Midtown Academy
– The Path Forward
The Midtown Academy, Inc.
Parent Update Meeting
June 3, 2015
Meeting agenda
Midtown is a very good Baltimore City public school, but like the broader city school system, our
financial situation has worsened. However, we will be OK for next school year. We are here to
discuss the long-term budget, and the tough decisions we believe need to be made now to set us
on the course for a sustainable quality institution. From a board perspective, retaining teachers is our
#1 priority, and we want to bring the parents into the loop on potential changes, as parents have
always been a vital part of Midtown’s success and will need to be going forward as well.
• Midtown mission
• Financial overview
• Expansion update
• Fundraising update
• Board goals
• Next steps
• Questions/discussion
The Midtown Academy, Inc.
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The Midtown Academy mission
• Uniting diverse communities
• Igniting an enduring passion for learning
• Developing outstanding global citizens
The Midtown Academy, Inc.
3
Education has always been our top priority,
but good people come at a cost
•
Roughly 86% of Midtown’s budget is on personnel (~21% administration/65% instructional)
•
Midtown average teacher salary exceeds charter average and BCPS average, but class size
is less than average in both cases
•
Model teachers get rewarded with higher pay, but we get no more money to pay for them
•
Staff costs increase each year absent turnover
•
Midtown typically spent more on operations than it received from BCPS, but cash windfall
from Race to the Top grant bought some extra time after teacher contract changed
•
Changes were proposed at the board level a few years ago to deal with this operating
deficit; however, we decided as a board/staff/community to keep staffing/culture in tact
and pursue expansion as path the preferred path to fiscal sustainability
•
With expansion options exhausted in the near-term, and BCPS funding declining, we have to
address our annual budget issues NOW
The Midtown Academy, Inc.
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Not just a Midtown problem; BCPS model penalizes
all charter schools who value teacher quality
• Mismatch of revenues and expenses
• Per pupil funding
• Pay actual, charge average
• Facility costs – charters pay double
• New charter bill failed to address any real issues
• BCPS inefficiently operated
The Midtown Academy, Inc.
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Charter funding model challenges
Per pupil revenue model for charters encourages large class sizes and/or low-cost
teachers, and while we are adding 14 students next year, further additions to
student population are unlikely due to facility constraints
Budget for next year would be balanced, if we
could add two more students per grade with no
change to staffing
BCPS Funding Does Not Keep Up with BCPS Costs
(FY08-FY15 CAGR)
$2,100,000
$2,000,000
BCPS Avg Teacher Salaries
5.7%
$1,900,000
$1,800,000
$1,700,000
Per Pupil
0.5%
$1,600,000
$1,500,000
20
22
24
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Source: Midtown Academy financials
The Midtown Academy, Inc.
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7.0%
Budget review
This past year’s deficit was addressed through a combination of cash
reserves, increased fundraising efforts, and expense controls
BCPS Revenues Did Not Cover Costs
$2,050,000
$2,000,000
$1,950,000
$1,900,000
$1,850,000
$1,800,000
$1,750,000
$1,700,000
$1,650,000
$1,600,000
FY15 revenues
FY15 expenses
Source: Midtown Academy FY15 budget from Nov 2014 meeting
The Midtown Academy, Inc.
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Since Midtown is not alone in its fiscal challenges,
we believe something has to change at a higher
level (City/State)
• BCPS has dipped into its “rainy day” fund the last two years and
had to cut staff to meet next year’s budget, given its own
$108mm budget shortfall
• BTU contract mandates majority of costs continue to rise, while
per pupil funding is falling  unsustainable
• Even though change is needed, unfortunately, we don’t know
when and what changes we may get in the near-term
• In the meantime, Midtown board has difficult decisions to make,
as we need to spend less but don’t want to cut key teachers or
programs like other schools are doing
The Midtown Academy, Inc.
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Expansion update
Why expand?
 Offer more high-quality public school seats to children in Baltimore City, specifically
within Bolton Hill, Reservoir Hill, and the Midtown Benefits District
 Current building significantly undersized (Jacobs Report cites Baltimore City K-8
average square footage per pupil at 167 and national average of 137, whereas
Midtown will be just 77 this coming school year. Even elementary schools averaged
between 129-180 sq ft/student)
 Long-term financial sustainability (with rising costs and inability to add more students,
lack of revenue increase from City Schools will bleed schools and/or staff)
 Offer better programming/services/facilities to students and families
Where we are now
Evaluated over 40 potential sites over the past 18 months
Completed programming with staff to determine building wants/needs
Community charrettes held to gather ideas/support for new space
Performed significant due diligence on several lease/purchase options, and
concluded that no sites currently exist that meet our criteria from a space and/or
budget standpoint
 Still having discussions and looking, but no site in near-term picture




The Midtown Academy, Inc.
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Fundraising update
Events




Art auction was a big success, netting nearly $40K in our first year
PTO/Staff events helped (e.g., Holiday Sock Hop, Bingo, Babysitting, Bake Sales, Popcorn)
Staff appeal successful but not replicable
Looking to add more next year
Grants




