San Ysidro Elementary School District Fiscal Oversight Report April 11, 2013

1. San Ysidro Elementary School DistrictFiscal Oversight ReportApril 11, 2013 Lora Duzyk Assistant Superintendent, Business Services

2. Why are we here tonight? • Discuss the District’s Second Interim Report • AB1200 Fiscal Oversight – What is a Negative Certification? • County Superintendent Intervention • The District’s Fiscal Recovery Plan • Next Steps

3. Second Interim Report • Letter to the Board President dated 3/20/2013 “The district will be unable to meet its financial obligations in the subsequent fiscal year, 2013-14 and beyond…” • Current Year 2012-13 • Projected deficit spending of ($2.44 million) • 2.7% Reserve for Economic Uncertainty • Unable to qualify for County TRANS pool due to inability to pay • $1.5 million in internal borrowing to cover cash shortfalls

4. Unrestricted Deficit SpendingRevenue & Contributions less Expenses

5. Unrestricted Reserve Trends 2009/10 thru 2013/14

6. Second Interim Report • Multi-Year Projection (as of February 28, 2013) “The district needs to cut a total $9.5 million during the two year period of 2013-14 to 2014-15, representing a yearly average of 17.5% of unrestricted expenditures” • Needed expenditure reductions • 2013-14 = $4.2 million • 2014-15 = $ 5.3 million

7. Second Interim Report • Cash “The combination of internal borrowing and a Temporary Transfer of Funds from the County Treasury may be insufficient to cover district cash needs in fiscal year 2013-14 under the current budget projections.” • 2013-14 • Out of cash in April/May 2014 • Projected cash need in 2013-14 = $3.8 million • Projected cash payment from the state = $2.2 million

8. Cash Flow Trends

9. 2012/13 General Fund Monthly Ending Cash Balance

10. 2013/14 General Fund Monthly Ending Cash Balance

11. AB 1200 Fiscal Oversight • Effective January 1, 1992 • Expanded authority for the County Superintendent to intervene in financially troubled school districts • Revised and standardized the budget development and interim reporting processes • Addressed other issues related to fiscal accountability such as emergency apportionments, actuarial studies, approval of debt issuance and more • Created the Fiscal Crisis and Management Assistance Team (FCMAT)

12. Interim Report Certifications • Positive– the district will meetits financial obligations for the current and two subsequent fiscal years • Qualified– The district may not meetits financial obligations for the current or next two fiscal years • Negative – The district will be unable to meet its financial obligations for the current or next fiscal year.

13. Qualified/Negative Certifications • “3rd Interim” for period ending April 30; file with the County Superintendent, Superintendent of Public Instruction and State Controller’s Office by June 1st • Limitations on debt issuance • Possible downgrade by rating agencies resulting in higher borrowing costs • Prior review and approval of collective bargaining agreements by the County Superintendent is required

14. Qualified/Negative Certifications • Qualified status: the Board retains authority but may have compensation withheld for failure to provide information • Negative status:County Superintendent appoints a fiscal advisor with stay and rescind authority over Board actions

15. County Superintendent • The County Superintendent shall impose one or more of the following - EC 42127.6(e): • Impose a budget on a district • Stay or rescind any action that is determined to be inconsistent with the school districts ability to meet its obligations for the current or subsequent fiscal years • Assist in developing a financial plan to enable the district to meet its obligations

16. County Superintendent • The County Superintendent shall …(cont’d) • Assist in developing a budget for the following year • Assign a fiscal advisor to perform any of the above on behalf • Note that the school district would be required to pay 75% and the COE 25% of the expenses incurred for the fiscal advisor • And all actions that are necessary to ensure that the district meets its financial obligations

17. County Superintendent • All districts issuing Certificates of Participation (COPs) or revenue bonds must provide the County Superintendent with evidence of their ability to repay • Districts with qualified or negative certifications may not issue these debt instruments without the County Superintendent first determining that the repayment of that debt is probable. • The District will not be able to borrow when it can’t pay the funds back (projected April/May 2014).

18. CountySuperintendent • All districts must disclose the costs of an agreement with an exclusive representative at a public meeting • Districts with qualified or negative certifications are required to give the County Superintendent 10 days to comment on the agreement • Negative - Fiscal Advisor may “Stay/Rescind” Board action on the agreement

19. Role of a Fiscal Advisor • The Fiscal Advisor: • May be COE staff or an External Consultant • Is the Advisor to the County Superintendent, not to the school district • Has “Stay and Rescind” authority over board actions • Does not initiate board actions • Will sit on closed board sessions • Cannot abrogate existing labor contracts

20. Road Map to Solutions • Fiscal Recovery Plan. The plan may include but not be limited to: • Communication- All stakeholders! (Board, Leadership, Labor, Staff, Community – including parents, Policy makers, Legislators – anyone who will listen!)

21. Road Map to Solutions • Fiscal Recovery Plan, (cont’d.) • Increase Revenues • Increase ADA • State Revenues/ LCFF • Donations • Grants

22. Road Map to Solutions • Fiscal Recovery Plan, (cont’d.) • Decrease Expenditures • Prepare for the worst/ hope for the best! • Sooner vs. Later • Spending and Hiring Freeze • On-going vs. One-time • 85% of total Unrestricted Expenditures are people and related costs