The financial analysis was prepared to support a proposed $1/hour wage increase for bargaining unit employees of Tulsa Public Schools. While revenue decreased in 2013 due to lower federal funds, state aid has increased over 2011-2013. General fund expenditures have consistently declined from 2011-2013, most significantly for student transportation. Underspending has allowed the district to achieve a revenue surplus each year, doubling its fund balance. The analysis concludes Tulsa Public Schools is in a healthy financial condition and can support a wage increase through more accurate budgeting and better use of existing resources.

1. To: Ed McIntosh, President, AFT 6049 Oklahoma
From: Allie Lupico, AFT Research and Strategic Initiatives
Date: September 2, 2014
Subject: Tulsa Public Schools Financial Analysis
The following analysis was prepared on behalf of AFT 6049 Oklahoma to support the Union’s proposed $1.00/hour across the board increase to all bargaining unit employees. Tulsa Public Schools Consolidated Annual Financial Reports for the years ended 2013, 2012, and 2011 as well as preliminary and amended budget documents for the years 2014-15, 2013-14, 2012-13, and 2011-12 were used to prepare this analysis. All financial documents were accessed through the district website.
Revenue
General fund total revenue increased between 2011 and 2012, but decreased in the year ending 2013. This decrease was mainly due to the loss of funds from the Federal government. However, State aid- which accounts for about half of all funds received by the district has shown growth over the period
District Audited Financial Statements Year End 6/30/2011 As a % of Total Revenue Year End 6/30/2012 As a % of Total Revenue Year End 6/30/2013 As a % of Total Revenue
Property Tax 86,782,000 27.49% 84,058,000 26% 80,973,000 26%
Other Local Sources 0.00% 0% 6,202,000 2%
Intermediate Sources 9,446,000 2.99% 9,581,000 3% 10,194,000 3%
Fees and Charges 3,292,000 1.04% 1,778,000 1% 1,905,000 1%
State Aid 150,247,000 47.59% 164,889,000 51% 165,104,000 54%
Federal Aid 63,762,000 20.20% 59,000,000 18% 41,534,000 13%
Earnings (loss) on investments 438,000 0.14% 277,000 0% 402,000 0%
Misc. 1,726,000 0.55% 1,938,000 1% 2,128,000 1%
Total Revenue 315,693,000 100.00% 321,521,000 100% 308,442,000 100%

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studied. Similarly, funds from local sources, second most important revenue source for the district has held constant. According to the district budget documents, total revenue is projected to decrease from 2012-13 to 2013-14 but improve again in 2014-15, with increases in state and federal funds accounting for most of the gain.
2014-15 Estimated Actual Revenue 2014-15 Preliminary Revenue Budget
Local Sources 96,288,742 93,073,137
Intermediate Sources 9,839,957 9,825,000
State Sources 154,053,051 157,565,251
Federal Sources 39,735,403 45,048,199
Total New Sources 299,917,153 305,511,587
Expenditure
District Audited Financial Statements Year End 6/30/2011 As a % of Total Expenditure Year End 6/30/2012 As a % of Total Expenditure Year End 6/30/2013 As a % of Total Expenditure
Current:
Instruction and instruction related services 175,663,000 56.32% 172,815,000 55.91% 170,653,000 57%
Support services- student and staff 47,285,000 15.16% 44,818,000 14.50% 44,436,000 15%
Instructional and school leadership 17,082,000 5.48% 16,982,000 5.49% 17,039,000 6%
Administrative support services 22,475,000 7.21% 23,390,000 7.57% 23,127,000 8%
Operation of non-instructional services 1,176,000 0.38% 1,464,000 0.47% 543,000 0%
Operation and maintenance of plant services 23,222,000 7.45% 24,702,000 7.99% 23,890,000 8%
Student transportation services 16,171,000 5.18% 13,939,000 4.51% 10,271,000 3%
Facilities acquisition and 176,000 0.06% 2,000 0.00% 190,000 0%

