Enrollment trends challenge conventional thinking

Picture of the original design of Mason Elementary hung in their front hallway

Picture of the original design of Mason Elementary hung in their front hallway

Last week I published a blog that again pointed to the ongoing problem the Grosse Pointe Public School System faces in student enrollment. It had more views than many of my posts and I read some interesting comments that encouraged me to go a layer deeper on the data analysis.

Here’s a slide deck I created to share some of the pertinent views.

Despite a loss of over 1,000 students since 2005, and an expectation that enrollment might stabilize, the future looks equally troubling.

Elementary enrollment is decreasing at a rate four times greater than the secondary level. As those losses work their way toward the secondary level, aggregate enrollment will continue to drop.

Imbalance across the district is also striking, but perhaps unexpectedly. South High School feeder schools enrollment loss is occurring at a rate three times greater than North High School equivalents. If these trajectories hold, and it looks like they will, the once nearly 400 student gap between the high schools will close over the next couple of years.

A couple highlights on that front. If next year’s projections hold true, Defer Elementary, a major South feeder school, will have lost over  one-third of its enrollment since 2003. It will have a mere 19 more students that Trombly.

Meanwhile on the north end, Mason Elementary has been the only elementary school to experience an increase in enrollment from 2003 to 2014. Fellow North High School feeder Poupard Elementary is tied with Kerby as having second best enrollment trend in this same time period – even if it is a 2% loss. That is still significant because it is so much less than the district’s overall loss rate.

The only thing I like about this data is that it will challenge the overly simple, and really  misinformed, view that school test scores are the major driver in enrollment. The data doesn’t support that conclusion.

I also think the magnitude of the enrollment reductions cannot be attributed to private school enrollment or the half-day kindergarten issue. These trends are very clearly population based. In ensuing posts I hope to cross reference this enrollment data against census data to get an even better view.

The implications for budgeting are significant. District administration will need very tight projections by school and grade level, balanced against class size guidelines, to make the staffing decisions that are required in April. Missteps here can introduce major budget challenges.

GPPSS projects significant enrollment drop

If Assistant Superintendent Chris Fenton’s projections for the 2015-16 school year come to pass, the Grosse Pointe Public School System’s General Education student enrollment will fall to its lowest level since 1993.

That date is significant as it preceded the state’s landmark school funding overhaul, 1995’s Proposal A, among whose most significant characteristics is that district revenue is tied directly to student enrollment.

The GPPSS enjoyed the ride since Proposal A’s passage. In 1993, the General Education student enrollment was 7,680. It rose steadily from that time hitting a high water mark of 8,930 in 2005. But it’s been all down since then, reaching 7,914 this year and then a projected drop to 7,760 next year.

That drop from 8,930 t0 7,760, if it were to come to pass, represents an annual revenue loss of nearly $12 million since the GPPSS receives about $10,000 per pupil in revenue.

The only good news about that kind of drop is that it has been gradual and the district’s response to that kind of revenue loss has generally been staff level reduction. Historically, teaching staff reduction has been roughly proportional to student enrollment. Non-teaching staff reduction has been much more steep.

It is true that the GPPSS enrollment reduction is directionally consistent with Michigan population, but not as bad. From 2004 to 2013, Michigan’s student population has dropped about 12% while the GPPSS has dropped just over 6%. This student population drop has been a statewide phenomenon and was one of the big drivers for the growth in School of Choice programs – as districts competed with each other for a more scarce resource – students.

The GPPSS famously has not, and will not, be a school choice participant, but that factor alone cannot completely account for its drop in enrollment in contrast to other similar districts.

Select District Enrollment Trends

As the chart on the left shows (please click to enlarge), among the GPPSS, Birmingham, Bloomfield Hills, Northville, Rochester and Troy Schools, Grosse Pointe and Bloomfield are the only two whose enrollment has dropped from 2004 to present.

I have highlighted the contrast to Birmingham before. In 2004, the GPPSS had 1,000 more students than Birmingham. Today Birmingham enrollment is greater than GPPSS. Birmingham has not relied on School of Choice to increase enrollment.

Bloomfield has been more like GPPSS, in fact far worse. Within the last few years, after a protracted and divisive battle, Bloomfield closed one of its two high schools.

This is the kind of issue that requires a great deal of analysis – and probably more than the district has undertaken. But at least among the statewide data and in contrast to Bloomfield and Birmingham Schools, we cannot fairly pin the GPPSS’ enrollment drop on any one thing – and probably not even on just the school system itself.

