` Proposed Final Budget May 18, 2016

EPS spends less than 80% of PA school districts on a per pupil basis Budget increase needed to spend at county average - $6.9 million Budget increase needed to spend at state average - $28.7 million EPS spends less per pupil than 80% of PA school districts

Raising real estate taxes is not a viable solution %Amount Worst case tax increase needed to balance budget 22.9%$8,853,000 Best case tax increase needed to balance budget 7.9%$3,042,000 Tax increase allowed (with exceptions) 5.0%$1,948,200 Tax increase allowed (without exceptions) 3.7%$1,428,200

EPS has a high real estate tax rate and a low cost per pupil. Why does the district continue to struggle financially? How does EPS compare with the other 500 PA school districts? DATA POINTRANK Median Household Income - $33, th (bottom 3%) Economically Disadvantaged – 80.1%12 th (top 3%) English Language Learners– 9.2%11 th (top 3%) Charter Enrollment – 16.9%11 th ( top 3%) Special Education Students -16.9%133 th (top 27%) State & Local Revenue per Pupil (ADM) – $11, th (bottom 4%) State, Local, Federal Revenue per Pupil (ADM) – $12, th (bottom 12%) 4

Due to inadequate funding, EPS student’s do not have the same opportunities as student attending surrounding districts A $1,000 increase in EPS’s per pupil funding would increase annual revenues by $13,576,000 5

EPS’s state and local revenue per pupil (ADM) is the lowest in IU #5 School District State & Local Revenue per Pupil (ADM) Fast Facts Median Household Income Economically Disadvantaged Special Education English Language Learner Charter Average Daily Membership Conneaut $15,044 $44, %16.4%0.1%6.0%2, Wattsburg Area $14,718 $62, %20.8%0.1%3.0%1, Harbor Creek $14,353 $62, %14.5%0.1%2.0%2, Fairview $14,311 $76, %10.0%0.7% 1, Iroquois $14,263 $52, %17.7%0.4%2.4%1, PENNCREST $14,132 $46, %16.4%0.3%3.6%3, Warren County $13,764 $44, %17.4%0.1%7.4%4, General McLane $13,527 $52, %14.5%0.3%1.9%2, Corry Area $13,478 $39, %21.7%0.1%2.1%2, Crawford Central $13,284 $43, %16.8%0.2%3.0%3, Fort LeBoeuf $13,085 $54, %16.0%0.6%1.6%2, North East $12,728 $49, %11.1%0.1%2.0%1, Union City Area $12,648 $45, %13.6%0.0%2.4%1, Northwestern $12,421 $50, %14.8%0.2%2.5%1, Millcreek $12,012 $55, %13.6%1.2%1.8%7, Girard $11,848 $49, %16.1%0.2%3.4%1, Erie City$11,143 $33, % 16.9% 9.2%14.4%13, AVERAGE $13,339 $50, %15.8%0.8%3.5%3, To meet the IU #5 per pupil average, annual revenues at EPS must increase by $29,814,741 To meet Conneaut’s per pupil funding, EPS’s revenues would need to increase $52,963,253 annually 6

Tonight’s Task Choose from among the potential cuts / tax increase to achieve a balance ($4.3 million). Note that our revenue assumes the Governor gets at least a $100 million education funding increase. We have heard as recently as yesterday from our legislative delegation that such an increase is unlikely.

Budget Backdrop Our TRAN is questionable. PRAG is doubtful that we will get any bids. If no TRAN, we will need an advance of Basic Education Funding. Usually, a BEF advance is an automatic trigger for Financial Recovery.

Budget Backdrop Due to our funding, we will begin with a negative $2.5 million fund balance. This also may be considered by the Secretary of Education as a cause for Financial Recovery status

Budget Deficit Starting Budget Deficit $ 10,324,133 Cuts Included in Preliminary Budget Central office positions (10) $ 1,385,000 Grant funded professional development & curricular purchases $ 1,324,000 Instructional coaches (22) $ 1,320,000 Retirements $ 1,200,000 Elementary positions (5) $ 300,000 Reduce charter transportation to state minimum $ 250,000 Reduce transportation to state minimum $ 250,000 $ 6,029,000 Current Budget Deficit $ 4,295,133

