Step One:
Remove any pockets from the shirt.
Step Two:
Cut the top portion of the shirt, right under the arms or whatever length you want your skirt to be. (Remember to allow 1/2" for the seam.)
Step Three:
Sew the elastic band to the top of the skirt. Pull the elastic band while sewing, so the skirt will gather and it'll expand when you put the skirt on.