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construction services
Charter schools 1,468,000 0.47% 1,310,000 0.42% 4,249,000 1%
Other 7,173,000 2.30% 9,666,000 3.13% 5,649,000 2%
Debt Service 0.00% 0.00% 0%
Principal 0.00% 0.00% 0%
Interest 0.00% 0.00% 0%
Total Expenditure 311,891,000 100.00% 309,088,000 100.00% 300,047,000 100%
General fund expenditures have consistently declined over the period studied. Student transportation services has been proportionally reduced to the greatest extent, having been cut by nearly a third from 2011 to 2013 and accounting for half of total cuts. Reductions in Instruction and Instruction related services make the remainder of the $11 million in cuts. According to the districts budget documents, expenditure is expected increase from 2012-13 to 2013-14 and increase further in 2014-15 to $310, 101, 624.
2013-14 Estimated Actual Expenditure 2014-15 Preliminary Expenditure Budget
Salaries 194,078,735 200,337,156
Benefits 57,867,782 54,882,966
Purchased Prof & Tech Services 9,712,162 12,140,586
Purchased Property Services 3,229,099 3,700,382
Other Purchased Services 5,950,585 6,655,546
Supplies and Materials 26,093,297 22,721,615
Property/Equipment 255,445 106,593
Other Objects 1,242,012 2,436,066
Other Uses of Funds 6,197,999 7,120,714
TOTAL GENERAL FUND 304,627,116 310,101,624
Fund Balance
District Audited Financial Statements Year End 6/30/2011 Year End 6/30/2012 Year End 6/30/2013
Total Revenue 315,693,000 321,521,000 308,442,000
Total Expenditure 311,891,000 309,088,000 300,047,000
Excess (deficiency) of revenues over (under) expenditure
3,802,000
12,433,000
8,395,000

4. Ed McIntosh, AFT 6049 Oklahoma/Page 4
Is there a revenue surplus or deficit? surplus surplus surplus
Fund Balance- Beginning of the Year 23,682,000 31,332,000 43,782,000
Fund Balance- End of the Year 31,332,000 43,782,000 52,186,000
Steep reduction in district spending has enabled the district to achieve a revenue surplus in each of the past three years. As a result the general fund balance has nearly doubled from the beginning of FY 2011 to the end of FY 2013. The district now holds enough money in reserve to cover 17% of expenses. According to a Moody’s Analytics rating update issued in January 2014, the district budget was faring better than expected and the agency reported an expected budget surplus of $5 million for fiscal 2014.
Variance Analysis
Over the period studied the district has displayed a pattern of inaccurate budgeting practices that result in savings from underspending. Although the district routinely overestimates the revenue it will collect, its ability to project expenditures has been even less reliable. In salary expense alone the variance between the final budget and actual spending resulted in savings of $7 million in 2012, $12 million in 2013, and at least $2 million in 2014 relying on the most recent estimates available. Underspending on non-certified salaries alone is projected to save the district $1.3 million in 2014. The chart below shows a familiar pattern: consistent downward revisions of the preliminary budget ultimately leading to underspending and savings.
Preliminary Amended Estimated Actual
2011-12 46,835,307 N/A 49,594,061 48,190,521
2012-13 51,245,563 51,057,513 49,434,191 47,933,090
2013-14 51,323,521 51,570,314 49,961,865 N/A
2014-15 50,628,831
Concluding remarks:
Tulsa public schools has demonstrated healthy and improving financial condition over the time period analyzed. Although state funding has presented a challenge, in the upcoming 2014-15 year the district has projected an increase in total revenue. The district has responded to revenue uncertainty by significantly reducing expenditures over time. This practice has generated a surplus in each of the three years for which audited financial information is available and a surplus is also expected in fiscal 2014. In its most recent audited financial statements the district held reserves sufficient to cover 17% of expenses, a level which rating agencies consider being adequately sufficient. The district can support a wage increase for non-certified employees with existing resources, by more effectively utilizing available revenue and more accurately budgeting annual expenditures.

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