Schools will take 5 years to be debt-free

By Ian Perrotta
Review Staffwriter
Last Wednesday (Nov. 11) the results of the annual financial audit were presented to the Hamtramck School Board. While no serious inconsistencies were found in regards to accounting practices, the report did indicate that in fiscal year 2009 the school district saw red – financially speaking, of course.
The independent audit was conducted by Hungerford & Co., an accounting firm based out of Southgate. In the company’s presentation to the School Board, the district’s accounting was found to be “in conformity with accounting principles generally accepted in the United States.”
However, one major violation did surface. According to state regulations, school districts are not allowed to have a budget deficit. Since Hamtramck did not finish 2009 in the black, the school district is technically breaking the law. While that may seem shocking, there are approximately 40 to 80 other districts throughout the state also facing a deficit, and that number will only get larger once the most recent aid cuts impact this year’s budgets.
The problem the district faces is the same problem faced by many ordinary citizens: skyrocketing healthcare costs coupled with stagnating income. Yearly inflation of the dollar’s value hovers between 1% and 2.5%, but healthcare costs increase at a rate 15 times that, or 19% to 22%. Compounding that is the fact that the school district only expected healthcare costs to increase at a rate of 6% to 8%, meaning actual costs were almost four times the projected amount.
Originally, the school budgeted $30 million in revenue, with expected expenses of $30.2 million. While this would have left the school $195,365 in the red, the actual situation was worse. Real revenue only came out to $28.8 million in the face of $30.1 million in expenses. Though the original budget still resulted in a deficit, Superintendent Tom Niczay explained that the district really had no other options and was only acting in a way that was necessary and prudent.
“We did our best to balance the budget,” he said, “but faced with unexpected costs and aid losses, the result was a deficit. It’s unfortunate, and we’re working on a deficit reduction plan.”
According to Director of Finance Glenn Pasternak, that plan is a five-year deficit reduction plan that will focus on lowering healthcare costs and creating more efficient program management. The former has obvious benefits, but more efficient program management will both reduce cost and allow for more federal programs, making the district more attractive and potentially bringing in more students. Under the direction of the Michigan Department of Education, the district is required to make monthly reports until the elimination of the deficit. Hamtramck’s deficit reduction plan is due Dec. 15.
The news wasn’t all bad, though. Compared to other school districts of a similar size, Hamtramck spent $9,216 per student, $793 more than the state average of $8,423. Moreover, the state financial aid per pupil was at a 10-year high of $7,316 for the fiscal year ending in 2009. Unfortunately, that number is expected to go down $292 to $7,024 in fiscal year 2010 – the amount expected to be lost by each school district due to the recent budget passed by the Michigan legislature.

Expenditures Per Pupil
Instructional Salaries $ 5,247
Other Instructional 278
Instructional Support 1,124
Business and Administration 947
Operations and Maintenance 1,247
Other Support Services 198
Other Costs 175
Total $ 9,216
Source: Hungerford & Co.

Students per Teacher 2007-08
Hamtramck 25
Highland Park 38
Detroit 27
River Rouge 24
Redford Union 30
Ecorse 26
Source: Hungerford & Co.

Foundation Allowance Per Pupil 2008-09
1. Grosse Pointe $ 10,184
2. Melvindale – Allen Park 8,995
3. Romulus 8,862
31. Hamtramck 7,316
32. Wyandotte 7,316
33. Dearborn Heights No.7 7,316
34. Lincoln Park 7,316
Source: Hungerford & Co.

General Fund: Year Ending June 30,2009
Budget Actual Variance
Revenues $30,054,065 $28,819,486 (4.11)%
Expenditures $30,249,430 $30,142,317 0.35%
Excess Expenditures $(195,365) $(1,322,831)
Source: Hungerford & Co.

Special Revenue Funds: Revenue and Expenditures for Year Ending June 30, 2009
Recreation Cafeteria Athletics
Total Revenue $1,106,309 $1,213,832 $157,034
Total Expenditures $1,066,301 $1,299,909 $157,034
Excess Revenue
(Expenditures) $40,008 $(86,077) $0
Source: Hungerford & Co.

Total Revenue: General Fund
100% $28,819,486
State 71.5% $20,605,932
Federal 19.3% $5,562,161
Local 9.2% $ 2,651,392
Source: Hungerford & Co.

2009 Expenditures: General Fund $30,142,317
Instruction 60.5% $18,236,102
Support Services 36.4% $10,971,803
Other Financing Uses 2.3% $693,272
Community Services .8% $241,138
Source: Hungerford & Co.

2009 General and Special Revenue Funds Expenditures: Where the Money Goes
Total Expenditures 100% $31,968,797
Salaries 55.7% $17,806,620
Employee Benefits 25.3% $8,088,106
All others 19.0% $6,074,071
Source: Hungerford & Co.

Comparative Condensed Balance Sheet
June 30, 2009
Year 2009 2008
Assets $6,659,437 $ 8,705,888
Liabilities $7,778,405 $ 8,502,025
Fund Balance
(Deficit) $ (1,118,968) $ 203,863
Source: Hungerford & Co.