The Stark Reality:

2. The Stark Reality: • We cannot cut our way out • We cannot tax our way out • With a combination of our reductions already made and additional cuts and use of our Rainy Day Fund we can reach only a temporary “equilibrium” through 2011-2012 school year. • We cannot afford current staffing. • We will be different—not done! Slide is from spring 2011

3. Determining what’s next… Slide is from spring 2011 • After July 1 • Review legislative outcomes • Of financial and programmatic impact • For future planning • Determine program change options to shed cost and sustain the most important opportunities that protect our student outcomes in a new era for public schools • These are the tasks of leadership

4. Reduction in Force Information There are three basic options developed by the Leadership Team to cover next year’s losses. It is necessary for the Board to authorize RIF this evening, if you are going to do so. • Option 1: Use RDF for entire $1.75M shortfall next year • Option 2: RIF 16 and pay $900K from RDF • Option 3: RIF 33 and hold RDF for tax cap losses and future deficits projected by financial experts Slide is from spring 2011

5. Last April – the Board Chose: Slide is from spring 2011 GF Deficit = $3,122,954 RDF Balance at June 30, 2013 would be ZERO.

6. Rainy Day Fund (RDF) • The $903K in RDF expenditures previously authorized by the Board will be completed by June 30, 2012 • Last year’s choice of Option 2 lowered RIFs needed through use of nearly $1M in RDF • The Board’s potential courses of action for 2012-2013 are similar to those for ‘11-’12

7. 2012 Budget Book – Page 133 Budget Prep Projected GF Deficit = $2.8 million

8. Expected Effect of Restructure

9. Since July, rates have remained favorable Actual bond sale is expected around the third week of January

10. Why is the projected General Fund deficit for 2012-2013 so much larger than the deficit for 2011-2012? The Debt Restructuring helps: Allows full CPF Payment of max legal amount for utilities & property Insurance New GF deficit for2012-2013 projection should be $2.5 million New Projected GF Deficit = $2.5 million

11. General Fund cliff: Over $1.4 million less in funding for 2012-2013 than in 2011-2012 1. The expiration of the federal stimulus grant at the end of the 2011-2012 school year – $1.04 million 2. The continuation of the $1.6 million state funding cut in 2011 into 2012 with an additional $300,000 reduction 3. Exhaustion of the 90-16 funds ($125K) used to recall two teachers

12. Options for Action • The options for 2012-2013 are the same as those presented last spring for 2011-2012: • The Board can fund all of the General Fund deficit using Rainy Day Funds alone. • The Board can fund a portion of the deficit with a combination of Rainy Day Funds and a RIF. • The Board can eliminate the deficit using Reduction in Force alone.

13. Options 1, 2 and 3:

14. Option One: Use of $2.5 million of Rainy Day Fund for 2012-2013 school year No RIF required Would completely deplete RDF in 2013. No emergency reserve left. Would create yet another funding cliff in 2013-2014, requiring a substantial number of additional RIFs.

15. To consider about the RDF • This money is our only reserve against contingencies, e.g. major building system emergency repairs, etc. • The funding cliff expected in 2012 and for the 2012-2013 school year may be made worse by expenditures of RDF money now. (Steepens the drop!) • Changes to the funding formula and issues such as the charter school and voucher bills before the legislature may materially affect our future funding negatively. Slide is from spring 2011

16. To consider about the RDF • Using this one-time money to buy a temporary fix for continuing expenses destines you to “buy” the same position(s) again or downsize more in the next cycle. • Use of the RDF as the fix is an unsustainable approach. Our decline in revenue requires a decline in spending in the largest area of expenditure for our district. Slide is from spring 2011

17. Option Two: Use approx. $1.25 million of the Rainy Day Fund for 2012-2013 school year RIF required – Preliminary estimates would be 10 – 15 teachers* Would reserve some RDF for 2013-2014, leaving approximately $1.4 million for emergencies or use. Would not guarantee no further RIFs needed in 2013-2014.

18. Option Three: Use no Rainy Day Funds for 2012-2013 school year RIF required – Preliminary estimates would be 20 – 25 teachers* Would reserve remaining RDF for 2013-2014, leaving approximately $2.7 million for emergencies or use. Still could not guarantee no further RIFs needed in 2013-2014.

19. Comments on Options 2 and 3: • *The estimated number of RIFs includes consideration of planned retirements and related cost savings from non-replacement (where possible) or lower costs for replacements. Additional attrition due to resignations or other unforeseen events would be replaced as needed. This is critical for program planning. • Assumes contractually required salary increases for teachers • Assumes no additional private fund raising (e.g. 90-16) • Assumes no additional RIF for non-certified staff • Assumes no changes in school funding levels by the legislature in 2012

20. Possible RIF Mitigations • Known teacher retirements already submitted total 5 teachers for 2012 and 8 in 2013. • Earned Income proceeds and elimination of remaining ECA subsidies could reduce the RIF number by another 4 to 6. • However, certain pending legal actions may offset these mitigations or even exacerbate the RIF need.

21. Options 1, 2 and 3: