Illinois K 12 Regional Shared Services Initiative Shared

© © Illinois K 12 Regional Shared Services Initiative Shared Services Capabilities for K 12 Education Operational Overview & Panel Discussion Session IASBO 55 th Annual Conference Illinois Association of School Business Officials Panelist/IASBO Copy Synch-Solutions 2006© – Confidential

© Meeting Agenda/Purpose © Illinois K 12 Regional Shared Services Initiative • Facilitate understanding and goals for shared services • K 12 Shared Services already in use • Gain understanding of other shared services transformation efforts in government and commercial • Questions & Answers Illinois Association of School Business Officials Synch-Solutions 2006© – Confidential

© Introduce the Panel Team © Illinois K 12 Regional Shared Services Initiative Rob Grossi, Bloom Township School Treasurer, his office currently manages a fully operational finance-finance/payroll shared services facility in support of 16 school districts in South Suburban Cook County Matt Miszewski, Chief Information Officer, State of Wisconsin and leading Wisconsin’s IT Shared Services Initiative Andy Estep, Deputy Director, State of Illinois Department of Central Management Services; CMS initiated a shared services model of consolidation and the effort has resulted in a initial realization of $529 million worth of savings. Amy Jo Clemens, Regional Superintendent, Regional Office of Education, Lee & Ogle Counties and IARSS Chairperson for the Illinois K 12 Regional Shared Services Initiative Dan Fallon, Partner - Accenture Government Consulting Practice; Shared Services & Infrastructure Optimization; Accenture is one of the largest business consulting companies in the world and leads many state-level and country-level shared services efforts Mike Maher, Shared Services Practice Leader: K 12/Government Shared Services, Synch-Solutions Illinois Association of School Business Officials Synch-Solutions 2006© – Confidential

© © Shared Services – Critical First Point Illinois K 12 Regional Shared Services Initiative SHARED SERVICES = ADMINISTRATIVE/ OPERATIONS Illinois Association of School Business Officials Synch-Solutions 2006© – Confidential

© © Shared Services – Critical First Point Illinois K 12 Regional Shared Services Initiative SHARED SERVICES = ADMINISTRATIVE/ OPERATIONS (And this is not just about technology) Curriculum-side Services Illinois Association of School Business Officials Synch-Solutions 2006© – Confidential

© © Panel Insight Illinois K 12 Regional Shared Services Initiative Regional Superintendent Amy Jo Clemens, is the Chairperson representing the IARSS interest in developing a shared services operating pilot (for 20 school districts) 1. In many aspects, school districts already leverage shared services, describe some of the areas. 2. Where do you envision school districts being able to best leverage a shared services operating model? 3. As an educator, what is the core mission of a school district? Are school districts holding true if there are better ways to achieve the “backoffice” operational/administrative functions? 4. In many states, much of the non-teaching aspect of school district operations are “outsourced” to 3 rd party providers (Laidlaw, Sodexho, etc. ); There currently is a proposal to create a regionally-based shared services platform that would be administered by the ROE’s, what do you believe is the risk for a local school district? (Joe Mc. Donnell, Bremen Township to respond as well) 5. Why do you believe school districts are resistant to moving to a shared services model, yet so many districts are now facing significant financial challenges? Illinois Association of School Business Officials Synch-Solutions 2006© – Confidential

© © Shared Services – Represents Out-of-the-Box Thinking Illinois K 12 Regional Shared Services Initiative Traditional Operating Model Each School District Owns & Manages its Own Administration/Operations Illinois Association of School Business Officials Synch-Solutions 2006© – Confidential

© © Today – Faced with Significant Economic Impacts Illinois K 12 Regional Shared Services Initiative Operating Costs, Salaries, Healthcare, Special Education, etc. , continue to spiral upwards, while Revenues, (referenda, tax base, interest) are not keeping pace (and in many cases, even declining) Costs Financial Distress Number of Districts Revenues Operating Surplus Balanced Budget Illinois Association of School Business Officials Synch-Solutions 2006© – Confidential Deficit Spending

