UPLAND UNIFIED SCHOOL DISTRICT Charting a Safe Course During a State Fiscal Crisis MAY REVISE 2009 Confronting the Brut

1. UPLAND UNIFIED SCHOOL DISTRICTCharting a Safe CourseDuring a State Fiscal CrisisMAY REVISE 2009 Confronting the Brutal Facts Presented by Gary Rutherford, Ed.D. Superintendent June 16, 2009

2. Things have gone from bad to worse: State revenues have fallen dramatically Expenditures continue to rise on the natural Borrowing is more difficult & more expensive California continues to lose jobs Increased demand on social services There is no way to “trim around the edges” and not deal with the structural imbalance between revenue and the cost of public services There will be more cuts to public education – and all major areas of the state budget OVERVIEW OF THE STATE BUDGET

3. Proposition 98 is on a rollercoaster ride: Cuts to revenue limit & cuts to categoricals Flexibility within categorical programs Addition of one-time federal funds Changes to Maintenance of Effort mandate And much, much more to come What does this all mean? Less of everything for California’s children Coupled with cuts to health and welfare programs, the most vulnerable Californians – mostly children – are in for a very tough year OVERVIEW OF THE STATE BUDGET

4. The already reduced budget adopted in February is reduced by another $24.3 billion Major cuts to K-12 education, welfare, prisons and higher education No suspension of Prop 98 – but it’s not needed because the floor has dropped No COLA and a huge deficit factor Lottery and other special election proposals are dead More cuts to K-12 ($3.9 billion) between February and the May revise Some additional flexibility anticipated, not yet approved Even more funding deferred- creates a cash flow burden Dramatically lower funding for every aspect of government services MAY REVISION FEATURES

5. The projected deficit is now $24.3 billion with the failure of the May 19 special election ballot measures and falling revenue projections Major Budget-balancing proposals: $16 billion in cuts/savings, with $7.2 billion from Prop 98 $2.8 billion from revenue accelerations and fees $2 billion from local government borrowing $3.5 billion from program consolidations, fund shifts and other changes MAY REVISION PROPOSALS

6. STATE & FEDERAL “SOLUTIONS” • Categorical Program Flexibility - Linda Kaminski, Ed.D. • American Recovery and Reinvestment Act (ARRA) - Sherri Black • Increase in Deferred Funding - Steve Cary

7. CATEGORICAL FLEXIBILITY • Home-to-School transportation will be reduced by 65% • There is pending legislation to increase the number of categorical programs to allow districts more flexibility in spending and “sweeping” carry-over balances

8. AMERICAN RECOVERY AND REINVESTMENT ACT • Stimulus money: one-time money spent by June 30, 2011 • Approximately $3.1 million, not including restricted Title I and IDEA (special ed) • Intent is to keep employees working • Will be used to pay annual PARS payment for early retirees in years 1 and 2 • Balance will help to intercept further lay-offs (i.e. maintain CSR at 24:1 in K-3 in 2009-10)

9. DEFERRED FUNDING • As the State runs out of cash, an increasing number of payments to school districts will be deferred • In UUSD, these “delayed” payments vary in size from $2 to $6 million • While the income is delayed, the expenses must be paid on time • District is protecting a fund balance of $10 to $12 million for this purpose – will be monitored weekly

10. REVENUE LIMITS FOR 2009-10 • The May Revision recognizes the statutory COLA at 4.25%, down from an estimated 5.02% in the January Governor's Budget, but does not propose to fund it • The May Revision proposes to cut revenue limits an additional $1.894 billion from the 2009 Budget Act level • The new proposal will result in a base-revenue-limit-per-ADA reduction of 3.45% for the average district in 2009-10

11. 2008-09 REVENUE LIMITS: UUSD *0.88572 deficit factor = 88.572% funding, or a 11.428% deficit

12. Jan. 20092008-09 Feb. 20092008-09 June 2009May Rev. 5.66% COLA .68% 4.56% 2.63% 6.41% 2007/08 LEVEL $5,656 $5,544 $5,437 REVENUE LIMIT FUNDING: 2008-2009 Nov. 20082008-09 $6,138 $5,862

13. 2009-10 REVENUE LIMITS: UUSD *0.82033 deficit factor = 82.033% funding, or a 17.967% deficit

14. $6,447 5.1% DEF 13.1% DEF 17.97% DEF FEBRUARY 2009 $5,603 $5,249 $6,120 REVENUE LIMIT FUNDING: 2009-2010 MAY REVISE JUNE 2008, projected

15. Bumpy Road of Per Pupil Funding

16. The last time per pupil funding was near the projected 2009-10 level was: 2005-06 In that year, total compensation (salary, benefits, step/column) totaled: $67,618,293 CONFRONTING BRUTAL FACTS

17. The projection for 2009-10 total compensation (salary, benefits, step/column) is: $76,288,518 And this is after reductions in force and retiree savings have been factored in. CONFRONTING BRUTAL FACTS

18. 2005-06 $67,618,293 CONFRONTING BRUTAL FACTS 2009-10 $76,288,518 A difference of: 11.4%

19. Q: How will Upland USD respond? A: We will “stay the course.” • Enhance the bottom line by the spending and hiring freeze implemented in November (this is one-time money) • Conservative, planned deficit spending using supplemental reserves, again a temporary ‘fix’ • Exercise categorical flexibility in state budget with discretion; factor in Federal Stimulus Package once confirmed

20. How will Upland USD respond? • Identify additional revenue sources • Identify additional cuts in spending • Seek negotiated solutions with employees • Hope for the best; plan for the worst • Communicate and stay focused • Advocate, advocate, advocate

21. BUDGET ACTIONS IN 2008-09 The ending balance for 2008-09 was enhanced by $5.7million through spending cuts, funding shifts, planned deficit spending of supplemental reserves, and reductions in management, certificated and classified positions carried forward from June 2008. And then the May Revise introduced an additional $2.5 million in lost revenue.

22. 2009-10 PROPOSED BUDGET The final budget for 2009-10 includes a staggering $10.5 million in additional spending cuts to address reduced funding and enhance the bottom line to balance the budget over a three-year window of reduced funding. Problem: About $6.6million of these actions spend “one-time” money (i.e. AARA) that must be replaced in the out years for a positive certification.

23. 2010-11 SOLVENCY SCENARIO Even as the state budget projection begins to stabilize with a modest funded COLA (.90%), the district must replace the $6.6 million in last year’s budget with ongoing actions.

24. 2011-12 SOLVENCY SCENARIO With current budget and spending assumptions in place, included a projected funded COLA (2.4%) the district will need to cut an additional $3.8 million to maintain a positive certification.

25. The earlier spending cuts, including negotiated solutions, can be achieved - the greater the compounded impact will be on the long-term budget. For example, a $1million reduction in 2009-10 spending that carries forward will reduce the need to cut in 2010-11 from $6.6million to $4.6million, based on current assumptions. AN IMPORTANT CONSIDERATION

26. June 16- Restructure Business Division to strengthen, enhance fiscal services - Adopt 2009-2012 Final Budget - Approve Resolution to Negotiate Salaries, Work Year and annual compensation in 2009-10 Ongoing- Seek negotiated settlements for 2009-10 and beyond - Monitor cash flow on a weekly basis - Continue spending/hiring freeze - Continue advocacy for resilient and adequate public school funding NEXT STEPS

27. www.upland.k12.ca.us Email: budget@upland.k12.ca.us