Your District May Be Headed for an Iceberg

Don’t Ignore the Warnings

The Story of the Titanic

Image from griid.org

Susan Barkley, Assistant Director susan.barkley@education.ky.gov

Kentucky Department of EducationDivision of District Support502.564.3930

Presenter

173 districts

54 are independen

ts

No charter schools

Largest = 94,000

students

Kentucky School Districts

Photo from accuweather.com

Fund Balance Revenues compared to expenditures Enrollment and attendance Staffing levels Tax rates Bonding capacity Using “Band Aids” Lack of information

The Warning Signs

Our Icebergs

DEFICIT

BUDGET

CRISIS

INSOLVENCY

NO BONDING CAPACITY

Photo from cbc.ca

Data already collected Annual Financial Report and Balance Sheet data Enrollment/attendance data Staffing data

COMPILE, COMBINE, COMPARE!

Using Financial Data

General Fund: Committed, Assigned, and Unassigned Funds over which the Board has control Amounts remaining after considering current

obligations Includes board-designated funds, outstanding

purchase orders Trend data is important

Fund Balance

2011-12$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

General Fund Available Fund Balance

Gee, that doesn’t look so bad…

2008-09 2009-10 2010-11 2011-12$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

General Fund Available Fund Balance

…until you look at 2011-12 compared to the three previous years!

Without action, you’ll hit the iceberg in 2013-14

KENTUCKY DEPARTMENT OF EDUCATIONANNUAL FINANCIAL REPORT - AUDITED FUND BALANCES

COMMITTED, ASSIGNED AND UNASSIGNEDFISCAL YEARS 2010 THROUGH 2012

District FY 2012 FY 2011 FY 2010

Increase (Decrease)

Over 3 Years

001 Adair County 1,540,549.09 926,695.77 1,077,637.07 42.96%

005 Allen County 1,726,982.47 2,021,780.98 2,232,004.44 -22.63%

006 Anchorage Independent 1,879,944.02 2,156,653.73 1,857,069.79 1.23%

011 Anderson County 1,874,351.33 1,663,790.16 1,421,288.24 31.88%

012 Ashland Independent 3,001,773.34 3,461,938.57 2,771,424.31 8.31%

013 Augusta Independent 355,049.67 490,672.73 562,977.49 -36.93%

015 Ballard County 1,543,844.62 1,333,981.62 1,625,250.56 -5.01%

016 Barbourville Independent 812,128.63 805,374.06 668,099.25 21.56%

017 Bardstown Independent 1,164,696.31 1,005,726.69 542,320.07 114.76%

021 Barren County 2,479,570.25 2,431,685.65 1,429,370.80 73.47%

025 Bath County 3,916,890.57 3,699,736.41 3,808,987.98 2.83%

026 Beechwood Independent 1,362,595.56 1,182,352.59 1,528,973.70 -10.88%

031 Bell County 763,463.34 1,246,320.58 1,016,669.19 -24.91%

032 Bellevue Independent 1,967,372.93 1,493,185.30 1,336,745.25 47.18%

034 Berea Independent 2,712,065.78 3,382,017.13 3,450,464.28 -21.40%

035 Boone County 23,257,916.82 16,592,083.03 19,257,622.55 20.77%

041 Bourbon County 4,136,547.14 3,578,681.29 3,943,223.03 4.90%

Revenues and Expenditures

Is the district spending more than is received during the year?

Include transfers Watch other funds! (food service, day care,

construction) OVERSPENDING = REDUCTION IN FUND

BALANCE

KEY FINANCIAL INDICATORS - GENERAL FUNDPrepared October 05, 2012

FY 12 FY 11 FY 10 FY 09Fund BalanceCommitted, Assigned and Unassigned Fund Balance (330,018)$ 1 614,389$ 1,074,822$ 769,068$

Total revenues and other financing sources 6,224,925$ 1 5,851,436$ 5,777,911$ 5,999,910$ Total expenditures and other financing uses 6,906,679$ 1 6,274,472$ 5,472,157$ 5,645,308$ Excess (deficiency) (681,754)$ 1 (423,036)$ 305,754$ 354,602$

Fund Balance as a percentage of Funds 1 and 51 expenditures -5.47% 4.33% 9.45% 10.55%

Fund balance is decreasing & becomes deficit Overspending

results in a hit to fund balance

Legislative funding is directly related to attendance Attendance = Funding

What is the trend?

Enrollment/Attendance

KEY FINANCIAL INDICATORS - GENERAL FUNDFOR THE 2008-09 THROUGH 2011-12 YEARS

FY 12 FY 11 FY 10 FY 09

Average Daily Membership (ADM)ADM 338.904 3 356.445 3 354.136 3 391.289 3

Increase (decrease) from prior year (17.541) 2.309 (37.153) - Increase (decrease) in four year period (52.385) Percentage increase (decrease) in four year period -13.39%Number of schools 1 1 2 2ADM/School 339 356 177 196

State Average ADM/School 528 527 525 523 Above (Below) State Average ADM/School (189) (171) (348) (327)

PersonnelFTE Certified Staff 36.74 3 37.94 3 38.19 3 37.89 3

FTE Classified Staff 25.81 30.27 29.27 25.75 Salaries and Benefits as a Percentage of Total Expenditures 85.35% 1 84.14% 2 88.42% 2 86.89% 2

ADM is decreasing

Staffing remained the same, despite a consolidation

Consolidation

Certified and Classified Salaries and benefits are 85% of general fund expenditures (state average) Legislative funding is directly related to

attendance Staffing level should be responsive to

attendance level Or other expenditures must be reduced

Staffing Levels

85%

15%

Salaries & Benefits

Everything Else!

2008-09 2009-10 2010-11 2011-12

Unresponsive Staffing Level

attendance funding staffing

To stay out of trouble, action must be taken

Tax Rates/Assessments

Tax Rate The rate for this year impacts EVERY future

year

Tax RevenueTax Rate Compensating Compensating 4% CompensatingMaximum Tax Rate Permitted 4% 4% 4% 4%Estimated Uncaptured Tax Revenue 7,780

KEY FINANCIAL INDICATORS - GENERAL FUNDPrepared October 05, 2012

Compensating rate produces same level of revenue as PY

This doesn’t seem like much for a single year, but…

2012-13 2013-14 2014-15 2015-1690

95

100

105

110

115

120

Compounding Effect of Tax Rates

With 4% Compensating

LOSTREV-ENUES

Total principal and interest payments on bonds and leases (including KISTA)

Compare debt to fund balance High debt ratio indicates financial weakness

Bonding Capacity

Redirecting funds Capital Funds Request

Beware of soft money ARRA and other short-lived grants Pork barrel appropriations When $ runs out, cuts must be made if no

other funding source

“Band Aids”

Look for ways to increase revenues Tax rates Additional grants

Look for ways to decrease expenditures Efficiencies Cut unnecessary spending Are staffing levels appropriate for the

enrollment?

Changing Course

Immediate action is necessary BUT Results take time

State recommendationsOn-site visit

State takeover

Changing Course

Your Good Questions