Retiree Costs Continue to Bust Farmington Schools Budget

budget challenges are expected to continue in the 2012-2013 school year.

Even if the district’s enrollment doesn’t decline as much as estimated, and even if state and federal funding levels remain steady, retirement costs are expected to increase by more than 11 percent, requiring the district to contribute a budget-busting 27.36 percent of its total payroll to a state employee retirement system.

“It’s completely unsustainable,” said Board of Education treasurer Frank Reid at the board’s Dec. 6 meeting, at which executive director of business operations Mary Reynolds gave the first budget report for the 2012-2013 school year.

Reynolds has in the past compared initial budget assumptions to looking into a crystal ball. This year, she said, “My crystal ball is cloudy” because the current economic climate is driving down property values, and ultimately, taxes collected to support public schools.

About 88 percent of the budget goes toward salaries and benefits, she said. The district has settled all its union contracts, which does help make the budgeting process a little more predictable than it was last year.

And Gov. Rick Snyder's two-year budget, with no anticipated decreases to school funding, provides even more stability, Reynolds said. She assumes that per-pupil funding of $9,895 will remain flat. She’s also assuming that employee benefits will increase by a typical 10 percent, and that the district will lose about the same number of students it did this year – approximately 240, the result of lower birth rates and Michigan’s declining population.

But the fast-growing retirement costs are killing the budget.

Retirement contribution at 27 percent

When voters approved Proposal A in 1994, the state, which used to bear those retirement costs, shifted that responsibility to the local school districts. That year, the contribution to the fund was only 5 percent of payroll, Reynolds said. Next year, it will be higher than 27 percent.

Board trustee Howard Wallach said it was a good thing he wasn't chewing on anything when he read that estimate, because, he said, “I would have choked.”

Reid said that he recently met with representatives at the state Capitol to discuss school funding, and he pleaded with them to do something about rising retirement costs. He said they told him they were “working on it.”

But all he’s seen, he said, is a “total lack of leadership” among state elected officials. Rather than working on retiree costs, they are working on legislation that would eliminate or drastically raise caps on the number of the state’s charter schools, as well as a new law that requires students to recite the Pledge of Allegiance at school and requires a flag in every classroom.

The budget committee will meet with Reynolds on Dec. 19 to discuss initial estimates. The district needs to adopt a budget by June 30, 2012.

Capital budget needs

On the budget is likely to be $1.89 million in capital projects. For example, needs a new roof, at an estimated cost of $428,000, said Jon Riebe, director of facilities, who updated the board on a long list of improvements.

In the long-term, TMP Architects made a report in September 2009, estimating some $104 million in necessary infrastructure repairs and upgrades.

In the shorter-term, paving projects throughout the district are expected to cost about $555,000. Also on the list of repairs are the lintel upgrades at , to remove rusted steel and direct water away from the lintels.

At , traffic patterns are worn into the 12-year-old carpet in the office and there is a hole worn in the heaviest of the traffic areas, Riebe said. And the ceiling in the boy’s shower near the pool is peeling and flaking off, requiring repairs.

In all, Riebe said, the deferred capital projects total $22 million.