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A. Lewis Trenton financial review & forecast
 

A. Lewis Trenton financial review & forecast

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    A. Lewis Trenton financial review & forecast A. Lewis Trenton financial review & forecast Presentation Transcript

    • A Financial Review Trenton Public Schools Presented by: Arch Lewis Research Analyst Michigan Education Association
    • We’ve All Heard About Michigan s Michigan’s Weak Economy Michigan’s Recent Statistics: –50th in Personal Income Growth –50th in Unemployment Rate –49th in Employment Growth (Decline for Michigan)--- Michigan)--- Louisiana 50th L i i –49th in Index of Economic Momentum (Population, Personal Income, Employment)---Louisiana 50th Employment)---Louisiana
    • We’ve All Heard About A Big 3 Bailout Million National Light Vehicle Sales 17.00 Total v. Detroit 16.00 16.5 16.1 15.00 14.00 13.00 12.00 12.6 12.7 11.00 10.00 10 00 9.00 8.00 8.7 8.1 7.00 53% 50.4% 6.00 6.1 5.9 47% 5.00 48.8% 4.00 3.00 3 00 2.00 1.00 *Projected 0.00 2006 2007 2008 2009* Total Sales Detroit 3 Annual % Detroit Three Market Share in White Box Source: Automotive News.
    • We Have Heard About Michigan Losing 1 in 4 Manufacturing Jobs 1,000 ployment (1,000s) 900 ( 800 Jan 1992 Jul 1999 March 2006 775,900 775 900 908,200 908 200 664,500 664 500 nthly Emp 700 600 Mon 500 1990 1992 1994 1996 1998 2000 2002 2004 2006 Source: U.S. Department of Labor, Bureau of Labor Statistics.
    • We’ve Heard A Lot of Things About Michigan’s S h l F di Mi hi ’ School Funding C i i Crisis 5
    • We’ve Heard About Michigan’s Declining Enrollment i hi ’ li i ll There are 128,788 fewer students, attending K-12 School Districts in g K- Michigan in 2009 than in 2003. 437 of the 552 School Districts in Michigan are experiencing declining enrollment. L’Anse enrollment L Anse Creuse is among the lucky 115.
    • As luck would have it… While all of these things are true… true They really have much less impact y y p than we may think on the fortunes of the Trenton Public Schools
    • It Does, However, Leave Us With A Choice… Choice
    • We Can be the Victim… Victim And Continue to A d C ti t Argue for Our Limitations
    • Is the Trenton Public Schools Really Broke? Is it Our Fault?
    • Let’s Take Let s a Look
    • First some Context…
    • This Analysis is grounded in the following assumptions: g p
    • The General Fund is used to… “provide a full range of educational programs for students.” students.” Plant Moran - June 30, 2007 30
    • This analysis views Teachers as the district’s di t i t’ most valuable single asset. t l bl i l t
    • The best way to look at district revenues and expenditures i to d dit is t examine trends over a longer g than one year time frame.
    • The financial story of a school y district cannot g be told through any single financial measure, such as fund surplus. p
    • Only an accumulation of financial information and comparisons, taken together, offers an accurate picture of a district’s financial health. Last…
    • It is not enough to show how the district simply made “ends meet.”
    • What is critical is showing how tax dollars were actually used to deliver… deliver Maximum Educational Impact.
    • 2004- 2004-2008 Financial Analysis y Past Performance
    • 2004- 2004-2008 Financial Analysis We have examined the district’s financial audits along with the information filed with the State of Michigan over a period of 5 years.
    • Total General Fund Revenues Available to Appropriate $11,200 $11,000 $10,800 $10,600 $10,400 $10,200 $10,000 $9,800 $9,600 , $9,400 $9,200 $9 200 2004 2005 2006 2007 2008 Per Pupil GF Revenues Increased 8.8% Over the Previous 5 Years
    • General Fund Available Revenues & Expenditures 34,000,000 33,000,000 , , 32,000,000 31,000,000 30,000,000 29,000,000 29 000 000 28,000,000 27,000,000 26,000,000 25,000,000 24,000,000 23,000,000 22,000,000 22 000 000 21,000,000 20,000,000 19,000,000 18,000,000 17,000,000 16,000,000 15,000,000 2004 2005 2006 2007 2008 Revenues Available to Appropriate General Fund Expenditures
    • Excess (Deficit) of Revenues Over Expenditures $5,500,000 $5,000,000 $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- 2004 2005 2006 2007 2008
    • “Is the District focusing available revenue on student learning?”
