Lake Fenton Schools Adds $434,000 to Fund Balance Last Year

has earned the highest grade possible on its annual audit. It has an unqualified opinion on its 2010-11 financial statements, for the fiscal year that ended June 30, said Partner Tom Taylor, of Taylor & Morgan, P.C.

The district was able to add $434,000 to its fund balance reserves, even more than the $300,000 he anticipated, said Superintendent Wayne Wright. A large factor in this was, Lake Fenton had the choice of accepting all of its federal Ed Jobs funding in one year or two. And school officials decided to accept all of the federal money (aimed at saving and creating education jobs) last year in case the government ended the program early.

For the next fiscal year, 2011-12, a large negative number of $100,000 or more, is projected, Wright said. This is even with Education Plus funding.

Lake Fenton schools' fund balance was at 20 percent, $3.1 million, as of June 30, Taylor said. The state average for school fund balances, not including Detroit public schools, which would throw off the average, was 8.75. LFCS's fund balance sounds like the district is in good shape, he said, but the $3.1 million isn't enough to cover an entire year's expenses.

In addition, of the $3.1 million, $2.2 million is the amount that hasn't been committed to any purpose, he said.

Good news for Lake Fenton Community Schools is, the district continues growing in its number of students — unlike many area school districts, Taylor said. The district receives 74 percent of its funding from state aid, and 19 percent from nonhomestead property taxes. Thus, more students mean more funding, and the district loses money for each student who leaves.

Although student numbers continue to increase in Lake Fenton schools, declining state per pupil funding is a problem. For the 2010-11 school year, state funding was $7,301 for each Lake Fenton Community Schools student -- down from $7,671 in 2009-10, said Taylor. This year, per pupil funding is expected to be $300 to $370 less than the year before.

In addition, 82 percent of Lake Fenton's budget goes to its employees' salaries and benefits, he said. This is percentage is lower than in many other districts, because Lake Fenton schools contract out some services.

"It's a people business," he said.

Thus, if a district is looking to address budget shortfalls, "you are looking at people," Taylor said.

Another issue is increasing retirement rates the school district must pay, on behalf of its employees, he said. This money goes into the state retirement system, which pays state employees retirement benefits after they stop working. As of Oct. 1, the retirement rate was 24.46 percent, so, on a $100,000 payroll, $24,000 of that would go to the state retirement system.

The 24.46 percent retirement rate is an almost 4 percent increase from the previous year's rate, of 20.66 percent, Taylor said. With the increase, Lake Fenton Community Schools are spending $350,000 on retirement costs alone.
The district's revenue is pretty flat, but it is forced to pay increasing retirement costs, Taylor said. "It's a huge burden, and it's getting worse."

In addition, the 24.46 retirement rate is scheduled to increase to 27.36 percent, Wright said.

And Lake Fenton schools had $600,000 in its sinking fund balance, as of June 30, Taylor said. This fund is a millage the district levies, for its facilities.

The food services program in the school district is doing very well, he added. The food services fund was able to pay for some of the utlity costs the general fund absorbs on its behalf.

For athletics, a change in financial reporting took place with the 2010-11 audit. Now the athletic fund is combined with the general fund, instead of athletics being in its own, separate fund, Taylor said. The school district contributed $275,000 on behalf of the athletic fund, which is slightly less than the previous year.

The news for community education was still positive, although not as good as in previous years, he said.

An issue for schools is pending legislation concerning the elimination of personal property taxes in the state, Taylor said. If property taxes are less, the state will end up paying more to fund schools and it could impact state aid to schools. In addition, eliminating personal property taxes would affect schools' total taxable value, and the amount of mills they can levy to pay off their debt. And if school districts' taxable value drops, their millage rate would have to go up, he said.

On the issue of personal property taxes, he said, if General Motors buys a press, for example, "you want to encourage it." But there needs to be a way to replace the revenue from the tax, Taylor said.

A huge problem with eliminating personal property taxes for businesses is, its impact on seniors and anyone who pays property taxes, he said.

Secretary Alberta Martin said the pending legislation to eliminate personal property taxes is a concern for senior citizens. "We should go and let seniors know about it. It is a direct reversal for them."

For schools, "seniors do the voting," Martin said. School ballot questions, such as sinking fund millages, don't pass if they don't have seniors' support, she said.