2016/17 1st Interim Budget

1. 2016/17 1st Interim Budget Black Oak Mine Unified School District Board of Trustees Darcy Knight, President Jeff Burch Joe Scroggins Ronnie Ebitson Bill Drescher Superintendent Jeremy Meyers

2. How the Budget Process Works… • The State requires School Boards to adopt district budgets by June 30th of each year. • After the adoption of the State budget schools are required under Education Code 42127(i)(4) to update district budgets with any significant changes within 45 days. • Two interim reports are taken to the board for approval each year. • December - Referred to as 1st Interim • March - Referred to as 2nd Interim • Books are closed in July-August and taken to the Board for approval in September as “Unaudited Actuals”.

3. Budget Timelines • JULY 1st-Adopted Budget -or- • Not later than 45 days after the Governor signs the annual Budget Act, the school district shall make available for public review any revisions in revenues and expenditures that it has made to its budget to reflect the funding made available by the Budget Act. (EC 42127 (i) (4)) • DECEMBER – 1st Interim Budget • The 1st Interim report will be presented at the public board meeting in December of each year. This report will include any changes made to the budget since the budget adoption in June, including those reported 45 days after the Governor signed the annual Budget Act. • MARCH – 2nd Interim Budget • The 2nd Interim report will be presented at the public board meeting in March of each year. This report will include any changes made to the budget since the 1st Interim report was presented in December. • JUNE 1ST – 3rd Interim Budget (Qualified or Negative Certified Districts Only) – • No later than June 1, each school district with a qualified or negative certification for the second interim report must provide financial statement projections of the district’s fund and cash balances through June 30 for the period ending April 30 to the county superintendent, the Controller, and the SPI. • SEPTEMBER – Unaudited Actuals • The Unaudited Actuals report will be presented at the public board meeting in September of each year. This report will reflect the actual revenue and expenditures of the district for the budget year.

4. Budget Certifications • (1) "Positive," • the district is able to meet its financial obligations for the remainder of the fiscal year and subsequent two fiscal years • (2) "Qualified," • the district may not be able to meet its financial obligations for the current year or two subsequent fiscal years • (3) "Negative," • the district will not be able to meet its financial obligations for the remainder of the current year or the subsequent year 3 Choices BOMUSD’s Choice: • BOMUSD has certified “Qualified” for the school years: 2009/10, 2010/11, & 2011/12, 2014/15 and 2015/16. • BOMUSD has certified “Positive” for two years in 2012/13 and 2013/14. • The current administration recommendation is a “Qualified” budget certification for the 2016/17 First Interim Budget.

5. Budget Assumptions There are many unpredictable factors that affect revenue and expenditures. Because of that, the District bases its budget on assumptions. This is the best information available at the time the budget is adopted. The adopted budget, therefore, should be considered a “financial snapshot” on the date it is approved. As variables change, formal adjustments, approved by the board, are made throughout the course of the year.

6. REVENUES

7. Where do schools get most of their money?

8. Local Control Funding Formula - LCFF • There are two distinct phases of LCFF: • (1) The 8 year implementation phase – Transition Entitlement • Until the LCFF is fully funded, school districts and charter schools, will receive an LCFF Transition Entitlement. • The Transition Entitlement is based on an LEA’s 2012-13 funding level, adjusted for changes in student population, and the amount of funding the LEA would receive under the LCFF model at full implementation. • The fully funded phase – Target Entitlement • Funding increases based on COLA

9. TRANSITION-SIMPLIFIED LCFF CALCULATION

10. TARGET - LCFF Grant – 2016/17 Rates

11. Supplemental/Concentration Grants - Eligibility Determination Supplemental and Concentration Grant increases are calculated based on the Unduplicated Pupil Percentage of total enrollment accounted for by the following: English Learners Free & Reduced-Price Meal Program Eligible Students (FRPM) Foster Youth • Black Oak Mine’s percentage of these pupils to total enrollment is about 45%, which means we are eligible for the Supplemental Grant, but NOT the Concentration Grant

12. GRADE SPAN ADJUSTMENT (K-3) Districts must reduce average TK-3 class sizes for each school site toward 24:1 at the same pace as LCFF gap funding is provided. IMPORTANT NOTE: Failure to meet the annual enrollment target at any school results in the loss of the K-3 adjustment for the ENTIRE district.

