A. Lewis Trenton financial review & forecast

A FinancialA Financial ReviewReviewA FinancialA Financial ReviewReviewA FinancialA Financial ReviewReviewA FinancialA Financial ReviewReview

Trenton Public SchoolsTrenton Public Schools

Presented by: Arch LewisResearch AnalystMichigan Education Association

We’ve All Heard About Michigan’s Weak Economy

We’ve All Heard About Michigan’s Weak EconomyMichigan s Weak EconomyMichigan s Weak Economy

Michigan’s Recent Statistics:Michigan’s Recent Statistics:

5050thth in Personal Income Growthin Personal Income Growth––5050thth in Personal Income Growthin Personal Income Growth––5050thth in Unemployment Ratein Unemployment Rate––4949thth in Employment Growth (Decline for Michigan)in Employment Growth (Decline for Michigan)------L i i 50L i i 50ththLouisiana 50Louisiana 50thth

––4949thth in Index of Economic Momentum (Population, in Index of Economic Momentum (Population, Personal Income, Employment)Personal Income, Employment)------Louisiana 50Louisiana 50thth

We’ve All Heard About A Big 3 BailoutWe’ve All Heard About A Big 3 BailoutNational Light Vehicle SalesMillion National Light Vehicle Sales

Total v. Detroit

16.516.1

14.00

15.00

16.00

17.00

12.712.6

10 00

11.00

12.00

13.00

8.18.77.00

8.00

9.00

10.00

53% 50.4%

5.96.1

3 00

4.00

5.00

6.0053% 50.4%

48.8% 47%

0.00

1.00

2.00

3.00

2006 2007 2008 2009*

*Projected

Source: Automotive News.

2006 2007 2008 2009*

Total Sales Detroit 3 Annual % Detroit Three Market Share in White Box

We Have Heard AboutWe Have Heard AboutMichigan Losing 1 in 4 Manufacturing JobsMichigan Losing 1 in 4 Manufacturing Jobs

900

1,000

(1,0

00s)

800

ploy

men

t (

March 2006664 500

Jan 1992775 900

Jul 1999908 200

600

700

nthl

y E

mp 664,500775,900 908,200

5001990 1992 1994 1996 1998 2000 2002 2004 2006

Mon

Source: U.S. Department of Labor, Bureau of Labor Statistics.

We’ve Heard A Lot of Things AboutWe’ve Heard A Lot of Things AboutMi hi ’ S h l F di C i iMi hi ’ S h l F di C i iMichigan’s School Funding CrisisMichigan’s School Funding Crisis

5

We’ve Heard AboutWe’ve Heard Abouti hi ’ li i lli hi ’ li i ll

We’ve Heard AboutWe’ve Heard Abouti hi ’ li i lli hi ’ li i llMichigan’s Declining EnrollmentMichigan’s Declining EnrollmentMichigan’s Declining EnrollmentMichigan’s Declining Enrollment

There are 128,788 fewer students, There are 128,788 fewer students, attending Kattending K--12 School Districts in 12 School Districts in ggMichigan in 2009 than in 2003.Michigan in 2009 than in 2003.

437 of the 552 School Districts in 437 of the 552 School Districts in Michigan are experiencing declining Michigan are experiencing declining enrollment L’Anse Creuse is among theenrollment L’Anse Creuse is among theenrollment. L Anse Creuse is among the enrollment. L Anse Creuse is among the lucky 115.lucky 115.

As luck would have it…As luck would have it…As luck would have it…As luck would have it…

While all of these things are trueWhile all of these things are trueWhile all of these things are trueWhile all of these things are trueWhile all of these things are true…While all of these things are true…They really have much less impact They really have much less impact While all of these things are true…While all of these things are true…They really have much less impact They really have much less impact y y py y pthan we may think on the fortunes than we may think on the fortunes of theof the

y y py y pthan we may think on the fortunes than we may think on the fortunes of theof theof theof theof theof the

Trenton Public SchoolsTrenton Public SchoolsTrenton Public SchoolsTrenton Public Schools

It Does, However, Leave Us It Does, However, Leave Us With A ChoiceWith A ChoiceWith A Choice…With A Choice…

We Can be the We Can be the VictimVictimVictim…Victim…

A d C ti tAnd Continue to Argue for OurArgue for Our

Limitations

Is the Trenton Public Schools Is the Trenton Public Schools Really Broke?Really Broke?Is the Trenton Public Schools Is the Trenton Public Schools Really Broke?Really Broke?Really Broke?Really Broke?Really Broke?Really Broke?

Is it Our Is it Our Fault?Fault?

