Budget Blog

Here is a historical breakdown of the Saline Area Schools Fund Balance from 1993/1994 through last year.  We are projecting it to be in the 5% range at the end of the current (09/10) fiscal year.

SAS Staff & Community,

We are continuing to work through a challenging budget reduction process. We are beginning to meet with three community committees - Building/Grade Reconfiguration, Pay to Participate and Activity Fee - to review opportunities and make recommendations related to both efficiency savings and revenue enhancement.  In addition, we are continuing to review options for reducing our current year deficit of $1 million.  Since November, we had been targeting the January 26th Board of Education meeting to make recommendations regarding the need for mid-year staff reductions.  Based on several factors, we are delaying any recommendations regarding staffing until the February 9th Board of Education meeting. This will provide us necessary time to review additional options and still meet contractual obligations regarding notifications.

Based on information from the State of Michigan,  the budgeting process for the 2010-2011 school year will also be challenging.  Following the recommendations from the community committees in March,we will be conducting “community budget forums” to get feedback on possible budget reduction measures for 2010-2011.  These forums will occur in April as we prepare to submit the budget to the Board of Education in June.

Please continue to check the Budget Blog for more updates.

Thank you,

Scot Graden

Athletic Director Rob White explains the Saline Area Schools Athletic Department Budget.

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This is an excerpt from a report from David Martell, Michigan School Business Officials (MSBO) Executive Director (with italicize comments from Thomas S. Wall, SAS Assistant Superintendent)

The State held its Revenue Consensus Estimating Conference (CREC) today (January 12, 2009) and the three parties (House Fiscal Agency, Senate Fiscal Agency and Michigan Department of Treasury) agreed on state revenue estimates for this fiscal year and next.  While the numbers could have been worse, they certainly could have been better.

The Good News: The parties confirmed that there are enough revenues estimated so that no proration of districts’ foundation allowances will be necessary for 2009-10.  The $165 cut to the foundation and the vetoes of Sec. 20j funding (does not effect Saline Area Schools) and other categoricals will stand.  The balance sheet for the School Aid Fund (SAF) is projected to end the 2009-10 year with a $53.7 million balance, which will be available for 2010-11.

The Bad News: The SAF revenue estimate for 2010-11 includes the $53.7 million balance carry forward and the remaining $184.1 million in ARRA federal stabilization funds, but still falls short of estimated baseline expenditures by $423 million or $268 per pupil. This is in addition to the $165 reduction for the 2009-10 school year.

The Governor now has the challenge of preparing a balanced 2010-11 School Aid Budget based on these numbers and present the budget to the Legislature no later than February 12, 2010.  The really bad news is the General Fund/General Purpose (GF/GP) budget is also showing a shortfall – the shortfall is over a billion dollars.  This does not bode well for getting additional SAF support from GF/GP coffers.  (In the past, the State’s GF/GP fund contributed to the SAF for school funding, but over the years, this has slowly eroded away to almost nothing.)

Here is another good news/bad news scenario to consider.  While the SAF is projected to be short in 2010-11 by $423 million (bad news), if you compare the reduction in both beginning balances and ARRA stabilization funding between 2009-10 and 2010-11, the shortfall can be blamed on relying on “one-time fixes.”  Therefore, had expenditures equaled revenues this year, there would be no cut necessary for 2010-11 (the good news).  More related bad news though; this means that we are again relying on beginning balance and ARRA stabilization funds to the tune of $237.8 million for 2010-11 and the saga may continue into 2011-12.

One Interesting But Sobering Statistic: The economists that presented today stated that Michigan was 20^th among states for Per Capita Income as late as 2001.  By 2008, Michigan had fallen to 37^th place and at the end of 2009, is our Great Lake State is estimated to fall to 40^th place among states for Per Capital Income.

As Michigan prepares to “right the School Aid Fund ship” yet again, will the state continue to spend like we are 20^th in per capita income or like we are 40^th?

Here are some additional comments from Mr. David Martell, MSBO Executive Director on presentations that were conducted at the Consensus Revenue Estimating Conference.

Consensus Conference Economic Update

Today in Lansing, the Consensus Revenue Estimating Conference (CREC) convened, bringing together the state fiscal agencies and administration to confer on the amount of revenues available for appropriation in the General Fund General Purpose (GF/GP) and School Aid Fund (SAF) for the current and next fiscal years.  State Treasurer Robert Kleine chaired the meeting and in his opening remarks, set the stage by stating, “significant changes in the State’s spending and taxation policies need to be addressed to put us on a more consistent funding stream.”

