2018-19 1st Interim Budget December 11, 2018 So... why do a 1st - - PowerPoint PPT Presentation

2018-19 1st Interim Budget

December 11, 2018 Tamalpais Union High School District

So... why do a 1st Interim budget report?

➢ The 1st Interim reports:

○ Actual financial activity from July 1st through October 31st ○ Projects financial activity through June 30th

➢ Comparison: Adopted Budget (June 2018) vs. 1st Interim Budget (December 2018) ➢ Provides an opportunity to:

○ Revise the budget based on any significant changes since the budget adoption in June ○ Recalculate Multi Year Projections ○ Discuss any needed changes or actions

➢ Board must approve certification of financial condition

○ Positive – “will be able” ○ Qualified – “may not be able” ○ Negative – “unable”

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Agenda

➢ Budget Reporting Cycle ➢ Context: Where were we in June and the Fall? ➢ Key Assumptions ➢ Budget: Revenue & Expenditures - What has changed since June? ➢ STRS and PERS increases ➢ Multi-Year Projection - Where are we going? ➢ Other Funds ➢ Prudence and Next Steps ➢ Questions

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Budget Reporting Cycle

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Where were we in the Fall?

• In the last 10 years, TUHSD has added 1,227 students resulting in additional 70.5 fte certificated staff
• Given TUHSD is ‘basic aid’, we do not get extra revenue for each student
• As a result, TUHSD is projecting operating deficits of

○ $7.9M for 2018-19 (current year) ○ $8.7M for 2019-20 ○ $9.7M for 2020-21

• The Reserve has and will decrease by these operating deficits

○ Reserve was $24.8M in 2016-17 & is currently $17.7M to begin this year ○ Reserve is projected to be depleted by 2020-21

• Solution = Reduce costs + Increase revenue (supplemental parcel tax)

$8M = $3M + $5M if parcel tax passes $8M = $8M + 0 if parcel tax fails

• Need staff and community input on how to reduce costs with and without Parcel Tax

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Basic Aid vs. State-Funded (LCFF)

• District is entitled to a calculated

revenue entitlement

• Comprised of both local property taxes

revenue and state aid

• If property taxes exceed the calculated

revenue entitlement, then the district keeps the overflow revenue and receives only basic (minimal) state aid

• Does not receive significant additional

revenue for each new student in enrollment growth

• TUHSD is about $17M over the LCFF

entitlement

• Formerly referred to as ‘Revenue Limit’
• District is entitled to a calculated

revenue entitlement

• Comprised of both local property taxes

and state aid

• When property taxes do not meet the

calculated revenue entitlement, then the State makes up the shortfall with additional funding up to the calculated revenue entitlement

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Key Budget Assumptions

Enrollment & Average Daily Attendance ○ Official enrollment reported to the state is estimated to be 5,167 students ○ Estimate Actual Average Daily Attendance (ADA) of 4,850 ■ An increase of 214 ADA from 2017-18 ■ Estimated ADA to enrollment ratio of approximately 96% (excluding NPS & County students) ■ Unduplicated pupil percentage of 10% for supplemental & concentration funding

• Given the District receives the majority of its general purpose revenues in the form of

property taxes (i.e. basic aid funded), the increase in ADA from 2017-18 does not significantly impact operating revenues. It does, however, increase operating expenditures.

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Key Budget Assumptions (continued)

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Property Tax Revenues

While still increasing, property tax revenue growth has slowed.

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Combined Parcel Tax Revenue

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Sources of 2017-18 General Revenue (combined)

➢ General Purpose $ 63,666,385

○ Property taxes, Education Protection Account, minimum State Aid

➢ State Funding $ 4,691,972

○ Not part of LCFF (Lottery, Special Education, etc.)

➢ Federal Funding $ 1,169,181

○ Title I, Title II, etc.

➢ Local Revenue $ 17,288,728

○ Parcel tax, Foundations, facilities fees, interest

TOTAL: $ 86,816,266

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General Fund Revenue Sources (Unrestricted)

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Enrollment Growth

○ Additional 1,344 students over 10 years

■ 3,823 students in 2008-09 to 5,167 students in 2018-19

○ 35% increase over ten year time period

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Enrollment & Growth

While the rate of increase of property taxes slows, enrollment continues to grow. The combination puts a squeeze

• n funding per student.

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Revenue per Student

Revenue continues to increase, but at a slower rate than student growth, so funding per student drops.

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Salaries and benefits comprise approximately 88% of the District’s unrestricted expenditures, and approximately 77% of the combined General Fund expenditures.

General Fund Expenditures

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General Fund Expenditures

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STRS & PERS Rates grow exponentially

• In 2013, both STRS and PERS rates were re-calculated based on the Public Employee Pension

Reform Act that restructured retirement age and benefits.

