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Smaller and older

GP Community Census_Slide 1

With the recent publication of the 2014 American Community Survey (ACS) by the U.S. Census Bureau, we can analyze a variety of data. Here’s a quick glance at population and median age changes among the Grosse Pointe Communities (Park, City, Farms, Shores and Woods).

If I recall correctly, the Shores data is affected by their reorganization as a city from a village. This may have affected their overall population in this period.

Overall the five Grosse Pointes have a 2014 population of 45,107.

The reasonably long-term trends raise some interesting questions which we will explore in upcoming posts.

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Chromebooks rising

According to a new report from Futuresource Consulting, the Google powered Chromebook that once made up less than 1% of personal computing devices used in the U.S. K-12 market now commands a dominant 51% market share just three years later.

What’s significant about Chromebooks (i.e., the TL;DR version?)

  • They are significantly less expensive than Microsoft based laptops and iPad’s
  • They are purely network-based devices, meaning they rely 100% on cloud-based services (storage and applications) – a computing model that basically every student is familiar with since that is what most smartphones are.

In the failed GP Technology Bond proposal, over a third of the $50 million proposal would have gone to fund over 20,000 personal computing devices. Meanwhile the debate raged about the role of cloud computing in the technology plans.

The district has been, and has the capacity now, to address the core infrastructure issues to progress cloud computing. The Chromebook is now mainstream and I expect many classrooms have them in use.

It would be worthwhile to hear what plans the district has now to further evaluate this cost effective and technologically flexible approach in greater scale.

K-12-Education-Tech

GPPSS 2015 audit in three charts

Yesterday the Grosse Pointe Public School System posted the 2014-15 fiscal year audit – and the news was welcome.

Last year’s budget and all its amendments presented quite a roller coaster ride for followers of district finances, as I posted here and here. To summarize, here are three charts visualizing the data.

2015 Audit_Final 1

Quick analysis: 2015 revenue was in line with the twists and turns of the budget, but expenses came in over $1 million better (lower) than the projections made in last June’s Final Budget.

2015 Audit_Final 2

Quick analysis: Given the lower than expected 2015 actual expenses, fund equity increased by $1.2 million better than the June Final Budget, or $1.9 million overall. This is the second straight annual budget surplus after the $18 million aggregate loss from 2010 to 2013.

2015 Audit_Final 3

Quick analysis: Fund equity rose from 6.0% at the end of 2014 to 7.8% at the end of 2015. Based on the current year’s budget and its anticipated $1.6 million surplus, fund equity could end at 9.5% come next June, a mere $400,000 away from the long-standing goal of returning fund equity to 10%.

I will look at revenue and expense line items in more detail later, but for now the summary statement is that this was a good result – far better than what was expected last June. It is always welcome news when the budget exceeds projections (when running a surplus), but this was a big miss to forecast. More precision is required.

Bigger picture, the district’s march to 10% fund equity continues, and very likely a year ahead of schedule. This will be important to watch as we get closer to employee and teacher contract discussions, which are likely to commence soon given expiration at the end of the 2016-17 year.

More to come on that.

One less controversy for future school votes

We can take away at least one source of controversy from future school bond and millage votes in Michigan.

The February election option is dead given legislation signed into law by Michigan Governor Rick Snyder last week. School elections may still take place in May and August as well as November.

The Grosse Pointe communities experienced this controversy last year when the tech bond proposal came before voters in February. It was controversial for other reasons including the $50 million price tag, its “one-to-one computing” philosophy, and the association of the technology initiative with former superintendent, Dr. Thomas Harwood.

Nevertheless, the tech bond rejection is historic now not just for its decisive margin of defeat (70% / 30%), but it was the last time a GPPSS election will have occurred in February.

Lawmakers cited voter turnout as the primary motivation for the new law. Recent voting patterns in the GPPSS support this rationale.

GPPSS Voter Turnout 2014

Technically if the district filed for a February election by the July 31 deadline this year they could beat enactment of this bill. No definitive statement has been made by district officials indicating plans for a new tech bond, although some parties have lobbied the district to pursue another tech bond.

