Financial Update and Impact Pinconning Area School District January 2010

Michigan and National Economy National recession is expected to last until at least into the first quarter of 2010 Michigan – recession projected to bottom out in the summer quarter of 2011 Michigan - Lost 540,000 jobs since 2000 Michigan - Projected additional job loss of 397,000 through year 2011 Unemployment rate of 15% for 2009 Data from University of Michigan and Dana Johnson, Chief Economist – Comerica Bank and Maureen Maquire, economist and President of ThinkResearch and CSNews Research Parnter on the Forecast Study

Effect on PASD since 2002 Per pupil funding – Increased 1.8% per year Employee retirement – Increased about 3.5% per year Health insurance – Increased over 5% per year (even with benefit adjustments) Student enrollment – Declined 3.1% per year General Fund revenue - $13.9 million for Revenue has decreased an average of 1% per year for seven years.

Why is enrollment declining? Birth counts in Michigan were 153,000 in 1990 and were 122,000 in 2008 (about 20% decline) PASD Kindergarten down about 20% since 2001 Parochial – enrollment is down 40% from 2001 PASD graduates around 135 seniors each year, but only has about 100 kindergartners.

Cumulative Cost of Declining Enrollment YearFoundationAllowanceYear/YearEnrollmentDeclineYear/YearLostRevenue ‘02-03$6,70083$ $6,70054$361, $6,70027$180,900 ‘05-06$6,87565$446,875 ‘06-07$7,08586$609,310 ‘07-08$7,20470$504,280 ‘08-09$7,31634$248, $7,15188$629,288 Cumulative Enrollment Decline Cumulative Lost Revenue 83$556, $917, $1,098, $1,545, $2,154, ,659, $2,908, $3,537,297 Total $15,378,0311

Budget Adjustments Teaching and support positions reduced or eliminated to reflect reductions in enrollment Administrative positions eliminated and combined Health Insurance benefit changes and staff premium contribution Single bus route for transportation Closed Garfield Elementary Food Service charged more for overhead

Budget Adjustments Implemented Pay to Participate for HS and MS Athletes Staff wage freezes Reduced school/calendar days Community Education programs eliminated Sub-contracted out teacher substitutes Reduced Building and Department Budgets

Advantages and Disadvantages of a Buyout Advantages Avoids layoffs Avoids unemployment costs Saves money over one or two years Significant short-term savings Disadvantages Disrupts normal retirement patterns Mass exodus of experienced teachers Costs the district money over time

Why Doesn’t a Buyout Work? Generally, people can’t afford to retire more than two years early Buyout gives away the savings between step 10 and step 0 Each subsequent year, the replacement teacher is one or two steps ahead on the salary schedule (prematurely hired instead of the normal replacement process)

What is the Biggest Issue Facing PASD? Health Insurance? Retirement Rate? Lack of Funding From the State? Fuel or Utility Costs? Although all of the above are important, one of the biggest issue facing PASD is: DECLINING ENROLLMENT

History of Declining Enrollment Fall K-12 Enrollment Counts

Enrollment by Level Fall 2002 & 2009

Enrollment Decline by Level Fall 2002 to 2009

Elementary Enrollment % Decline by School to % Loss 25% Loss 36% Loss

Fall K-12 Enrollment Projected Through 2013 Loss of 8%

% -8.5% -3.9% +31.5% Major Changes in State’s Demographic Composition Ahead

Outlying Elementary School of Choice Currently four students with school of choice at Linwood Elementary. Currently two students with school of choice at Mt. Forest.

Elementary/Middle School Grade Level Comparison of Districts K-4 Elementary / 5-8 Middle School –Standish K-5 Elementary / 6-8 Middle School –Arenac-Eastern –AuGres –Bangor –Bay City –Essexville K-6 Elementary / 7-8 Middle School –Pinconning

Elementary Building Configuration CentralLinwood Mt. Forest Total Grade K Young Sp Ed 211 Library111 Computer Lab 1 Lab In Library 1 Music/Health121 ISD/Sp Ed Itinerant 100 Title111 Empty100

So, What Does This Mean? So, What Does This Mean? District-wide, there are 11 elementary rooms not being used for core K-6 classrooms. Taking all the classrooms and an average of 27 per class, student capacity for elementary is over 1,200. –Elementary is currently at a level of 60% capacity. Enrollment at the elementary level is such that the district can operate two elementary schools instead of three.

What About Other Levels? What About Other Levels? Enrollment will continue to decline at middle school and high school levels over the next few years as the low numbers trickle upward. Enrollment at the middle school is such that we could move 6 th grade up to middle school, which would compare with other districts in the area. Adjustments will continue to be made each year with staffing levels. We will continue to take advantage of opportunities to reduce expenses in all areas.

Cumulative Cost of Declining Enrollment YearFoundationAllowanceYear/YearEnrollmentDeclineYear/YearLostRevenue ’10-11$7,31654$395,064 ’11-12$7,31628$204,848 ’12-13$7,31654$395,064 ’13-14$7,31635$256,060 Cumulative Enrollment Decline Cumulative Lost Revenue 54$395,064 82$599, $994, $1,251,036 Total $3,240,988

Budget Projections – Decline in Enrollment (54 x $.6,900) $372,600 Step Cost $120,000 Health Insurance Increase Cost (5% increase) $86,000 Retirement Rate Increase (1.5% increase) $20,200 Structural Deficit from $800,000 Decrease in Foundation Allowance $250 per student $385,000 Total Negative Adjustments Total Negative Adjustments$1,663,800

Consideration of Facility Consolidation Board has been informed about the issue Board meetings and worksessions will continue to communicate the issue publicly Plan for elementary facility consolidation at the end of Cost savings of approximately $250,000 to close one elementary Closing one school may affect the other school attendance boundaries

Board Meetings/Worksessions Will continue to review information such as enrollment history and projections, boundaries, building information, utilities, mechanical systems, staffing, technology Purpose – Communicate to the Board and community that an elementary school needs to be closed at the end of the school year

Potential Timeline January – Board Meeting Presentation February – Site Committee to review current quality of all elementary buildings February – On-Line Budget Survey available February/March–Updates and information at Board Meeting and Worksessions March 8 – Committee reviews information to close an elementary school building March 22 – Board Vote on recommendation to close an elementary End of March– Kindergarten Registration begins Late Spring 2010 – Transition meetings are held

Communication about the Process Link to presentation information will be on the Pinconning Area School's Website at Updates at each Board meeting On-Line Budget/Financial Survey Presentations to staff and community during February/March

Strategic Goals Strong Fiscal Foundation Quality Extra-Curricular Programs Facilities K-12 Quality Technology Plan Appropriate Staffing/Professional Development Quality Curriculum