    • Teacher Salary as a % of Revenue 42.0% 41.5% 41.0% 40.5% 40.0% 39.5% 39.0% 39 0% 38.5% 38.0% 37.5% 37.0% 37 0% 36.5% 36.0% 35.5% 35.0% 35 0% 34.5% 34.0% 33.5% 33.0% 33 0% 32.5% 32.0% 2004 2005 2006 2007 2008
    • Teacher Insurance as a Percent of Revenue 7.5% 7.0% 7 0% 6.5% 6.0% 5.5% 5 5% 5.0% 4.5% 4.0% % 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 2004 2005 2006 2007 2008 Over the period insurance costs have Decreased an average of 03/100 of 1% per year as a percent of available revenue.
    • Teacher Insurance Costs The District Commits 6.7¢ To Instructional Health Benefits
    • Teacher Retirement Costs as a Percent of Revenue 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 0 0% 2004 2005 2006 2007 2008 Insurance costs have increased an average of 14/100 of 1% per year as a percent of revenue.
    • Instructional Retirement Costs The District Commits 5.9¢ To Instructional Retirement Benefits
    • Total Teacher Compensation as a Percent of Revenue 60.0% 57.5% Peer Group Average 55.0% 55 0% 52.5% 50.0% 47.5% 45.0% 42.5% 40.0% 37.5% 35.0% 32.5% 32 5% 30.0% 27.5% 25.0% 22.5% 22 5% 20.0% 17.5% 15.0% 12.5% % 10.0% 7.5% 5.0% 2.5% 0.0% 2004 2005 2006 2007 2008 Teacher Salary % Available Revenue Teacher Insurance % Available Revenue Teacher Retirement % Available Revenue Teacher FICA % Available Revenue
    • Instructional Expenditures as a Percent of Available Revenue Compared to Peer Group 62.5% 60.0% 57.5% 55.0% 52.5% 50.0% 47.5% 45.0% 45 0% 42.5% 40.0% 37.5% 35.0% 32.5% 30.0% 27.5% 25.0% 22.5% 20.0% 2004 2005 2006 2007 2008 Total Direct Instruction as a Percent of Available Revenue Instruction Benchmark
    • Total Instructional Support Costs Compared to Peer Group 15.00% 14.00% 14 00% 13.00% 12.00% 11.00% 10.00% 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 3 00% 2.00% 1.00% 0.00% 2004 2005 2006 2007 2008 Support Services Peer Group Average
    • Shortage of Revenues Committed to Direct Instruction $- 2004 2005 2006 2007 2008 $(500,000) $(1,000,000) $(1,500,000) $(2,000,000) $(2,500,000) $(3,000,000)
    • “Student performance rises when schools increase [not decrease] the th percentage of total t ft t l operating funds devoted to classroom instruction.” How the World’s Best-performing School Systems Come Out on Top McKinsey & Company 2007
    • Non-Instructional Cost as a Percent of Revenue 15.50% 15.00% 14.50% 14.00% 13.50% 13.00% 12.50% 12.00% 11.50% 11 50% 11.00% 10.50% 10.00% 9.50% 9.00% 8.50% 8.00% 7.50% 7.00% 6.50% 6.00% 6 00% 5.50% 5.00% 4.50% 4.00% 3.50% 3.00% 3 00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 2004 2005 2006 2007 Support Services as a % of Avail. Rev. Administration as a % of Avail. Rev. Operations & Maintenance as a % of Avail. Rev. Transportation as a % of Avail. Rev.
