Rescue Union School District 2 nd Interim Report

1. Rescue Union School District2nd Interim Report Presented by Art Schmitt, Interim CBO March 12, 2013

2. What to Expect • 2nd Interim Certification Status • Budget changes since the 1st Interim • Current year Deficit Spending • Enrollment • Multiyear Projection • Reserves • Next Steps

3. 2nd Interim Certification Status • Positive Certification • Based on current projections this district will meet its financial obligations for the current fiscal year and subsequent two fiscal years • The District will have a positive ending fund and cash balance for the current and next 2 years

4. Budget Changes since the 1st Interim Report • Bottom line – increase in ending balance of $69,535 • From not budgeting mandated cost block grant receipts • Offset with an increase in special education costs

5. Deficit Spending • Deficit Spending is when current year expenditures exceed current year revenues • During tough economic times districts dip into reserves to forestall consequences for another year • Sometimes the deficit spending is planned • Funds carried over from one year to the next will create the appearance of deficit spending

6. Current Deficit Spending The Second Interim Report shows the District spending $1,069,683 more than the budgeted revenues. The causes of the deficit spending include: Re-budgeting site/dept. carry over from last year $ 554,527 Re-budgeting unspent flexibility program dollars $ 141,733 Re-budgeting site/department lottery funds carried over $ 200,457 Re-budgeting restricted funds carried over $ 332,771 Less one-time Forest Reserve Receipts -$ 108,193 Less one-time receipt from El Dorado Irrigation District -$ 83,812 One time use of irrigation district dollars $ 40,000 Sub-total $ 1,077,483 Deficit spending as reported - 1,069,683 Actual surplus $ 7,800

7. Multiyear Projection • Enrollment Decline • Governor’s budget – Local Control Funding Formula (LCFF) • Cost of Living Adjustment (COLA) • Flexed K-3 Class Size Reduction (CSR) funds end 6/30/14 • Federal funding cut between 5.9% – 8.2% • Forest Reserve funding ends 2012-13 • Fundraiser and donation income recognized when received • Automatic advancement on the salary schedules included • No carry over funds included nor other one-time revenues and expenditures

8. Enrollment Projected to have 550 fewer students or the equivalent of 1 school

9. Enrollment • The enrollment decline is due to: • Declining birth rates • Aging population • The economy

10. Multiyear Projection • Enrollment Decline • Governor’s budget – Local Control Funding Formula (LCFF) • Cost of Living Adjustment (COLA) • Flexed K-3 Class Size Reduction (CSR) funds end 6/30/14 • Federal funding cut between 5.9% – 8.2% • Forest Reserve funding ends 2012-13 • Fundraiser and donation income recognized when received • Automatic advancement on the salary schedules included • No carry over funds included nor other one-time revenues and expenditures

11. Multiyear Projection • Deficit spending is projected at ($488,461) for 2013-14 and $(1,749,631) for 2014-15 • Increase in 2014-15 caused by loss of K-3 CSR funds

12. Multiyear Projection In summary, the 2013-14 deficit spending is caused primarily by: • Plus Revenue Limit COLA $ 316,447 • Less funding from declining enrollment (494,104) • Less one-time Forest Reserve (108,193) • Less one-time EID payment ( 83,812) • Less Lottery and MAA receipts ( 34,200) • Increase in Special Ed and Transportation costs (142,666) • Reduced certificated staffing 7.22 FTE 519,296 • Salary schedule movement, including statutory benefits (324,116) • Add back one-time expenditure from EID money 40,000 • Projected increase in energy costs ( 50,000) • Full-year cost for new custodial and mechanic positions (128,309) • All other changes, net 1,196 2013-14 Estimated reductions needed to balance the budget $(488,461)

13. Reserves • Reserves are a safety net that allow a district to meet its fiscal obligations. • Reserves allow a district to have cash on hand to meet its obligations even when hit with unexpected financial turbulence • Most financial problems are really multiyear problems and not one-time. • Reserves are one-time funds – once used, they are not replaced except by purposeful action of the district • Reserves can carry a district through a year of financial problems until budget cuts are implemented to solve the problem

14. Reserves • Significant reserves are needed to solve ongoing budget problems, even temporarily, if no other actions are taken to right-size the budget. • Goal is to have the resources necessary to meet both planned and unplanned financial challenges, while spending as much of the current year’s resources as possible on the current year’s programs and students

15. Reserves – How Much Are Needed? • State required minimum reserve level for Rescue is 3% of General Fund Expenditures • Rescue Union SD risk factors needing higher reserves • Declining enrollment • Delays in cash receipts • Restricted programs require unrestricted contributions • Transportation, Special Education • History of deficit spending and/or projected future deficit spending • In 2010-11 the average reserve level for an elementary district was 23.59%, in 2009-10 the level was 19.05% • Board established 15% with an annual review

16. Reserves

17. Next Steps • Using Board goals and priorities develop the 2013-14 budget with the intent to eliminate deficit spending no later than 2015-16 • Don’t wait until 2015-16 to implement changes • A $1 saved in 2012-13 is $3 saved by 2015-16 • Use Board study sessions to discuss the development of the budget • Communicate the budget to staff and the community • A copy of the PowerPoint presentation will be posted on the District’s website March 13