Operating Budget Fiscal Year 2020-21 First Reading June 23, 2020 1 - PowerPoint PPT Presentation

Operating Budget Fiscal Year 2020-21 First Reading – June 23, 2020 1

Overview Objectives  Review state mandated budget adoption process  Highlight fiscal implications of COVID on the 4-year fiscal outlook  Emphasize significance of enrollment on district resources  Consider message and audience of 4-year operating budget outlook  Present, as first reading, operating budget for fiscal year 2020-21 Key performance outcomes  4.1.a – Long-term planning in finance, staffing, technology, and facilities are intentionally and systematically driven by student enrollment, learning measures, and strategic priorities  4.1.b – A minimum ending fund balance of five percent is maintained in the general fund Board goal  S.3.a – Establish and audit budget priorities to align with strategic 2 priorities

Adoption process State law prescribes budget adoption process  RCW 28A.505.040 – Make budget available to public by July 10  RCW 28A.505.050 – Publish notice of public hearing in newspaper  RCW 28A.505.060 – Hold hearing and adoption on same day  RCW 28A.505.060 – Adopt budget by August 31  RCW 28A.505.090 – Prepare budget in OSPI state document F-195 2020-21 - adoption schedule  June 17, 2020 – First published notice of public hearing and adoption  June 23, 2020 – Board meeting – first reading  June 24, 2020 – Second published notice of public hearing and adoption  July 1, 2020 – Board meeting – budget hearing and adoption  July 2-3, 2020 – Budget filed with ESD 189 and OSPI 3

Influences on budget outlook 4

COVID impacts on 4-year projection March 17 budget workshop projection  2020-21 would use $3.4 M of reserves + $2.0 M net cuts to 8% EFB  2021-22 would use $3.5 M of reserves + $2.5 M net cuts to 7% EFB  Structural deficit is 3-year salary regionalization cut of $3 million per year  2022-23 would require more significant cuts without added revenues $2.5 million net First proceeds from reductions planned 2022 EP&O Levy for 2021-22 will be spring 2023 12.0% 10.6% 10.2% 10.0% 8.9% 8.0% 8.0% 7.0% 7.0% Operating Budget 6.7% 6.0% 6.0% 5.0% 4.3% 4.0% Revised 2.8% Projection 2.0% 1.5% Begin 0.0% Expenditure -2.0% -2.1% Reductions -4.0% 8/31/19 8/31/20 8/31/21 8/31/22 8/31/23 5 Actual Forecast Forecast Forecast Forecast

COVID impacts on 4-year projection One time 2019-20 savings increases current year projected ending balance from 8.9% to 10% helping to offset cost impacts in 2020-21  $775,000 reductions identified by cabinet  $1 million central substitutes  $700,000 curriculum adoptions shifting expenditures to future years  $440,000 in MSOC underspend  $300,000 underspend capital levy technology transfer to general fund  $81,000 spring athletics  Increased COVID costs near $2 million to be offset by CARES fund 6

COVID impacts on 4-year projection Funding loss and increased costs drop projected ending fund balance for 2020-21 from 8% to 6%  Legislature concluded with minimal investment in K-12  $3.4 million legislative formula rule change cut transportation funding  $2.25 million special education  $1.4 million in levy funding, if collections drop to 97%  $680,000 salary funding cut due to drop in Implicit Price Deflator (IPD) from 1.9% to 1.6%  $450,000 interest earnings from lower cash balances and lower interest rates  $250,000 risk pool increase  $250,000 SEBB funding shortfall 7

COVID impacts on 4-year projection Updated 4-year projection for 2020-21 budget  Significant cuts planned for 2022-23 have accelerated to 2021-22  Projected fund balance use of $10-13 million needs to be offset  Cost control measures will be in place during 2020-21 12.0% 2020-21 fund First proceeds from 10.6% 10.0% balance drops from 2022 EP&O levy will 10.0% 10% to 6% be spring 2023 8.9% Operating Budget 8.0% 8.0% 7.0% 7.0% Previous Projection 6.0% 6.0% 6.0% 6.0% 6.0% Begin Expenditure 5.0% Reductions Maintain Minimum 4.0% Fund Balance (4.1.a) 2.8% Previous Target 2.0% 0.0% 8/31/19 8/31/20 8/31/21 8/31/22 8/31/23 8 Actual Forecast Forecast Forecast Forecast

