By Meg Peters
Review Co-Editor
Lake Orion School’s accountant firm, Plante Moran, issued an unqualified opinion on the district’s financial status for the 2014-2015 fiscal year, the highest level of assurance they could provide.
Plante Moran representatives Donna Hanson and Kurt Golsby assessed and tested the district’s internal control systems and uncovered no findings or weaknesses to report to the school board.
Total revenue at the end of the year equated to $78,382,457. The largest factor in total revenue, at 78.7 percent, continues to be the piece the district receives from the state foundation allowance. In 2014-2015, this piece of the pie amounted to $61,653,340.
The next component is the federal piece, comprising 2.9 percent of total revenues. Lake Orion received $2,270,191 in federal funding last year.
The third contributor to total income is from local property tax revenues, about $8,597,794 or 11 percent.
Miscellaneous funding for 2014-15 made up 7.4 percent of general fund revenues, or $5,861,132.
Total expenditures, on the other hand, tallied to $79,154,040.
The largest expenditure continues to be instructional and instructional support, 75 percent of general fund expenditures coming in at $59,365,530 for last year. These dollars directly affect the students.
The remaining 25 percent of the expenditure pie is a combination of school administration costs, human resources, technology, transportation, and athletics, among others.
Another fact: about 83 percent of every dollar spent from the general fund goes to salaries and benefits, Golsby reported.
The district ended the 2014-15 year with about $7.6 million in the general fund.
Historical perspective of general fund balance
In 2012, the state eliminated $470 in per pupil funding to the foundation allowance to every district in the state.
Since then, things have been a bit rough.
‘Since that time, and actually since 2011, you can see the district has had planned budget uses of the fund balance over those years, and you can see the trend going down hill,? Hanson said. ‘I will say overall we’re seeing this trend across the board for school districts statewide.?
Since 2012, if all the fund balances across the state are collectively combined, they’ve decreased about $100 million each year since that time, she continued.
The reason for this decline is a significant shift in the way a district is funded.
As for the typical increases to a district’s foundation allowance’those days are gone.
‘Over the past several years, there has been no increase in funding or small increases, and then you would have to earn funding with best practice money or performance grants,? she told the board. ‘Now, even in 2016, those types of funding are gone. What we are seeing is a shift in funding for school districts going in a flow-through manner.?
For example, the state could provide the funding for the district’s revenue, but will allocate that funding to be spent on contributions into the district’s pension plan.
‘The pension plan dollars essentially come in as revenue to the district and have to be paid directly into the [pension] system,? she said. ‘So it really limits what districts can do to maintain operations at the current level. Over time, even just maintaining the programs cost more each year.?
Trustee Birgit McQuisten echoed this sentiment.
‘That flow through concept is a difficult thing for districts to handle because it’s presented to the public from the state that they are putting billions of dollars into the school systems. As you said, they handed you this check and you had to count it as revenue and turn around and give it right back. We had no realization of that in the classroom. Our costs continue to increase, so it’s an interesting paradigm we face, and very difficult to plan,? McQuisten said.
Hanson said it’s not sustainable, but that most districts are in this same position.
‘Districts are less liquid. Once a district falls below a 10 percent fund balance as a percentage of expenditures, that’s where we see the cash flow issues arising. You’re right at that cusp right now.?
At the close of the 2014-15 school year, the general fund was 9.8 percent of total expenditures.
‘So we wanted to point that out and make sure you understood this trend can’t continue, and it takes a lot of planning and adjustments’over the next few years to address this.?
If no additional revenues entered the district’s system, it could survive off its general fund for approximately five weeks.
‘Maintaining anything between 10 and 15 percent is really difficult, but that has been our board policy, that any budget we adopt should be at least 10 percent,? Superintendent Marion Ginopolis said. ‘Many districts that are now considered to be deficit districts drop down to four or five percent fund balance. In order to maintain your programs these districts, and we’re the same way, have had to eat into their fund balance. When I first started here, our fund balance was 18 percent, it was extremely high. Over the years, the money we get from the state has not given us enough to do that, so we’ve been eating into our fund balance.?
We can’t keep doing that, she said.
So, the district is going to start looking at some significant reductions.?
‘That’s not anything I’m ready to say, because the board has to look at that, but when you are talking about 85 percent of your budget is people, it’s not rocket science.?
The district’s Long Range Planning Committee has been analyzing the whole picture of the district, and how to continue providing outstanding programs for the kids with declining revenue. Please see an accompanying story in this week’s Review for more information.
Ultimately, the district is looking at resizing itself.
The committee will report its findings’Dec. 21’at a special budget meeting, which is open to the public. The meeting begins at?6 p.m., and will take place at the Orion Center, 1335 Joslyn Rd.
The meeting, which is expected to bring many members of the community, will also be televised on Orion Neighborhood Television’s Public Education Access Channel, Comcast channel 22.