    • Custodial Compensation and Health Benefits as a % of Revenue 5.50% 5.25% 5.00% 4.75% 4.50% 4.25% 4 25% 4.00% 3.75% 3.50% 3.25% 3 25% 3.00% 2.75% 2.50% 2.25% 2 25% 2.00% 1.75% 1.50% 1.25% 1.00% 0.75% 0.50% 0.25% 0.00% 2004 2005 2006 2007 2008 Custodial Compensation as a Percent of Available Revenue Heath Ins. Benefits as a % of Available Revenue
    • Custodial Health Costs The District Commits 0.82¢ To Custodial Health Benefits
    • Administrative Costs Compared to Peer Group 12.00% 11.25% 10.50% 10 50% 9.75% 9.00% 8.25% 8 25% 7.50% 6.75% 6.00% 6 00% 2004 2005 2006 2007 2008 Administration as a % of Avail. Rev. Peer Group Average
    • “How schools spend money is much more important than how much money schools have to spend.” . How the World’s Best-performing School Systems Come Out on Top McKinsey & Company 2007
    • If the District is experiencing financial difficulties… difficulties it’s not because the district is committing significantly more of its available revenues to salary, salary insurance or retirement costs.
    • What b t G Wh t about General Fund lF d Expenditures for Non- Non-Educational Purposes?
    • General Fund Financing for Non-Educational Purposes $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $- 2004 2005 2006 2007 2008 Transfer to Athletics Capital Outlay From General Fund Transfer to Capital Projects Transfer to Community Service
    • Fund Surplus With and Without Non-Educational Transfers $9,000,000 $8,500,000 $8,000,000 $7,500,000 $7,000,000 $6,500,000 $6,000,000 $5,500,000 $5,000,000 $5 000 000 $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- 2004 2005 2006 2007 2008 Fund Surplus Without Transfers Fund Surplus After Transfers
    • Are there more effective uses of those General Fund Dollars to t promote student learning? t t d tl i ?
    • Financial Capacity Does the District have the capacity to meet it’s ongoing financial obligations?
    • Financial Capacity p y Performance Ratios & Liquidity The district's Current Ratio is approximately 6.6 (District Assets/Liab.) meaning the District’s assets will cover its General Fund liabilities l li biliti almost 7 times. t ti MICROSOFT’S CURRENT RATIO IS 1.53
    • Financial Capacity p y Performance Ratios & Liquidity q y The district s Quick Ratio is district's approximately 1.72 meaning that current GF cash will cover about 172% of the district's current GF liabilities. MICROSOFT’S QUICK RATIO IS .59
    • Working Capital (Cash, Investments & Short Term Receivables less Current Payables) End of Year $8,000,000 $7,500,000 $7,000,000 $ , , $6,500,000 $6,000,000 $5,500,000 $5,000,000 $5 000 000 $4,500,000 $4,000,000 $3,500,000 $3 500 000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- 2004 2005 2006 2007 2008
    • Aligning Revenues & Educational Capacity d l How Connected are the District’s Resource Allocation Practices with its Core Educational Strategies? g
    • Aligning Revenues & Educational Capacity d l During the previous five years the district's years, district s operating spending has increased by $277 per student. At the same time, the district's allocation of operating spending for teacher compensation has decreased by $135 per student (or a -48.7% of the 48.7% total). Across the state, operating spending has increased by an average of $524 over the same period of period, which $322 (or 61.5% of the total) has gone toward teacher compensation.
