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Encinitas Union School District

Encinitas Union School District. 2011-12 Proposed Budget June 28, 2011. 1. Themes for the May Revision. We still have three major problems in education finance: Low levels of funding – probably last in the nation now

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Encinitas Union School District

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  1. Encinitas Union School District 2011-12 Proposed Budget June 28, 2011

  2. 1 Themes for the May Revision • We still have three major problems in education finance: • Low levels of funding – probably last in the nation now • Volatility of funding – year-to-year funding levels are totally unpredictable • Uncertainty of funding – estimates of funding are wildly uncertain from January to May to Budget enactment and beyond • We will have all three of these problems until: • The economic condition of the state improves and expansion begins • State revenues and spending reach an equilibrium • Education spending rises in priority at the state level • There is a stable, predictable source of ongoing funding for education • Proposition 98 has not been successful in protecting education • We have done worse than the rest of the State Budget in both good times and bad

  3. 2 The May Revision • The May Revision is in keeping with the general theme of the Governor’s January Budget Proposal • Big cuts, already enacted, for the non-Proposition 98 side of the Budget • Elimination of redevelopment agencies and redirection of property tax • Realignment of programs from the state to the local level • Extension of temporary taxes by vote of the people • Relatively level funding for K-12 education • Big funding cuts from community colleges and higher education • Some things have changed • Tax revenues have increased, independent of tax extensions • The Governor has had no success getting Republican support for taxes • Increased pressure for pension, business, and other reforms

  4. 3 The May Revision • Some things remain the same • The State Budget is still dependent upon future events – extension of taxes • The State Budget is balanced only if revenues are increased by some future event • “Electioneering” will continue with education funding threatened if new revenues do not materialize • Education funding is the “hot button” for voters to approve taxes • Voters will not extend taxes to increase welfare payments or to increase funding for prisons – so we can expect education to remain part of the “electioneering”

  5. 4 The Budget Planning Process • Budget planning begins with the Governor’s January Budget Proposal • The Governor’s “flat funding” proposed for 2011-12 resulted in a loss of $19 per Average Daily Attendance (ADA) • He clearly delineated a loss to Proposition 98 of an additional $2.1 billion if the temporary taxes were not extended – another $330 per-ADA loss • The May Revision is a major check point • It has always recommended using the Governor’s May Revision as the basis for the June district budget • This year, the May Revision proposes flat funding, and it is recommend that the June district budget be prepared assuming flat funding on a per-student basis between 2010-11 and 2011-12 • The next major check point is State Budget enactment

  6. 5 Stability for Education • Is this a more stable Budget for education? The experts think “Yes” • Less reliance on tax extensions – only $4 billion at election risk instead of $12 billion • More reliance on ongoing revenues of $6.6 billion • Cuts to non-Proposition 98 side proposed in January have been made $13.4 billion • Proposition 98 has risen, deferrals have lowered, but could be reinstated if needed • Less exposure to suspension of Proposition 98 and no political will to suspend • Overall, it is much safer in May than in January • However, we still need continued vigilance through enactment and beyond

  7. 6 California Economy • The pace of the state’s economic recovery is picking up • In February the state added 96,500 jobs, the best monthly gain since the recovery began • The Department of Finance’s chief economist declared, “We have a recovery on our hands. This was an awfully good report.” • Personal income growth is about 3% in 2011, up from 2.8% in 2010 and-2.4% in 2009 • UCLA forecasts 5.5% for next year • Taxable sales fell more than 14% in 2009 andwill grow about 3% in 2011 • UCLA forecasts 7% growth in 2012 Source: UCLA Anderson Forecast, March 11, 2011, p. 77

  8. 7 California Economy The state faces risks to the economic recovery • California’s housing market continues to be a drag on the economy • Overbuilding during the bubble, home foreclosures during the recession, and tighter credit standards in recovery • Five straight years of employment losses in the construction industry beginning in 2007 • State and local government deficits, with corresponding cuts in public sector employment and transfer payments • Any U.S. or international shocks will threaten California’s growth Source: UCLA Anderson Forecast, March 11, 2011

  9. 8 Risks to the Revised Budget Proposal In January, the key risk to the Governor’s Budget was voter approval of three temporary taxes by July 2011 • New risks to the state spending plan accompany the May Revision: • Tax proposals worth $4 billion could be rejected by the Legislature or state voters • Litigation challenging special fund shifts, social services grant cuts, and realignment proposals • Economic and revenue risks • Turmoil in the Middle East could raise oil prices, triggering inflation and impairing the recovery. The European debt crisis could boost interest rates and limit access to capital

  10. 9 Proposition 98 • Proposition 98 is supposed to provide a minimum guarantee of funding for K-12 education and the community colleges based on the prior year’s funding level, adjusted for workload changes and inflation • For 2010-11, Proposition 98 was suspended by $4.3 billion to $49.7 billion • Because of suspension any increase in current-year General Fund revenues does not automatically increase the minimum guarantee because of the suspension • The May Revision proposed a small increase in Proposition 98 spending of about $100 million related largely to growth in ADA