Jobs

In a presentation by the Research Seminar for Quantitative Economics (RSQE) of the University of Michigan, Dr. George Fulton and Ms. Joan Crary reported that Michigan’s economics continue to struggle, losing 278,000 jobs in 2009, on a percentage basis only worse in 1945 and 1958.  Job loss will continue at a slower pace however, continuing to drag the State economy in the coming years.  Although there has been an uptick in auto sales, the drain on employment seems destined to continue through 2012.  Most agree 2009 was a dreadful year, although the second half of 2009 will presumably have some job growth.  This is not forecasted in the near future, but moderate job gains are expected in the last quarter of 2011.  Dr. Fulton stated, “It’s going to take some time” to recover from the large number of job losses the State has seen over the last five years (895,000), during which virtually one in five jobs has been lost.  Unemployment is expected to settle at 15% for 2010 and trend down in the following years between 14.0% - 14.9%.  It’s not nearly over yet folks.  Here’s the silver lining, price inflation should stay low through 2011.  Local inflation to 2.3% in 2010 and 2011 which is similar to what we saw in 2008.  The forecast for personal income gain in 2010 and 2011 is also a bright spot; however disposable income will decline due to the price increases and a weakening purchasing power.

As for State revenues, the combined effects of shrinking tax revenues and the failing economy, GF/GP revenue shrank 21.3% in 2009 and will continue to shrink at a lesser rate.  The SAF saw a decline of 5.1% with a leveling expected in 2011.

Fulton stated that, “we need to reevaluate the tax system and the expenditure side and essentially come up with a plan that more appropriately reflects the economy where the expenditures are out of line and revenues are falling short.”  According to Fulton, moving from short-term thinking to long-term thinking is a theme that seems to be more apparent at this time than ever before.

Steep Recessions – Steep Recoveries

Mr. Nigel Gault, Chief US Economist of the IHS Global Insight, presented a similar outlook focusing on the fact that steep recoveries usually follow steep recessions; however recoveries after a financial crisis are usually slow.  He is expecting a subdued recovery.  The decline in employment was significant and the increase in productivity was exceptional, which means fewer workers are maintaining the same or similar output.  From a national level, he expects unemployment to maintain at a 10% level.  In what seems to be a broken record, Mr. Gault stated, “we are not generating enough revenues to continue to support current expenditure levels.”

Michigan’s Big Three

Mr. Sean McAlinden, the Executive VP for the Center for Automotive Research spoke about the current status of the automotive industry; an industry that Michigan’s economy has been significantly dependent on for survival.  Major reductions in the number of salaried and hourly workers beg the question whether the Michigan economy continues to be dependent on autos, or has it diversified to an extent where the significance of autos has been lessened. With an estimated 178,000 current employees among the big three, nearly 98,000 of those jobs are in Michigan.  The outlook continues to be grim as the Detroit three are projected to continue to lose market share and suppliers who have been in hibernation during this financial downturn will find it very difficult to continue.  Sales levels are not expected to return to pre-recession levels of 16 – 17 million units, but rather settle into 10 – 12 million unit levels. As a result, production for Chrysler is down 50%, GM is down 45% and Ford is down nearly 17% from the 2008 levels. This is certainly reflected in the total sales being down by 21% as a percentage change between 2008 and 2009.  It is Mr. McAlinden’s opinion that, “the recovery in this sector began in the last quarter of 2009,” implying that a rebound is underway.

Michigan’s Rebound Stifled

The next presentation reiterated the above economic scenarios using Michigan specific information as the basis.  Unlike the national scene, Michigan’s rebound has been stifled by high unemployment and the lack of consumer confidence.  Rebecca Ross of the House Fiscal Agency stated that the current recession is the longest period of economic downturn since the Great Depression, the third steepest employment decline and the steepest GDP decline on record.  Although there were job gains made in the Education and Health Service employment sector, other sectors such as manufacturing, trade, transportation and utilities realized a decline in jobs of 295,000 since 2007.  This equates to nearly 75% of the total job losses in Michigan during that time.  Coupled with a 14.7% unemployment rate, which is significantly higher than comparable states, Michigan will continue to struggle with the recovery even as other states may begin to rebound.  A positive note is that the inflation rate remains low and is forecasted to be below 2010 levels in 2011.

