Superintendent’s Budget Advisory Committee

1. Superintendent’s Budget Advisory Committee 2013-14 Budget Development Cycle September 20, 2012

2. VISION STATEMENT “to cultivate and empower our students to be ethical, productive, successful and contributing members of our global society”

3. EMUHSDMission Statement • Advocate, nurture and sustain a positive school culture …challenging and rigorous, standards-based curriculum… that promotes achievement for all students; • Ensure management of the organization, … for a safe, efficient and effective learning environment … conducive to student learning and staff professional growth; • Collaborate with families and community members, respond to diverse community interests and needs,… ; • Model a personal and institutional code of ethics and develop professional leadership capacity.

4. Board Priorities • Academic Excellence – Achievement for all Students • “Every Student, Every Minute, Every Day” • Safe & Effective Learning Environment • Fiscal Stability, Organizational Alignment & Transparency • Model Ethical Behavior and Grow Internal Capacity • Community Involvement & Collaboration

5. Agenda • Purpose of the BAC • Protocols and Ground Rules • Defining a Budget • Components of a School District Budget • Economic Update • State of the State • Current District Financial Position • Review of Unaudited Actual Results • Tax Initiative – Impacts • Next Steps

6. Purpose of the Budget Advisory Committee • Create broader understanding of the budget development process and its context • Further the effort toward transparency • Promote community involvement and collaboration • Provide input, discussion and consideration of budget improvement opportunities • Create accountability mechanism • Carry recommendations for 2013-14 budget to the Superintendent for his consideration • Based on input, Superintendent then takes his recommendations to Board • Develop restoration plan Budget Committee functions in an advisory capacity only

7. BAC PROCESS • Understand the State and District Financial “picture” • Review District financial data • Break into small groups • Bring ideas to the larger group • Get input from those you represent • Identify opportunities for resource “repurposing” • Review and prioritize • Develop recommendations for Superintendent’s review • Develop restoration plan

8. GROUND RULES

9. Building Consensus Consensus decision-making is a groupdecision- making process that seeks the consent, not necessarily the agreement, of participants and the resolution of objections. It is not unanimity!”

10. CONSENSUS GOALS • Agreement Seeking: Attempts to help everyone get what they need! • Collaborative: Contribute to a shared proposal that meets the concerns of all group members, as much as possible • Cooperative: Reach the best possible decision for all of its members, rather than competing for personal preferences. • Egalitarian: All members of the group should be afforded, as much as possible, equal input into the process. • Inclusive: As many stakeholders as possible should be involved in the process. • Participatory: The process should actively solicit the input and participation of all members

11. “Building Consensus” • Only one person speaks at a time; please do not interrupt while someone is speaking • Each person expresses their own views, rather than speaking for others at the table or attributing motives to them • Give others a fair chance to speak • No personal attacks; Challenge ideas, not people! • Everybody agrees to make a strong effort to stay on track with the agenda and to move the deliberations forward • Everybody will seek to focus on the merits of what is being said, making a good faith effort to understand the concerns of others. Questions of clarification are encouraged; disparaging comments are discouraged

12. Ground Rules , continued . . . • Concerns should be voiced when they arise, not later in the deliberations when a "surprise" objection is raised • Each person will seek to identify options or proposals that represent shared interests, without ignoring legitimate disagreements. Each person agrees to do their best to take account of the interests of the group as a whole • Each person reserves the right to disagree with any proposal and accepts responsibility for offering alternatives that accommodates their interests and the interests of others • Anyone who speaks to the media will speak only about their views. We ask that no member of the BAC speak on behalf of the group as a whole without permission of the group as a whole.

13. Budget development cycle

14. What is a School District Budget? • The district’s budget begins July 1 of each year as its starting point and ends on June 30 • Starting Point = Beginning Balance – How the district ended from the previous year • Ending Point = Ending Fund Balance – How the district ended (or will end) the current year • Restrictions, Designations, Assignments & Commitments

15. The Budget Reporting Cycle June December July April - May January January Feb - March

16. State Required Budget Cycle • Adopted Budget - Board must adopt on or before July 1st • Interim Reports • First Interim - Board must approve 45 days after October 31 (by December 15) • Second Interim - Board must approve 45 days after January 31 (by March 15) • Unaudited Actual Results • Board must approve on or before September 15

17. Adopted Budget A LIVING DOCUMENT New Appropriations; Budgeting Carryovers Working Budget Evaluate Spending & Adjust Expenditures Projection September Closing of Books Unaudited Actual Results

18. Definition of Terms A number of terms are used throughout this presentation that require definition. • Working Budget -- represents the original 2012-13 Adopted Budget adjusted for board-approved appropriations as well as budgeting of prior year carryover. • 2012-13Projection – calculation as to what revenues, expenditures and ending balances will be as of June 30, 2013. It is based on evaluating current spending patterns. • Interim Reports – reports required by the Sate of California identifying the financial condition of the District at a specified time during the fiscal year