    • Net Change in Enrollment and Teaching Staff 50 3 2 25 1 0 0 2004 2005 2006 2007 2008 -25 -1 -2 -50 -3 -75 75 -4 -5 -100 -6 -125 125 -7 -8 -150 -9 -175 10 -10 -200 -11 -12 -225 13 -13 -250 -14 Change in Student Pop. Change in Staff
    • Actual v. Expected Change in Professional Staffing 4 4.0 (1) -1.0 2004 2005 2006 2007 2008 (6) -6 0 6.0 (11) -11.0 (16) -16.0 (21) -21.0 (26) -26.0 (31) -31.0 (36) -36.0 Change in Staff Expected Change in Staffing
    • Student to Staff Ratio - Direct Instruction 18.5 18.0 17.5 17.0 16.5 16.0 15.5 15.0 14.5 14.0 2004 2005 2006 2007 2008 2009 Student/Staff Ratio Statewide Mean 20:1 A 1 point change in the Ratio equals $701,514 in cost or 1.8% of Expenditures
    • Commulative Sunk Cost from Inconsistent Alignment of Enrollment and Staffing - 2004 2005 2006 2007 2008 (2,000,000.00) (4,000,000.00) (6,000,000.00) (8,000,000.00) (10,000,000.00) (12,000,000.00)
    • “The quality of an education system cannot exceed the quality of its staff.” How the World’s Best-performing School Systems Come Out on Top McKinsey & Company 2007
    • Aligning Revenues & Educational Capacity Are there more effective A th ff ti uses for district resources that will promote student learning and attract and reward quality educators?
    • Financial Forecast
    • What are district policymakers committed to do in the future to ensure that the “right amount” of money is distributed equitably, used productively, and accounted for f meaningfully? i f ll ?
    • Enrollment Trends 2004-2009 3125 3100 3075 3050 3025 3000 2975 2950 2925 2900 2875 2850 2825 2800 2775 2750 2725 2004 2005 2006 2007 2008 2009 During the previous 5 years the District has lost a net of 268 students -- an average of 45 students per year.
    • Annual Change in Teaching Staff - 2004 2005 2006 2007 2008 (2) (4) (6) (8) (10) (12) (14) During the previous 5 years net of 40 Classroom Teachers have not been replaced, an average net loss of approximately 8 teachers per year.
    • Projected Change in Enrollment & Teaching Staff 2,900 160 158 2,850 156 2,800 154 152 2,750 150 2,700 148 2,650 146 144 2,600 142 2,550 140 2009 2010 2011 2012 2013 Enrollment Teaching Staff Over the period 2009-2013 we project a loss of 181 students and a planned decrease in teaching staff through attrition of 2 instructional staff per year.
    • Teacher Compensation as a Percent of Available Revenue 47.5% 46.0% 44.5% 44 5% 43.0% 41.5% 40.0% 38.5% 37.0% 35.5% 34.0% 32.5% 31.0% 29.5% 28.0% 26.5% 25.0% 23.5% 23 5% 22.0% 20.5% 19.0% 17.5% 16.0% 16 0% 14.5% 13.0% 11.5% 10.0% 2009 2010 2011 2012 2013 Based on a planned decrease of 10 teaching staff, an annual 3% Increase in Salary and maintaining past trends in Insurance and Retirement costs
    • Projected Revenues & Expenditures $37,500,000 $35,000,000 $32,500,000 $30,000,000 $27,500,000 $25,000,000 $22,500,000 $20,000,000 $17,500,000 $15,000,000 $12,500,000 $10,000,000 $7,500,000 $5,000,000 $2,500,000 $- 2009 2010 2011 2012 2013 Revenues Available to Appropriate Expenditures Based on assumptions previously outlined. Includes Federal Stimulus Projections
    • Excess Revenues Before Transfers $8,500,000 $8,000,000 $7,500,000 $7,000,000 $6,500,000 $6,000,000 $5,500,000 $5,000,000 $5 000 000 $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- $ 2009 2010 2011 2012 2013 Based on assumptions previously outlined
    • Here i the real H is th l Bottom Line Line…
    • At some point, p the need to conserve scarce tax dollars needs to translate into doing something that will control the future and enhance the district’s educational outcomes.
    • Here are the 4 real questions… • How connected are resource allocation practices with core educational strategies…NOT What does the budget look like? • How focused are General Fund revenues on student learning…NOT How big is the general f O fund surplus? ? • Are resources being spent in a manner that will attract and reward quality educators…NOT What is educators NOT the increase in insurance premiums? • Who is ensuring that the “right amount” of money is right amount distributed equitably, used productively, and accounted for meaningfully to achieve those objectives…NOT How much do we need for a rainy day?
    • You can’t get there by chasing rainbows… Most “cheap” deals are expensive down the road. road
    • You can only get there by… by Planning Ahead Pl i Ah d