  11. 10 Proposition 98 • For 2011-12, the May Revision acknowledges an increase in General Fund revenues, resulting in an increase to Proposition 98 above the January Governor’s Budget Proposal of $3 billion in 2011-12 to $52.4 billion • The boost in Proposition 98, however, will not result in an increase in per-pupil funding at the district level because the Governor’s May Revision proposes to allocate the increase in Proposition 98 to: • Reverse $2.5 billion in K-12 apportionment deferrals • Reverse $350 million in community college deferrals • Fund mental health and out-of-home care for special education students, which was previously funded by counties

  12. 11 Proposition 98 and the Tax Extension • The May Revision recognizes additional revenues of $2.8 billion for the current year and $3.5 billion for the Budget year • The new revenues and rebenching add $3.0 billion to the Proposition 98 guarantee for 2011-12 • This reduces the potential drop in Proposition 98, even after loss of the temporary taxes, if that occurs, to $1.6 billion instead of the $2.1 billion projected in January • The amount that could be lost to education without suspension of Proposition 98, therefore, becomes much less than previously projected • At the same time, a reversal of previously planned deferrals eliminates most of the Proposition 98 growth

  13. 12 Proposition 98 Funding

  14. 13 Revenue Limits • The May Revision acknowledges a statutory cost-of-living adjustment (COLA) for revenue limits of 2.24%, up from the estimated 1.67% COLA in January • The Deficit Factor for school districts and charter schools is 19.754%, up from 19.608% in January • The Deficit Factor in the Governor’s January Budget was too high, resulting in an average cut of $19 per ADA in 2011-12 • The May Revision corrects this error and the per-pupil revenue limit funding will indeed be flat

  15. 14 Revenue Limit COLA • The statutory COLA amounts for 2010-11 and 2011-12 are:

  16. 15 Revenue Limit Deficit Factors

  17. 16 Mandate Reimbursements • The Governor’s May Revision reduces funding for mandates by $38.2 million • The reduction reflects the adoption of specific recommendations of the K-14 workgroup on mandate reform convened by the Legislative Analyst’s Office (LAO) • The workgroup could not come to a consensus on recommendations • Based on this work, the LAO supports the following reform option and funding mechanism for mandates: • Preserve only mandates related to accountability, health, and safety • The approach would eliminate all but roughly a dozen mandates and reduce annual costs to about $40 million • Replace the existing reimbursement system with a block grant • The block grant would provide each school district with a standardper-pupil rate for the cost of performing all mandates or a certain subset of mandates

  18. 16 Basic Aid Districts • Senate Bill (SB) 70 (Chapter 7/2011), the Education Trailer Bill, includes a provision of a “fair share” reduction for basic aid districts equal to an 8.92% reduction on the base revenue limit subject to the deficit as of the Second Principal Apportionment for the 2010-11 fiscal year • Basic aid districts will see this reduction coming from state categorical funds for the 2011-12 fiscal year • Three categorical programs, however, are exempt from the reduction: • After School Education and Safety (ASES) Program • Quality Education Investment Act of 2006 • Child Care and Development • There are approximately 124 basic aid districts for the 2010-11 fiscal year,an increase of 55% over the last several years • The increase in the number of basic aid districts is primarily due to the decline in student enrollment and the cuts to the revenue limit

  19. 17 Flexibility Options Continue • SB 70 extends all existing flexibility options by two additional years • The following options extend through 2014-15: • Tier III categorical flexibility • Delaying compliance with most recent instructional material adoptions • Eliminating required routine restricted maintenance and deferred maintenance contributions • Allowing for shortening the instructional year by up to five days • Allowing the deposit of surplus property sale revenue into the General Fund • Other flexibility options: • K-3 Class-Size Reduction relaxed penalties – extended through 2013-14 • Reduction to Reserves for Economic Uncertainty • Minimum is one-third of required levels for 2010-11 and 2011-12

  20. 18 Special Education • Under the May Revision, AB 602 funding is proposed to remain unchanged from the Governor’s January Budget Proposal • Growth is funded, but no COLA • Growing special education local planning areas (SELPAs) would receive $465.4404 per ADA – this rate has not changed since 2008-09 • However, although funding appears stable, there are many issues that remain of concern in special education • Mental health services • Special Disabilities Adjustment (SDA) • Federal law requires that mental health services be provided to students with disabilities

  21. 19 Special Education – Mental Health Services • Governor Brown proposed providing funding in 2010-11 and 2011-12 from a variety of sources, and the Legislature has taken a slightly different tact • Trailer bills have appropriated funds for 2010-11 and 2011-12 as follows: • SB 70 allocates $80 million in one-time funding for 2010-11 • Funding goes to SELPAs following a complicated formula based on the type and amount of services provided • AB 100 (Chapter 5/2011) provides $98.6 million for 2011-12 to county mental health agencies from Proposition 63 (Mental Health Services Act) revenue Major change proposed in May Revision • The Governor proposes to permanently shift AB 3632 services from counties to schools and provides SELPAs