19. Definition of Terms • Undesignated Reserves –that portion of the Ending Balance that is unrestricted in its use. This should be distinguished from Restrictions, Commitments or Designations which represent those parts of the ending balance that are “set aside” or legally restricted for a specific purpose. • Structural Deficit – A fundamental imbalance in revenues vs. expenditures, as opposed to one based on short-term factors such as one-time revenues or expenditures

20. Fundamental Considerations in Developing a Budget • The educational programs and services that represent the board’s goals and priorities • The services and staffing necessary to support these programs • The revenues available to carry out the educational programs • The expenditures necessary to implement the educational program

21. Budget Assumptions • Form the fundamental basis for the creation of the budget • Address the most common mathematical elements of the document • Includes decisions regarding: • Enrollment and ADA • Staffing formulas and class size requirements or limitations • Statutory or funded COLAs • Collective Bargaining Agreements • Federal or State funding provisions (triggers, funding reductions, etc.) • Lottery funding • Site budget allocations • New or revised programmatic requirements • Identification of the “core” educational program • One of the most critical elements in developing a budget

22. BAC Budget Development Process(What Will We Be Doing?) • Budget Calendar is published at the beginning of the fiscal year • Detailed timeline of events • Anticipate meeting every two to four weeks • Subgroups (recommendations) • Focus on the priorities of those you represent – obtain input • Identify potential budget improvements • Final recommendations by January • Superintendent • Takes his final recommendations to Board • Restoration Plan

23. Budget Workshops • Will occur intermittently throughout the budget development process • Represents opportunity to align budget allocation decisions with Board of Trustees’ policy decisions • Look for board confirmation in terms of budget priorities vs. current resource allocations • Explain and Review Governor’s budget • Bring forward final recommendations for approval • Public Hearing and Final Adoption

24. Summary • Budget is a “living” document • Changes occur just after adoption • “Be its master, not its slave” • A “tool” for success

25. Budget DevelopmentRevenues • Revenue Limit Sources (major funding source for EMUHSD ) • Base Revenue Limit (BRL) times ADA • Revenue Limit (RL) = State Aid and Property Taxes • Deficit Factor must be considered • Federal • Other State • Local

26. Revenue Limit – THE BASICS • Enrollment generates ADA • For 12-13, we estimate that 9,930 enrollees will generate approximately 9,537 units of ADA • Enrollment has been on the decline for the last four years; and is anticipated to continue to decline over the foreseeable future • At least through 2018 based upon latest demographic projections by Davis Demographics

27. Average Daily Attendance (ADA) • Average Daily Attendance is equal to the number of pupils actually attending classes who are enrolled for at least the minimum school day • Example: 10 students attending school for ½ year equals 5 ADA • ADA times funded Base Revenue Limit ($’s per student per year) equals Revenue Limit dollars – the District’s major source of revenue!

28. Restricted (Categorical) vs. Unrestricted Funding • General Fund Contribution to a Restricted Program (a.k.a. “encroachment”) • Maintenance of Effort – Supplement vs. Supplant

29. Budget DevelopmentExpenditures (1000’s) • Certificated Salaries • All certificated staff including teachers, counselors, nurses, librarians, certificated administrators • Step & column movement • Substitute costs • Extra duty/Co-curricular Stipends • Hourly Program salaries • Supplemental Hourly, Saturday School, etc.

30. Budget DevelopmentExpenditures (2000’s) Classified Salaries • Includes clerks, aides, custodians, maintenance staff, secretaries, bus drivers, campus supervisors, district administrative staff • Extra service assignments • Step & Column costs • Substitutes • Overtime

31. Budget DevelopmentExpenditures (3000’s) Employee Benefits • Health & Welfare (Medical, Dental, Vision, Life) • Per Employee $ 18,550* • Statutory Benefits – Cert 12.047%, Class 23.017% • Retirement (STRS, PERS, Social Security) • Medicare • Unemployment Insurance & Workers Compensation *Maximum = United HealthCare HMO, Family Delta PPO and Family Vision; PPO “Cap” is Kaiser HMO Amount

32. Budget DevelopmentExpenditures (4000’s) • Textbooks • Instructional & non-instructional supplies • Books & Supplies • School site funding formulas • Department allocations • Non-capitalized equipment • ≤ $5,000

33. Budget DevelopmentExpenditures (5000’s) • Services & Other Operating Expenditures • Travel • Dues & Memberships • Utilities • Insurance • Contracts & Consultants • Audit expense • Legal fees • Other

34. Budget Development Expenditures(6000’s & 7000’s) • Capital Outlay (over $5,000) • Building/site improvement costs • Capitalized equipment • Other Outgo/Transfers Out/Other Uses • Indirect Costs • Debt service payments • Transfers to other funds • Deferred Maintenance Match

35. State Budget Impacts

36. Governor’s Budget2012-13 • Fundamentally dependent upon voters taking action to adopt a new round of temporary taxes – Prop 30 • 0.25% increase in the sales tax • higher tax rates for the state's wealthiest ($250k – Indiv. $500k – Married) • Cost of Living Adjustment (COLA) — Not funded for 2012-13 • Significant “trigger” cuts to school revenue limits if Governor Brown's tax initiative fails (over $500 per student)! • Buy down of approximately $2.1 billion in deferrals if Governor tax initiative passes. • No new funding for education.

