Allendale Public Schools Management’s Discussion and
Analysis For the Fiscal Year Ended June 30, 2015
Factors Bearing on the District’s Future
• The uncertainty of student foundation funding levels, as well as funding for other K-12 education programs, reflects the economic difficulties faced by the State of Michigan and the District. One of the most important factors affecting the District’s budget is student count. General Fund revenue is generated from the State’s per pupil allowance, a combination of State aid and property taxes. Under State law, the District cannot assess additional property tax revenue for general operations.
• Demographic projections indicate that enrollment is likely to continue growing slowly over the next several years. While this is good news, especially compared to most districts within the State, the lack of stability in the funding stream from the State, and rising costs in many areas including employee health insurance, retirement contribution costs, and utilities, District administration continues to remain diligent in its decision-making as the Board desires to increase its level of reserves (fund balance) that will allow the District to stop the practice of short-term borrowing for cash flow needs. Measures to accomplish this include, but are not limited to, cooperative agreements with the Ottawa Area Intermediate School District as well as neighboring public and parochial schools and strategic changes to how the District handles its non-instructional support services.
• In July 2015, Governor Snyder signed early warning legislation into law which requires school districts with fund balances less than 5 percent of the total budget to submit documentation to the Michigan Department of Treasury. The District’s unassigned fund balance is 3.5% and has remained steady while student enrollment and overall budget increases. The Allendale Board of Education and district staff have maintained a balanced budget and will continue to carefully monitor spending.
• In September 2012, the Governor signed P.A. 300 of 2012 – MPSERS Reform into law. (See Financial Statement Footnote 8) This bill is the first step by the lawmakers to reform the Michigan Public Schools Employee Retirement System (MPSERS) in order to make it affordable and sustainable into the future. This law required current school employees to make choices regarding their pension and retiree healthcare which could impact the District’s and employee’s contributions. It also set the stage for addressing the ever-growing unfunded liability that MPSERS is facing. It is expected that there will be additional legislative action to fully deal with the unfunded liability and that, to some degree, the cost of addressing the issue will fall upon system participants, school districts, and possibly the State’s School Aid Fund.
• In 2010, Congress enacted the Patient Protection and Affordable Care Act (PPACA) in order to increase the number of Americans covered by health insurance and decrease the cost of health care. The law puts in place comprehensive health insurance reforms that will roll out over four years and beyond. The economic impact of healthcare cost increases continue to be a challenge for the District and its employees. District administration will continue working with its healthcare providers to implement provisions of the PPACA as they become required.
• In 2007, Allendale voters approved utilizing the School Bond Loan Fund, (a program created by the Michigan Legislature to assist school districts in bonding for new facilities) to construct new school buildings in order to accommodate the District’s growing population of students. New legislation passed in December 2012 obligates school districts to annually review their outstanding debt beginning in the fall of 2013 and levy a millage to ensure that the bond debt will be paid within a newly appointed 30-year period. House Bills 4496 and 4497 were signed into law by Governor Snyder in June 2015 which amended the 2012 legislation allowing the District to refund its 2005 bonds and refund certain outstanding indebtedness to the State of Michigan under the School Bond Qualification and Loan Program. These 2015 Refunding Bonds will reduce interest expense by approximately $5.3 million. District administration will be working with its financial advisors and bond attorney to determine if continued favorable interest rates will allow future refunding possibilities.
Contacting the District’s Financial Management
This financial report is designed to provide our citizens, taxpayers, customers, investors and creditors with a general overview of the District’s finances and to demonstrate the District’s accountability for the money it receives. If you have questions about this report, or need additional information, please contact the Chief Financial Officer at Allendale Public Schools, 10505 Learning Lane, Allendale, MI 49401.