1 a review of mcps budget category 12 office of legislative oversight report 2012-2 presentation to...
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A Review of MCPS Budget Category 12Office of Legislative Oversight Report 2012-2
Presentation to Montgomery County Board of Education
Fiscal Management Committee
January 9, 2012
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Category 12 Expenditures
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Category 12 Expenditures
$235$270
$306$335
$373$411 $430 $442
$472$462
$0
$50
$100$150
$200
$250
$300
$350$400
$450
$500
FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12
Milli
ons
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Category 12 Expenditures As Percent of Total Operating Budget (Tax-Supported)
FY03 18%
FY12 23%
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FY12 Category 12 Expenditures
Group Insurance Active46%
FICA21%
Group Insurance Retiree10%
Retirement15%
Other8%
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Retirement Costs
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MCPS Employees’ “Core” Pension Benefit
• 77% (mostly teachers) in pension plan funded and administered by State
• 23% (mostly non-teachers) in pension plan funded by County and administered by MCPS
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MCPS Employees’“Supplemental” Pension Benefit
• All permanent employees receive pension supplement funded by the County and administered by MCPS
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FY03 $16.7 million
FY12 $77.8 million
MCPS’ Share of Pension Contribution
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Increase in Pension Fund Contribution Caused By:
• Salary increases
• Growth in workforce size
• Lower than assumed investment performance
• 2006 plan enhancements
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Liabilities ($ obligated to pay)
Assets ($ in the fund) =Funded
Ratio
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MCPS Pension Fund
Funded Ratio
FY03 102%
FY11 70%
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Decrease in Funded Ratio
Investment losses
Liabilities
Assets
2006 plan enhancements
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Future Pension Costs
MCPS’ actuaries project:
• Minimal change in FY13
• Increased cost in FY14 and FY15
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Group Insurance
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Group Insurance Funds
• Revenue: primarily employer and employee premium contributions
• Expenditures: primarily health care claims
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MCPS Group Insurance Fund Expenditures
Fund FY03 FY12 % Increase
Active Employee $131.4 million
$260.7 million 98%
Retiree $39.9 million
$84.6 million 112%
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Group Insurance Budgeting Challenges
• Changes in claims experience
• Calendar vs. fiscal year
• Time between budget development and start of fiscal year
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Active Employee Group Insurance Fund
FY11 Beginning
Fund Balance (July 1, 2010)
$8.5 million
Fund Activity During FY11
Revenue $263.4 million
Expenditures $250.3 million
Difference $13.1 million
FY11 Ending Fund Balance
(June 30, 2011)
$21.6 million
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Active Employee Group Insurance Fund Surplus
• Monthly data show expenditures trending lower than projected
• Cumulative expenditures $7.6 million lower than projected midway through the fiscal year
• In February/March, actuaries advised MCPS that a significant year end surplus was likely
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Active Employee Group Insurance Fund
Fiscal YearEnd of Fiscal Year
BalanceBalance as % of
Expenditures
FY08 $11.8 million 5.6%
FY09 $2.8 million 1.2%
FY10 $8.5 million 3.5%
FY11 $21.6 million 8.6%
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Education Committee Recommendations
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Recommendations for Council Action
• Request BOE submit supplemental information to Council in April and October of each year
• Integrate information into annual budget decision making and ongoing oversight
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April•Estimated future pension contributions•Plan to achieve desired pension funding ratio•Budgeted vs. actual group insurance data•Projected year-end insurance fund balances
October•Budgeted vs. actual Category 12 expenditures •Summary of intra-Category 12 transfers•Explanation of need for transfers
Additional Information
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• Category 12 cost drivers and expenditures
• Status of pension “funded ratio”
• Fund balance policy for group insurance
Education CommitteeDiscussion Issues
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A Review of MCPS Budget Category 12Office of Legislative Oversight Report 2012-2
Presentation to Montgomery County Board of Education
Fiscal Management Committee
January 9, 2012