37. DISTRICT FINANCIAL DATA

38. Budget Assumptions for MYP • 2012-13 financial information forms the basis and starting point for 2013-14's preliminary budget • Statutory COLA • 3.24% in 2012-13 (unfunded) • Rev. Limit deficit factor for 12-13 is 22.272% (Note: If the tax measure fails in November, deficit factor will increase to 28.814% or an additional $4.9M reduction in funding – Add to already $16.6M underfunding! • Projected enrollment and ADA decline of approximately 126 students • Impact of all contract settlements has been incorporated

39. Enrollment , ADA and “Yield” on Enrollment

40. EMUHSDRevenue Limit • The statutory un-deficited Base Revenue Limit is $7,811 per ADA • BUT deficit factor of 28.814%! (including the “trigger”) • In 2012-13, being funded at $6,073 per ADA – a gap of $1,738 or about $16.6 M! • With “trigger” the gap grows $4.9M and becomes $2,251 per ADA or $21.5M! • Revenue Limit is largest funding source for the district • Anticipate $54.2 Million in 2012-13 for El Monte

41. EMUHSD Budgeted Revenues($ Millions)

42. EMUHSD 12-13 Budgeted Expenditures($ Millions)

43. EMUHSD General Fund(With Level II Reductions of $3.6 Million) 2010-11 2011-12 2012-13 ActualsActuals Working Budget BEGINNING BALANCE, July 1 $26.1 $17.8 $12.7 REVENUES $85.6 $87.8 $81.3 EXPENDITURES ($93.3)($92.9) ($88.2) Net Incr./(Decr.) in Fund Bal. ($7.7) ($5.1) ($6.9) Audit Adj. ($0.6)$0.0$0.0 ENDING BALANCE $17.8 $12.7 $5.8 Restrictions $0.6 $0.6 $0.3 Designations $3.1 $2.8 $2.6 Undesignated $14.1 $9.3 $2.9 % Reserve 18.4% 13.0% 6.6%

44. General Fund Financial Statements * Uses the Opening Balance based on 2011-12 Actual Results

45. Statutory vs. FundedBase Revenue Limit Impact Loss of cost-of-living adjustment (COLA)$10.1 Million Loss ofbaseline dollars $6.5 M to $11.4 M BASELINE

46. Cash Flow Issues • Approx.42% of funding due in cash will not be paid until the next year • No categorical funds at least until end of October • Adult Education • Special Education • State Categorical Programs, e.g., EIA • 84% of the district’s Revenue Limit funding comes from State Aid (vs. property taxes). • As a result, impact of state “deferrals” is greater at EMUHSD • Borrow and use flexibility options from other funds, as necessary

47. Cash Flow & Deferrals • Not only has funding been reduced by almost 30% per year(if initiative fails), but; • State is “deferring” the cash payment necessary to pay the bills! • In 2012-13, the State will push $ 18.1 Million of cash for EMUHSD into 2013-14! • That’s nearly 42% of District’s cash for the year! • Anticipate covering with use of County Pool, inter-fund borrowing and potential TRANs

48. Cash Flow • Interventions: • County Pool • TRANs • Inter-fund transfers

49. Multi-Year ProjectionAssumptions The following assumptions form the basis for the MYP: • Level II Board-approved budget reductions have not been enacted including: • Elimination of D.O. TOSA • Across-the-Board salary reduction for all staff of 3.545% • Enacting of 5 furlough days • Reduce SB65 Coordinator positions to 11 months • Eliminate winter break and spring break vacation days for clerical staff • TOTAL DOLLAR VALUE OF ABOVE __ $3.567 Million • Expenditures • based on current spending levels • adjusted for CPI in “out” years • LEVEL I reductions of $5.6M enacted as part of Fiscal Stabilization Plan

50. Multi-Year ProjectionWithout Level II Cuts IF: Tax Initiative Fails (12-13 Beg. Balance $12.7 M) Year2012-13 2013-14 2014-15 Revenues $80.9 $81.6 $82.5 Expenditures $91.8 $92.2 $93.5 To Balance Budget($10.9) ($10.6) ($11.0) Ending Balance $1.8 ($8.8) ($19.8) % Reserve 1.6% IF: Tax Initiative Passes (12-13 Beg. Balance $12.7 M) Revenues $85.7 $86.4 $87.2 Expenditures $91.8 $92.2 $93.5 To Balance Budget ($6.1) ($5.8) ($6.3) Ending Balance $6.6 $0.8 ($5.5) % Reserve6.8%0.4%