Budget Development and Expenditure Comparison Analysis

FY2018 Budget Development 1

FY2018 Budget Calendar Dates November, 2016 FY2018 Personnel Position Allotments - March, 2017 Budget Administrator Report and Account Review Monitor 2017 State of GA General Assembly State Revenue Estimate Property Value Digest Calculations and Growth Prepare Other General Fund Revenue Estimates Prepare Other Fund Budgets April 20, 2017 Present Initial FY2018 Tentative Budget to the Board Descriptions May 10, 2017 Budget Public Forum Board FY2018 Budget Discussion Adopt FY2018 Tentative Budget May 18, 2017 Board FY2018 Budget Discussion June 14, 2017 Budget Public Forum Legal Adoption of FY2018 Budget 2

Recent Budget Accomplishments FY2015 FY2017 FY2015 Budget Full Salary Step for All Eligible Employees Added 300 Teachers 2% Salary Restoration for All Employees No Furlough Days 180 Day School Year FY2016 Budget 4% Salary Increase for All Employees Full Salary Step for All Eligible Employees Added 100 Teachers FY2017 Budget 2.5% Salary Increase for All Employees Full Salary Step for All Eligible Employees Added 64 Teachers 3

General Fund Expenditures Comparison of General Fund Costs Per FTE General Admin Expenditure Comparison of Metro Districts Expenditures Atlanta Cobb DeKalb Fulton Gwinnett FY2012 $585 $107 $195 $213 $230 FY2013 $437 $116 $202 $214 $217 FY2014 $435 $120 $174 $244 $188 FY2015 $393 $121 $170 $215 $198 FY2016 $367 $144 $185 $248 $198 Data Source: The Governor s Office of Student Achievement State Report Card information. 4

General Fund Expenditures Comparison of General Fund Costs Per FTE Expenditure Comparison of Metro Districts Expenditures Atlanta Cobb DeKalb Fulton Gwinnett Instructional Media $8,898 $239 $6,066 $134 $5,834 $124 $6,343 $145 $5,078 $107 Instruction Support $651 $248 $304 $555 $448 Pupil Services $556 $231 $315 $332 $257 General Admin $367 $144 $185 $248 $198 School Admin $817 $603 $631 $554 $663 Transportation $544 $407 $501 $526 $539 Maintenance & Ops $1,454 $562 $829 $864 $585 Debt Services School Food Services $47 $7 $ - $ - $14 $ - $ - $ - $ 3 $ - Renovation & Cap Project $ - $ - $ 3 $ 3 $ - Total $13,580 $8,395 $8,740 $9,570 $7,878 5

Local Revenue Cobb County Property Taxes Local Revenue Cobb County property tax contributes approximately 48% of the District s General Fund Revenue. School Tax Calculation: $206,700 X .40 $82,680 ($10,000) $72,680 X 18.90 $ 1,374 Median Home Value in Cobb County 40% Assessment Rate Assessed Value for Tax Purposes Homestead Exemption Tax Base for Property Tax Cobb Schools Millage Tax Rate General Fund School Taxes on a Median Home Current FY2017 Millage Tax Rate A Millage Tax Rate is $1 per $1,000 of Assessed Value 18.90 Mills 0.00 Mills 18.90 Mills Cobb County Schools General Fund Millage Rate Cobb County Schools Debt Service Millage Rate Cobb County Schools Total Millage Rate 6

Local Revenue Comparison of Metro Atlanta School Taxes Standard Homestead Exemption General Fund Millage Rate Taxes on a $206,700 Home School District Debt Service Millage Rate Atlanta (APS) $30,000 21.715 0.025 $1,145 Cobb $10,000 18.900 0.000 $1,374 DeKalb $12,500 23.380 0.000 $1,641 Fulton $30,000 18.483 0.000 $974 Gwinnett $4,000 19.800 2.050 $1,719 7

Debt Management and Millage Rate Information Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Digest Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 School District General Fund 19.00 18.90 18.90 18.90 18.90 18.90 18.90 18.90 18.90 18.90 18.90 Debt Service .90 No Long Term Debt Total School District Rate 19.90 18.90 18.90 18.90 18.90 18.90 18.90 18.90 18.90 18.90 18.90 County Government General 6.82 6.82 6.82 6.82 6.82 7.72 7.72 7.52 7.32 7.12 7.12 Fire 2.56 2.56 2.56 2.56 2.56 3.06 3.06 3.06 3.06 3.06 3.06 Debt .22 .22 .22 .22 .22 .33 .33 .33 .33 .33 .33 Total County Gov t Rate 9.60 9.60 9.60 9.60 9.60 11.11 11.11 10.91 10.71 10.51 10.51 State of Georgia .25 .25 .25 .25 .25 .25 .20 .15 .10 .05 .05 Total Unincorporated Overlapping Rate 9.85 9.85 9.85 9.85 9.85 11.36 11.31 11.06 10.81 10.56 10.56 Note 1 - Cobb County School District (Management of Millage Levy) A. General Fund Millage Rate has decreased from 19.90 Mills in 2007 to 18.90 Mills in 2016. B. Debt Service Millage Rate - Cobb Schools retired all long term debt in FY2007 and completely eliminated the Debt Service Millage at that time. This was a PLANNED STRATEGY to provide additional district financial flexibility with no Long Term Debt. Note 2 - The Cobb County School District has consistently maintained a 1.10 Mill flexibility under the State of Georgia 20.00 Mill Cap. 8