Let’s TakeLet’s TakeLet s Take Let s Take a Looka Looka Looka Look

First some First some Context…Context…

This Analysis is This Analysis is grounded in thegrounded in thegrounded in the grounded in the following assumptions:following assumptions:g pg p

The General Fund is used to… The General Fund is used to… ““provide a full range of educational provide a full range of educational programs for studentsprograms for students.”.”

Plant MoranPlant Moran June 30 2007June 30 2007Plant Moran Plant Moran -- June 30, 2007 June 30, 2007

This analysis views This analysis views TeachersTeachers as the as the di t i t’ t l bl i l tdi t i t’ t l bl i l tdistrict’s most valuable single asset.district’s most valuable single asset.

The best way to look at district The best way to look at district d dit i td dit i trevenues and expenditures is to revenues and expenditures is to

examine trends over a longer examine trends over a longer ggthan one year time frame.than one year time frame.

The The financial financial storystory of a school of a school yydistrict cannot district cannot be told through be told through ggany any single single financial financial measure, measure, such such as fund surplus. as fund surplus. pp

Only an Only an accumulationaccumulation of financial information of financial information and comparisons, taken together, offers an and comparisons, taken together, offers an Only an Only an accumulationaccumulation of financial information of financial information and comparisons, taken together, offers an and comparisons, taken together, offers an accurate pictureaccurate picture of a district’s financial health.of a district’s financial health.accurate pictureaccurate picture of a district’s financial health.of a district’s financial health.

Last…Last…

It is not enough to show how It is not enough to show how the district simply madethe district simply made

It is not enough to show how It is not enough to show how the district simply madethe district simply madethe district simply madethe district simply made

“ends meet.”“ends meet.”the district simply madethe district simply made

“ends meet.”“ends meet.”

What is critical is showing how tax What is critical is showing how tax dollars weredollars were actuallyactually usedused to deliverto deliverdollars were dollars were actuallyactually usedused to deliver…to deliver…

Maximum Educational Impact.Maximum Educational Impact.

20042004--2008 Financial Analysis2008 Financial Analysisyy

Past PerformancePast PerformancePast PerformancePast Performance

20042004--2008 Financial Analysis2008 Financial Analysis

We have examined the district’s We have examined the district’s financial audits along with the financial audits along with the information filed with the State of information filed with the State of Michigan over a period of 5 years.Michigan over a period of 5 years.

Total General Fund Revenues Available to Appropriate$11,200

$10,800

$11,000

$10,400

$10,600

$10,000

$10,200

$9,600

$9,800

$9 200

$9,400

,

Per Pupil GF Revenues Increased 8.8% Over the Previous 5 Years

$9,2002004 2005 2006 2007 2008

General Fund Available Revenues & Expenditures

33,000,00034,000,000

29 000 00030,000,00031,000,00032,000,000

, ,

26,000,00027,000,00028,000,00029,000,000

22 000 00023,000,00024,000,00025,000,000

19,000,00020,000,00021,000,00022,000,000

15,000,00016,000,00017,000,00018,000,000

15,000,0002004 2005 2006 2007 2008

Revenues Available to Appropriate General Fund Expenditures

Excess (Deficit) of Revenues Over Expenditures$5,500,000

$4,500,000

$5,000,000

$3,500,000

$4,000,000

$2,500,000

$3,000,000

$1,500,000

$2,000,000

$500,000

$1,000,000

$-2004 2005 2006 2007 2008

“Is the District “Is the District focusing available focusing available revenue on student revenue on student learning?”learning?”learning?”learning?”

Teacher Salary as a % of Revenue

41.0%41.5%42.0%

39 0%39.5%40.0%40.5%41.0%

37 0%37.5%38.0%38.5%39.0%

35 0%35.5%36.0%36.5%37.0%

33 0%33.5%34.0%34.5%35.0%

32.0%32.5%33.0%

2004 2005 2006 2007 2008

Teacher Insurance as a Percent of Revenue

7 0%

7.5%

5 5%

6.0%

6.5%

7.0%

%

4.5%

5.0%

5.5%

3.0%

3.5%

4.0%

1.5%

2.0%

2.5%

0.0%

0.5%

1.0%

Over the period insurance costs have Decreased an average of 03/100 of 1% per year as a percent of available revenue.

2004 2005 2006 2007 2008

Teacher Insurance CostsTeacher Insurance CostsTeacher Insurance CostsTeacher Insurance Costs

The District Commits 6.7¢

To Instructional Health Benefits

Teacher Retirement Costs as a Percent of Revenue7.5%

6.0%

6.5%

7.0%

4.5%

5.0%

5.5%

3.0%

3.5%

4.0%

1.5%

2.0%

2.5%

0 0%

0.5%

1.0%

Insurance costs have increased an average of 14/100 of 1% per year as a percent of revenue.

