MCS's presentation from the Fact Finding Hearing regarding the development of the current fiscal situation and how it developed.

1. Muncie Community Schools
Support for MCS’ Last Best Offer
Fact Finding Presentation
March 9, 2017

2. MCS’s Accounting Department:
Cash Flow Concerns
– Holding & deferring bills
– Choosing who to pay
– Close calls with payroll to date

3. Accounting Concerns Cont’d:
Timing of Debt Payment
• The school did not have sufficient funds in the
bank to pay the debt obligation payment due
on 12/31/16, so a check was mailed on
12/30/16.
• The check cleared on Tuesday, 1/4/16, one
day after the MCS received funds from the
January 2017 tax anticipation warrant.

4. Michael Reuter Financial Overview
• Muncie Community Schools – The perfect
storm
– Changes in the school funding formula (State
Support)
– Property tax caps introduced

5. State Support – General Fund
• The funding formula eliminates the minimum
guarantee and no longer includes a de- ghoster
• Muncie Schools enrollment (ADM):
– September 2013, 6,254.50 (ADM)
– September 2016, 5,620.00 (634.50 ADM decrease)
– February 2017, 5,570.00 (684.50 ADM decrease)
• In 2009, Governor Daniels cuts K-12 Funding
$300 million

6. Property Tax Caps
• In 2008, property tax caps are introduced
• The General Fund is not supported with property
tax, but could bear the burden if the school is not
able to make the “annual debt payment”
(currently the debt fund has a negative balance)
• The state has a program called intercept
– If the school is unable to make the payment the state
will intercept the state support from the General Fund

7. MCS – Exhibit 4C
(Kicking the can down the road)
• December 31, 2016, the General Fund balance is
negative ($10,137,825)
• In 2016, the School transferred $10,267,875.33 in
old coop/tuition/vocational bills (majority were
2014-2015 obligations) (MCS Exhibit 10B)
• This gave the district a “more accurate” picture of
the General Fund condition

8. MCS – Exhibit 4C [Cont]
• The General Fund negative balance ($10,137,825)
does not account for the delayed teacher
payments listed on the narrative of the MTA -
$1,451,380.21 General Fund portion
• The General Fund negative balance ($10,137,825)
also does not account for the remaining negative
fund balances (as of 12-31-16) in Funds 1310,
1450, 2150. This suggests MCS has not paid all of
the outstanding obligations for 2015-2016
coop/tuition/vocational bills.

9. MCS – Exhibit 4C [Cont]
• The General Fund negative balance
($10,137,825) also does not account for any
shortfalls for the Debt Payments due to
property tax caps
• As of December 31, 2016, the Debt Service
Fund (200) is carrying a negative cash balance
($2,316,051.68)

10. MCS Cash Flow – Exhibit 4C
• MCS is experiencing a serious cash flow issue!
• If it were not for the fund balance shown in the
Construction Fund (Bond Proceeds –Fund
number 071) - positive $9,398,655 - MCS would
not be making payroll nor would they have been
able to make the Debt Payment at the end of
2016, trigging the intercept program

11. MCS Cash Flow cont’d:
General Obligation Bond
• Bond issued in 2014, bringing in $10 million.
• Because it is tax-free to the bond holders, the
proceeds must be spent on capital
improvements by April 2019.
• To date, less than $1 million has been spent
on capital improvements.
• The rest of the cash has been used to offset
negative balances in the general fund (cash
flow)

12. MCS Cash Flow – Exhibit 4C
Had the bond proceeds been
expended in 2016…
As of December 31,2016
Fund 710 (Construction Fund – Bond
Proceeds)-
Exhibit 4C, Page 1 of 4
$9,398,655
Combine Fund balance - Exhibit 4C, Page 4 of
4
($1,460,214)
Combined Fund balance without construction
fund balance ($10,858,869)

13. Closing Comments
• I want everyone to know I am very sympathetic to
this situation. Everyone wants to maintain
competitive teacher wages and no one want to lay
off people, but I have been in this business for 25
years and have not seen such a difficult financial
outlook
• This will not be a quick fix and even the MCS
proposal will not fix the problem in one year.

14. Financial History Overview

15. Financial History Overview 2007-2014
• 2007-2013: the contract provided for deficit spending
each year (except 2009)
– 2009—MCS received Federal Stimulus Funding
– Since 2007, the MCS has spent approximately $42 million
more than it has taken in
• 2013-2014: New CFO (since the 1970s)
– Summer of 2014: CFO & financial consultant uncovered
structural deficit (originally estimated at $8 million)
– CFO meets with Board and the MTA regarding the deficit
– November 2014: MTA and MCS enter into a contract over
the objections of the CFO and a financial consultant
• They were concerned that the contract would bankrupt the school
corporation

16. Financial Overview 2015-2016
• Summer 2015: New Superintendent & CFO hired
• MCS offers to conduct a joint third party audit of
finances with the MTA, but the MTA declined the
offer
• Board engages Michael Reuter to conduct
financial projections
• April 2016: State audit results uncover $10.2
million in unpaid bills from CY 2015 and earlier

17. Financial Overview 2016-2017
• September 2016: MTA raises concerns about
the timeliness of paychecks and threatens a
lawsuit under the Indiana Wage Payment
statute.
• Winter 2017: New CFO hired
– New data calculations reveal worse financial
position then previously projected (use of
restricted funds)

18. MCS’s Board and the Administration
Support Teachers
• Muncie Community Schools is the top district in
Eastern Indiana in career earnings
• The Board understands how hard teachers work
and value them greatly
– Two board members were formerly teachers in MCS
– One board member was also an administrator in the
area
• The administrative team routinely works to find
ways to honor and support teachers throughout
the community

19. Comparative Teacher Salaries 2016-2017
School Corporation Beginning (Full time) Highest Salary
Blackford $34,349 $61,457.45
Cowan $35,000 $58,993
Daleville $34,028 $56,860
DelawareComm. $35,663 $60,372
Kokomo $34,000 $61,762
Liberty-Perry $34,385.90 $63,754
Marion $35,000 $64,749
MCS Proposed $37,000 $64,119
Richmond $35,803 $52,181
Wes-Del $33,689 $59,989
Yorktown $35,688 $60,847