General Fund Revenue Streams The District has two major General Fund Revenue Streams: State Revenue 52% Local Revenue 48% 9

General Fund State of Georgia QBE Revenue The State of Georgia contributes approximately 52% of the Cobb County School System's Revenue. The State of Georgia uses a funding formula called the: Quality Basic Education (QBE) Act Basic Formula: (1)FTE Student Count (Average of Oct & March Counts) X (2)Program Weight (Kindergarten, Grades 1-3, Etc.) X (3)QBE Base Amount X (4)Training & Experience Factor (5)Minus Local Five Mill Share 10

State Revenue - GA Local 5 Mill Fair Share Local Fair Share $76,766,302 $81,438,049 $88,827,699 $95,996,050 $130,896,069 $111,425,229 $119,785,031 $128,360,314 $139,200,389 $136,638,547 $133,973,704 $134,918,836 $135,582,243 $131,545,629 $133,378,963 $132,140,110 $136,707,956 $144,570,519 Year to Year Change Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Local Fair Share ($4,671,747) ($7,389,650) ($7,168,351) ($34,900,019) $19,470,840 ($8,359,802) ($8,575,283) ($10,840,075) $2,561,842 $2,664,843 ($945,132) ($663,407) $4,036,614 ($1,833,334) $1,238,853 ($4,567,846) ($7,862,563) $160,000,000 $140,000,000 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Local Fair Share/Local Five Mill Share (LSF) - The Local Share for each school system is an amount of money equal to the amount that can be raised by levying five (5) mills on the forty (40) percent equalized property tax digest. Each local system will receive an amount of State funds that is the QBE program cost for the system MINUS the Local Share Amount. Cobb County's Local Share contributions have risen sharply over the last decade. The graph above represents the funding deducted from the State revenue earned by the CCSD. The State s calculation of LFS only deducts State exemptions. The State does not consider Local exemptions, such as the age 62 or over exemptions. When taking Local exemptions into account, the deduction for 5 mills actually equates to a 6.4 Mill Reduction. 11

State Revenue - Austerity Reduction History of Austerity Cuts Total $ 9,018,265 $ 9,018,265 $ 19,035,896 $ 28,054,161 $ 22,370,784 $ 50,424,945 $ 22,370,583 $ 72,795,528 $ 11,211,055 $ 84,006,583 $ 9,442,954 $ 93,449,537 $ 31,495,340 $ 124,944,877 $ 85,929,510 $ 210,874,387 $ 69,797,086 $ 280,671,473 $ 72,553,160 $ 353,224,633 $ 72,141,399 $ 425,366,032 $ 65,900,761 $ 491,266,793 $ 45,821,472 $ 537,088,265 $ 28,518,269 $ 565,606,534 $ 10,388,743 $ 575,995,277 $ 10,388,627 $ 586,383,904 Total Austerity Cuts Year Cumulative FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 $90,000,000 $80,000,000 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $0 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Cumulative austerity reductions will be $586,383,904 for FY2018 12

Property Digest Exemptions Age 62 & Older Exemption Age 62 & Older Exemption Revenue Loss Age 62 & Older Exemption Revenue Loss $ 55,223,996 $ 58,887,343 $ 63,786,653 $ 62,531,078 $ 62,480,837 $ 62,354,354 $ 64,642,279 $ 70,981,218 $ 78,946,514 $ 90,042,136 $100,000,000 Fiscal Year FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 $90,000,000 $80,000,000 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $- Note: Qualified homeowners who are age 62 as of January 1 are entitled to a full exemption in the school general and school bond tax categories. 13

Property Digest Exemptions Total Exemption Revenue Loss Total Exempt Revenue Loss Total Exempt Revenue Loss $ 103,022,491 $ 103,239,838 $ 109,478,575 $ 113,874,207 $ 108,376,691 $ 105,546,658 $ 107,456,527 $ 110,771,055 $ 121,682,719 $ 134,168,811 Fiscal Year FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 $140,000,000 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $- FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 Note: This chart represents all exemptions. $90 Million of the $134 Million exemption is the result of the age 62 and older exemption. 14

Teachers Retirement System FY2018 Increase The Teacher s Retirement System (TRS) increased FY2018 employer share costs from 14.27% to 16.81%. The additional CCSD employer cost for FY2018 is $15,500,000. 15

Classified Health Insurance Increases FY2018 Classified Health Insurance Increase - $3,600,000 Note: Cumulative increase of $23,019,284 since FY2014. Classified Health Insurance Increases Fiscal Year FY2014 $5,400,000 FY2015 $5,400,000 FY2016 $5,115,870 FY2017 $3,503,414 FY2018 $3,600,000 Total $23,019,284 16

