Finance and Enrollment Update

I’ve recently had some questions posed about district finances, specifically district debts. School finance is very complicated and trying to effectively summarize some of these concepts into a readable post has been challenging. I’m hopeful at a minimum to provide some context.  As I’ve communicated previously, WCS has been “held as the high watermark” by the State of Michigan for how it has managed its finances and is no longer listed as financially distressed. Note the numbers I am using below are as of July 31, 2017. These will be updated soon when the results of our 2017-2018 school year financial audit are completed.

State Unfunded Pension Liability: The State of Michigan has reassigned unfunded pension liability to local districts, essentially moving the liability from their books to those of school districts across the state. This is not something we can do anything about as decisions regarding the allocation of resources to the state retirement system are dictated in the annual state budget. WCS holds approximately 28 million dollars of this liability on its records. This liability, combined with a trend of decreasing enrollment and a fund balance that was in the lowest 2% of districts in Michigan are the reasons why our bond rating was downgraded by Moody’s two years ago. These trends have very much turned around. Our enrollment is now significantly increasing (see graph at the bottom of the post) and our fund balance is projected to exceed 5% (see Board Goals here) by the end of this school year. These positive results are likely to improve our bond rating when future audits are completed.

1995 District Bond: The community approved a 27.5 million dollar bond in 1995, with the corresponding funds being spent in 1996-1998. Among other things, the bond was used to build Discovery Elementary School, build the community pool, and renovate and expand the other three school buildings, transportation garage, and athletic facilities. Financed over 30 years, there is approximately 9 million left to be paid off on this bond. The remainder of this bond will be paid in May of 2025. This community-approved bond is one of the reasons the District has debt on its books.

2004 District Bond: The community approved a 24.5 million dollar bond in 2004, with the corresponding funds being spent in 2005. Among other things, this bond was used to build the performance gym, weight room, walking track, and math/science pods/wing at Williamston High School. It was also used to construct the entrance and office of Explorer Elementary, upgrade instructional technology, various infrastructure projects, playground equipment, and athletic facilities across the district. Six school buses were also purchased as well as paying off the loans on the district properties on Sherwood and Rowley Roads. This bond debt was refinanced in 2015 and is scheduled to be paid off in 2030. There are approximately 13 million dollars remaining of this bond debt. This community-approved bond is another reason the District shows debt on its books.

Two important notes on bonds. When a community supports a bond issue, a school district receives all the funds upfront. The community, via the district, then pays off the bond debt, usually over 30 years. For example, two Ingham County school districts recently passed bonds for 69.7 million and 93.7 million respectively. The districts will receive that money upfront to use for improvements but will incur that debt (plus interest) on their books. Secondly, it is common for the initial debt payments on a bond to exceed the funds collected via the local debt levy. It is common for districts to borrow money from the School Bond Loan Fund to cover the difference. WCS borrowed from the School Bond Loan Fund and then took out a loan on favorable terms to pay off the balance of what was borrowed. That 18.5 million dollar loan will be paid off in 2020. That is the final primary reason the District shows debt on its books.

Lastly, our preliminary fall enrollment numbers are significantly above projections.  Once final figures are tabulated, we anticipate a total enrollment of above 1890 students. The graph below provides some recent context regarding student enrollment at WCS.