1. A Financial Review
Trenton Public Schools
Presented by: Arch Lewis
Research Analyst
Michigan Education Association

2. 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

3. 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.

4. 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.

5. We’ve Heard A Lot of Things About
Michigan’s S h l F di
Mi hi ’ School Funding C i i
Crisis
5

6. 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.

7. 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

8. It Does, However, Leave Us
With A Choice…
Choice

9. We Can be the
Victim…
Victim
And Continue to
A d C ti t
Argue for Our
Limitations

11. Is the Trenton Public Schools
Really Broke?
Is it Our
Fault?

12. Let’s Take
Let s
a Look

13. First some
Context…

14. This Analysis is
grounded in the
following assumptions:
g p

16. The General Fund is used to…
“provide a full range of educational
programs for students.”
students.”
Plant Moran - June 30, 2007
30

17. This analysis views Teachers as the
district’s
di t i t’ most valuable single asset.
t l bl i l t

18. 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.

19. The financial
story of a school
y
district cannot
g
be told through
any single
financial
measure, such
as fund surplus.
p

20. Only an accumulation of financial information
and comparisons, taken together, offers an
accurate picture of a district’s financial health.
Last…

21. It is not enough to show how
the district simply made
“ends meet.”

22. What is critical is showing how tax
dollars were actually used to deliver…
deliver
Maximum Educational Impact.

23. 2004-
2004-2008 Financial Analysis
y
Past Performance

24. 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.

25. 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

26. 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

27. 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

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

29. 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

30. 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.

31. Teacher Insurance Costs
The District Commits 6.7¢
To Instructional Health Benefits

32. 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.

33. Instructional Retirement Costs
The District Commits 5.9¢
To Instructional
Retirement Benefits

34. 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

35. 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

36. 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

37. 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)

38. “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

39. 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.

40. 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

41. Custodial Health Costs
The District Commits 0.82¢
To Custodial Health
Benefits

42. 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

43. “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

45. 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.

46. What b t G
Wh t about General Fund
lF d
Expenditures for
Non-
Non-Educational
Purposes?

47. 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

48. 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

49. Are there more effective uses
of those General Fund Dollars
to
t promote student learning?
t t d tl i ?

50. Financial Capacity
Does the District have the capacity to
meet it’s ongoing financial obligations?

51. 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

52. 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

53. 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

54. Aligning Revenues &
Educational Capacity
d l
How Connected are the
District’s Resource
Allocation Practices with its
Core Educational Strategies?
g

55. 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.

56. 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

57. 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

58. 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

59. 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)

60. “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

61. 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?

62. Financial Forecast

63. 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 ?

64. 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.

65. 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.

66. 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.

67. 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

68. 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

69. 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

70. Here i the real
H is th l
Bottom Line
Line…

71. 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.

72. 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?

73. You can’t get there by chasing
rainbows…
Most “cheap” deals are
expensive down the road.
road

74. You can only get there by…
by
Planning Ahead
Pl i Ah d