Utica

UCS budget sees $7M gain for 2011-12, proposed loss in 2012-13

By Brad D. Bates
C & G Staff Writer

UTICA — A year after adopting a budget for the 2011-12 fiscal year with a $5.2 million deficit, the Utica Community Schools Board of Education approved a budget revision for the year with a $7 million gain.

The June 11 budget revision consisted of a nearly $5 million increase in state revenue from last June’s budget adoption and roughly $6.5 million in cuts in instruction and support services that largely account for the $12.2 million turnaround.

“There are a number of variables we have to mange throughout the year,” UCS Director of School/Community Relations Tim McAvoy said of how budgets evolve.

“And you have to look at the variance in light of our total budget,” McAvoy added, noting that the $12.2 million difference in the budget between adoption and revision accounts for 4.5 percent of the total budget.

Of the cuts, the largest came with the district spending $3,364,062 less on “basic programs” in the instruction heading of the budget and $3,075,093 less on “transportation” in support services.

“In the adoption of the budget, those three variables, we didn’t have that information,” McAvoy said, citing an additional $3.4 million in state revenue for best practices and a Michigan Public School Employees Retirement System offset, $1.1 million in state categorical carryover and $5.8 million achieved through negotiation settlements with teachers, paraprofessionals and transportation workers after the 2011-12 budget adoption.

Along with increase in state money, the district also took in $1,516,108 more in federal funding throughout the 2011-12 year.

The surplus pushed the district’s fund balance, which is essentially a savings account for the district, from $32,249,512 at the beginning of the year to $39,281,526.

McAvoy said the ability to increase the fund balance, which in 2010 was forecast to fall from $26.6 million to $19.9 million by June 2011, is unrelated to recent raises in the tax rate from a 3.5-mill debt levy in 2009 to a 3.75-mill debt levy in 2010 to its current rate of 3.85 mills to address falling property values and revenue.

“For the debt service fund, the district must levy the millage necessary, 3.85 mills, to meet principal and interest payments on debt,” McAvoy said in an email. “The schedules of repayment are determined at the time bonds are sold. The millage rate has been impacted by the reduction in property taxable values.

“There is no correlation between the general fund fund balance and the millage levied for debt purposes, as they are separate funds.”

The forecasted deficit from the 2011-12 budget adoption would have placed the district with $27,070,267 in its fund balance heading into the 2012-13 year.

The 2011-12 budget was the second consecutive budget to boast a gain despite showing a loss upon adoption and the third straight budget to beat predicted losses.

The 2010-11 budget turned a proposed $6 million deficit to a $971,574 gain, and the 2009-10 budget saw a proposed $15 million loss reduced to a $4.9 million loss.

Officials said a similar turnaround for the 2012-13 $267.7 million budget that was adopted by the board June 11 with a forecasted $23.2 million deficit will be hard, though.

“Future operating deficit reductions achieved through revenue increases and cost reductions will be more difficult due to the reduction in one-time state revenue, loss of federal funding and the one-time operating transfers used in 2011-12 that cannot be repeated,” McAvoy said in an email.

“Cost reduction strategies made available, such as health insurance hard caps have been fully implemented for the 2012-13 year. Additional structural savings through contracting grounds, operations and warehouse functions and labor concessions have been incorporated in the development of the budget.”

Compared to its 2011-12 counterpart, the 2012-13 budget has an increase of $8,065,402 in expenditures with $22,184,657 less in revenue.

“In adopting the budget, district officials also noted that there will be further guidance from the Michigan Department of Education on best practices,” a press release from the district said.

“In addition, retirement reform being considered by state lawmakers may impact the budget. Any future adjustments must be presented to the Board of Education for approval.”

The decrease in revenue stems from a forecasted loss of $10,913,476 in federal funding; $7,047,562 in funding from “other financing sources,” such as special education funding from the Macomb Intermediate School District; $1,939,605 in state funding; and $2,284,014 in local revenue.

Expenditures increased by $15,253,693 in instruction, which was offset by a decrease of $1,640,935 in support services, which included a drop of $254,606 in transportation.

“More than 70 percent of all operating expenditures are earmarked for classroom instruction,” the release added. “UCS ranks in the top 25 percent of all Michigan districts in instructional spending.”

To cover the proposed $23.2 million deficit for 2012-13, the district has maintained it would like to use no more than $12 million from its fund balance.

“We have tried to keep (the fund balance) at 10 percent to mange cash flow and keep us from a borrowing position,” Executive Director of Business and Finance Jill Tomyn had said Feb. 13 of the need to not let the fund balance dip below $27 million.

Using $12 million from the fund balance still leaves an $11 million gap in the 2012-13 budget.

“Our focus will continue to be to bring our expenditures in line with our revenue,” said Assistant Superintendent for Business and Employee Services Stephanie Eagen.

You can reach C & G Staff Writer Brad D. Bates at bbates@candgnews.com or at (586)498-1029.