© © Shared Services – Represents Out-of-the-Box Thinking Illinois K 12 Regional Shared Services Initiative Traditional Operating Model Each School District Owns & Manages its Own Administration/Operations Illinois Association of School Business Officials Synch-Solutions 2006© – Confidential

© © Shared Services Illinois K 12 Regional Shared Services Initiative Shared Services The premise behind Shared Services relies on the fact that decentralized organizations can dramatically reduce operating costs, eliminate redundant headcount and improve the quality of services provided by centralizing non-strategic administrative functions. . Illinois Association of School Business Officials Synch-Solutions 2006© – Confidential

© © Panel Insight Illinois K 12 Regional Shared Services Initiative Matt Miszewski & Andy Estep, at the State level, both Illinois and Wisconsin are deploying shared services initiatives ; 1. Each of you, briefly describe the scope of services that Shared Services is/will be providing within your respective states. 2. What were the drivers that predicated the decision? 3. And where are you in the process? 4. How would you envision these same tenets being applied to school districts? 5. What do you see as the barriers and what/how do you believe those barriers could be removed to enable States to create the vehicle for School Districts to embrace a shared services administrative/operational model? Illinois Association of School Business Officials Synch-Solutions 2006© – Confidential

© © Shared Services in Public Sector - Education Illinois K 12 Regional Shared Services Initiative Shared Services The premise behind Shared Services relies on the fact that decentralized organizations can dramatically reduce operating costs, eliminate redundant headcount and improve the quality of services provided by centralizing non-strategic administrative functions School Districts/Government Entities of Tomorrow Changing the Paradigm Borrowing (Best Practices) from Industry & Leveraging to the Public Sector Illinois Association of School Business Officials Synch-Solutions 2006© – Confidential

© © Shared Services – Borrow from Industry & Leverage to Education Illinois K 12 Regional Shared Services Initiative Shared Services Operating Model Each School District Still Manages Its Own Administration/Operations, but Shares the Infrastructure & Support Costs and Functionality Illinois Association of School Business Officials Synch-Solutions 2006© – Confidential

© © Operational Drivers Illinois K 12 Regional Shared Services Initiative We have put our public schools in a terrible bind by pitting our demand for high student achievement and a higher quality workforce against declining state and local funding. 4 The above quote points specifically to a classic business case idiom: How can more be done with less? § § § Currently, there are 4 school districts under the School Finance Authority (SFA), 79 on the Financial Watch List and 111 on the Financial Early Warning List; In 2002, 61% of the school districts were operating with deficit spending; In 2003, the number is projected to rise above 75%; Over 25% of the districts that have been operating with deficit spending have been doing it for > 3 years Over the past 5 elections >65% of the proposed operational referenda failed. Even with the recently announced increases in school funding, the number of schools that are reducing programs and cutting teachers & staff, continues to increase As with School Districts, greater numbers of county & local government entities are being forced into deficit spending 4 The Condition of Public Education Illinois 2002 Report; Published by Illinois State Board of Education Illinois Association of School Business Officials Synch-Solutions 2006© – Confidential

© © Shared Services SB 3000 Synopsis & Overview Illinois K 12 Regional Shared Services Initiative In September of 2004, Governor Blagojevich signed the 2004 Education Reform Act (SB 3000)1 Within the vision of the legislation, the bill identifies ways to provide industry -driven, best-of-class operational and administrative solutions to help local school districts reduce their operating expenditures; Within the language of the Public Act (93 -1036), the Illinois Legislature provides: § For the creation of Regionally-based Administrative Technology Services Centers; § ISBE will assist school districts in pooling administrative or other services and facilitate cooperation between school districts that may be able to achieve economies of scale through shared services; § The State Board of Education may exercise this power in cooperation with the Regional Superintendents of Schools § Participation is voluntary Shared Services is not about school district consolidation, but to further enable local school districts to continue to maintain their local autonomy and control, while leveraging proven solutions to reduce their overall administrative and operational costs/expenses. Illinois Association of School Business Officials Synch-Solutions 2006© – Confidential