Applied for total of 8 grants, asking for over $500K during FY15 to support both expansion and
general operating costs from both local and national foundations
Received $40K from Clayton Baker Trust for expansion (spent in FY15) and $20K from Wright Family
Foundation for intervention program (for FY16)
Large ask of Abell Foundation to cover expansion-related expenses was denied, but we plan to
resubmit a request in the next round.
Grants plan for FY16 includes grants for middle school (waiting to hear from Hoffberger
Foundation and others); however, grants for general operating expenses are rarely funded,
especially with Baltimore City now having 34 charter schools.
* We were able to fundraise enough to close the FY15 gap and leave money in the bank
The Midtown Academy, Inc.
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Budget planning FY16
Near-term considerations
 Cash (keeping lights on, school safe, and staff paid are top priorities)
 Staff (teachers are priority, and culture important, so we want to keep turnover low)
 Fundraising (the more we raise, the better)
Long-term considerations
 Cash (want to build a significant cash reserve, especially in aging building and with
foundation support for charters drying up)
 Staff (need to balance high-quality instruction with budget constraints)
 Fundraising (need to establish/designate staff position to lead the effort with board
support)
 BCPS support/change (need to push for fair funding mechanism for charter schools,
including facility support)
 Facility (this model is unsustainable over the long run in the current building with the
current BCPS contract and funding model)
 Charter renewal – need to show fiscal responsibility to get charter renewed (post-FY18)
The Midtown Academy, Inc.
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Expansion as path to balanced budget unlikely near-term,
so need to take alternate route to stay in business
Per pupil funding not tied to expenses; funding level inconsistent and
falling in FY16
9,600
9,556
9,500
9,450
9,412
9,387
9,400
9,300
9,264
9,194
9,200
9,115
9,115
9,100
9,061
9,000
8,900
Drop in per
pupil for next
year caused
most concern.
It dropped
$169/student for
charters and
$143/student at
traditional
schools, so it’s
everyone’s
problem.
8,800
FY08
FY09
FY10
FY11
FY12
FY13
FY14
The Midtown Academy, Inc.
FY15E
FY16E
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We can’t expect City Schools to increase our funding to
match our rising costs
Baltimore City School System Funding is Flat At Best, Which Does Not
Support Cost Increases
1,600
1,400
1,360.8
1,340.9
1,339.4
FY14
FY15
FY16
1,200
1,000
800
600
400
200
0
Source: BCPS 2015-16 Adopted Operating Budget
Figures in USD millions
The Midtown Academy, Inc.
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Midtown’s budget was not balanced earlier, because 1) it
didn’t have to be and 2) we tried an alternative path
Cash Reserve Has Been Used to Fund Operating Losses But Little
Safety Cushion Left
$300,000
$250,000
$240,658
$200,000
$150,000
$122,372
$100,000
$51,410
$50,000
Note: Would have been
less of a decline, if we’d
gotten grant to cover
expansion expenses but
trend remains the same
$0
FY13
FY14
FY15E
The Midtown Academy, Inc.
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A look out beyond next year is concerning without
significant BCPS changes
Midtown Annual Operating Deficit Growing Without
Cash Reserves to Draw From
Without Additional Students, We Would Be Looking
at a Much Bigger Hole
$0
($50,000)
$0
Line represents reasonable level of
fundraising under current model
($50,000)
($100,000)
($150,000)
($100,000)
($150,000)
($200,000)
($118,647)
($126,254)
($144,954)
($219,119)
($250,000)
($160,871)
($300,000)
($178,504)
($200,000)
($199,095)
($287,613)
($350,000)
($208,669)
($250,000)
($240,173)
($347,470)
($400,000)
($409,139)
($450,000)
($300,000)
FY13
FY14
FY15E
FY16E
Source: Midtown Academy actuals and projections
Operating deficit defined as BCPS revenue less operating budget
Graph on right pro forma for 180 students
FY17E
FY18E
FY13
The Midtown Academy, Inc.
FY14
FY15E
FY16E
FY17E
FY18E
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Staffing budget – two choices
• Keep everything status quo
– We should be safe for one more year and then run into big funding deficit in
FY17 and beyond, likely requiring more significant cuts
– Still no paid position responsible for external communications/fundraising
• Restructure to create more effective/efficient administration
– Our #1 goal remains retaining our high-quality teachers
– Improve likelihood of balanced budget this year and next by reducing
administration costs (21% of current budget – too big for school our size)
– Need to have outward-facing and fundraising responsibilities in-house to
position the school for long-term success
– Midtown one of a few charter schools without an Executive Director presently
The Midtown Academy, Inc.
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Board goals – 2015-16
• Approve and then manage a budget that is reasonably conservative
for the next two years, aiming to 1) avoid another Fall 2014 cash crisis
and 2) to set parents and staff at ease
• Maintain strong teachers in classroom and preserve Midtown culture
• Establish development/communications role on staff
• Increase parent/staff involvement on board committees – mainly
fundraising
• Increase individual donations vs. FY15
• Set a new record for the Uniting Diverse Artists art auction
• Grow non-Bolton Hill, non-Reservoir Hill donor base
The Midtown Academy, Inc.
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Next steps
• Board will meet to determine best course of action for the long-term
viability of Midtown Academy, taking into consideration input from
parents/staff/community (who are represented on the board)
• Update parents this summer with a letter after the board meeting
• New parents will then be brought up to speed on current issues
• New board elections to take place in the fall
• Board will keep families up-to-date on financial situation via
quarterly budget summary
• Families should increase involvement – PTO, Board, volunteer, give
The Midtown Academy, Inc.
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Questions/open
discussion