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Oakland Schools Budget Presentation 2010-2011 May 5, 2010

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Doing More with Less

 Primary goal is to retain core services to our local school districts  District demand for ISD services is growing in many areas  Revenue to the ISD continues to decrease in all funds

3 Key Factor in Budget Development

Local School District Funding –

Student count & Foundation Allowance (70%)

Intermediate School District Funding –

Revenue based primarily on property taxes (90%)

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Property Tax Forecast

Property Tax decreases Fiscal Year 2008-09 Fiscal Year 2009-10 Fiscal Year 2010-11 Fiscal Year 2011-12 Fiscal Year 2012-13 Fiscal Year 2013-14 Fiscal Year 2014-15 -0.5% - $ 0.4M

-4.5% - $ 11.7M

-13% - $ 38.4M

-12% - $ 59.8M

-5.0% - $ 67.6M

-0.0% - $ 67.6M

2.0% - $ 64.7M

Annual Property Tax Collection has declined from FY 2009 to FY 2014 by 31% Accumulative loss from FY 09 to FY 15 is $310.3M

FY 2008 base year tax levy is $216.9M

5 Oakland Schools Property Tax Revenue GEF SEF C F EF T o t al ( F l at F Y 0 8 ) Lo ss ( C Y vs F Y 0 8 ) A ccumul at ed Lo ss T o t al C Y T ax R ev.

221.0

211.0

201.0

191.0

181.0

171.0

161.0

151.0

141.0

131.0

121.0

111.0

101.0

91.0

81.0

71.0

61.0

51.0

41.0

31.0

21.0

11.0

1.0

FY 2007-08 Property Tax Level

F Y 0 9 F Y 10 F Y 11 F Y 12 F Y 13 F Y 14 F Y 15 12 . 9 16 3 . 6 4 0 . 0 3 8 . 0 2 16 . 9 2 16 . 9 ( 0 . 4 ) 12 . 2 155. 0 ( 11. 7) 10 . 6 13 4 . 9 3 3 . 0 2 9 . 1 2 7. 6 2 7. 6 2 16 . 9 2 16 . 9 2 16 . 9 2 16 . 9 ( 3 8 . 4 ) 9 . 3 118 . 7 ( 59 . 8 ) 8 . 9 112 . 8 ( 6 7. 6 ) 8 . 9 112 . 8 ( 6 7. 6 ) 9 . 0 115. 0 2 8 . 2 2 16 . 9 ( 6 4 . 7) ( 0 . 4 ) ( 12 . 1) 2 16 . 5 2 0 5. 2 ( 50 . 5) 178 . 5

Dollars in millions

( 110 . 3 ) ( 177. 9 ) ( 2 4 5. 5) ( 3 10 . 2 ) 157. 1 14 9 . 3 14 9 . 3 152 . 2

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State Aid Reductions

General Education:

 Section 81 14.5% reduction ($500,000) ($1.7M) decrease from FY 2009

Special Ed & Career Focused Ed

 Held flat from prior year ($608,564) decrease from FY 2009

7 Cost Containment Reductions & Measures in Response to Declining Revenue

      Continued health insurance premium share FY 2010 & 2011 salary freeze Five (5) unpaid furlough days for all employees (approx. 2% wage decrease) Salary reduction in 2012 by 3% for three years Attrition, Voluntary Employee Sick Leave Program (VESLPP) and workforce reductions – 105.5 FTE reductions Continued planned spend down of fund equity to 5%

8 Cost Containment Reductions & Measures in Response to Declining Revenue

      Reduction in travel & other purchased services Reduced supply budgets Lower contractors’ pay rates Less frequent equipment replacement Lease consolidation Lower energy consumption

9 Oakland Schools, Current Benefit Plan Summary January 2010 - Non-union

– – – –

Community Blue PPO, employees premium share ranging up to 4.5% Flexible Blue, employee paid bonus and H.S.A. contribution Prescription co-pay changes from $10/$20 to $5 Generic and $30 Brand Spousal surcharge raised to 6% of two person cost July 2010 - Union