Yes, great schools can and do attract families. But of course the schools in Bloomfield are outstanding – and I generally think GPPSS are very good schools. Birmingham and Northville are examples of communities that are solving this riddle. The Grosse Pointes have some work to do.

 

10 observations on proposed Michigan School Aid Fund budget recommendation

Capitol Building, Lansing, MI

Capitol Building, Lansing, MI

If it’s been a while since you familiarized yourself with state spending patterns and state school spending in particular, I suggest reviewing the State of Michigan House Fiscal Agency report embedded below along with one published by Gov. Snyder’s office, available here.

Here are my top ten observations prompted by my review of these two presentations, along with my previous years of analysis of state and local education budgets.

 

  1. The state has two primary funds; the General Fund (GF) and the School Aid Fund (SAF). The 2014-15 proposed General Fund totals $10.1 billion. Of that a mere $115,000 goes to the SAF. The SAF itself totals $12.3 billion – 20% higher than where state budget money goes to fund everything else but schools. Nearly 97% of the SAF goes to K-12 funding.
  2. Sales Taxes are the largest revenue source for the SAF – accounting for 46% of its total. Next highest source is Income Tax at 20%. Property Taxes, in the form of the State Education Tax, accounts for 15% of the SAF.
  3. SAF budget appropriations have increased every year since 2012, but the vast majority of those increases (almost all of it) has flowed to offset the underfunded Michigan Public School Employee Retirement System (MPSERS).
  4. In real dollars, Michigan’s SAF appropriations are down 7% from 2006 levels ($13.9 billion vs. $14.9 billion); however, student enrollment is down 11% in the same time (1.7 million to 1.51 million). So why have we struggled so much financially? One word – MPSERS.
  5. The proposed SAF budget is at its highest level since 2005. The controversy surrounding whether this is a true increase is based on such an increasing percentage flowing to MPSERS.
  6. MPSERS now accounts for 6.4% of the SAF budget and ever increasing portions of local school budgets. In 2014, 13.4% of the Grosse Pointe Public School System’s total General Fund budget was spent on MPSERS expense. Ten years ago it was about 8%. That’s about a $5.5 million increase in cost to fund legacy costs.
  7. From 2013 to 2018, the SAF is projected to grow by $2.2 billion – again reinforcing how Proposal A works well when the economy is stable and growing. But half of that revenue growth is earmarked to reduce MPSERS unfunded liability. In next year’s state budget alone, GP Schools would have been obligated for an additional $200 per student – or over $1.6 million – in MPSERS cost increase if the state did not defray that cost. This is a huge shift in how Michigan is better managing school budgets.
  8. The MPSERS reforms passes in 2012 have already reduced the unfunded liability from $47 billion to $31 billion.
  9. The proposed 2016 SAF budget with its $815 million allocation to pay down MPSERS liability translates to $600 per Michigan student. The 2012 reforms translates to $475 per student totaling $1,075 per each Michigan student. Without these reforms and investments, a district like Grosse Pointes’ would have seen $8 million in increased cost.
  10. Over the last couple of years, and into the next decade plus, local school districts will have been required to budget an incremental 25% of total salary costs to fund MPSERS. With all these reforms and pay-downs, that rate will decrease to less than 5% in 2039.

The summary, if I didn’t flog the dead horse above briskly and frequently enough, is similar to what I said so many times when I served on the Board of Education: MPSERS has been the beginning, middle and end of most of the economic trauma. It proved to be an unsustainable expense and the 2012 reforms and other Snyder administration budget and policy decisions are proving to address the root cause issue.

GPPSS budget surplus proves capacity for tech funding

Last week the Grosse Pointe Public Schools received the independent financial audit for the 2013-14 school year. I have prepared an analysis of the audit in the slide deck embedded here.

The 2013-14 financial year was particularly critical because it began with just $2 million in fund equity. Also the district ran a $3.5M deficit in 2012-13. The 2013-14 audit shows a dramatic turnaround. Here are some highlights from the 2013-14 audit:

  • The district ran a $3.7M budget surplus when it had expected to run a $2M surplus. This ended a four year run of annual deficits that saw fund equity lose over $18M (details on how here.)
  • Compared to the previous year, 2013-14 revenues came in $464,000 higher and expenses dropped by $7.8M – undoubtedly the single largest annual expense reduction the district has ever seen. This puts the district a year ahead of schedule in the quest to return to 10% fund equity.
  • 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.

