2012-13 F INANCIAL STATE OF THE DISTRICT

P R E PA R E D B Y: B R E N D A N WA L S H , T R E A S U R E R , B O A R D O F E D U C AT I O N

N O V E M B E R 2 6 , 2 0 1 2

Grosse Pointe Public School System Financial Transparency Series

Key General Concepts

Source Data

Michigan Dept. of Education, Bulletin

1014

GPPSS Budget Modeling Utility

2008 through 2011 agrees to audit. 2012

and on are projections.

Compensation

Direct compensation is salary and any

additional payments made to employees, governed by contract

Indirect compensation is net health care, FICA

and state mandated retirement (MPSERS)

School Funding

State dictates per pupil operating revenue

Health care is negotiated locally, but

state laws affect

Retirement rate (MPSERS) and FICA are non-negotiable locally.

2

Employee contracts – Key Concepts

Theme & Intent Emphasizes total

compensation rather than just direct compensation

Shares risk and reward proportionally across all

employees

Ties total compensation to school funding variables

beyond our control

Triggers & Effect

Agreement with employees that a 10% Fund Equity level

is necessary

If Fund Equity drops below 10%, compensation is

reduced proportionally.

If Fund Equity exceeds 15%, compensation increases

Implications & Benefit

The district’s financial health is protected by the contracts not Fund Equity

itself

Allows the district to make investment decisions guided

first by best interests of students, not compensation

or budgets

3

GPPSS and statewide proportional investment by function 4

47.4%

55.9%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Basic Instruction Added NeedsInstruction

InstructionalSupport

Business &Admin.

Operation Maint. Transport.

Statewide Avg. GPPSS

(Source: Michigan Dept. of Education)

5

Per Pupil GPPSS Statewide Rank

2004 2011 2004

(of 744) 2011

(of 788) Enrollment 8,915 8,391 32 29

Operating Revenues Local $ 3,087 $ 3,362 82 114 State $ 7,524 $ 7,728 23 84 Federal $ 212 $ 557 555 655

Total $ 11,028 $ 11,647 42 76

Expenditures*

Basic Instruction $ 5,658 $ 6,507 28 33 Added Needs Instruction $ 1,033 $ 1,453 218 160

Instructional Support $ 1,014 $ 1,371 86 56 Administration $ 1,160 $ 1,294 300 470 Operations & Maintenance $ 1,458 $ 1,125 91 206 Transportation $ 45 $ 76 571 608

Total $ 11,043 $ 12,012 42 62

Revenues less Expenditures ($ 15) ($ 365)

Per Pupil Revenue and Expenses from 2004 to 2011

(Source: Michigan Dept. of Education)

*Not all expenses are listed, but total is complete

6

GPPSS Statewide Rank

2004 2011 2004

(of 744) 2011

(of 788)

Total Operating Revenue per Pupil $ 11,028 $ 11,647 42 76

Instructional Salaries per Pupil $ 6,536 $ 7,448 18 26

Support Services Salaries per Pupil $ 2,645 $ 2,918 90 60

Average Teacher Salary $ 66,799 $ 80,566 7 5

Combined Retirement and FICA Rate 20.64% 28.1%

General Education Pupil to Teacher Ratio

Statewide Average 22.0 23.0

GPPSS Average and Statewide Rank 18 20 144 211

GPPSS Rank among same sized districts (47 total) 3 3

Good news, bad news story of salary compensation and pupil to teacher ratios

In 2010, the 76th ranked teacher salary in Michigan was $67,380 (Lakeshore Schools) which is 16% lower than our $80,566 average.

(Source: Michigan Dept. of Education)

Total Revenue and Expenses per Pupil

$10,000

$10,500

$11,000

$11,500

$12,000

$12,500

$13,000

2008 2009 2010 2011 2012 2013 2014 2015

Total Expenditures Per Pupil Total Revenue Per Pupil

7

$107

$96 $2.0

($0.1)

($3.2) ($3.1)

($7.6)

($3.9)

$5.0

$6.9

($10.0)

($8.0)

($6.0)

($4.0)

($2.0)

$0.0

$2.0

$4.0

$6.0

$8.0

$80.0

$85.0

$90.0

$95.0

$100.0

$105.0

$110.0

2008 2009 2010 2011 2012 2013 2014 2015

An

nu

al D

elt

a in

Mill

ion

s

An

nu

al R

ev. ,

Exp

. in

Mill

ion

s

Total Revenue Total Expenses Annual Delta

General Fund Annual Revenue and Expenses 8

Projected Total compensation by employment group as percentage of total General Fund expenditure

65.7% 66.1% 66.8%

4.0% 4.1% 4.2% 4.4% 4.6% 4.6% 3.1% 3.0% 3.1% 5.5% 5.2% 5.4%

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

80.0%

85.0%

90.0%

95.0%

2012 2013 2014

Technology

Exec Admin

NIS

Parapros

TA's

Clerical

Plant

Bldg Admin

Teachers

9

Ratio of Employees to Blended Student Enrollment 8% workforce reduction from 2008 through 2012

