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District headed for fiscal crisis?

Superintendent: Escanaba shows early warning signs of financial stress

October 22, 2013
By Jason Raiche (jraiche@dailypress.net) , Daily Press

ESCANABA - Escanaba Area Public Schools shows several early warning indicators of fiscal stress, according to a budget update presented to the school board during its regular meeting Monday by Superintendent Michele Lemire.

Lemire cited a September 2013 memorandum to school districts from State Superintendent Mike Flanagan urging them to evaluate district data in the following areas: enrollment, revenues and expenses, fund balance, borrowing, and funding.

Declining enrollment is one major factor causing fiscal stress to EAPS, especially since enrollment numbers are linked to state aid payments the district receives. Five years ago, the district had 2,716 students, but in 2012-13, this number had fallen to 2,522. Moving forward, much uncertainty lingers over the impact new state aid funding formulas will have on public schools.

Starting this year, the new state aid funding formula will use data from the fiscal year - October 2013 and February 2014 count days - instead of the previous calendar year data from October 2013 and February 2013 count days.

Another change impacting enrollment is through a new rule that went into effect Oct. 1.

"In the past, if we counted a kid in the fall, even if the kid moved, we got to keep the money. That's not so anymore," said Lemire of the new rule, called Section 25.

Starting this year, if a student moves to another Michigan district, Escanaba can only collect a portion of that funding based on the amount of days the student attended school in Escanaba. The student's new school will get to pick up the remaining funds by filling out the required paperwork.

"If a student from another public school in Michigan moves into Escanaba, we can also fill out paperwork to claim a portion of funding if we do it within 30 days," she said. "However, if a student moves from out-of-state or from a non-public school, we don't get any funding."

Another big fiscal stress factor relates to revenues and expenditures.

In four of the last five years, Escanaba has spent more money than it takes in, with the 2013-14 budget showing expenditures over revenues as well.

Additionally, the district continues to experience a declining fund balance and has seen an increase in restricted revenues, or money they receive such as Title I, Title II, Title VII, or At-risk funds, which can be used only for certain expenses.

"I've seen, in just my last five years, so much more money that's restricted," said Lemire. "We can't use it for the normal day-to-day operations. In fact, restricted revenue in the 2013-14 school year makes up 16.83 percent of our budget."

Escanaba has also had to increase the amount of money it borrows because the district does not have enough of a reserve for cash-flow purposes with such a small fund balance. Just recently, in fact, the school board approved a tax anticipation note through Upper Peninsula State Bank for cash flow purposes since the district was unable to receive payments from federal programs due to the federal government shutdown. The note allows the district to borrow funds to get through the next several payrolls until state and federal funding comes into the district.

And although the district has received small increases in funding in the past few years, these are not enough to offset declining enrollment and other cost increases, noted Lemire - yet another fiscal stress factor for EAPS.

Now the district must begin work to prepare for the 2014-15 budget.

"We have to have a projection for 2014-15...because in order to get the 'best practice' money for this year, we have to do a projection for next year," said Lemire.

Looking into next year, she said the district must add five student days to the school year. They also anticipate a loss of one-time per pupil funds and increased costs due to fees associated with the Affordable Care Act.

Lemire is proposing setting up work groups to consider problems, potential solutions, costs, and pros and cons as they relate to the budget.

In other business, the board:

approved the 2012/2013 audit report presented by Annette Eustice of Rehmann Robson. According to Eustice, Escanaba Area Public Schools earned an "unmodified opinion," the equivalent of an "A" grade.

adopted a resolution urging continued implementation and funding of the common core state standards.

approved the creation of a sick leave bank for a Teamster member.

approved the addition of two qualified and certified teaching assistants to assist with the differentiation of instruction at the fourth-grade level after review and discussion with the district's finance committee.

approved the following personnel recommendations for new hires: Martin Collier for the open permanent bus driving position that extends into Bark River; Cathleen Niles for an open noon-hour supervisor position at Lemmer Elementary School; Linda Beauchamp for the Key Club advisor position; and Mike Beveridge for the girls' freshman basketball coach.

 
 

 

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