Financial ProjectionsWhy Now and What to Look For

Jeff Feyerer – Business Manager - Fairview School District 72

Elizabeth Hennessy - Partner– William Blair & Company

Merv Roberts - Board Member – Stevenson High School District 125

Financial Projections

• Expenses• Revenues• Capital Expenditures• Fund Balances• Tax Rates

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Why Financial Projections?

•Planning•Decision Making

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Leadership Topics

• Data• Information• Knowledge

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Leadership Topics

• Data:“Last year’s budget was $100M.”

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Leadership Topics

• Information– Data with context

“Expenses have been rising at 3% per year.”

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Leadership Topics

• Knowledge– Shared information that is actionable– Stable enrollment will begin dropping next year– New mandated programs will begin next year

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Leadership Topics

• Plans consistent with mission, vision, values and goals

• Plans should be collaborative

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Leadership Topics

• How do we learn?– Teach, practice and reflect

• Collaborate– Administration– Board Members– Others

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Other Planning Considerations

• Variability of line item• .1% rule

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Why are they important NOW?

• Financial situation of state/districts• Current/potential legislation• Transparency• Negotiations• Planning• Makes budgeting easier year to year• Recognize, anticipate, react!

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ASSEMBLE A PLAN

• Gather pertinent data • List assumptions for revenue and expenditures• Discuss with board/administration about

goals/parameters for projections• How long should you look back? Go forward?• How will you use the results of the

projections? Will they be released or just internal?

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DATA TO USE & GATHER

• Current Budget/Actual• Historical Financial Documents• Past/Projected Enrollment and Staffing• Collective Bargaining Agreement(s)• Board/Administrative Directives• Long Term Capital Plans

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REVENUES

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REVENUE NOTES

• Be conservative in estimates!• Understand primary revenue sources• Changes in the pipeline• Understand internal trends• Know your district’s property

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REVENUE ASSUMPTIONS

LOCAL

• Levy (CPI, EAV, etc)• Interest Income• CPPRT• Tuition• Student Fees • Rental Income

• Cafeteria Sales• Intergovernmental

Agreements• Local tax appeals• Referenda?• TIF??

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REVENUE ASSUMPTIONS (cont.)

STATE

• General State Aid (80% FY2014)

• Special Education• Transportation• Bilingual Education• Grants

FEDERAL

• Special Education• Title Grants• Medicaid

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EXPENDITURES

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EXPENDITURE NOTES

• Over EXPEND!• Aim toward high end of historical trends • Area can be broken down by having other

internal plans: O&M, capital, personnel, technology that assign responsibility for planning

• Maintain educational programs

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Expend. Assumpions – Salaries (100)

• Employee Roster/Personnel Plan• Collective Bargaining Agreement/Salary

Schedule• Administrative Contracts• Compile scattergrams• List other: extra duty, stipends• Classified Staff: estimate future based on past

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Expend. Assumptions – Benefits (200)

• Medical/Dental Insurance – trend toward the high end

• Other insurance offered• TRS/IMRF/THIS – how to project for the

unknown?• Retirement Benefits• Driven by personnel plan (insurance

enrollment, TRS/IMRF/THIS)

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Expend. Assumptions – Purchased Services (300)

• Assemble list of contracts with expiration, rate increases

• Separate contractual from variable• Identify trends in both groups• Variable can be estimate, but contractual

should be more exact• Included in district wide plans (O&M,

Technology)

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Expend. Assumptions – Supplies (400)

• Estimate based on historical trends• Very difficult to estimate based on size of

purchases and amount of areas that use this object

• Reference district wide plans (tech, O&M)• Expansion/addition of programs

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Expend. Assumptions – Capital (500)

• Building Plan – additions, safety measures, expansion due to enrollment

• Technology Plan – equipment rollouts, expansion of classroom use

• Vehicle Schedule• Consider facility analysis

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Expend. Assumptions - Other

• Tuition – understanding special education needs

• Debt Payments – should be easy based on schedule; will there be other issues in the next 5 years?

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TWO MAIN FACTORS:LEVY (REV) AND SALARIES (EXP)

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SALARIES EXAMINED• Employee roster/personnel plan =>

scattergram or listing => other pay duties/stipends/overtime/substitute

• Highest expenditure item, spend most of your time, analyze carefully

• Limited by parameters of current contract: what do you estimate for the future?

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SCATTERGRAM2013-2014 Salaries/Scattergram

Step BA BA+15 MA MA+15 MA+30

1 $0 $0 $0 $0 $0 2 $50,749 $0 $57,983 $0 $0

3 $208,640 $0 $59,319 $0 $0

4 $107,190 $0 $0 $0 $0 5 $55,099 $59,211 $0 $66,822 $0 6 $56,672 $0 $381,558 $0 $73,152

7 $0 $62,484 $130,522 $69,969 $149,624

8 $0 $0 $67,066 $0 $76,608 9 $0 $66,341 $0 $73,678 $157,032

10 $0 $0 $142,100 $0 $0

11 $0 $0 $0 $0 $0 12 $0 $0 $0 $79,931 $0 13 $0 $0 $61,993 $0 $0

14 $0 $0 $79,854 $84,510 $357,332

15 $0 $0 $0 $0 $275,142 16 $0 $0 $0 $0 $94,131 17 $0 $0 $0 $91,792 $0 18 $0 $0 $0 $93,510 $1,215,132