0.0%2004 2005 2006 2007 2008

Instructional Retirement CostsInstructional Retirement Costs


To Instructional Retirement Benefits

Total Teacher Compensation as a Percent of Revenue

55 0%57.5%60.0% Peer Group Average

45.0%47.5%50.0%52.5%55.0%

32 5%35.0%37.5%40.0%42.5%

22 5%25.0%27.5%30.0%32.5%

12.5%15.0%17.5%20.0%22.5%

2.5%5.0%7.5%

10.0%%

0.0%2004 2005 2006 2007 2008

Teacher Salary % Available Revenue Teacher Insurance % Available RevenueTeacher Retirement % Available Revenue Teacher FICA % Available Revenue

Instructional Expenditures as a Percent of Available Revenue Compared to Peer Group

62.5%

55.0%57.5%60.0%

45 0%

47.5%50.0%52.5%

37.5%40.0%

42.5%45.0%

30.0%32.5%35.0%37.5%

22.5%

25.0%27.5%

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

14 00%15.00%

12.00%13.00%14.00%

9.00%10.00%11.00%

6.00%7.00%8.00%

3 00%4.00%5.00%

1.00%2.00%3.00%

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)

2004 2005 2006 2007 2008

$(1,000,000)

$(1,500,000)

$(2,000,000)

$(2,500,000)

$(3,000,000)

“Student performance “Student performance rises when schools rises when schools increase [not decrease]increase [not decrease]th t f t t lth t f t t lthe percentage of total the percentage of total operating funds operating funds devoted to classroomdevoted to classroomdevoted to classroom devoted to classroom instruction.”instruction.”

How the World’s Best-performing School Systems Come Out on TopMcKinsey & Company 2007

Non-Instructional Cost as a Percent of Revenue

14.50%15.00%15.50%

11 50%12.00%12.50%13.00%13.50%14.00%14.50%

9.00%9.50%

10.00%10.50%11.00%11.50%

6 00%6.50%7.00%7.50%8.00%8.50%

3 00%3.50%4.00%4.50%5.00%5.50%6.00%

0.50%1.00%1.50%2.00%2.50%3.00%

0.00%0.50%

2004 2005 2006 2007Support 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%

4 25%4.50%4.75%5.00%5.25%

3 25%3.50%3.75%4.00%4.25%

2 25%2.50%2.75%3.00%3.25%

1.25%1.50%1.75%2.00%2.25%

0.25%0.50%0.75%1.00%

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 CostsCustodial Health Costs


To Custodial HealthTo Custodial Health Benefits

Administrative Costs Compared to Peer Group12.00%

10 50%

11.25%

9.75%

10.50%

8 25%

9.00%

7.50%

8.25%

6 00%

6.75%

6.00%2004 2005 2006 2007 2008

Administration as a % of Avail. Rev. Peer Group Average

““How schools How schools spend money is spend money is much moremuch moreimportant than important than how much how much money schoolsmoney schoolshave to spendhave to spend.”.”have to spendhave to spend..


If the District is experiencing financial difficultiesIf the District is experiencing financial difficultiesfinancial difficulties… financial difficulties…

it’s not because the district is it’s not because the district is it’s not because the district is it’s not because the district is committing significantly more of committing significantly more of its available revenues to salaryits available revenues to salarycommitting significantly more of committing significantly more of its available revenues to salaryits available revenues to salaryits available revenues to salary, its available revenues to salary, insurance or retirement costs.insurance or retirement costs.its available revenues to salary, its available revenues to salary, insurance or retirement costs.insurance or retirement costs.

Wh t b t G l F dWh t b t G l F dWhat about General Fund What about General Fund Expenditures forExpenditures forExpenditures for Expenditures for NonNon--EducationalEducationalNonNon Educational Educational

Purposes?Purposes?

General Fund Financing for Non-Educational Purposes$1,400,000

$1,200,000

$800,000

$1,000,000

$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

$8,500,000

$9,000,000

$7,000,000

$7,500,000

$8,000,000

$5 000 000

$5,500,000

$6,000,000

$6,500,000

$3,500,000

$4,000,000

$4,500,000

$5,000,000

$2,000,000

$2,500,000

$3,000,000

$-

$500,000

$1,000,000

$1,500,000

$-

2004 2005 2006 2007 2008Fund Surplus Without Transfers Fund Surplus After Transfers

Are there more effective usesAre there more effective usesAre there more effective uses Are there more effective uses of those General Fund Dollars of those General Fund Dollars t t t d t l i ?t t t d t l i ?to promote student learning?to promote student learning?