Bottom line for now: There is more financial capacity in the general fund than had been expected. The knock on effect is that the district now has a budget source to continue to address technology issues – including looking at cloud based services and leasing which will have no capital investment requirements and would not be allowed in a bond based funding model.

It would not be unreasonable to earmark $1M in additional general fund budget annually to make great strides in this area. Any further talk of a tech bond should be received with very healthy skepticism. (For reference, see my post on addressing district technology needs without a tech bond.)

GPPSS fund equity increase more than expected

The Board of Education Building at 389 St. Clair

The Board of Education Building at 389 St. Clair

In the Grosse Pointe Public School Systems’ annual financial audit for operations ending on June 30, 2014 (last school year) the district’s General Fund Equity had been expected to finish at $4 million or about 4% of total expenditures.

The audit shows that fund equity ended at $5.7 million or 6% of expenditures, which were $1.7 million less than the final budget for 2013-14 and the main reason why fund equity increased more than expected. The ending fund equity then is 142% above the anticipated levels.

This is significant, and welcome, news as the district is now a year ahead of original schedule in its return to 10% fund equity levels and changes the dynamic relative to concerns about inability to make certain necessary investments.

More analysis to follow shortly. The full audit is available here.

GPPSS millage patterns worth noting

This month the Grosse Pointe Public School communities renewed two millages that constitute about 25% of the district’s operating budgets. The Hold Harmless (referenced in below as “HH”) represents about $23 million in annual revenue. The Sinking Fund (“SF”) delivers about $2.5 million. They are both important, but clearly losing the HH would be far worse than losing the SF.

The 2014 renewals generally reflect the community understands their importance. Each of the six voting communities passed both at similar proportions within their cities, but oddly the SF passed at a slightly higher overall rate than the HH millage.

Also worth noting is the higher passage rate of the millages in the City, Farms and Park in comparison to the Woods, Harper Woods and the Shores. The City’s passage rate of the HH was a 15.7% percentage points higher than the Shores.

2014 Both Millages

 

The pattern was different in 2009 when the HH received stronger support than the SF.

2009 Both Millages

As we look at the comparison of the HH elections from 2009 to 2014, the gradation across the cities follows the same pattern, but more noteworthy is a significant reduction in the overall passage rate, that dropped from 77.4% in 2009 to 70.5% in 2014.

GPPSS HH Millage Only

Oddly the SF did not experience the same degradation of support from 2009 to 2014 with both years showing a near identical passage rate.

GPPSS SF Millage Only

Between this comparison and the otherwise proportionally consistency across the communities, there was something about the HH millage question this year that induced a decrease in support.

GPPSS board vote: A tale of 6 cities

The Grosse Pointe Public School System is comprised of five cities (the Pointes) and part of a sixth (Harper Woods). It’s been that way for decades and the community takes that for granted in many respects – or painfully reminds us. (Unite the Farms, anyone?)

The North end / South end thing is indeed a thing of sorts. While some look with disdain or cast this thing aside with a trite phrase, the 2014 school board vote demonstrates mathematically that the difference between the two ends of the district is real.

2014 vote_NorthvSouth

While Margaret Weertz gained a seat on the Board this week, if the the South end had its own board of education, she would have lost and Cynthia Sohn would have won. Weertz overall top 3 finish is attributable mainly to her Woods success where she beat Sohn by over 1,100 votes. Her message didn’t play too well down South.

So what?

The message Cynthia Sohn brought to the campaign resonated strongly with the South end. The newly configured Board of Education, when seated in January 2015, ought to take note of this.The board really ought to endeavor to resolve why the South end cities’ perspective is so different from the North end’s.

Speaking of unity, this breakdown also demonstrates that Summerfield and Ismail would have won in both these hypothetical districts. That matters, like it (or Ismail) or not – particularly in light of this past election cycle and “the slates.”

I was puzzled from the get go on why Weertz, Summerfield and Howlett chose to formalize their campaign. Their responses to repeated questions about it rang hollow and were really counter to their own calls for unity.

Why? Because their alignment was really designed to block Ismail from winning… and it didn’t work. I make this claim mainly because Sohn’s candidacy was the square peg to the slate’s approach. By almost any objective view, she would be a great trustee. Why go out of their way to block her? Well, apparently because she was thought to be aligned with Ismail. And that’s who the district establishment – including members of the board and staff – really did not want to see win.