–

6% cap in place – year to year carry-over

–

MESSA Choices

– – –

Prescription benefit $10 generic and $20 brand name Office visits $5 co-pay Current contract expires June 30, 2011

Oakland Schools Financial Impact of Benefit Plan Changes

Savings Over Five Years = $ 5,387,820

Data Source: McGraw Wentworth Analysis of Actual Results $ 4,524,888 $ 4,656,274 $ 238,637 $ 4,524,888 $ 4,417,109 Annual Cost If No Changes $ 6,764,089 $ 6,093,774 $ 4,948,988 $ 5,491,541 $ 1,240,573 $ 931,342 $ 1,628,613 $1,348,655 Oakland Schools Annual Savings Oakland Schools Annual Cost $ 4,017,646 $ 4,250,968 $ 4,465,160 $ 5,415,434 Enrolled 405 Enrolled 397 Enrolled 400 Enrolled 405 Enrolled 402 2005 2006 2007 2008 2009 Note: 1. Enrollment is noted at the bottom of each bar with 2010 cost at 1/1/2010 level (anticipated to change in June 2010) 2. Cost with no changes based on 11% annual rate of increase (most projections range from 7% to 13%) 3. 2010 savings based on actual 2010 BCBS rate renewal (no credit / adjustment for Risk Related Fund) Enrolled 388 2010

Over 94% of Oakland Schools Budget is Spent on Services to Local Districts 5.19%

FY 2011 Proposed – $314.1 Million

11 94.81% Transfers to LEAs & Direct Program Support - $297.8M

ISD Operations - $16.3M

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About those services to LEAs

    Services are prioritized by local superintendents and their staff through a survey done every 3-4 years.

Usage data from District Service Report Feedback on services is collected annually from each referent group (HR, finance, instruction, technology, etc.) Input to Oakland Schools – Continuous Improvement Plan

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Oakland Schools Programs & Services

Highlights from 2008/2009 District Service Report

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Professional Development and Instructional Services

    More than 55,000 participants attended 2,100 ISD and regional events Pearson Benchmark used by 26 districts and Inform by 27 districts with 50% subsidy from ISD 616,000 assessments administered (up from 213,000 last year) 3,644 Special Education students received direct services

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Professional Development and Instructional Services

    $1,970,200 worth of materials provided to students with special needs Homeless/Wraparound served 1,270 students 1,345 Back to School (increase of 300) and 1,029 truant students (decreased of 164) served $21,871,847 saved by districts who sent students to the Career Technical Campuses

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Technical Campuses Cluster Enrollment 2009-2010

8% 12% 8% 6% 10% 15% 17% 11% 13%

1 st semester enrollment - 3,070 2 nd semester enrollment – 2,928

Transp. Tech - 15% Health Science - 17% EET - 11% BMMT - 13% Cosmetology - 10% Culinary Arts - 12% Constr. Tech - 8% Agriscience - 8% Visual Imaging - 6%

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Technology, Business and Operational Services

     SPAM filtering blocked more than 1.2M SPAM emails/day Student information system (Zangle) saved $56,795 each for 15 districts totaling $851,925 AMS Business/Finance/HR application saved 6 districts $85,797 each, totaling $514,782 Tech Services fielded and resolved 21,600 technical assistance calls from local districts Transportation collaboration helped reduce Special Education bus mileage by 295,478 miles with an estimated savings to 26 school districts of $2.2M. Summer route collaboration saved an additional $35,696 and 7,072 miles.

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Technology, Business and Operational Services

     $3.1M volume of cooperative purchases in Oakland County; participated in more than $12.4M of purchases in statewide competitive bids Production Printing & Graphics produced 11.4M copies (up from 1.8M) at reduced cost and free delivery to local districts Local districts received $5,356,447 through Medicaid Fee for Service revenue Fee for service support to Brandon, Clawson, Madison, Oak Park, Pontiac, Southfield and South Lyon Technical Campus Student Enrollment – – 1 st 2 nd semester enrolment 3,070 semester enrollment 2,928

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Program Highlights in the Proposed 2010-2011 Budget

