Austin Independent School District FY 2010-11 Preliminary Budget

1. Austin Independent School DistrictFY 2010-11 Preliminary Budget Community Conversations on the Budget Meria Carstarphen, Superintendent Nicole Conley-Abram, CFO

2. FY2011 Preliminary Budget Highlights Proposes $13.1M in budget efficiencies, reductions and reallocations to cover the following: Cure the projected structural deficit of $7.1M. State authorized step increase of $2.8M for teachers, counselors, librarians, speech pathologists and other professionals on the professional salary scale only. Baseline budget increases of $1.8M to maintain continuity of services. Funding towards Strategic Plan initiatives-$4.7M. AU/turnaround-$3.5M School Counselors-$1.2M No cuts to local campus BTOs. In fact, approx. $5M is being decentralized from central to local high schools. No increase in the tax rate for M & O One cent increase to cover debt for bond program. Unmet needs still remain to cover Year 1 Mission Critical Strategic Plan Initiatives and any salary increases beyond step increases for teachers. 1

3. Budget Book Highlights�An Excellent Read Message from the Superintendent, p. 2-3 Strategic planning process and integration with the budget, p. 4-6 Board budget parameters, p. 7 Comparative look of Austin ISD, within the state and nationally, p. 10-11 Systemwide budget challenges (economy, pay parity for teachers, Academically Unacceptable campuses, enrollment growth, technology and maintenance needs), p. 14-17 The Bond Program, p. 18 Proposed cuts, p. 21-22 Funded and unfunded Mission Critical Strategic Plan initiatives, p. 24 Current uses of Stimulus funds, p. 26-28 Financial analysis (different funds, sources of revenue, tax rates, attendance and revenue, where the $ goes, how the $ is spent, personnel), p. 30-38 2

4. Financial Landscape 3

5. Financial Landscape Overall Market Depth and length of recession unknown Downturn has had a dramatic effect on state/local funding State sales tax has experienced unprecedented double digit decline in last four consecutive months Sales tax represents 64% of General Revenue-related taxes Local Revenue Residential property values are declining despite relief efforts Commercial real estate struggling the most: Vacancies up, rental prices down Many Travis County commercial real estate properties will need refinancing over next three years. Only 25% of funding needed for refinancing is estimated to be available Tax appraisal office projects an 8% decline in the 2010 tax base and a 2% decline in 2011; growth of 6.75% anticipated in 2012. 4 Though the economic downturn has not been as drastic in Texas as it has in other parts of the country, its effects will be felt over the next few years at both the state and local levels. For the purposes of developing the FY2011 budget, we are assuming a decline of 8% in the property tax base.Though the economic downturn has not been as drastic in Texas as it has in other parts of the country, its effects will be felt over the next few years at both the state and local levels. For the purposes of developing the FY2011 budget, we are assuming a decline of 8% in the property tax base.

6. Financial Landscape State Revenue This biennium, the state used Federal stimulus funds to offset a shortfall in state funding. AISD received $23.7M in federal Stabilization funds. State already has estimated deficit in current year of $250M and $500M deficit in FY2011. Next biennium, state funding for education is expected to remain static or may even decline. The state may face an estimated $10-$15 billion structural deficit when federal stimulus funds expire. A shortfall of $3.2 billion associated with just funding the education funding formula. Local Stimulus Funding AISD has received a total of $64 million over two years. This funding ends in 2011-12. District is currently using stimulus funds for important programming, such as credit recovery and full-day pre-K, but what happens in 2011/12? 5 Significant decreases in tax income, particularly the sales tax, which is a major source of general revenue for the state, will limit available funding for education, health care, and other areas that typically receive a significant portion of their funding from the state. State used $23.7 M in ARRA funds to fill formula gap. Regional CFOs are beginning to plan for the worse and assume discontinuation of these funds. AISD is using Stimulus funds to support important programming like Full-day Per-k, dual Language and credit recovery programs. All of which will need to be supported locally in the FY12 budget.Significant decreases in tax income, particularly the sales tax, which is a major source of general revenue for the state, will limit available funding for education, health care, and other areas that typically receive a significant portion of their funding from the state. State used $23.7 M in ARRA funds to fill formula gap. Regional CFOs are beginning to plan for the worse and assume discontinuation of these funds. AISD is using Stimulus funds to support important programming like Full-day Per-k, dual Language and credit recovery programs. All of which will need to be supported locally in the FY12 budget.

