Brendan P. Walsh

Between the Grosse Pointe Public Schools’ 2014-15 budget planning discussion at last Monday’s meeting and the budget materials posted on the district website, we can conclude the following based on current plans:

• The district will increase technology spending in 2014-15 by roughly $1.6 million. $1.1 million would be sourced from the Sinking Fund and an additional $500,000 would be sourced from the General Fund. In total, when adding run rate technology costs, the district would allocate roughly $2.5 million to technology spending in 2014-15 and nearly $3 million in 2015-16.
• In the ensuing two years (2015-16 and 2016-17) the district would further increase technology spending out of the General Fund by an additional $500,000. This is mostly attributable to the end of the Energy Bond payments of $675,000 annually.
• Even with these increases in technology spending, the district would run General Fund budget surpluses on average of about $2 million per year for the current fiscal year, for 2014-15, and for 2015-16.
• General Fund equity is projected to increase from 2012-13’s $2 million (or 2%) to $8.8 million (or nearly 9%) at the end of 2016-17.
• The surplus in 2016-17 budget year is projected currently at $900,000 from the previous year’s $1.8 million. According to the district’s reports, this is mostly attributable to a $1 million increase in employee direct compensation and a $500,000 increase in employee indirect compensation.

This last bullet is key as a large portion of last Monday’s discussion was dedicated to the teacher contract that runs through 2016-17. The contract specifies that the district “shall use best efforts to adopt a budget” that results in General Fund equity reaching certain thresholds annually. The table below compares current projections against the contract’s defined “best effort” levels.

[table id=22 /]

Unlike in past years, failure to reach the designated Fund Equity levels will not automatically trigger employee compensation reductions. The “Modified Formula” language clarifies that unless the shortfall to target is attributable to an increase in state mandated retirement costs (MPSERS) or due to reduction in state funding, employees shall “not experience any impact” for not reaching the target levels. Furthermore, the contract later specifies the true target for the 2015-17 fund equity is 10%.

So what does all this mean?

It means that even if the district does not meet the 10% goal, employee compensation won’t be affected. While it’s admirable to strive for a 10% fund equity, the contract does not require it. For those concerned with bond ratings, agencies will be seeing four straight years (minimally) of budget surpluses and a very clear trajectory to 10% fund equity by 2017-18.

It’s also noteworthy that the only reason the 10% target won’t be reached is due to employee compensation increases of $1.5 million in 2016-17. Without this anticipated increase, fund equity would end at about 10.3%. Therefore it would be a disservice to students and the community if the district made essentially arbitrary cuts to meet a 10% target that is essentially meaningless. It’s almost certain that the 10% would be met in the ensuing budget year just at the current run rate.

Again to the point I’ve made before, the district remains on very firm financial ground. It’s running budget surpluses into the foreseeable future. Fund Equity is well on its way to returning to very healthy levels. Technology spending is increasing substantially even without a tax increase. Class sizes and course offerings remain as they are now. Fees are not increasing and employee compensation is projected to increase.

About 99.99% of districts in the state would trade with GPPSS in a heartbeat.