Preliminary Budget Summary INCREASE /PERCENT BUDGETPROJECTED(DECREASE)CHANGE REVENUES Real Estate Taxes $ 44,903,000 $ 44,933,068 $ (30,068)-0.07% Earned Income Taxes 6,770,000 6,740,000 30, % Other Taxes 946, % Other Local Revenues 2,283,588 4,776,952 (2,493,364)-52.20% State Subsidies 108,671, ,255,208 5,416, % Federal Subsidies 16,727,613 17,527,911 (800,298)-4.57% Other Revenue Sources 1,200,000 3,182,034 (1,982,034)-62.29% 181,501, ,361,174 $ 140, % EXPENDITURES Salaries 72,597,228 74,272,100 (1,674,872)-2.26% Retirement 21,693,250 19,154,600 2,538, % Other Employee Benefits 30,136,341 29,141, , % Purchased Services 13,293,206 14,323,282 (1,030,076)-7.19% Utilities 2,152,100 1,841, , % Tuition 5,500, % Charter Tuition 23,400,000 21,700,000 1,700, % Equipment & Supplies 4,810,219 6,307,096 (1,496,877)-23.73% Debt Service & Other 12,214,282 12,110, , % 185,796, ,350,796 1,445, % Deficit $ (4,295,133) $ (2,989,622) NOTE : state subsidies have been budgeted using half the increase proposed by the Governor. No real estate tax increase has been included.

Major Revenue Variances Compared with Major Revenue Increases State Retirement Subsidy$1,784,300 Basic Education & Ready to Learn Subsidy1,683,058 Rental Subsidy1,600,000 Cafeteria Fund Allocation1,200,000 Pre-K Counts Grant199,475 Major Revenue Decreases GE Grant $2,370,000 Health Insurance Reserves 3,182,034 Federal Grants800,298 Non-Major Variances $25,818 Net Increase in Revenues$140,319

Major Expenditure Variances Compared with Major Expenditure Increases PSERS Retirement Contribution $2,538,650 Charter School Tuition 1,700,000 Health Insurance 695,672 Retirement Incentives/Sick Days 459,900 Utilities 310,200 Major Expenditure Decreases Salaries (excluding subs) $(2,559,372) Equipment & Capital Purchases (1,355,146) Payroll Taxes (160,697) Supplies(141,731) Non-Major Variances (41,646) Net Increase in Expenditures$1,445,830

Proposed Expenditures

Options to Balance the Budget Current Budget Deficit $ 4,295,133 Options to Balance Budget Eliminate art & music (35) $ 2,100,000 Eliminate sports & extra-curriculars $ 1,500, % real estate tax increase $ 1,428,200 Eliminate full-day kindergarten (18) $ 1,100,000 Eliminate police department (5) $ 939,300 Close a high school $ 900,000 Close libraries (15) $ 660,300 Assistant principals (5) $ 400,000 Elementary guidance counselors (6) $ 360,000 Eliminate technology purchases $ 165,000

Budget Timeline May 25, 2016 – Adopt Proposed Final Budget June 29, 2016 – Adopt Final Budget

The Path Forward We have no reason to believe that any assistance will come from Harrisburg. Even the recent Fiscal Code applies the BEFC Fair Funding Formula only to new money, which will take more than a decade just to correct our structural deficit. This does not take into account our building needs, or any improvement of educational resources. It is simply too little, too late.

Possible Closure of our High Schools The PA School Code does not mandate that we provide high school education, only K-8. If we do not offer high school, students would be eligible to attend the high school that is the nearest or most conveniently located to their homes. Or, students may be assigned to high schools in other districts assuming agreements can be negotiated. We would be obligated to pay tuition and transportation costs.

Possible Closure of our High Schools We understand that this is a disruptive solution, and would engage our community and our Erie County school districts in a year-long planning process. There is precedent for this process, although in much smaller districts – Midland Borough SD, Duquesne SD, and Wilkinsburg SD. While we anticipate that this will reduce our costs, the primary reason for this change is to ensure equity for our children.

What should we do? Are we willing to cut our way to another balanced budget? Are we willing to deny our children resources that are taken for granted in every district in Erie County? Are we willing to spend less on our children than 85% or 90% of the districts in Pennsylvania, when even those in Recovery and receivership haven’t cut as much as we have?