7. Financial Landscape The economic downturn and lack of new state funding for education is affecting school districts throughout Texas. AISD�s financial situation is currently sound, but the District faces the challenge of balancing the budget over the next three years. 6

8. What Was the Approach to Developing the Budget? Compliance with ten Board Budget Parameters (summarized): Maintain balanced budget and strong Bond Rating Limit impact on classrooms Aggressively pursue additional revenue, costs savings and efficiencies that can be realized prior to making any programmatic reductions Increase capacity, leverage efficiency study Establish transparency Consider multi-year impacts Cure structural deficit Sets the foundation for multi-year financial planning Leverage the MGT Efficiency Study and stakeholder feedback where feasible and consistent with strategic plan Build capacity to address a small portion of mission critical strategic plan requirements 7

9. Did Stakeholders Provide Input? The Administration used various tools to obtain stakeholder input on the 2010-2011 budget: Community Meetings: 265 participants Direct E-mails: over 220 through January 10th On-line survey: 7,300 respondents Formal Proposals from Ed Austin, DAC and AAPSA Suggestions Included: Reduce Central Administration layers of oversight & redundancies Increase revenue opportunities Go �Green�, save energy, paper and become more automated to drive efficiency Reduce outside contracting Spend strategically; however, there was divergence on spend priorities 8 The anecdotal information I was received was that this process was unprecedented in terms of feedback and engagement. In addition to the CBRC, I was also supported by a Principals focus group. There was convergence in the ideas we obtained form Stakeholders.The anecdotal information I was received was that this process was unprecedented in terms of feedback and engagement. In addition to the CBRC, I was also supported by a Principals focus group. There was convergence in the ideas we obtained form Stakeholders.

10. How Were the MGT Efficiency Study Recommendations Leveraged? 9 Some of the efficiency ideas were leverages as part of the FY2011 budget reductions proposal. Remaining unimplemented actions represent wide-spread, systemic actions that would greatly impact local campuses.Some of the efficiency ideas were leverages as part of the FY2011 budget reductions proposal. Remaining unimplemented actions represent wide-spread, systemic actions that would greatly impact local campuses.

11. MGT Efficiency Study: Big Ticket Proposals Still Not Implemented 10 Big ticket items are still on table that affect campuses and the employee base.Big ticket items are still on table that affect campuses and the employee base.

12. Austerity Planning: 2009-10 In FY2010 (Current): The District implemented $14.6M in reductions and imposed a Central office hiring freeze. AISD received $11.9M in Medicaid revenue, offsetting the need to use Fund Balance ($15M). 11 Our austerity planning began in FY2010.Our austerity planning began in FY2010.

13. Preliminary FY2011:Budget Overview 12

14. FY2011 Preliminary Budget Overview of Funds 13

15. 14 Budget Basics: Overview of Funds2010/11

16. Budget Assumptions Reduction in tax base of 8%. M & O tax rate remains at $1.079/$100 taxable value. I & S tax rate increase of one cent: $0.133/$100 taxable value . No change to State Target revenue (best case scenario for FY12). Enrollment increase of 685 students. Collectability rate remains at 97.8%. No salary increases. Proposing various savings/reductions that total $13.1M to close the gap and implement a small portion of the strategic plan. 15

17. Budget Overview: General Fund Revenue 16

18. Budget Basics: FY 2010-2011 General Fund Revenue (Less Chapter 41) 17

19. AISD Has Paid $1.3Billion to State in Chapter 41 Payments Since 2000/01 18

20. Local Revenue: Property Tax Collections Austin ISD Receives certified tax roll from county appraisal district (July) Holds public hearing on budget and tax rate prior to adoption Board adopts budget and tax rates prior to August 31 District sends to state any tax collections above statutory target revenue limits, aka recapture (approx. $127 million in 2010/11) 19

21. 20 Jurisdictions Involved in Tax Appraisal/Collection Process Travis County Appraisal District Determines market value of each property as of Jan. 1 of each year Reviews protests of contested values Certifies the total taxable value for each taxing jurisdiction by July 25 Travis County Tax Office Collects taxes for each jurisdiction

22. 21

23. 22 Maintenance & Operations Tax Rate $1.00 = Compressed rate 0.04 = Golden pennies ? no voter approval required ? not subject to recapture 0.02 = Silver Pennies ? voter approval required ? not subject to recapture 0.11 = Copper pennies ? voter approval required ? subject to recapture $1.17 Max. Rate Allowed

24. 23 Limited Growth in Property Taxable Values

25. State Revenue: Target Revenue Target revenue causes inverse relationship between tax collections and state aid Increase in tax collections creates a decrease in state aid and an increase in recapture Decrease in tax collections creates more state aid and a decrease in recapture Overall state aid/tax collections increase only if student enrollment grows 24

26. 25 FY2011 Preliminary Budget Assumes No Change in Target Revenue Weighted Average Daily Attendance (WADA) and Target Revenue are key funding components. It costs the district approx. $44.38 per student for each missed day. Target revenue varies for each district Austin ISD $6,073 Pflugerville ISD 5,218 Manor ISD 5,677 Eanes ISD 6,334 Del Valle ISD 5,465 Lago Vista ISD 6,346 Lake Travis ISD 6,193 State Average 5,441

27. 26 FY2011 Preliminary Budget Assumes Modest Growth in Enrollment

28. 27 Where the Tax Money Goes:General Fund Expenditures (Less Chapter 41)

29. 28 Where the Tax Money Goes: cont�General Fund Expenditures (Less Chapter 41)

30. Balancing the Budget: Planning for the Future 29

31. While developing the 2010-11 Budget, the District is also looking ahead and planning for the next three fiscal years. Choices and changes made to balance the budget this year can dramatically affect the district�s financial condition three years from now. 30