14.2 13.8 14.1 14.3 14.3 14.3 14.3 14.3

24.7 23.4

24.4

26.2 26.0 26.1 25.8 26.5

7,800

7,900

8,000

8,100

8,200

8,300

8,400

8,500

8,600

8,700

10.0

12.0

14.0

16.0

18.0

20.0

22.0

24.0

26.0

28.0

30.0

2008 2009 2010 2011 2012 2013 2014 2015

Stu

de

nt

Enro

llme

nt

Rat

io o

f Em

plo

yee

s to

Stu

de

nts

Student to Teacher Ratio Student to Non-Teacher Ratio Enrollment

10

Includes General and Special Education Teachers

General Fund Equity total value and as % of General Fund Expenditures

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

$0

$5,000

$10,000

$15,000

$20,000

$25,000

2008 2009 2010 2011 2012 2013 2014 2015

Fun

d E

qu

ity

as %

of

Exp

en

dit

ure

s

Fun

d E

qu

ity

(in

$0

00

’s)

Value % of Expenditures

11

Cost represented on Per Pupil basis by Category Small margin of expense over revenue is amplified by student count

$7.4 $7.8 $7.7 $7.2 $7.4 $7.1 $6.5 $6.3

$1.2 $1.2 $1.2

$1.2 $1.2 $1.2 $1.1 $1.1

$1.8 $1.9 $1.9

$2.0 $2.4 $2.3 $2.1 $2.0

$1.7 $1.6 $1.7 $1.9

$1.7 $1.6

$1.5 $1.5

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

2008 2009 2010 2011 2012 2013 2014 2015

Pe

r P

up

il ($

00

0’s

)

Direct Comp. Health Care Retirement/FICA All Other Revenue/Pupil

12

Major expenses per pupil as a % of revenue per pupil Retirement cost escalation is clearly our biggest problem

60% 62% 63% 60% 63% 60% 55% 53%

9% 10% 10% 10% 10% 10% 9% 9%

15% 15% 15% 17% 20% 20%

17% 17%

14% 13% 14% 16% 15% 13%

13% 13%

0%

20%

40%

60%

80%

100%

2008 2009 2010 2011 2012 2013 2014 2015

Direct Compensation Health Care MPSERS/FICA Other

13

Retirement costs are a function of state set rate applied to salaries. Salary reduction is only way to reduce retirement costs.

Average total compensation per employee and average total compensation per employee % change from 2008

$67.3 $68.0 $68.7 $66.9 $68.4 $66.0 $60.0 $58.9

$16.4 $16.4 $16.9 $18.5 $21.7 $21.5 $19.0 $18.7

0% 0.9%

2.3% 2.1%

7.3%

4.9%

-5.8%

-7.2% -8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

2008 2009 2010 2011 2012 2013 2014 2015

Dif

fere

nce

fro

m 2

00

8 b

ase

line

Avg

. To

tal C

om

pe

nsa

tio

n in

Th

ou

san

ds

Direct Comp. Health Care MPSERS/FICA Change from 2008

14

Change in per pupil revenue vs. change in average total compensation per employee against 2008 baseline

-2.1%

-3.8%

-4.9% -4.8% -4.8% -4.8%

2.3% 2.1%

7.3%

4.9%

-5.8%

-7.2%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

2009 2010 2011 2012 2013 2014 2015

Revenue/Pupil Avg. Total Compensation

15

Potential Employee Compensation Changes in the Context of our Communities' Changing Economy

16

Change in Median Household Income

(2000 to 2010)

Change in Per Capita Income

(2000 to 2010)

Grosse Pointe City -15.7% -30.9%

Grosse Pointe Farms -18.2% -16.5%

Grosse Pointe Park -7.8% -17.8%

Grosse Pointe Shores -18.0% -10.5%

Grosse Pointe Woods -16.4% -19.7%

Harper Woods -26.8% -32.1%

Source: U.S. Census Bureau, American Community Survey via Southeast Michigan Council of Governments (SEMCOG, www.semcog.org)

GPPSS: Striking the right balance 17

Current Path

Salaries scale proportionally to revenue

No change in student to teacher ratio

10% projected reduction in direct compensation over three years

Grosse Pointe Public Schools operates at a structural surplus

Without…

Large class sizes

Reduced programming

Outsourced custodians

Higher student fees

Schools of Choice

We should still investigate other options 18

• GPPSS loss of students is out of alignment with like districts, even those not reliant on School of Choice. Enrollment

• GPPSS cost per pupil rising dramatically higher/faster than benchmark and state average.

Added Needs Instructional Costs

• GPPSS dramatically out of alignment; salaries, ratios/schedules, programs should be evaluated

Basic Instructional Costs

• Currently this is a $1M annual expense. There has got to be a better way.

Staff Development / Substitute Costs