GPPSS’ rare, and difficult, position among Michigan districts

Budget approval season is upon us for Michigan public schools and at least two – Farmington and Southfield – are learning how hard it is to maintain low class sizes, robust course offerings and pay higher than average teacher salaries – a topic I have treated before.

The Grosse Pointe Public School System is indeed doing this – with great difficulty and at a cost – and it has dwindling company.

To manage a comparison, I isolated Michigan districts with enrollment greater than 2,000. There are 219 such districts in total. The GPPSS is the 26th largest district in the state (enrollment of 8,353 in 2014 – the year of this analysis). Over 1.1 million of Michigan’s 1.5 million total students are represented in this group.

All of those districts are plotted in the chart below. The X-axis is the average teacher salary and the Y-axis is the ratio of general education students to general education teachers. All of this data is from the State of Michigan.

Sals and Ratio

Of the 219 districts, only 40 are in the lower right quadrant, having pupil to teacher ratios lower than the average and teacher salaries higher than the average. Five of these – GPPSS, Southfield, Farmington, Birmingham and Bloomfield – represent the outermost boundary.

Select 5

A reminder of the obvious, revenue per pupil, determined by the state, matters tremendously to salaries and pupil ratios. These five districts have revenue per pupil significantly higher than the 219 district sample. The GPPSS has the lowest revenue per pupil among these five outlier districts.

Notice that Birmingham and Bloomfield allocate a similar proportion of the revenue to teacher salaries and remain just above the group’s average. The GPPSS and Farmington are well above that average.In the GPPSS’ case, each percentage point is worth about $1 million.

But revenue per pupil is a different story. If it had Bloomfield’s revenue per pupil, the GPPSS total revenues would be $25 million per year higher! Despite that higher revenue, Bloomfield pays its teachers on average 7% less than the GPPSS, but employs (proportionally) 20% more teachers.This what enables Bloomfield to boast the lowest ratio of general education pupils to teachers in the state (among districts larger that 2,000 students).

Birmingham and GPPSS pay teachers about the same amount, but both still significantly higher than average. Birmingham uses their higher revenue position to employ proportionally 8% more teachers than the GPPSS. For Birmingham and Bloomfield, higher revenue and salary controls allow them to stay comfortably in the lower right quadrant.

For the other two members of this group of five, Southfield and Farmington, it’s not very pretty.

Southfield projects it will run a $9.2 million annual shortfall next year driving their fund equity to 4%. Its school board approved sweeping changes this week that will merge their two high schools, close two elementary schools, sell another school and freeze employee wages.

Farmington ran a nearly $6 million budget shortfall this year, dropping their fund equity to 4%. They announced massive layoffs for the coming year. 180 employees in total will lose their jobs, including 100 teachers. Despite those cuts, the district still projects a $1.5 million shortfall next year.

Undoubtedly with these actions, Southfield and Farmington will surrender their outlier positions. In all likelihood, they’ll see a sharp increase in their pupil to teacher ratio. The GPPSS, meanwhile, will remain on this outlier list along with two districts whose revenue per pupil is significantly higher.

So what?

In general, this analysis serves as a reminder of how the GPPSS stacks up against other districts in the two budget areas that are most under the control of the local board and have the greatest impact on a district’s financial profile – teacher salaries and number of teachers employed.

As I’ve written before, even after the contract driven salary concessions, the GPPSS offers a compensation package and working environment arguably unrivaled in the state, but for two districts who have far higher revenues.

We also see how hard it is to maintain this position, as Southfield and Farmington are now experiencing. The GPPSS must recall these lessons now and in the coming budget years.

GPPSS’ 2016 budget will try where 2015 budget failed

At tonight’s meeting, the Grosse Pointe Public School System Board of Education will pass two budgets – a final revision to the 2015 budget and the first version of the 2016 budget.

It’s only fitting it is happening this way. The 2016 budget aims to accomplish what the 2015 budget failed at – bringing General Fund Equity to just above 8%.