© © K 12 Business Case/Value Proposition Illinois K 12 Regional Shared Services Initiative By applying the “lessons learned” by industry, the opportunity exists today to create greater efficiencies, collaboration of services and value by the Regional Offices of Education to the local school districts and subsequently, to the communities that they serve. Greatest benefit of a shared services model is to dramatically reduce application/ infrastructure & operational costs. Additional benefits include: § Dramatically reduce operational redundancies within local districts, regionally and within the Illinois State Board of Education § Equalize and improve the overall support services capabilities across all districts § Provides for newest technologies, without the total cost of ownership (shared) § FTE reductions would be effected primarily with natural attrition and retirements – as opposed to layoffs or RIF actions § Enables local entities to continue to maintain autonomy and control Illinois Association of School Business Officials Synch-Solutions 2006© – Confidential

© © Panel Insight Illinois K 12 Regional Shared Services Initiative Dan Fallon, Partner at Accenture has been involved in Shared Services projects not only in the Public Sector, but also in numerous Fortune 500 efforts 1. Why do the majority of the Fortune 500 embrace shared services (collectively the State’s 878 school districts have combined budgets of about $23 B which equates to somewhere between Coca Cola #89 and #91 Aetna, so Illinois K 12 is a very significant collective entity), would some of those same reasons be applicable to school districts? 2. Over time many corporations got away from their core business, we are now seeing trends where those corporations are focusing their attention, back to their primary business, could the same rationale be equated to government/school districts? Are administrative/backoffice functions core or something that could be better shared/operated from a central capacity? 3. What are the areas that shared services could bring the greatest return/value? 4. What do you believe are the challenges that school districts face? Are they similar/different to Corporations and what did Accenture do to mitigate those challenges? Illinois Association of School Business Officials Synch-Solutions 2006© – Confidential

© What we have heard from you © Illinois K 12 Regional Shared Services Initiative § § § Trust Works ok now, why change? Who’s going to pay for this? We do not want to lose control of our data! Where is this working now? Significant business process and change management requirements Initial trade-off of development and implementation costs to justify cost reductions and savings – threshold ROI Requires significant collaboration, participation (“buy-in”) and commitment by districts to gain economies of scale/efficiencies Would require intra and inter-district cost (re) allocations Political implications/impacts Fear of loss of locally based jobs The (proverbial) well is running dry, we must seek aggressive and alternative solutions to enable our communities to continue to achieve Illinois’ K 12 educational objectives A member of the Illinois State Senate, January, 2005 Illinois Association of School Business Officials Synch-Solutions 2006© – Confidential

© Closing Comment & Questions © Illinois K 12 Regional Shared Services Initiative Comments by the Panel: Shareholder or taxpayer value, are they the same and if so, do you believe that shared services could better enable school districts achieve their core mission more effectively? Why? Questions (copies of the presentation and supporting material has been provided to IASBO and can also be found at www. k 12 sharedservices. org, which is a site specifically focused upon K 12 Shared Services information) Illinois Association of School Business Officials Synch-Solutions 2006© – Confidential

© © Panel Insight Illinois K 12 Regional Shared Services Initiative Rob Grossi, Bloom Township School Treasurer, his office currently performs the financial function/support for 16 south suburban school districts; 1. Highlight the scope of services 2. Although 13 of the districts are required by statute to use your office, 3 additional school district and 1 ROE office are now leveraging the services that your office provides. Why are these additional school districts now using your office’s services? 3. Is cost the sole driver or is there additional intrinsic drivers/value? 4. How significant have the impact been for the 3 new school districts to change their operations, and although the benefits have yet to be fully realized, overall what do you believe the opinion will be? 5. As a benchmark, what do you believe your overall cost is to run these school district’s payroll? Illinois Association of School Business Officials Synch-Solutions 2006© – Confidential