Annualize the Use of $10 Million In Fund Balance from FY2017 The FY2017 General Fund Original Budget was: $976,056,402 Revenue Appropriations $986,056,402 Expenditure Appropriations $ 10,000,000 The FY2017 Budget was balanced using $10 Million in General Fund Balance which is One Time Funds. Note: The FY2018 General Fund Budget utilizes $10 Million in new recurring FY2018 revenue to annualize recurring expenditures. 17

Fy2018 Tentative Budget Description Revenues Expenditures Difference FY2017 Original Budget $976,56,402 $986,056,402 ($10,000,000) Board Approved Adjustments $7,138,722 FY2017 Revised Budget $976,056,402 $993,195,124 ($17,138,722) FY2018 6% Digest Growth $21,436,422 FY2018 Dec Tag/TVAT Collections ($4,667,755) FY2018 State QBE Earnings Growth $24,990,356 FY2018 Other Revenue Adjustments $5,584,232 Subtract One Time Expenditures ($3,138,722) Operating Cost to Open New Schools $861,000 Salary/Benefits Changes $25,127,969 Allotment Adjustments $2,635,000 Miscellaneous Expenditure Changes ($300,851) FY2018 Tentative Budget (Recurring) $1,023,399,657 $1,018,379,520 $5,020,137 1.1% One Time Bonus for All Employees $8,195,000 FY2018 Tentative Budget (Final) $1,023,399,657 $1,026,574,520 ($3,174,863) 18

Fy2018 Budget Balancing Why is the FY2018 Budget so challenging to balance and why has a 1.1% one-time bonus been proposed instead of a salary percentage raise increase? 19

Fy2018 Budget Balancing Summary of FY2018 Budget Challenges: FY2018 Revenue Cuts FY2018 Additional Expenditures Budget Issue Comments State Austerity Cut $10,388,627 $586.3 Million since 2003 State Local 5 Mill Share $7,862,563 $144 Million for FY2018 Local Age 62 Exemption $11,095,622 $90.0 Million Current Year Local Total Exemptions $12,486,092 $134.2 Million Current Year Classified Health Insurance $3,600,000 $23.0 Million Current Year Teachers Retirement Increase from 14.27% to 16.81% $15,500,000 Annualize $10 Million in Fund Balance used in FY2017 $10,000,000 20

Cobb Teacher Salary Schedule is Significantly Higher than the State Teacher Salary Schedule Cobb Teacher salaries are significantly higher than the State of Georgia salary schedule. At the T4 Teacher salary schedule, the Cobb local salary supplement ranges over and above the State of GA Teacher salary schedule from 20.4% to 27.2%: T4 Teacher Salary Supplement Range 23.30% to 27.20% T5 Teacher Salary Supplement Range 21.90% to 24.70% T6 Teacher Salary Supplement Range 20.90 to 23.60% T7 Teacher Salary Supplement Range 20.40% to 23.10% 21

Cobb Versus State Teacher Salary How much would the State raise have to be to make the State salary schedule equivalent to the CCSD salary schedule? Example (salary schedule Step One): Description FY2017 State Base Salary $33,424.00 FY2017 CCSD Base Salary $42,364.00 Difference (Local Supplement) $8,940.00 Proof $33,424.00 Local Supplement 26.75% X 1.2675 $42,364.00 Note: The State FY2018 Raise Would have to be 26.75% in order to make the State salary schedule equivalent to the CCSD salary schedule. Cobb, in essence, has given higher raises and more pay than then state in all previous years. 22

Cobb Versus State Teacher Salary Salary schedule example (T4 Teacher - salary schedule Step One) Description Increases Totals State Salary Schedule FY2017 State Base Salary Step 1 $33,424.00 State Salary Step $1,003.00 Governor s Proposed 2% Raise $688.54 Subtotal of Salary Change $1,691.54 FY2018 State Salary $35,115.54 CCSD Salary Schedule FY2017 CCSD Base Salary Step 1 $42,364.00 CCSD Step $1,435.00 CCSD 1.1% Bonus $481.79 Subtotal of Salary Change $1,916.79 FY2018 CCSD Base Salary $44,280.79 23

No Remaining Unassigned General Fund Balance in Excess of One Month Reserve Unassigned Fund Balance FY2015 $90,588,000 FY2016 $74,840,000 Note: Unassigned Fund Balance as of June 30, 2016 has decreased to a level in the range of one month reserve. There is no more available Fund Balance to assist in balancing the budget. Note: Additional use of Fund Balance will result in the District having to assume SHORT TERM BORROWING in order to meet monthly TEACHER payroll expenditures. 24

General Fund Budget Balancing Budget Balancing Option - Use Fund Balance 25

Limited Lapse Remaining in the General Fund All remaining General Fund revenue and expenditure lapse has been used in previous years to assist in funding the FY2016 4% raise and the FY2017 2.5% raise. Definition of Lapse Over-collected revenue compared to budget and underspent expenditures compared to budget. Board Quarterly Financial Reports have consistently revealed that lapse has, for the most part, been eliminated from the General Fund Budget. Revenue and expenditure lapse is not available to assist in balancing the FY2018 General Fund Budget. 26