Financial Projections Why Now and What to Look For

1. 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

2. Financial Projections • Expenses • Revenues • Capital Expenditures • Fund Balances • Tax Rates 1

3. Why Financial Projections? • Planning • Decision Making 2

4. Leadership Topics • Data • Information • Knowledge 3

5. Leadership Topics • Data: “Last year’s budget was $100M.” 4

6. Leadership Topics • Information • Data with context “Expenses have been rising at 3% per year.” 5

7. Leadership Topics • Knowledge • Shared information that is actionable • Stable enrollment will begin dropping next year • New mandated programs will begin next year 6

8. Leadership Topics • Plans consistent with mission, vision, values and goals • Plans should be collaborative 7

9. Leadership Topics • How do we learn? • Teach, practice and reflect • Collaborate • Administration • Board Members • Others 8

10. Other Planning Considerations • Variability of line item • .1% rule 9

11. 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! 10

12. 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? 11

13. 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 12

14. REVENUES 13

15. REVENUE NOTES • Be conservative in estimates! • Understand primary revenue sources • Changes in the pipeline • Understand internal trends • Know your district’s property 14

16. REVENUE ASSUMPTIONS LOCAL Cafeteria Sales Intergovernmental Agreements Local tax appeals Referenda? TIF?? • Levy (CPI, EAV, etc) • Interest Income • CPPRT • Tuition • Student Fees • Rental Income 15

17. REVENUE ASSUMPTIONS (cont.) STATE FEDERAL Special Education Title Grants Medicaid • General State Aid (80% FY2014) • Special Education • Transportation • Bilingual Education • Grants 16

18. EXPENDITURES 17

19. 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 18

20. 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 19

21. 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) 20

22. 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) 21

23. 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 22

24. 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 23

25. 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? 24

26. TWO MAIN FACTORS:Levy (REV) and SALARIEs (EXP) 25

27. 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? 26

28. SCATTERGRAM 27

29. 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 28

30. 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% 29

31. PROJECTING TAX LEVIES • Maximum Tax Rate By Fund 30

32. 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 31

33. 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 32

34. 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 33

35. 1986-Changing Community Perspectives • Blue Ribbon community interview: “the school has plans in place” “I like the stability” “There are no surprises” 34

36. 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? 35

37. Tax Rate / Total less B &I Rate1989 Through 1995 36

38. 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 37

39. 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) 38

40. 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 39

41. 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 40

42. 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 41

43. Tax Rate / Total less B &I Rate1998 Through 2005 42

44. 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 43

45. Fund Balance1994 Through 2018 44

46. Fund Balance1994 Through 2018 45

47. Communication Tips • Community Relations: • Broad-based collaboration • Task forces • Parent groups • Community organizations • Powerful: “The Community Told Us” 46

48. 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 47

49. 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 48

50. Communication Tips • When the Message Changes: • Provide the rationale for the change • Admit that you were wrong • Repeat the process from the prior slide 49