  22. 20 Special Education – Mental Health Services • Major change proposed in May Revision • The Governor proposes to permanently shift AB 3632 services from counties to schools and provides SELPAs with the following funds: • Continuation of $69 million in federal IDEA funding as appropriated in SB 70 • Addition of $221.8 million in Proposition 98 funding for mental health and out-of-home residential services • $98.6 million, per AB 100, continues to be provided to county mental health agencies from Proposition 63 • LEAs can contract with county mental health for these services • Funding will be distributed to SELPAs in a manner similar to AB 602 formulas

  23. 21 Federal Funding Update • The federal government took a page from California’s Budget playbook this year and passed a tardy Budget • Relatively flat funding for most K-12 education programs, but with a few notable exceptions: • Approximate reduction of 10% to Title IIA (Professional Development and Class-Size Reduction) • Elimination of Title IID (Enhancing Education Through Technology) • Approximate reduction of 10% to Title I local assistance entitlements due to increases to required state-level reservations • There is still talk of a reauthorization of the Elementary and Secondary Education Act occurring in the near future, but no action has been taken to date

  24. 22 Apportionment Deferrals

  25. 23 Budget Timeline Reality Bites Official Budget Timeline July August Who knows?

  26. 2011-12 Key Budget Assumptions 24 Following are key budget assumptions for 2011-12 based on the Governor’s Budget:

  27. 2011-12 Key Budget Assumptions 25

  28. 2011-12 Key Budget Assumptions Annual Property Liability Premium of $227,916 Total Regular Ed. FTE budgeted is 215 Step and Column is budgeted for Certificated and Classified employees No salary increases included for any bargaining units Staffing @ 23:1 for K-3, and 31:1 for 4-6 Maintain retiree benefits as they now exist Employer Labor Related Costs: STRS 8.2500% PERS/PERS Reduction 13.0200% Social Security 6.2000% Medicare 1.4500% SUI 1.6100% Workers Comp. 1.2368% Health & Welfare $10,680 26

  29. 2011-12 Key Budget Assumptions Utilities Increase of 11% Funding of $41,822 for safety monitor positions State Funding of Deferred Maintenance of $197,931. District match will be suspended for one more year Site allocation of $35.00 per prior year CBEDS enrollment (will be adjusted at 2011-12 CBEDS) Site allocation of $6.00 per prior year CBEDS enrollment for Media books and supplies 10 days of teacher sick leave per FTE Custodial supplies of $350 per classroom Routine Restricted Maintenance to be funded at 2.5% of total General Fund expenditures if district match toward Deferred Maintenance Fund is suspended for one more year Transportation expense of $532,980 27

  30. Average Daily Attendance 28

  31. Unrestricted General FundRevenues, Expenditures, and Changes in Fund BalanceJune 30, 2011 29

  32. Unrestricted General Fund Revenues 30

  33. Unrestricted General Expenditures 31

  34. Components of the Ending Fund BalanceJune 30, 2011 32

  35. Multi Year Projection 33

  36. Multi Year Projection 34

  37. Multi Year Projection Use of the remaining $2,000,000 from Reserve as Approved during budget planning for future years in 2009-10 Is it going to be $1,000,000 each year? Utilizing State Categorical Programs Tier III Flexibilities to maximum to cover the potential negative impact of $1,724,250 to cover the effect of $330 per ADA over multi years? Increase the current Board approved class sizes to ?: K-3 @ 23:1 4th – 6th @ 31:1 Facilities Issue with smaller classrooms? The impact of the layoffs? Eliminating auxiliary supports? – Reading Teachers, TOSA’s? Eliminating or combining Central Services at the District and School Sites level? Reducing Departments, and Sites discretionary funds? 35

  38. Restricted General FundRevenues, Expenditures, and Changes in Fund BalanceJune 30, 2011 36

  39. Restricted General Fund Revenues 37

  40. Restricted General Fund Expenditures 38

  41. General Fund Expenditures(Unrestricted & Restricted) 39

  42. District Expenditures by Function 40

  43. Child Nutrition FundRevenues, Expenditures, and Changes in Fund BalanceJune 30, 2011 41

  44. Deferred Maintenance FundRevenues, Expenditures, and Changes in Fund BalanceJune 30, 2011 42

  45. Special Reserve – Non Capital FundRevenues, Expenditures, and Changes in Fund BalanceJune 30, 2011 43

  46. Special Reserve - Post Employment Benefits FundRevenues, Expenditures, and Changes in Fund BalanceJune 30, 2011 44

  47. Building FundRevenues, Expenditures, and Changes in Fund BalanceJune 30, 2011 45

  48. Capital Facilities FundRevenues, Expenditures, and Changes in Fund BalanceJune 30, 2011 46

  49. Special Reserve – Capital Facilities FundRevenues, Expenditures, and Changes in Fund BalanceJune 30, 2011 47

  50. Paul Ecke Central Trust Fund Revenues, Expenditures, and Changes in Fund BalanceJune 30, 2011 48

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