32. Approaches to Reaching a Balanced Budget Efficiencies, Cost Savings and Adjustments ($5.9M): These savings would be realized as a result of increased use of technology, information, best practices and organizational alignment which leads increased cost-effectiveness without a significant impact to service levels. Budget Reductions ($4.9M): Proposed reductions to the budget, which may have some impact on service levels. Revenue Maximization ($130K): Options that will increase that amount of revenue generated for the district. Budget Reprogramming/Decentralization ($7.5M combined): Budget actions that transfer funding between areas. 31 There are four major categories that define our approach to balancing the FB2011 budget. Efficiencies allowed us to reduce budget or expenditure assumptions.There are four major categories that define our approach to balancing the FB2011 budget. Efficiencies allowed us to reduce budget or expenditure assumptions.

33. GF Proposed Efficiencies, Cost Savings, and Adjustments ($5.9 M) 32 Highest yielding actions result from becoming self insured to prepayment of loans in fY2010. Both of these actions will require action from the Board in the current year. We save in administrative fees and state taxes from becoming self insured. BCBS indicated that we are 2 out of 155 of their large urban district clients still fully insured.Highest yielding actions result from becoming self insured to prepayment of loans in fY2010. Both of these actions will require action from the Board in the current year. We save in administrative fees and state taxes from becoming self insured. BCBS indicated that we are 2 out of 155 of their large urban district clients still fully insured.

34. GF Proposed Reductions ($4.9M) 33 We are proposing approx $4.9 in reductions. Many of these reductions were leverage from the efficiency study. The FTE impact is distinctly different from the position or headcount impact. It is estimated that nearly 144 positions would be impacted.We are proposing approx $4.9 in reductions. Many of these reductions were leverage from the efficiency study. The FTE impact is distinctly different from the position or headcount impact. It is estimated that nearly 144 positions would be impacted.

35. GF Revenue Maximization ($130K) 34 We are increase the projected revenue by $130k. We will also being taking steps to sale surplus property. One site on Loyola Lane and a Travis county site as candidates. We will also takes steps to determine feasibility of school bus advertisements. However, we must be careful about this one consider impact on road safety. We are increase the projected revenue by $130k. We will also being taking steps to sale surplus property. One site on Loyola Lane and a Travis county site as candidates. We will also takes steps to determine feasibility of school bus advertisements. However, we must be careful about this one consider impact on road safety.

36. GF Reprogramming ($2.6M) & Decentralization to Support Strategic Plan ($4.9M) 35 We have some reprogramming to support strategic plan initiatives and new accountability model which put more funds on local campuses. Monies associated with AU will support new design models. May of these reductions are based on historically under spend. The decentralization of HS allotment monies affect 46 positions currently being supported by these funds.We have some reprogramming to support strategic plan initiatives and new accountability model which put more funds on local campuses. Monies associated with AU will support new design models. May of these reductions are based on historically under spend. The decentralization of HS allotment monies affect 46 positions currently being supported by these funds.

37. Out-Year Structural Imbalances Still Remain 36

38. Need to Consider a Best and Worst Case Scenario for Out-Years Challenges: Structural deficit; FY12-$6.3M, FY13-$15.3M Deciding what programming is important to keep when we reach ARRA Funding Cliff State Fiscal Stabilization Funds -$23.7M Title I Part A ARRA- $21.5M Title I School Improvement ARRA � $1.0M Title I Part D ARRA- $.36M Title II Part D ARRA- $.67M IDEA B Formula ARRA- $16.9M IDEA B Preschool ARRA- $.44M Strategic Plan Investments Solutions: Programmatic expenditure reductions Revenue alternatives 37

39. Proposed Program Changes and Budget Increases 38

40. Proposed Baseline Increases 39

41. Strategic Plan Year 1 Mandatory/Mission Critical Investments 40 The preliminary budget only satisfies a small portion of the Y1 mandatory/critical investments leaving a substantial gap.The preliminary budget only satisfies a small portion of the Y1 mandatory/critical investments leaving a substantial gap.

42. Strategic Plan Year 1 Priority Investments 41 We also have additional funds gaps for other Y1 priorities. The highest cost is facilities & IT.We also have additional funds gaps for other Y1 priorities. The highest cost is facilities & IT.

43. Options to Address Current and Out-Year Budget Needs Implement additional budget reductions that would impact on important programming at the campus level. Postpone implementation of Strategic Plan Initiatives. Seek additional Revenue Options: Increasing the attendance rate by 1% generates $5.6 million. Pursue private grants and sponsors Tax Rate increase of .01 cents generates approx. $5.3 million, subject to recapture. 42

44. Budget Milestones Going Forward Community Conversations (March) March 25, Reagan HS March 30, Travis HS Public Hearing (April 26th) Preliminary Tax Roll (May) Revised Budget Presentation (June) Certified Tax Roll (End of July) Public Hearing (Legally required) (Aug) Board Adoption (Aug) Expenditure Budget Tax Rate Historical Exemptions 43