     Alternative high school program in Southwest Quadrant (under study) Resources for formative student assessments aligned to state standards Maintaining resources for schools at risk Atlas-Rubicon West, curriculum management system - $139,000 More external service staff placed in LEAs upon request

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FY 2010-11 Budget Highlights Program Support & Subsidies

       Continuation of Benchmark/Inform subsidy - $500,000 Expanded Math and Science support - $550,000 Targeted Schools Refugee Program - $100,000 for 3 years $19.3m for direct instruction of 3,000 students in high end/high-tech programs at the Technical Campuses Regional CTE program support - $2.5m

CFE Transportation Reimbursement - $2m

21 FY 2010-11 Budget Highlights Program Support & Subsidies

       Regional Procurement Process (cooperative contract network with over $10.4 million of annual usage) AMS, Zangle, ONE Network technical support Provide Special Education PA-18 funding and support $137.5M (decreased by $8.8m from FY 2010) Beverage Consortium Transportation Improvement Association (TIA) Inter-district mail services Tri-County Alliance

Overview of Fiscal Year 2010-11

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Oakland Schools Proposed Budgets

Fund Balance Target Setting Protocol

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The proposed protocol for the development of each fund’s year ending fund balance target will be predicated upon:   5 percent of the operating programs contained in said fund Known economic liabilities or designated reserves of a specific fund The fund balance target setting protocol recognizes the following economic realities: – – The State of Michigan’s economic environment The economic status of the LEAs that comprise the Intermediate School District.

Oakland Schools Board of Education approved the Protocol on 6/15/2009

Practice for the Special Education Fund is to distribute the amount in excess of the target unreserved fund balance.

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Oakland Schools Total Revenue Summary

1% 6% 3% 29% 6%

FY 2011 $323.9 Million

55% Property Tax Revenue - $178.6

State Revenue - $9.0

Other Local Revenue - $20.7

Other Financing Sources - $1.9

New Grant Award Funding - $94.5

Est. Grant C/O - $19.2

Dollars in millions

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Revenue Assumptions

     Property tax revenue decrease of

13%

Expected investment rate of return is 1.5% on available resources Increased local district utilization of our Finance, Human Resource application, Benchmark & Inform system and Novanet fee-based software system. General Education Section 81 reduced by 14.5% All other State Aid held flat

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Oakland Schools Fiscal Year 2011

Total Expenditure Budget by Type

20.5% Cash to LEAs 63.3% 5.7% 0.3% 3.2% 3.4% 2.8% 0.8%

$351.7 Million

Dollars in millions

Transfers to LEAs - $222.6

Salaries & Benefits - $72.2

Purchase Services - $20.0

Utilities - $1.2

Supplies, Materials, Dues & Fees - $11.3

JobLink Program - $11.8

Capital Outlay & Other - $9.9

Transfers to Other Funds - $2.7

27 Difference between Revenue & Expenditures

Total Difference: $27.8 Million  Capital Projects Funds $(10.9M)  Debt Service payments $(5M)  Special Education Fund $(11.0M)  All other funds $(.9M)

Oakland Schools Financial Impact of Benefit Plan Changes

Savings Over Five Years = $ 5,387,820

Data Source: McGraw Wentworth Analysis of Actual Results $ 4,524,888 $ 4,656,274 $ 238,637 $ 4,524,888 $ 4,417,109 Annual Cost If No Changes $ 6,764,089 $ 6,093,774 $ 4,948,988 $ 5,491,541 $ 1,240,573 $ 931,342 $ 1,628,613 $1,348,655 Oakland Schools Annual Savings Oakland Schools Annual Cost $ 4,017,646 $ 4,250,968 $ 4,465,160 $ 5,415,434 Enrolled 405 Enrolled 397 Enrolled 400 Enrolled 405 Enrolled 402 2005 2006 2007 2008 2009 28 Note: 1. Enrollment is noted at the bottom of each bar with 2010 cost at 1/1/2010 level (anticipated to change in June 2010) 2. Cost with no changes based on 11% annual rate of increase (most projections range from 7% to 13%) 3. 2010 savings based on actual 2010 BCBS rate renewal (no credit / adjustment for Risk Related Fund) Enrolled 388 2010

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Budget Highlights

• • • • MPSERS retirement rate budgeted at the weighted average rate of 18.79% (19.41% effective October 1, 2010) Non-union & union healthcare cost budgeted at annual increase of 13% Purchase Services, Supplies & Materials, Dues & Fees reduced by aggregate 10% Utilities reflect a 6% decrease from the prior year

Budget Highlights

30 FY 2011 proposed non-union salary & wage changes

A wage freeze was implemented on January 1, 2010 for Non-union staff. Non-union wages follow the calendar year.