13. AVERAGE DAILY ATTENDANCE – (ADA) LCFF grade span ADA is based on current year or prior year ADA, whichever is greater. This provides a one year grace period in the event the district may be experiencing declining enrollment.

14. Enrollment and Average Daily Attendance (ADA) Impact of declining enrollment on LCFF funding: 2016/17 – a loss of about $67,000 2017/18 – a loss of about $218,000 2018/19 – a loss of about $118,000

15. 2015/16 LCFF Income Assumptions • Four Main Assumptions to Project LCFF Income: • 1. ATTENDANCE (ADA PROJECTIONS) • District ADA Projections: • 2016/17 CBEDS ENROLLMENT= 1,076 (decrease of 49 from 15/16 CBEDS) • 2016/17 FUNDED ADA = 1,072 (based on 15/16 ADA) – includes NSS ADA • Charter ADA Projections: • 2016/17 CHARTER ENROLLMENT = 182 (decrease of 10 from 15/16 CBEDS) • 2016/17 FUNDED CHARTER ADA = 176 (based on 16/17 current year projected ADA) • 2. ANNUAL COLA • 2016/17 COLA = 0.0%, but District is funded at 3% below its LCFF target • 3. UNDUPLICATED PERCENTAGE (% of FRPM students, Foster Youth, English Learners) • 2016/17 Unduplicated Percentage = 46.50% • 4. PERCENTAGE OF GAP FUNDING DURING TRANSITION • (remember the GAP is the difference to where we are currently funded to our Target LCFF rate) • 2016/17 Percentage = 54.18%

16. Unrestricted vs. Restricted Income UNRESTRICTED INCOME • Can be used for any school related expense. Examples: LCFF, Non Prop 20 Lottery RESTRICTED INCOME (AKA Categoricals) • Expenditures must follow the specific guidelines of the grant or entitlement. • Grants and Entitlements are often referred to as “Categoricals” Examples: Special Education, Title IA, Title II, Workability

17. 2016/17 INCOME = $12 millionBY MAJOR CATEGORIES RESTRICTED INCOME = $2 m UNRESTRICTED INCOME = $10 m

18. Major Income Changes Since Adopted Budget • LCFF Income - $2,000 Increase • Minor changes in GAP • Federal Income – $27,000 Increase • MAA cash basis receipt of $2k • Medi-Cal cash basis receipt of $5k • Title IA carryover of $10k • Drug Free Divide carryover of $10k

19. Major Income Changes Since Adopted Budget • Other State Income – $139,000 Increase • College Readiness Block Grant $75k • *Projected STRS on-behalf increase $63k • Other Local Income – $302,000 Increase • Facility Fee reduction from GDRD MOU updates ($18k) • CTEIG Grant $60k • Technology Grant $12k • Bus Grant $293k • Special Ed NPS reduction ($41k) *Due to GASB 68, LEA’s were required recognize the revenue and expenditure that the State made directly to STRS in their “books”

20. EXPENDITURES

21. STAFFING (at 1st Interim Budget)

22. CalSTRS Rate Increases – Scheduleper Education Code Sections 22901.7 & 22950.5 These are the rates that BOMUSD will be paying.

23. CalPERS Rate Increases – Actual and Projected These are the rates that BOMUSD will be paying.

24. 2016/17 EXPENSES = $12.6 millionBY MAJOR CATEGORIES RESTRICTED INCOME = $3.8 m UNRESTRICTED INCOME = $8.8 m

25. Major Expense Changes Since Adopted Budget • CERTIFICATED SALARIES - $41,000 decrease • Changes based on turnover • CLASSIFIED - $8,000 increase • Updates to salaries for CSEA settlement, June board approved reductions and GDRD maintenance MOU staffing changes. • EMPLOYEE BENEFITS - $14,000 increase • Recognition of staffing changes and STRS on be-half changes.