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PROJECTING TAX LEVIES• Assumptions needed on new property – check

with local assessors, village managers, etc.• Research outstanding TIFs and understand what

levy year they expire• Research monthly CPI progress• Consider EAV trends and effect of the multiplier• Consider tax rate maximums and strategies for

levying dollars in unlimited funds

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PROJECTING TAX LEVIES• Understand the Property Tax Limitation Law

and how the Tax Cap Formula works:

• CPI December 1, 2011-December 1, 2012 determines CPI for Levy Year 2013 affecting Fiscal Year 2015 = 1.7%

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PROJECTING TAX LEVIES

• Maximum Tax Rate By Fund

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Using and Communicating Financial Projections

• Rationale for use at Stevenson High School• Telling the right story–Who, what, why, where, when and how and why not

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1982-Stabilizing the Tax Rate

• Growth in enrollment and equalized assessed value

• Tax rates fluttered up and down• Why not:– Stabilize the tax rate– Let fund balances fluctuate– Do two or three year budgets

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1985 Building Referendum

• Dissention in the community• Skeptical community• Strategy-hold building costs down• Develop a 5-year budget projection• Build a story around that• 5-year budget used in teacher negotiations

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1986-Changing Community Perspectives

• Blue Ribbon community interview:

“the school has plans in place”

“I like the stability”

“There are no surprises”

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1991-Tax Cap/PTELL

• 30 day window to sell working cash bonds• 1993 building referendum plans• EAV growth strong• How much?• How fast to pay it back?

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Tax Rate / Total less B &I Rate1989 Through 1995

1989 1990 1991 1992 1993 1994 1995 1.400

1.450

1.500

1.550

1.600

1.650

1.700

1.750

1.800

1.850

1.900

Total Tax Rate Total Tax Rate w/o issuing DebtTotal w/o B&I Rate

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1991-Tax Cap/PTELL

• The Story:– Tax Cap creates uncertainty– State created working cash opportunity– Stevenson will use the working cash to protect the

quality of the education program during this period of uncertainty

– Bonds will not increase the tax rate

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Impact of $11M Bond Sale

• No complaints from the community• Passed 1993 building referendum• Created a $4.1M annual non-referendum debt

capacity (Debt Service Extension Base)

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2002 Education Fund Referendum

• 1996 letter to the community– Deficit spending begins– Have built fund balances– Need an operating increase in about 5 years–Will keep you posted

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2002 Education Fund Referendum

• Planning 1998-99– EAV continues to rise– Tax rate declines– Operating referendum needed in 2002– 1993 bonds paid of 2003– Superintendent plans to retire 2001

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2002 Education Fund Referendum

• Actions Taken 1998-1999– Reschedule Superintendent retirement to 2002– Reschedule bonds to pay off in 2002– Debt restructure stabilized tax rate– Community trusts district’s financial management

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Tax Rate / Total less B &I Rate1998 Through 2005

1998 1999 2000 2001 2002 2003 2004 20051.400

1.500

1.600

1.700

1.800

1.900

2.000

2.100

2.200

Tax Rate Tax Rate w/o ReferendumTotal - B&I Rate

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2002 Education Fund Referendum

• Campaign Theme– Increase Ed fund rate by $.35– “not one penny more”–Maintain quality education programs– Protect home values

• Community Question–Why haven’t we heard about this before?– “We told you about it in1996”

• Result: Nearly 70% voted YES

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Fund Balance1994 Through 2018

1994

19

95

1996

19

97

1998

19

99

2000

20

01

2002

20

03

2004

20

05

2006

20

07

2008

20

09

2010

20

11

2012

20

13

2014

20

15

2016

20

17

2018

(20,000,000)

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

Fund Balance (Cash) Fund Balance (Accrual)

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Fund Balance1994 Through 2018

1994

19

95

1996

19

97

1998

19

99

2000

20

01

2002

20

03

2004

20

05

2006

20

07

2008

20

09

2010

20

11

2012

20

13

2014

20

15

2016

20

17

2018

(20,000,000)

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

Fund Balance (Cash) Fund Balance (Cash) less TRS FundingFund Balance (Accrual) Fund Balance (Accrual) less TRS Funding

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Communication Tips

• Community Relations:– Broad-based collaboration– Task forces– Parent groups– Community organizations

• Powerful: “The Community Told Us”

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Communication Tips

• What does the audience want to know?• What do you want the audience to know?• Do your homework-get the facts• Understand the facts• Identify connections between the facts• Review with Superintendent and Board

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Communication Tips

• The Message:– Tel the truth– Tell it often– Be consistent– Collaborate– Anticipate questions– Test with Friends– Anticipate the story you will tell if things go

wrong

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Communication Tips

• When the Message Changes:– Provide the rationale for the change– Admit that you were wrong– Repeat the process from the prior slide

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Financial Projections

• Create Understanding• Tool for Collaboration• Turn Data into Information into Knowledge• Constructive communication• Words, Numbers and Charts• Achieve Desired Results

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Questions??

• Jeff Feyerer – Business Manager – Fairview School District 72 - jfeyerer@fairview.k12.il.us

• Elizabeth Hennessy –Partner – William Blair - ehennessy@williamblair.com

• Merv Roberts– Board Member – Stevenson High School District 125 -mervroberts@comcast.net

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