Financial CapacityFinancial CapacityFinancial CapacityFinancial Capacity

Does the District have the capacity toDoes the District have the capacity to meet it’s ongoing financial obligations?

Financial CapacityFinancial CapacityFinancial CapacityFinancial Capacityp yp yp yp yPerformance Ratios & Liquidity Performance Ratios & Liquidity

The district's Current Ratio is approximately The district's Current Ratio is approximately 6.6 (District Assets/Liab.) meaning the 6.6 (District Assets/Liab.) meaning the District’s assets will cover its General Fund District’s assets will cover its General Fund li biliti l t 7 tili biliti l t 7 tiliabilities almost 7 times. liabilities almost 7 times.

MICROSOFT’S CURRENT RATIO IS 1.53MICROSOFT’S CURRENT RATIO IS 1.53

Financial CapacityFinancial CapacityFinancial CapacityFinancial Capacityp yp yp yp y

Performance Ratios & Liquidity Performance Ratios & Liquidity q yq y

The district's Quick Ratio isThe district's Quick Ratio isThe district s Quick Ratio is The district s Quick Ratio is approximately 1.72 meaning that approximately 1.72 meaning that current GF cash will cover about 172% current GF cash will cover about 172% of the district's current GF liabilities.of the district's current GF liabilities.

MICROSOFT’S QUICK RATIO IS .59MICROSOFT’S QUICK RATIO IS .59

Working Capital (Cash, Investments & Short Term Receivables less Current Payables)End of Year

$8,000,000

$6,500,000

$7,000,000

$7,500,000

$5 000 000

$5,500,000

$6,000,000

$ , ,

$3 500 000

$4,000,000

$4,500,000

$5,000,000

$2,500,000

$3,000,000

$3,500,000

$1,000,000

$1,500,000

$2,000,000

$-

$500,000

2004 2005 2006 2007 2008

Aligning Revenues & Aligning Revenues & d ld l

Aligning Revenues & Aligning Revenues & d ld lEducational CapacityEducational CapacityEducational CapacityEducational Capacity

How Connected are the How Connected are the District’s Resource District’s Resource Allocation Practices with itsAllocation Practices with itsAllocation Practices with its Allocation Practices with its Core Educational Strategies?Core Educational Strategies?gg



During the previous five years the district'sDuring the previous five years the district's

Educational CapacityEducational CapacityEducational CapacityEducational CapacityDuring the previous five years, the district s During the previous five years, the district s operating spending has increased by $277 per operating spending has increased by $277 per student. At the same time, the district's allocation of student. At the same time, the district's allocation of operating spending for teacher compensation hasoperating spending for teacher compensation hasoperating spending for teacher compensation has operating spending for teacher compensation has decreaseddecreased by by $135$135 per student (or a per student (or a --48.748.7%% of the of the total). total).

Across the state, operating spending has increased Across the state, operating spending has increased by an average of $524 over the same period ofby an average of $524 over the same period ofby an average of $524 over the same period, of by an average of $524 over the same period, of which which $322$322 (or (or 61.5%61.5% of the total) has gone of the total) has gone toward teacher compensation. toward teacher compensation.

Net Change in Enrollment and Teaching Staff50

2

3

0

25

2004 2005 2006 2007 2008 -1

0

1

2

75

-50

-25

-4

-3

-2

-1

-125

-100

-75

-7

-6

-5

-4

-175

-150

125

10

-9

-8

-7

-225

-200

13

-12

-11

-10

-250 -14

-13

Change in Student Pop. Change in Staff

Actual v. Expected Change in Professional Staffing4 4.0

(6)

(1)2004 2005 2006 2007 2008

-6 0

-1.0

(11)

(6)

-11.0

6.0

(16) -16.0

(26)

(21)

-26.0

-21.0

(31) -31.0

(36) -36.0Change in Staff Expected Change in Staffing

Student to Staff Ratio - Direct Instruction18.5

17.5

18.0

16.5

17.0

16.0

15.0

15.5

14.0

14.5

Student/Staff Ratio Statewide Mean 20:1A 1 point change in the Ratio equals $701,514 in cost or 1.8% of Expenditures

2004 2005 2006 2007 2008 2009

Commulative Sunk Cost from Inconsistent Alignment of Enrollment and Staffing-

2004 2005 2006 2007 2008

(2,000,000.00)

2004 2005 2006 2007 2008

(4,000,000.00)

(6,000,000.00)

(8,000,000.00)

(10,000,000.00)

(12,000,000.00)

““The quality of an The quality of an education systemeducation systemeducation system education system cannot exceed cannot exceed the quality of itsthe quality of itsthe quality of its the quality of its staff.staff.””