26. Major Expense Changes Since Adopted Budget • BOOKS/SUPPLIES - $204,000 increase • Technology Grant $8k • College Readiness Block Grant $46k • CTEIG Grant $22k • Restricted program carryovers (Title 1A, Drug Free, FMOT, CRANE Grant, Microsoft Ed Tech, Lottery) $86k • Student Accounts $44k • SERVICE/OTHER OPERATING COSTS - $115,000 increase • Technology Grant $3k • College Readiness Block Grant $25k • Various services including utilitiess, transportation $20k • Restricted program carryovers (Title 1A, Drug Free, FMOT, Microsoft Ed Tech, Lottery) $90k • Student Accounts $6k • NPS Decrease ($36k)

27. Major Expense Changes Since Adopted Budget • CAPITAL OUTLAY – $433,000 increase • Reduce FMOT Equipment ($9k) • CTEIG Grant $99k • AQMD Bus Grant $343k • OTHER OUTGO - $9,000 • Net increase in COE student services $9k

28. Net Position

29. RESERVES

30. RESERVES • RESERVES are necessary to protect the integrity of the educational program in an unpredictable operating environment. • 3% Reserve is equal to 2 weeks payroll • Moody’s recommends governmental agencies keep a 17% reserve –the equivalent of 2 months of operating expenditures • Remember it is important to remember that reserves are meant for one time expenses, not on-going. Most of BOMUSD expenses are on-going.

31. BENEFITS OF HIGHER THAN MINIMUM RESERVES • Financial flexibility to absorb unanticipated expenditures without significant disruption to educational programs. • Protection against exposure to significant one-time outlays such as disasters, lawsuits, or material audit findings. • Protection against the volatility of state revenues. • Cash management / avoiding the cost of borrowing cash. • Protection against declining enrollment. • Protection to cover increases in fixed and statutory costs. (ex – STRS increases) • Financial flexibility to shift resources as priorities set through the LCAP process change. • Planning for major projects such as information technology upgrades or deferred maintenance.

32. Management of Funds Current Reserves or Components of Ending Fund Balance – 2016/17 1st Interim

33. General Fund Multi-Year Projections 2016/17 to 2018/19

34. Multi-Year Projection Assumptions(details on pages 151-157 in 1st Interim Budget Packet) INCOME Projections for income assume same level of income with the following major changes: LCFF – GAP Funding increase 2017/18 = $226k 2018/16 = $118k LCFF – Loss due to declining enrollment 2017/18 = ($218k) 2018/19 = ($118k) Decreased One-Time or Temporary Grant Income received in 16/17 • Mandated Cost/Discretionary Funds, MAA, NEA Contract, COE Direct Service Funding, Facility Fees EXPENSE Projections assume the same level of staffing & spending with the following major changes: STEP/COLUMN 2017/18 = $129k increase 2018/19 = $79k increase STRS/PERS RATE INCREASES 2017/18 = $118k increase 2018/19 = $118k increase MINIMUM WAGE CHANGES 2017/18 = $50k increase 2018/19 = $149k increase

35. Further reductions needed to meet 2018/19 EUR of 4%

36. How do we get to a POSITIVE certification? The district continues to face challenges dealing with the fiscal implications of declining enrollment. By 2018-19 ADA is predicted to have dropped far enough that the district’s Economic Uncertainty Reserve will be mandated at 4%. In order to move towards a POSITIVE certification, the district must show that it can meet its minimum required state economic reserve for uncertainty in the current year and the two subsequent years. • The levels of budget reductions that will need to be made are currently: 2017/18 = ($90,000) on-going 2018/19 = ($90,000) additional

37. Planning Ahead for Black Oak Mine • Minimize impact on academic achievement and student safety • Minimize layoffs where possible • Challenge will be balancing a comprehensive program at the junior/senior high school level with our financial constraints • Maintain a budget reserve at the level required by State and Board Challenge for Black Oak Mine is to develop these priorities. Common themes for prioritizing budget reductions

38. Conclusion • The board and district have faced and continue to face many difficult decisions as we plan for the next school year and the years ahead in regards to programs and budget reductions. • Keys to success in these difficult times: • Patience, courage, and flexibility • Conservative plans and backup plans • Great communication with stakeholders • Strong financial reserves and policies