other - 0.00% - N/A 0.00% - N/A 0.00% 09 & 39 Agency Funds Other 164,126 100.00% 60,866 100.00% -62.92% 73,039 100.00% 20.00% 20 & 22 Internal Service Funds Other 3,073,727 100.00% 1,634,755 100.00% -46.82% 1,634,755 100.00% 0.00% 23 & 24 Self-Insured Health/Dental Other 270,764 100.00% 37,482,469 100.00% 13743.22% 40,435,116 100.00% 7.88% Grand Total, All Funds Property Taxes 75,872,334 19.58% 75,838,130 19.82% -0.05% 73,794,287 19.42% -2.70% State Aids & Credits 258,176,128 66.62% 226,012,605 59.07% -12.46% 224,307,651 59.03% -0.75% Federal Aid 17,281,294 4.46% 12,817,676 3.35% -25.83% 12,315,897 3.24% -3.91% Other 36,182,979 9.34% 67,978,145 17.77% 87.87% 69,564,959 18.31% 2.33% Total 387,512,735 100.00% 382,646,556 100.00% -1.26% 379,982,794 100.00% -0.70% 27

28

Revenues by Source Category 2013-14 Budget General Fund - by Account 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% General Spec. Ed. Q Comp Pupil Transp. Cap. Exp. Property Taxes State Aids & Credits Federal Aid Other General Fund - Total Federal Aid 2.91% Other 3.20% Property Taxes 18.28% State Aids & Credits 75.61% Property Taxes State Aids & Credits Federal Aid Other All Funds Federal Aid 3.24% Other 18.31% Property Taxes 19.42% State Aids & Credits 59.03% Property Taxes State Aids & Credits Federal Aid Other 29