That was indeed the plan for the 2015 budget. My last blog, “2015 budget lower than expected”, broke this down in more detail. With the final revision tonight, the 2015 performance worsened. Here’s a snapshot:

2016 Budget 1 FE

The original 2015 budget planned for an ending fund equity of 8.2%. But instead of the anticipated surplus of $2.3 million, the actual surplus (which is how fund equity grows) came in at less than $700,000 – a huge miss to budget. Here’s a further breakdown:

2016 Budget Operating

The 2015 budget miss is even more disappointing considering the strong momentum of the 2014 budget. The chart above shows a $3 million erosion of the 2014’s $3.7 million operating surplus that dwindled to $700,000 this year. This chart breaks this down further.

2016 Expense and Revenue

After some odd twists and turns through the budget year, 2015 revenue came in near the original budget projections. But while close in total, it massively missed on student enrollment revenue and state retirement revenue, which was just a pass-through cost. Expenses were worse, coming in $3.3 million higher than budget.

Now in 2016 the district needs to make up for this budget performance. The good news is that per pupil state revenue is higher, but GPPSS enrollment continues to drop ( a 137 student enrollment drop is projected in the budget). As a result, the district will reduce teacher headcount levels by almost 11 full time equivalents.

In total the 2016 instructional expenditure, despite fewer teachers, is $61.7 million versus 2015’s $61.99 million. As the teacher contract calls for a 1% salary increase this year, total Basic (non-Special Needs) salaries are only $103,000 less in 2016 despite that drop in 10.9 teacher headcount.

The only reason the 2016 projected operating surplus is $1 million better than 2015 is the end to internal transfer payments for legacy energy bonds. This is welcome news, but without that the district would be standing still economically despite fairly significant employment reductions and a slightly worse ratio of student to teachers.

The district cannot afford a budget miss in 2016 as it did in 2015 or it will have to revert employee headcount reductions at a pace greater than student enrollment loss. History tells us this is an unsustainable.

To end on a more positive note, the district did at least run a budget surplus for the second year in a row and a greater surplus is projected in 2016. Surpluses should not however lessen focus on expense controls, and that should be an area of improvement for the Board and administration starting right about now.

GPPSS 2015 surplus lower than expected

Following the publication of the district’s 2014 financial audit showing a $3.7 million operating surplus in the GPPSS General Fund, I wrote on this blog:

If the district could maintain expense controls in the current year (2014-15) consistent with last year, fund equity could increase by $4M and fund equity would end 2014-15 at 10% – two years ahead of schedule.

That won’t be happening. Let’s take a look at what transpired this budget year.

Adopting a General Fund budget in June for the ensuing year, in accordance with state law, requires assumptions about enrollment, state aid, retirement costs and many others. As assumptions are proven accurate or inaccurate, the budget must be amended by Board vote. The district’s first budget amendment came in January, the second in March and the third will happen this month just prior to the 2016 budget adoption – and the cycle will continue.

The chart below tracks the changes in the 2014-15 budget from its original adoption through the amendments, past and pending.

2015 Budget ChangesThe original 2015 budget increased expenses by $1.9 million over the 2014’s final audited budget. The first budget amendment increased spending by another $1.4 million for a total year over year spending increase of $3.3 million.

$1.8 million of that $3.3 million came from increases non-Human Resource expense, called Variable expenses. The largest portion of that increase went to technology where investment increased by over half a million, a logical and welcome decision in the wake of the tech bond debacle.Repairs and Maintenance increased by $385,000, textbooks by $275,000, and Property Tax adjustments increased by $360,000. Together these four constitute the majority of the year over year Variable expense increases.

The majority of the rest of the $3.3 million spending increase came from state mandated retirement costs, but that increase brought with it increased revenue estimated at over $1 million.

Revenue related to enrollment is the bigger problem. The original budget assumed 8,072 students in the Fall headcount. The actual was 7,912 – a miss of 160 students. That means revenue would come in over $1 million less than budgeted.

Despite that missed forecast, which would have been known in November, the district increased its revenue forecast in the January 2015 amendment by another $800,000 – presumably attributable to the retirement pass through revenue, but not properly accounting for the enrollment miss.

The district’s revenue forecasts were overly optimistic which enabled increased spending during the budget year. As a result, fund equity will increase, but by $1.3 million less than what the 2015 budget had originally anticipated – a 56% miss.

Thankfully fund equity will increase by about $1 million in 2015, which is very good, but $2.7 million less than the 2014 increase. Here’s a graphical view.