5 unpaid furlough days for 12 month staff (2% salary decrease) Continuation of employee premium share based on pay level (up to 4.5%) The progression increment movement within the market ranges plus the longevity stipends account for an average of 0.5% annually.

Budget Highlights

FY 2011 proposed union salary & wage changes

The OSTCEA and the Board of Education approved a one year extension on the existing contract, expiring June 30, 2011. The contract includes a wage freeze implemented on July 1, 2010. 3 unpaid furlough days for 10 month staff (2% salary decrease) Continuation of the 6% health insurance cap.

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Step increases are provided by contract for an average of 1.2% annually.

Allocation of costs

General Allocation

50% GE, 25% SE, 25% CFE

Activity Based Cost Allocation –FTE based

23% GE, 25% SE, 52% CFE

Abraham & Gaffney – sq footage based

50% GE, 26% SE, 24% CFE

Cost Based Allocation – Transportation

73% GE, 25% SE, 2% CFE

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Reference Enterprise Wide Summary Document

General Education Fund Summary

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  Total Revenue: $17.5 Million – Property tax – $10.6M (60% of total revenue) – – – Other local revenues – $3.5M

State sources revenues – $2.9M

Other financing source revenues – $.5M

Total Expenditures: $17.7 Million – General administration – $1.7M

– – – Finance and operations – $7.2M

Instructional services – $8.7M

Plant and fixed charges, transfers to LEAs – $.1M

Note: Medicaid Revenue now reflected in Fund 273

General Fund Overview

34 $35 $30 $25 $20 $15 $10 $5 $0 2002 Actual Revenue 2003 Actual Expense 2004 Actual 2005 Actual 2006 Actual 2007 Actual Unreserved Fund Balance 2008 Actual 2009 Actual 2010 2nd Amend Proposed 2011 Reserved Fund Balance

Dollars in millions

Fiscal Year 2011 General Education Fund Balance

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END OF YEAR:

Unreserved: $ 3,392,200 Reserved: Prepaid, Inventory and Deposits $ 35,000 Total Budgeted Ending Fund Balance $ 3,427,200 _______________________________________________________ 5% of GEF operating expenditures ($17.7 m): State Aid exposure (sec 81): Fund Balance Protocol Target: $ 0.9M

$ 2.9M

$ 3.8 Million

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Pending Legislation limits General Education Fund to 15% fund balance

Current Operating Expenditures (COE) - MDE defined Total Current Operating Expenditures do not include: • • • Capital Outlay Community Services Transfers outs (includes Medicaid transfers to districts)

Fiscal Year 2011 District Debt

Amount GEF Debt Principal: Total OS Bonded Debt: $ 5,165,000 CFEF Debt Principal: $44,770,000 QSCB Debt Principal (funds): $14,800,000 $64,735,000 Average Annual Payment $ 750,000 $ 3,100,000 $ 850,000 $ 4,700,000

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NOTE: Debt Service for the Administration Building Project Bond (2003) and QSCB issue is pre-funded in Debt Service Fund 310 & 313 and Debt Service for the campus renovations bond (2007) is pre-funded in Debt Service Fund 312 through FY 2014

General Fund Five-Year Forecast

Revenue: Expenditures: Operating Excess (Deficit) Proposed 2010-11 17,485,300 17,673,000 Projection 2011-12 16,438,850 17,520,690 Projection 2012-13 Projection 2013-14 Projection 2014-15 17,525,423 17,419,037 16,266,017 17,578,308 17,496,124 17,746,829 (187,700) (1,081,840) (250,705) End of Year Fund Balance: Reserved: Prepaid, Inventory and deposits Unreserved/Designated Total 38 End of Year Unreserved FB as % of Expenditures 34,900 3,614,900 3,392,300 0 2,345,360 2,345,360 19.19% 13.39% 0 2,451,745 2,451,745 0 1,139,454 1,139,454 14.08% 6.48% 0 888,749 888,749 5.01%

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ISD Budget Resolution

Revised School Code 380.624 - Overview 1.