Well, he won. Now we’ll see whether the call for unity was real and genuine or a pandering campaign slogan. Hint: We’re not off to a great start.

What I will call “The Ismail Factor” is a topic worth more attention and I will write more about it. I have some experience there having known Ahmed Ismail for years and having served on the Board with him.

For now, we know that Ismail’s reputation (good and bad) precedes him. We know that this past campaign was influenced in large part to block Ismail’s candidacy. We know that despite that effort, Ismail’s candidacy was well received by both the North and South end of the district – more balanced than even Margaret Weertz’s candidacy.

All that matters because we’re talking about the voice of the voting community. The same voices (votes) that entrusted this board with $25 million annually in renewed millages also believes Ismail is worthy of their trust and that Sohn should have represented the South end of the community.

Updated: 2014 GPPSS school board results

UPDATES: We now have results by city. Of note is now Summerfield becomes top voter getter. Amazingly tight Park race with just 70 votes ranging from 2nd (Weertz) to 4th (Sohn). Amazing that Howlett goes 5th in the Park. Big (proportionally) win by Ismail in Shores, even beating Weertz there.

Top 5 biggest wins by city and candidate:

  • Sohn – GP City – 22.2%
  • Summerfield – GP Park  and Weertz – GP Woods – 20.4%
  • Ismail – GP Shores – 19.7%
  • Sohn – GP Farms – 18.7%

More analysis to follow.

Nov 2014 GPPSS Election Results

 

Where did the $18M in fund equity go?

At the end of the 2008-9 school year, the Grosse Pointe Public School System had $20 million in General Fund equity and ran almost a perfectly balanced budget. By the end of 2012-13 fund equity was $2 million. How did it happen?

The short version is that state funding cuts and declining enrollment reduced revenue by $30.4 million. In the same time, $30 million in cost reductions were found, but other costs increased by $17.4 million. The net effect was an $18 million loss of fund equity.

This first chart shows the revenue variance from 2009-10 through 2012-13 in relation to 2008-9 when the budget was balanced.

 GPPSS Rev Loss v 2009

From 2008-9 to 2009-10 the GPPSS experienced a $5.8 million revenue loss, the majority of which was the result of then Gov. Jennifer Granholm’s cuts of October 2009. That same $5.8 million persisted and got worse in the ensuing two years. Revenue was moderately increased from 2011-12 to 2012-13, but nowhere near the earlier losses. (More details on revenue patterns here.)

The second chart here sums up all the expense and revenue categories that affected fund equity from 2009-10 through 2012-13.

 

GPPSS 18M FE Loss

The black bars represent shifts that work to preserve fund equity. Those total $30 million. The red bars work against fund equity. You see again the $30.4 million in lost revenue wipes out the total effect of the black bars (and then some). It’s the other four red bars that generated the vast majority of the $18 million drop in fund equity. The biggest culprit – again – is ever increasing retirement costs. (See recent post on retirement costs for more detail.)

These charts may beg the question, how did the district generate $20.6 million in compensation reductions? Was it the contract formula clause?

The short answer to the second question is no. The biggest contributor to direct compensation cost reduction was job reduction. From 2008-9 to 2010-11, the district cut 80 full time equivalent positions. Also, the effect of the early retirement incentive (ERI) replaced dozens of our most highly paid staff with new employees who received significantly lower salaries.

The formula clause did not kick in until 2012-13 and even then, it reduced direct compensation by about $2.7 million. This means that 90% of direct compensation reduction is attributable to job reduction or the ERI effect. Meanwhile, as the second chart above shows, total compensation costs were increasing due mainly to rising retirement costs. The chart below summarizes the problem of relying on job reduction to balance the budget.

GPPSS Comp v FTEs

So in 2011-12, despite 78 fewer employee FTE’s (or 9.2%), the district’s total compensation costs were just $2.2 million lower (or 2.4%). About half the cost increases from 2010-11 to 2011-12 were retirement increases. The other half is attributable to direct compensation cost increases.

Of course history proved this did not work. The district was running annual deficits that averaged $4.5 million per year from 2009-10 to 2012-13.

In summary, the $18 million drop in fund equity is primarily attributable to rising retirement costs and significant reductions in state revenue. The ensuing employee contracts are essentially adjusting employee compensation to respond to those two state driven issues. As we’re seeing now, fund equity will return to 10% – the agreed upon levels – by 2016-17 and job loss has been stemmed.