Economic Weakness & Tax Cuts

David Zin of the Senate Fiscal Agency reported that the continued economic weakness and tax cuts will result in 2010 revenues being below the 2009 figures.  Specifically, the earned income tax credit lowers the FY 2010 revenues by $338 million and FY 2011 revenues by $354 million.  Film credits lower revenues $98 million in FY 2010 and $120 million in FY 2011.  Mr. Zin reviewed the side by side comparison of the revenue estimates for each of the agencies.  As can be seen in the report, the estimates varied among the agencies, however an overall decline in the estimates from May was consistent.

Jay Wortley of the Department of Treasury reviewed the revenue estimates for both the GF/GP and the SAF, comparing the three agencies estimates as above.  Although differences were noted in the agencies estimates, consistently the changes in revenues from the May conference were again a downward trend for 2010 between a change of nearly $125 million less revenue to approximately $84 million less revenue than projected in May 2009.  In a slide depicting the constitutional revenue limit calculation, it can be seen that the current forecast of revenues falls far below the limit by $9 billion in 2010.

Pupil Estimates

Robbie Jameson of the Department of Management and Budget, Mary Ann Cleary of the House Fiscal Agency and Kathryn Summers of the Senate Fiscal Agency reported on the pupil estimates for 2010 and 2011.  The estimated pupil count decline for FY 2009-10 as projected at the May conference was adjusted to reflect 5,000 more students attending school, bringing the new total to 1,597,450 students.  The proposed consensus pupil count for FY 2010-11 shows a decline of nearly 17,000 students, bringing the forecasted total population to 1,580,100.

School funding sources are as follows:

http://www.michigan.gov/documents/mde/SAF_REV_FY08_Chart_263684_7.pdf

Click here to download the Budget Presentation from Mr. Thomas Wall. This presentation was made to the Board of Education on January 12th.

Saline Area Schools is developing three community committees to review the following issues:

• Building/Grade Reconfiguration Committee
• Pay to Play Review Committee
• Activity Fee Review Committee

These committees will meet starting in mid-January. Meetings will be held in the evening on an every other week basis.  Committees will likely meet 6-10 times.  Recommendations to the Board will be made in late March or early April.

If you are interested, please click here to download the application. The deadline to apply is January 8th.

Post from Steve Laatsch, Assistant Superintendent for Instructional Services:

Question: Why is the district choosing to continue to invest resources testing students in grades 2-8 on the NWEA test and grades 9-12 in PLAN/ACT in this difficult financial time?

Answer: The district is committed to using data to drive decision making around instructing our students.  We believe this is a critical component of improving instruction as we move forward in the 21st century.  We know that data compilation and analysis is much more valuable over an extended period to time as trends and patterns tend to develop.  We are in our second year of administering the NWEA test to our 2nd - 8th grade students and our 3rd year of giving the PLAN/ACT test to our high school students.    If we abandon giving these valuable tests, we would be back to square one, if and when, we choose to resume gathering this type of data on our students.

LANSING – Governor Jennifer M. Granholm today announced that the $127 per-pupil reduction in school aid payments to school districts is being paused. The decision is due to school districts spending less than authorized in 2009 and because of an unexpected increase in non- homestead property tax values. A formal letter from Budget Director Bob Emerson advising lawmakers of the pause in the reduction was sent to the chairs of the Senate and House Appropriations Committees today.
Without the pause, state officials would have processed the reduction in the December 20 school aid payments today. In preparation for the payment reduction, the governor asked budget and treasury officials for the latest information on the state School Aid Fund, which precipitated today’s announcement.
“The unexpected change in the School Aid Fund, which has led us to pause the proration ordered on October 22, provides temporary relief for school districts around the state,” Granholm said. “Throughout these uncertain economic times, our focus has been on giving school districts the most up-to-date information available so they can adjust their budgets accordingly. School districts still face tough decisions about how best to deal with significant funding cuts, but we are pleased that the closing of the books for 2009 has brought some short-term relief.”

Click here to read more.

Click here to read the Q & A regarding the proration delay.

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Question: By group, how much does 1% of salary cost?

Answer: Listed below the four groups and the total salary paid to each area.

Faculty/Certified Staff - Total: $29,842,131 1%= $298,421

Support Personnel – Total: $5,741,179 1%= $57,412

Principals/Assistant Principals/Directors – Total: $1,425,325 1%= $14,253

Department Heads/Managers – Total: $517,660 1%= $5,177

Central Office/Superintendent - Total: $879,159 1%= $8,791

In most of the sections above we receive reimbursement for Special Education services from the State and Federal Government. We also receive reimbursement for Title I, Title II and some other programs in the groups listed above.

Our costs (reflected above) in these areas are $5,885,901, from this 1% of our unreimbursed cost is: $47,087

Total Cost of 1% of Saline Area School salary - $336,967