2.

3.

Not later than May 1 of each year, the ISD shall submit proposed budget for next fiscal year to the board of each constituent district for review Not later than June 1 of each year, the board of each constituent district shall review the proposed ISD budget, shall adopt a board resolution expressing its support for or disapproval of the proposed budget Mail copy of resolution indicating support or disapproval (with rationale) to the Oakland Schools Board of Education

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General Education Fund

 Questions & Comments

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Special Education Fund Summary

 Total Revenue: $142.0 Million – Property tax – $134.9M (95% of total revenue) – – Other local revenues – $1.4M

State sources revenues – $5.7M

 Total Expenditures: $153.0 Million – Program supervision and direction – $2.3M

– – – Program operations – $7.5M

Plant and fixed charges – $5.7M

LEA transfers and program subsidies – $137.5M

Special Education Fund Overview

42 $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 2002 Actual Revenue 2003 Actual 2004 Actual Expense 2005 Actual 2006 Actual 2007 Actual 2008 Actuals Unreserved Fund Balance 2009 Actual 2010 2nd Amend Proposed 2011 Reserved Fund Balance

*FY 2004 contains “one time” operating adjustment for prior years **Dollars in millions

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Fiscal Year 2011 Special Education Program Support & Subsidies

PA-18 Base Distribution Start-up Contingency Extraordinary Contingency Section 24 subsidy Group Homes Havenwick SEI Regional Day Treatment Michigan Rehab Services Cash Match Total PA-18 Base Distribution $(8.8M) decline from FY 2010 $ 134,332,100 $ 850,000 $ 250,000 $ 100,000 $ 1,200,000 $ 150,000 $ 450,000 $ 180,000 $ 137,512,100

Oakland Schools Special Education Expenditure Budget Comparison

44 Transfers to LEAs OS Operations 80 60 40 20 180 160 140 120 106.9

100 18.5

110.09

23.4

145.8

27.4

137.8

16.02

134.7

16.9

143.4

17.66

160.7

18.6

148.18

18.9

157.03

19.37

137.5

15.5

0 FY 2 00 2 A ct ua l FY 2 00 3 A ct ua l FY 2 00 4 - A ct ua l FY 2 00 5 A ct ua l FY 2 00 6 A ct ua l FY 2 00 7 A ct ua l FY 2 00 8 A ct ua l 20 09 A ct ua 20 l 10 2 nd A m en d Pr op os ed 2 01 1

*External services with offsetting revenue not included in FY 2010 OS Operations Dollars in millions

PA-18 Base Distribution FY 2003-2015

Trend Line: Red After Property Tax Decline: Blue 180 160 $160.0

$155.0

140 $128.4

$130.9

$133.7

$142.1

$141.9$142.4

$143.1

$148.0

$134.3

120 45 100 FY 2003 $109.5

FY 2004 $112.0

FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010

Dollars in millions

$108.7

FY 2011 $103.2

FY 2012 FY 2013 $167.0

$171.0

$174.0

$103.2

$105.6

FY 2014 FY 2015

Fiscal Year 2011 Special Education Fund Balance

END OF YEAR:

Unreserved: Reserved: Future SE Center Facility Renovations Total Budgeted Ending Fund Balance $ 755,200 $ 286,000 $ 1,061,200

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5% of SEF operating expenditures ($15.5 m): State Aid exposure (sec 51a, 51a.8) Fund Balance Protocol Target: $ .775M

$ 3.9M

$ 4.675 Million

Special Education Five-Year Forecast

Revenue: Expenditures: Proposed 2010-11 142,044,900 153,016,800 Projection 2011-12 125,951,499 125,868,753 Projection 2012-13 120,248,596 120,153,830 Projection 2013-14 120,541,458 120,432,549 94,767 108,909 Operating Excess (Deficit) (10,971,900) End of Year Fund Bal: Reserved Center Program Facility Renovation Reserved/Designated Unreserved/Designated Total 47 End of Year Unreserved FB % net of LEA O.T.