Aligning Revenues & Educational CapacityAligning Revenues & Educational Capacity

A th ff tiA th ff tiAre there more effective Are there more effective uses for district resourcesuses for district resourcesuses for district resources uses for district resources that will promote student that will promote student learning and attract and learning and attract and reward quality educators?reward quality educators?reward quality educators?reward quality educators?

Financial ForecastFinancial Forecast

What are district policymakersWhat are district policymakers committed to do in the future to ensure that the “right amount” of money is distributed equitably,money is distributed equitably, used productively, and accounted f i f ll ?for meaningfully?

Enrollment Trends 2004-2009

3100

3125

3025

3050

3075

2950

2975

3000

2875

2900

2925

2800

2825

2850

2725

2750

2775

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.

2004 2005 2006 2007 2008 2009

Annual Change in Teaching Staff

-

(2)

2004 2005 2006 2007 2008

(4)

(8)

(6)

(10)

(12)

During the previous 5 years net of 40 Classroom Teachers have not been replaced, an average net loss of approximately 8 teachers per year.

(14)

Projected Change in Enrollment & Teaching Staff2,900 160

2,850156

158

2,750

2,800

152

154

2,700148

150

2,600

2,650

142

144

146

2,5502009 2010 2011 2012 2013

140

142

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.

Enrollment Teaching Staff

Teacher Compensation as a Percent of Available Revenue

44 5%46.0%47.5%

38.5%40.0%41.5%43.0%44.5%

31.0%32.5%34.0%35.5%37.0%

23 5%25.0%26.5%28.0%29.5%

16 0%17.5%19.0%20.5%22.0%23.5%

10.0%11.5%13.0%14.5%16.0%

Based on a planned decrease of 10 teaching staff, an annual 3% Increase in Salary and maintaining past trends in Insurance and Retirement costs

2009 2010 2011 2012 2013

Projected Revenues & Expenditures

$37,500,000

$30,000,000

$32,500,000

$35,000,000

$22,500,000

$25,000,000

$27,500,000

$15,000,000

$17,500,000

$20,000,000

$7,500,000

$10,000,000

$12,500,000

$-

$2,500,000

$5,000,000

2009 2010 2011 2012 2013

Based on assumptions previously outlined. Includes Federal Stimulus Projections

2009 2010 2011 2012 2013

Revenues Available to Appropriate Expenditures

Excess Revenues Before Transfers

$8,500,000

$7,000,000

$7,500,000

$8,000,000

$8,500,000

$5 000 000

$5,500,000

$6,000,000

$6,500,000

$3,500,000

$4,000,000

$4,500,000

$5,000,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$

$500,000

$1,000,000

$1,500,000

Based on assumptions previously outlined

$-2009 2010 2011 2012 2013

H i th lHere is the realBottom LineBottom Line…

At some point, pthe 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…Here are the 4 real questions…•• How connected are resource allocation practices How connected are resource allocation practices

with core educational strategies…NOT with core educational strategies…NOT What does the budget look like?

•• How focused are General Fund revenues on student How focused are General Fund revenues on student OO f ?learning…NOT learning…NOT How big is the general fund surplus?

•• Are resources being spent in a manner that will Are resources being spent in a manner that will attract and reward quality educators NOTattract and reward quality educators NOT What isattract and reward quality educators…NOT attract and reward quality educators…NOT What is the increase in insurance premiums?

•• Who is ensuring that the “right amount” of money isWho is ensuring that the “right amount” of money isWho is ensuring that the right amount of money is Who is ensuring that the right amount of money is distributed equitably, used productively, and distributed equitably, used productively, and accounted for meaningfully to achieve those accounted for meaningfully to achieve those objectives…NOT objectives…NOT How much do we need for a rainy day?

You can’t get there by chasing You can’t get there by chasing rainbows…rainbows…

Most “cheap” deals are Most “cheap” deals are expensive down the roadexpensive down the roadexpensive down the road.expensive down the road.

You can only get there byYou can only get there byYou can only get there by…You can only get there by…

Pl i Ah dPl i Ah dPlanning AheadPlanning Ahead

A. Lewis Trenton financial review & forecast

News & Politics

Transcript of A. Lewis Trenton financial review & forecast