Running head: School Funding Study

School Funding Study - Novi Community Schools

Melissa Carruth, Oakland University

EA 741
November 3, 2014

Running head: School Funding Study

Abstract

A school funding study is a way to analyze the impact of school funding

within a school district. This school funding study focuses on the finances of
the Novi Community School District in connection with the funding from the
State of Michigan. This will incorporate a general discussion of the overall
funding of schools in Michigan, as well as, the impact this funding has on the
Novi Community School District. The hypothesis for this study is to show the
direct impact the state has on the success of a school district. It will
incorporate historical data, as well as, a look into the future. The information
for this paper is incorporated from direct conversations with the Assistant
Superintendent of Finance for Novi Community Schools, Steven Barr, as well
as, documents shared with the School Board and annual audits located on
the district website, as well as, shared by Mr. Barr.

Running head: School Funding Study

Introduction
Novi Community Schools is a school district that has taken great pride
in their financial security. The school district is comprised of one high school
(grades 9-12), one middle school (grades 7-8), one upper elementary school
(grades 5-6), five lower elementary schools (grades K-4), 11 preschool
classes, and an Instructional Technology Center. The district is an
International Baccalaureate (IB) district, it is NOT a school of choice district,
except for employees of Novi Community School members, it offers 16 AP
courses, and has one district television studio/station. The district
encompasses 25.5 square miles and employs roughly 410 teachers. The
districts mission is In partnership with parents and community, the mission
of the Novi Community School District (NCSD) is to ensure that all students
develop the knowledge, skills, and character necessary to achieve their
highest potential and to be productive members of an ever changing global
society. The districts vision is Developing each students potential with a
world-class education. Lastly, the district has four goals. They are as
follows:
1.

The NCSD will ensure that each student will make no

less than one year s growth in one years time.

2.
The NCSD will ensure that all students achieve at a
high level. (There will be no achievement gaps.)
3.
The NCSD will evaluate and enhance opportunities
for students while maintaining a minimum 10% fund balance.

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4.

The NCSD will improve organizational quality and

customer service by creating common standards, systems, and

principles.
An image to the districts mission, vision and goals is entitled The Districts
Monument is as follows:

The district goals are the higher-arching band at the top. District #3 was
highlighted as that 10% fund balance goal is the starting point to the past,
present and future of Novi Community Schools.
Historically
Novi was founded as a city in 1969. Prior to Proposal A, Novi
Community Schools were financed primarily through local property taxes. In
fact, the local taxation accounted for roughly 69% of the State/Local split of
school finance, with State funding making up the other 31%. That method
sat well for Novi as property values were high in Novi and the town was

Running head: School Funding Study

quickly establishing itself as an economically sound and strong school
district.
In July 1993, Proposal A was signed and school funding and the impact
of Novi Community Schools changed completely from the start of Proposal A
to the current day. When Proposal A was enacted in 1994, those districts,
Novi Community Schools being one of them, with per pupil funding greater
than the maximum state-guaranteed foundation allowance of $6,500 were
made a promise to be held harmless from financial impact. Proposal A
allowed a one-time vote of the people to tax themselves for the difference
between the maximum state-guaranteed foundation allowance and their
current funding levels. As of 1994, this hold harmless effected 52 districts,
Novi Community Schools being one of them. Due to this, Novi voted to tax
themselves for $591 x number of pupils to derive a number to be added to
the budget entitled harmless supplemental millage. This will be examined
later when further examining the budget.
With the impact of Proposal A and the shift in state funding, Novi was
able to maintain the current budget, until the 2006-2007 school year.
Starting in 2006, Novi needed to cut about of a million in staffing and
programs. In 2007-2008, the district made $3.3 million in cuts, 2009-2010,
an additional $3.9 million, and in 2010-2011, $4.9 million were cut. These
cuts required the district to privatize custodial workers, staff layoffs, central
office positions terminated, bus route minimized and widened, institute payto-play in athletics, increase class sizes, and pay decrease for staff. In the

Running head: School Funding Study

end, the cuts were substantial enough and enrollment continued to increase
for the Novi Community School district, that at this time, the district seems
to have weathered the storm, put in place a district goal in terms of district
finances and have not had to make any cuts since 2011 and are not
projected to have to do so for the upcoming year.
Currently
After the passage of Proposal A, the average operational mills
decreased to six mills levied on homeowners by the State for the State
Education Tax, and 24 mills for non-homesteads (6 mills for the SET, 18 mills
levied by schools). Also, school district voters still must approve the mills
assessed on non-homesteads, and are required to renew these mills over
time. School districts also may ask voters for approval to levy mills for debt
(bonds), sinking funds, and recreation (if eligible). School funding is tied to
each pupil counted in a districts membership. Districts receive a foundation
allowance, which is a per-pupil funding amount.
According to the 2014-2015 original budget as of June 26, 2014, the
general fund for the district currently faces challenges like, continued flat or
reduced school funding since 2002, the Foundation allowance cut of $470
per pupil in 2011-2012 was not restored, funds diverted from School Aid Fund
to community colleges and higher education, retirement system obligations
and collective bargaining constraints. With those challenges in place, the
sources for revenue for the Novi Community School District is 27%
($22,727,677) property taxes, 60% ($41,267,217) State Aid, 2%