5.00% 82,746 286,000 0 775,200 1,061,200 386,000 0 757,946 1,143,946 5.00% 486,000 0 752,712 1,238,712 5.00% 586,000 0 761,621 1,347,621 5.00% Projection 2014-15 123,130,206 123,021,792 108,415 686,000 0 770,036 1,456,036 5.00%

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Special Education Fund

 Questions & Comments

Career Focused Education Fund Summary

 Total Revenue: $34.1 Million – – – – Property tax – $33.0 M (96% of total revenue) Other local revenues – $0.6 M State sources revenues – $.4 M Other financing source revenues – $0.1 M

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 Total Expenditures: $32.9 Million – – – – Campus and other program administration – $21.8 M LEA transfers and direct program operations – $5.1 M Facility and technology maintenance/renovations – $0.1 M Plant and fixed charges – $5.9 M

Career Focused Education Fund Overview

$70 $60 $50 $40 $30 $20 $10 $0 2002 Actual 2003 Actual 2004 Actual Revenue 2005 Actual 2006 Actual 2007 Actual 2008 Actual Expense Unreserved Fund Balance 2009 Actual 2010 2nd Amend Proposed 2011 Reserved Fund Balance

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Fiscal Year 2011 Career Focused Education Fund Balance

END OF YEAR:

Unreserved: Reserved: Prepaid, Inventory and Deposits $ 8,069,800 $ 67,200 Total Budgeted Ending Fund Balance $ 8,137,000 _______________________________________________________ 5% of CFEF operating expenditures ($32.9): State Aid exposure (sec 61a.1, 61a.2): Fund Balance Protocol Target $ 1.6M

$ .4 M $ 2.0 Million

Career Focused Education 5-Year Forecast

52 Revenue: Total Expenditures: Operating Excess (Deficit) Proposed 2010-11 Projection 2011-12 34,195,900 30,312,556 32,910,900 32,087,848 1,285,000 (1,775,292) Projection 2012-13 28,917,591 30,524,315 (1,606,724) Projection 2013-14 28,985,006 30,949,980 (1,964,974) Projection 2014-15 30,100,462 31,323,685 (1,223,224) End of Year Fund Balance Unreserved End of Year Unreserved FB as % of Expenditures 8,137,000 6,361,708 24.72% 19.83% 4,754,985 15.58% 2,790,011 9.01% 1,566,787 5.00%

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Career Focused Education Fund

 Questions & Comments

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Proposed Grants and Funded Projects Summary

   Total dollar award value of all current grants and funded projects: $113.7M

 New Awards  Carry Over $94.5M

$19.2M

Direct transfer to districts: $88M ISD administered grants and projects: $25.7M (Includes JobLink $11.8M

)

Other Funds

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       Cooperative Activities Fund 270 – Collaborative Program Development Initiative (CPDI) Cooperative Activities Fund 271 – Oakland Network for Education (ONE) Cooperative Activities Fund 272 - Alternative Education High School ( Under Study) Cooperative Activities Fund 273 – Medicaid Debt Service Fund 310 – Administrative Building Bond 2003: 15 years, ending 2018 Debt Service Fund 312 – CFE Campus Renovations Bond: 29 years, ending 2036 Debt Service Fund 313 – Qualified School Construction Bond:17 years, ending 2027

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Other Funds

     Capital Projects Fund 404 - CFE Technical Campus Renovations Phase II Project Capital Projects Fund 406 – Admin Bldg Renovation & Maintenance Capital Projects Fund 408 – Qualified School Construction Bond Production Print Fund 710 – Enterprise Fund (subsidy eliminated) Risk Related Activity Fund 810 – Internal Service Fund (unemployment pre-funded)

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Questions & Comments