• The result is less District funding available for any other uses.
• Compared to 2013-14, increased rates cost district additional $3.99M as of 2018-19
• By 2022-23, budget will reflect $2.7M more in annual district retirement contributions than

2018-19

• From 2013-14 to 2022-23, the cumulative impact is $6.7M annually

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STRS & PERS Costs double in next few years

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Reconciliation of Adopted vs. 1st Interim Budgets

Description Amount 2018-19 Adopted Budget Projected Deficit $ (7,847,650) Add: Variance Components (See Next Slide) $ 4,129,039 2018-19 First Interim Projected Deficit $ (3,718,611)

Operating Deficit occurs when the current year expenditures exceed current year revenues, which results in depleting reserves.

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Reconciliation Variance Components

Description of Variance Components Amount

Increase in Supplemental Parcel Tax revenue $2.9 Million Increase in One-Time Mandated Cost reimbursement revenue $901k Increase in expenditures given 1.5% salary increase for all groups for 2017-2018 ($810k) Decrease in expenditures given combined duties for Sr Director of Curriculum & Instruction with Tamiscal Principal position $151k Decrease in expenditures given 10% reduction in Department budgets $300k Decrease in expenditures given 25% reduction in school site budgets $300k Decrease in expenditures given elimination of Assistant Superintendent of Educational Services $256k Decrease in expenditures given reduction of work calendar for new Director of Nutritional Services $5,600

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Reconciliation Variance Components (continued)

Description of Variance Components Amount

Increase in expenditures given net increase of 2.7 fte in certificated staffing across the District ($370k) Increase in expenditures given additional Special Education transportation costs for 17.5 students ($136k) Increase in expenditures given additional staffing for Drake CEC Special Education classroom starting in January ($262k) Increase in expenditures given recognized Special Education Excess Costs for 2016-17 and 2017-18 (one-time) ($341k) Increase in recognized Community Education revenue from Summer 2018 $255k Reversed 2017-18 transfer out to Adult Education $192k Eliminated 2018-19 budgeted transfer out to Adult Education $132k Increase in Fund Balance given return of former Superintendent’s housing loan (one-time) $502k Other net adjustments (IT, Facilities, other) $153k Total Variance $4,129,039

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Reconciliation of Adopted vs. 1st Interim Budgets

Description Operating Deficit Ending Fund Balance (Reserve) 2018-19 Adopted Budget Projection $(7,847,650) $8,630,435 (6.5%) Add Variance/Change $4,129,039 $5,400,600

(change due to reduction in operating deficit & $1.3M adjustment to beginning fund balance at Unaudited Actuals in September)

2018-19 First Interim Projection $(3,718,611) $14,031,035 (11.5%) Average reserve levels for CA basic aid districts is about 17%, so TUHSD is below this average. The components of the District’s fund balance are as follows:

• Revolving cash - $12,000
• Assignments - $3.3M
• Reserve for Economic Uncertainty (REU) - $2.79M
• Amount above REU - $7.94M

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Multi-Year Projection Assumptions

Revenue Assumptions:

• Enrollment to continue to increase over the next three years by an estimated cumulative total of

242 ADA compared to 2018-19

• Local property tax revenue growth is projected to decrease from 4.64% in current year to 4.1% in

2020-21

• Federal revenue is expected to remain relatively constant
• State revenue is expected to remain constant
• Local revenue is expected to increase by the new supplemental parcel tax measure revenue

○ Prorated percentage of the annual parcel tax revenue in 2018-19 ($2.9M) ○ Full annual revenue in 2019-20 continuing for the term ($5.1M) ○ Additional increase with the 3% annual inflation adjustment in both parcel taxes Expenditure Assumptions:

• Step & Column increases are 1.83% for Certificated and 2.2% for Classified
• Additional 4.8 certificated fte positions to accommodate enrollment growth in 2019-20

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MYP Notes

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Summary of All Funds

In addition to the general fund, other funds collect and track specific funds for restricted purposes.

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1st Interim Certification

• Per AB 1200
• The First Interim projection indicates that, as defined in AB

1200, “the district will be able to meet its financial

• bligations for the current fiscal year and subsequent two

years.” The District is self-certifying as “Positive”

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Uncertainties & Prudence

• Increasing Enrollment and ADA for three more years
• Property Tax Estimates will be confirmed each fall
• Eventual downturn in the economy (every 8-10 years whether we like it or not)
• STRS and PERS annual increases larger than revenue increases
• Statewide trend of Special Education costs increases (unfunded mandate)
• Continued Deficit Spending Trend

○

Even with Supplemental Parcel Tax & planned expenditure reductions of $3M

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Budget Calendar & Key Dates

January 2019 New Governor’s proposal for State budget February 2019 Superintendent presents Fiscal Advisory recommendations to Board March 2019 2nd Interim Budget Report for 2018-19 April 2019 LCAP submitted to County Office for first review May 2019 Board reviews preliminary 2019-20 Budget from Superintendent inclusive

• f Fiscal Advisory input

Governor’s May Revise budget proposal June 2019 Board adopts 2019-20 Budget & LCAP

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Questions? Comments?

Special thanks to our Business Office staff for their work to help prepare this report!

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