Cover Memo to Board of Education Budget Development Parameters Resolution 1

Prepared by: Brendan Walsh

Memorandum
From: To: Cc: Date: Subject: Brendan Walsh, Treasurer, GPPSS Board of Education Members of the GPPSS Board of Education Thomas Harwood, Chris Fenton February 9, 2012 Introduction to Budget Development Parameters Resolution

It is only fitting that as the districts structural financial position changes, the development of Budget Development Parameters would change with it. This memorandum again re-introduces this Policy level process to the Board, the administration and the public.
GENERAL BACKGROUND INFORMATION Board Policy 6220 requires that the Board annually direct the district administration to commence development of the ensuing years budget by the adoption of a resolution that articulates the that the parameters shall: A. Identify specific financial goals and objectives that the Board requires in regards to specific cost reduction, revenue increases or other financially related objectives for particular budget elements. Identify particular budget related strategies that the Board prefers the administration to pursue or avoid in their development of the budget. Be as specific as possible in terms of the objectives, but allow for flexibility in the administration's approach to budget development.

preference of the Board in advance of budget development to avoid ambiguity and to allow the community to have a clear view of the budget development process from its inception. Policy states

B. C.

The budget development process relies on a series of expense and revenue assumptions that yield a projected annual surplus or shortfall. In recent years, projected shortfalls have been the norm as human resources cost increases outpaced Proposal A governed revenues. Staff reductions, class size modifications and other expense reducing measures resolved the projected shortfalls. A common parameter was the preservation of General Fund Equity, a reaction to revenue and expense uncertainty. Our current bargaining unit agreements were designed to adjust compensation in a formulaic manner to that same uncertainty while also guaranteeing General Fund Equity would always return to 10% if it ever fell below that level of General Fund expenditures. This brings a different tenor to budget development. Preservation of General Fund Equity is now primarily governed by our bargaining unit contracts as they respond to revenue and expense variables beyond our control when previously governed primarily by local budget decisions. Budget decisions now, a process commenced via the Budget Development Parameters Resolution, should be made with a cognizance of the districts educational mission and goals, guided by fiduciary

Cover Memo to Board of Education Budget Development Parameters Resolution 2

Prepared by: Brendan Walsh

responsibility, and supportive of the spirit of our partnership with our community of citizens and staff. The Board is not obligated to deliver overly specific parameters at this time anymore than we are bound to adhere to any we approve. This procedure merely presents the opportunity to communicate agreed upon interests that may affect what we receive, when, and in what manner. More discussion will inevitably follow as the administration builds the budget. Budget Background Materials In years past I have included expansive financial background material either in a memorandum such as this or in the Resolution itself. With considerable effort we have previously created thorough reports that I am formally calling Exhibits to this memorandum that will, again, be made available to the Board and the public. The Exhibits are as follows: 1. The current Budget Modeling Utility report of record, dated November 1, 2011. 2. The Financial Transparency Series report titled 2011-12 Financial State of the District and Projected Effects of Employee Contracts dated November 28, 2011. 3. The Financial Benchmarking Report, the most current of which contains State of Michigan Department of Education data from the 2009-10 school year and trends dating back seven years. 4. The Elementary Class Size Report reflecting trends from 2009-10 up to and including our current levels for the 2011-12 school year. 5. The current Staff Utilization Utility report. Therefore instead of re-stating all of the information in those reports in this memorandum or in the Resolution itself, these Exhibits are formally referenced for the Boards and publics review. Budget Development Parameters for the 2012-13 Budget Cycle As noted above, Policy 6220 does not obligate the Board to make specific clarification or provide specific directions, but rather presents us with a formal opportunity to do so as a Board, not as individual Board members. As a reminder, Board policy does not invest power to direct the Superintendent as individual Board members, but rather to the Board as a whole. Policy 6220 prescribes that the Budget Development Parameters Resolution be drafted by the Treasurer after review of the various financial reports and projections. I can report with confidence that I have indeed reviewed thoroughly these reports and projections. I also have a view of our history of budget development for the last 6 years. On this basis the Resolution I have drafted the simplest and leanest such Resolution since the Boards adoption of this policy. It is predicated on the current employee bargaining unit contracts, which represented a substantial financial investment by the Board of Education to establish a more embedded, systematic means of maintaining the quality of our academic program, meet district goals, and the needs of the taxpayers while also establishing harmony between our funding mechanism and our largest expense mechanisms our employee contracts. More so than at any other time in our districts history, the budget decisions we make now will have a clear and causal impact on employee compensation a decision willfully made by the Board of Education and all of the employee bargaining units by virtue of their approval of the contracts. It is my belief that these bargaining units share equally as the Board and the public that the quality of our programs remain intact through an unparalleled contraction of the State of Michigans ability

Cover Memo to Board of Education Budget Development Parameters Resolution 3

Prepared by: Brendan Walsh

to fund K-12 public education. It is also my belief that our employee bargaining units, being at the very point of service delivery, have a unique and valuable perspective as to the organization and delivery of services for students and families in this district. As Treasurer the Resolution I have drafted relies most heavily on Policy 6220s provision for identifying particular budget related strategies that the Board prefers the administration to pursue or avoid in their development of the budget. I am therefore advocating that the Board direct the administration to call for formal responses from all of the district bargaining units to provide their suggestions for budget strategies for the 2012-13 fiscal year. If adopted by the Board, this call to action, to which I recognize the bargaining units are not obligated to comply, sends clear indication that the Board of Education recognizes the causal relationship between budget decisions and employee compensation and that we therefore value such formal feedback for this reason balanced against the reasonable assumption that our bargaining units share equally with the Board an interest in delivering the best possible services for our students, families and taxpayers. The receipt of this formal feedback from the bargaining units would not obligate the Board of Education to act upon their recommendations, but would merely guarantee they would be considered by the Board of Education. Furthermore, such a request would not mean the Administration would not be able to make their own recommendations. Lastly, as is always the case, should individual Board members desire for additional specific direction, meeting the guidelines of Policy 6220, these can be received and reviewed by the Board of Education for consideration in the Resolution to be voted upon. I would merely ask that should this be of interest to individual Board members, those requests should be sent in written form to Dr. Harwood by 5:00p.m., Wednesday, February 22, 2012. Should anyone have questions for me, please feel free to e-mail them to me at brendan_p_walsh@yahoo.com . Respectfully submitted,

Brendan P. Walsh Treasurer, GPPSS Board of Education