2015 Fund Equity Changes

This is not all bad news, particularly as many Michigan districts continue to struggle their way back to financial stability. Follow the Ann Arbor Public Schools tension for your moment of schadenfreude.

The long-committed task to return General Fund equity to 10% of expenditures continues, just at a slower pace. Here’s where we stand:

GPPSS Fund Equity 2015

In Grosse Pointe, the budget is proving stable having run a surplus now for two straight years after five years and $18 million of deficits. Teacher salaries remain among the best in the state, and class sizes remain low, on the whole, in elementary.

The district has continued to maintain a report I started in my time on the Board. The report shows that projecting into next year and looking back to 2009, the district has seen a reduction in elementary enrollment of over 17% and that teacher headcount in elementary is down 14%. So ratio of students to teachers is actually more favorable now that seven years ago.

It’s nice to see more favorable student to teacher ratios, but such a loss of elementary enrollment portends continued enrollment reductions, most likely, for years to come. This report also highlights how teacher layoffs follow enrollment loss.

On top of last year’s unexpected drop of 160 students, the district is forecasting more of the same – another 154 student loss going into next fall. Enrollment continue to be the greatest threat to the district, in financial and other terms, and a topic I have treated frequently over the last few years.

Frankly better stated, this dual issue of enrollment and population trends is a matter that needs attention from the entire community, not just the schools.

But for now, dealing with just the Grosse Pointe Public School System, we learn once again that “the budget” is never really done. It’s many variables and assumptions need constant attention. The coming month is critical to that effort as the 2016 budget adoption is on deck.

GPPSS BOE narrows superintendent field

Larry Lobert, consultant with School Exec Connect, addresses GPPSS Board

Larry Lobert, consultant with superintendent search firm School Exec Connect, addresses the GPPSS Board

The next superintendent of the Grosse Pointe Public School System will be either Dr. Gary Niehaus or Dr. Steve Matthews.

This was the conclusion after last night’s Board of Education meeting at which the third finalist, Mr. Matthew Wandrie, was eliminated from consideration.

In an hour long meeting marked by civil exchanges the consensus pointed to Niehaus having the edge given that he appeared to have been a top choice of all seven trustees. In fact two trustees, Judy Gafa and Dan Roeske, at first named just Niehaus as their finalist and not even a second, but both later supported a motion by Ahmed Ismail to move Matthews and Niehaus forward as the two finalists.

That motion passed 5-2 with the dissenting votes coming from Lois Valente and Brian Summerfield. Interestingly both Valente and Summerfield advocated for Wandrie as their lead finalist and thus their dissenting vote. Neither had Matthews as a finalist.

This is noteworthy as we try to determine a front runner. To the extent this Board does have a center, Valente and Summerfield are it. With their support and that of the other five trustees, Niehaus has a wider and more firm base of support. This is also relevant given the strong likelihood that the Board will want a unanimous vote to appoint the next superintendent given the strain induced by the last selection – an infamous 4-3 vote for former superintendent Dr. Tom Harwood.

The support for Wandrie, current superintendent of Lapeer Schools, seemed to rest on his charisma and frequent reference to innovation. The Board’s comments betrayed a tension between hesitance for broad-based change and the drive to innovate. This was in odd juxtaposition to frequent reference by many board members to “good being the enemy of great.”

That catch phrase is the product of the Jim Collins book, Good to Great, which cautions “good” organizations to avoid complacency. A common strategy to address this is indeed innovation.

Putting that altogether, this tension would seem to further support Niehaus’ candidacy, as clearly Matthews is the more traditional, and thus “safe”candidate. He’s better known to the Board and was once himself a trustee on the GPPSS Board of Education – ironically losing his seat to Ismail (during his first successful run for the Board) and Angela Kennedy.

As a side commentary, it is odd that there would have even been an effort to narrow the field. The upside of reducing options is not evident – particularly when the one eliminated was the top choice of two trustees. But perhaps this points to the desire to have a unanimous choice for the finalist – in which case Dr. Gary Niehaus has to be considered the prohibitive favorite.

More details on the search process and timeline can be found at www.gpschools.org.

Stay tuned.