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($1,698,794) federal grants, 11% ($3,509,742) incoming transfers and other
transactions, like special education millage. The total general fund revenue
is estimated to be approximately $69.25 million for 2014-2015. The fund
balance, which aligns with district goal #3, is $6,495,706 for a total amount
available of $75,699,136. In 2011, the Fund balance was at 16.98% and has
decreased over time, but has stayed at 10% for the last three years to align
with the district goals.
These above stated numbers are based on a fall student count of
6,471.23 students. Novi Community Schools are not a choice district, nor
have tuition students. This is a 30 student increase from the prior year.
Since 2009, there has been a steady increase of enrollment. Over the 5-year
trend, that is a steady rise of 195.03 students to reach this years count. The
foundation allowance is $8,409 per pupil. Additional state funded revenue
incentives aid in the total which are $50/pupil for best practices, $82/pupil in
MPSERS cost offset, $70/pupil for performance based funding grant, and
$18/pupil for hold harmless grant. Currently, charter schools do not have an
impact on Novi Community schools. 20-30 students are lost to Catholic
schools for high school each year for enrollment projections between 8th and
9th grade. In general, the budget is based on a -10 decrease from year-toyear, but Novi has not seen this decrease yet and new housing
developments are being constructed currently.
The district has a variety of millage rates that impact the district
budget. As of the 2014-2015 budget, the tax rates are as follows:

Running head: School Funding Study

3.0719 hold harmless (-0.2 decrease from the prior year)

7.6278 debt fund (no +/- from prior year)
0.4932 sinking fund (no +/- from prior year)
0.98 recreation fund (no +/- from prior year)
6.00 state education (no +/- from prior year)
Total: 18.1729
As stated above, in order to get to our 18 mills, the district levies their
millage. In the past decade, all requests to the local taxpayers have been
passed by the voters. In November 2010, voters approved a renewal of the
sinking fund. In November 2013, an operating millage renewal was passed,
this is a renewal from 1994, 2014, and for 2014. In November 2013, there
was a public recreation millage passed. This is a rare millage for most school
districts, but one that Novi is eligible for. Finally, a $70.9 bond was passed
on the May 6, 2014 for a net -0- increase in the debt millage rate from 2013.
This bond will help to fund new technology initiatives, turf football field,
preschool building, buses, just to name a few. The reason for a net -0increase is due to the structure in technology, house values are going up and
bonds are being paid off, or a back fill.
Now knowing the trends, the budget, the enrollment, and the tax rates,
where is this money allocated for the district? 56% is for salaries, 30% for
benefits, which covers 86% of the expenses goes to teacher salaries and
benefits. 7% if for purchased services, 4.2% supplies, 0.3% capital outlay,
1.3% special ed center programs, and 1.2% other. This breakout for
expenses are based on the assumption of 0.5% pay cut by teachers, no
change in salary for administration and the NESPA union, a 4% reduction by

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the NFSEA and no change in the maintenance and transportation
departments. There were 12 teacher retirements and an increase last year
of 2 teachers. The retirement rate is paid 24.98% by the employer of the
33.99% and the insurance benefits are under a hard cap.
Collective bargaining process is still respected and adhered to in Novi
despite the Right to Work status being affected. Currently, Novi is bargaining
on a contract and Novi teachers are working under the terms of the last
working agreement. The bargaining process is only discussing two terms;
the calendar and wage. The terms will only be a one-year agreement as the
terms of the buy-out are yet to be determined. The last negotiations was a
seamless process except when the district attorney was present in
negotiations. Administration and the union appear to have a mutually
respected relationship. Class size is stated in the contract and are
maintained for all future contracts.

In the Future
In looking to next year, the district is already thinking, planning and
budgeting ahead. First, the district is offering a buy-out to teachers. They
need to commit by March 6th. If 30 teachers retire, they will receive $30,000
($10,000/year). If 35 teachers retire, they will receive $35,000 ($15,000,
$10,000, $10,000). If 40 teachers retire, they will receive $40,000 ($15,000,
$15,000, $10,000). The district has stated that if a buy-out happens, a step
increase and/or a pay raise will occur for the 2015-2016 year. This will be

Running head: School Funding Study

the first for either in four years. Though in budgeting, the district has the
following cautions:

Increased operating costs of classroom additions

Retirement rate increase
Foundation allowance
Increased non-instructional needs for increased student enrollment
Increased revenue from new Early Childhood Education Center
Increased operating costs from new Early Childhood Center
Conclusion
With the amount of financial insecurities placed on school districts
since 1993, Novi Community Schools are in a relatively sound financial state.
Enrollment is increasing, property values are increasing, the community is
supporting debt initiatives, and the fund balance maintains at 10%. As many
positives that are celebrating with Novis budgets, they still have the major
challenge each and every year of waiting for the State of Michigan to figure
their funding to see the impact it will continue to make on schools. Though
looking at Novi as a global state-wide perspective, Novi Community Schools
are in a better financial situation than most Michigan public school districts.