Community / Employee Meeting Budget Solutions Update

1. Community / Employee Meeting Budget Solutions Update April 14, 2010

2. Revenue Reductions since 2007-08

3. FVSD Revenue Limit Comparison2008-09 ~ 2009-10 *0.81645 = 1 - .18355 (deficit factor)

4. FVSD Revenue Limit Comparison 2009-10 ~ 2010-11 *0.81645 = 1 - .18355 (deficit factor)

5. Fountain Valley Per Student Funding 5

6. Budget Background • Budget reductions in 2008-09 totaled 1.9 million • Elimination of PLC’s • Elimination of P.E. Incentive Teachers • Supply, equipment and discretionary funds at D.O. and schools reduced • Eliminated staff development funding • Eliminated one cabinet level position • Reduced D.O. support personnel, counselor and night custodian hours • Reduced grounds and maintenance budgets

7. Budget Background • The 2008-09 budget was further reduced by $450,000 in January 2009 with custodial layoffs • Budget reductions in 2009-10 totaled $1.8 million, and affected every area • Class size • Technology • Literacy program • Special Ed and DTT aides • Assessment • Salary/work year reductions for classified, confidential and management teams

8. Budget Background • The adopted 2009-10 budget was based on the projections known in April and May • This budget made cuts required based on these projections – reductions, revenue sweeps, program elimination • Further reductions were made in July, specifically to the Base Revenue Limit (amount received per ADA) ~ (-$252/ADA) • Based on projected ADA of 6,009, this is an additional reduction of $1,514,268, for a total reduction of $4.0 million over 2008-09.

9. Budget Background • All available flexibility options were implemented • $445,000 in categorical funds were transferred to the general fund • $627,000 in restricted ending balances were “swept” into the general fund • Federal stimulus money is being used to fund existing programs whenever possible • Salaries and Benefits are 89% of total budget

10. Salary Adjustment History

11. Salary Adjustment History ~ CSEA

12. Salary Adjustments • Salary adjustments over the past 6 years have exceeded funded COLA by approximately 11% • Health and Welfare caps have also been increased • Funding for these increases was based on projected interest income when all 4 surplus sites were sold; Lamb & Wardlow sites have fallen out of escrow as of March 2010 • Implementation of raises was accelerated to move toward the mean anticipating the sale and close of escrow of all four surplus sites

13. Reserve Fund • Sale of property funds deposited here • Goal for these funds has always been to supplement general fund revenue to provide an alternative source of revenue for the District • Similar to an endowment fund, which maintains principal and uses interest income as a revenue stream, like a parcel tax, only better • Special SAB approval was necessary to use funds in this manner, no longer legally possible

14. Looking ForwardThe 2010 ~ 2011 Budget Year

15. Economic Outlook • Broader U.S. economy may be turning corner • Consumer spending, home sales and stock market are all rising • Third quarter GDP rose 2.2% • California suffers from high unemployment • Construction and manufacturing sectors remain weak in the State

16. Projected Recovery Time 8 years to return to pre-recession levels 1990 – 0% deficit 1994-96 – 12% deficit 2001 – 0% deficit

17. 2010-11 State Budget • $19.9 B shortfall over two years – why? • State reserve has been expended • Lost budget reduction solutions • Increase in caseloads • Revenue declines • Adverse court decisions • Operating shortfalls

18. Education Protected? • No 2009-10 mid year reductions, despite State budget deficits • CSR savings of $550 M are captured • Budget reduced in 2010-11 • Lower than proportional reductions for 2010-11 • $1.5 B in reductions for 2010-11 are away from classroom, targeted to central administration

19. 2010-11 District Budget • Revenue limits reduced by (0.38%) or $23 per ADA - $142,000 for FVSD • The one-time $252/ADA 2009-10 reduction is restored • A new on-going targeted reduction estimated at $191/ADA to reduce central administration - $1.18 M for FVSD • Net Base Revenue Limit will rise by about $43/ADA • However, future years projections are significantly lower • Current proposal may be “best case” scenario

20. 2010-11 Budget Assumptions

21. Other Financial Factors in 2010-11 • ARRA funding of $1,059,400 from 2008-09 will be expended • ARRA funding for Special Education of $500,000 will be expended • The $191 reduction is on-going, impacting future years in the 3 year projection • The projected COLA in future years is lower than initial estimates, impacting future years in the 3 year projection • CSR reduced penalties expire in 2012-13, impacting the third year of the 3 year projection

22. Other Financial Factors in 2010-11 • On-going deficit needs to be addressed • Based on the budget information available at this time, the goal should be to reduce at least $3 M from the 2010-11 budget. • Available funds to offset the deficit will be unavailable with the collapse of the Lamb/Wardlow sale • Future Fund 40 COP payments need to be taken into account and reserved • $1.0~$1.4 M per year for the next 10 years

23. Proposed Budget Solutions

26. Budget Approval • The budget must be adopted by the Board by June 30, 2010 • The budget is then reviewed by the Orange County Department of Education • The budget is either approved or returned for revision within legal timelines • To be approved, the District must show that it will be solvent for the budget year and two additional years • This requirement is why the District must make substantial cuts for 2010-11

27. Budget Approval • The District has been deficit spending for several years • Some of the deficits are planned for • The District can no longer support the level of deficit spending • The reserve account (savings account) can not sustain the level of withdrawals for the next 3 years to maintain solvency • There must be expenditure reductions

28. Reserve Fund (40) ProjectionIllustration

29. Next Steps • Budget committee continues to meet and formulate recommendations • Specific budget reductions will be presented to the Board for consideration beginning in March • Ideas for budget solutions will be solicited from employees and community Information meetings for the public and employees will be held in March and April

30. THANK YOU FOR ATTENDING QUESTIONS