COVID impacts on 4-year projection What can help the fiscal outlook?  Rapid economic recovery  Additional federal economic stimulus funding for K-12  State freeze on salary regionalization cut of 2% per year What can hurt the fiscal outlook?  Legislative supplanting of CARES funding (similar to 2009 ARRA)  Legislative non-basic education funding cuts  Sizable drop of student enrollment  IPD drop amplifies the regionalization funding cuts  COVID costs beyond that reimbursed by FEMA and CARES OSPI Projections 2020-21 2021-22 2022-23 Factor Use CPI 2.5% 1.6% 1.8% Levy IPD 1.6% 1.9% 2.0% Salaries 9

Enrollment paramount to revenues COVID introduced second measure of enrollment  Historically, quantitative measurements drive funding • Current year funding used February enrollment for annual projection  Reopening Washington Schools for 2020-21 Stakeholder Workgroup considering how to measure enrollment while in remote learning model • Registration is measurable, but how do we measure attendance?  Decision likely to be under significant legislative pressure to save money Registration and Traditional Attendance Funding Enrollment COVID added 2020-21 Engagement Funding? 10

Enrollment paramount to revenues Lower enrollment results in multiple impacts  Enrollment drives prototypical school model for most funding categories  Some State and Federal funding is driven by poverty measurements  Free and Reduced Price Lunch (F&RPL) participation drives funding  2020-21 student meal program design influences F&RPL percentage  Levy cap based on assessed property values or number of students General Education, 2020-21 Enrollment Special Education, Funding CTE and EL Learning F&RPL 2020-21 Assistance Percentage Funding Program and Title Educational Enrollment and 2021-22 Programs and Assessed Value Funding 11 Operations Levy

Enrollment paramount to revenues State must continue to fund current commitments  State law requires issuance of teacher contract prior to May 15  100 students = $1,130,000 Enrollment Notice Projections Staffing and Contracts Hiring Issued 12

4-year outlook messaging Legislature added 4-year projection in 2018  Everett has produced 4-year projections for many years  Districts commonly presented fiscal position to legislative audience • Without funding required by McCleary major cuts would happen • Rating agencies knew intent and kept ratings high in strong economy  Economic crisis changes the message to strong fiscal stewardship • With McCleary over, audience shift to community and rating agencies • Message honors Board Policy 6000, and 5% minimum fund balance 2019-20 4-year 2020-21 4-year 13

General Fund 14

General Fund – beginning balance May projection sets 2020-21 beginning fund balance  May 31, 2020 financial report summary: • Beginning fund balance 9/1/19 $ 33.1 million • Revenues and transfers in $ 326.3 million • Expenditures $(326.6) million • Projected ending balance 8/31/20 $ 32.8 million  2019-20 ending balance is projected to be 10.0 percent  Ending balance up from 8.9 percent due to savings while buildings closed  Savings help offset funding shortfalls in 2020-21 15

General Fund – summary 2019-20 actual beginning balance was $33,083,051 Budget Budget 2019-20 2020-21 % Change General Fund Difference Beginning Fund Balance 31,700,000 32,800,000 1,100,000 3.5 R estricted and Committed 1,752,000 1,952,000 200,000 11.4 Grant/Categorical Carryover 6,711,000 3,319,876 (3,391,124) (50.5) Assigned to Other Purposes 1,170,000 717,009 (452,991) (38.7) Unassigned 22,067,000 26,811,115 4,744,115 21.5 R evenues 338,884,277 347,069,742 8,185,465 2.4 E xpenditures 347,333,549 358,243,167 10,909,618 3.1 Ending Fund Balance 23,250,728 21,626,575 (1,624,153) (7.0) R estricted and Committed 4,052,000 3,452,000 (600,000) (14.8) Assigned to Other Purposes 250,000 450,000 200,000 80.0 Unassigned 18,948,728 17,724,575 (1,224,153) (6.5) 16

General Fund – enrollment Enrollment increase due to anticipated growth Budget Budget 2019-20 2020-2021 October 1 Headcount Difference % Change E lementary (K-5) 9,845 9,853 8 0.1 Middle (6-8) 4,850 4,880 30 0.6 High (9-12) 5,567 5,614 47 0.8 Total 20,262 20,347 85 0.4 Budget Budget Annual Average FTE 2019-20 2020-2021 Difference % Change E lementary (K-5) 9,848 9,856 8 0.1 Middle (6-8) 4,836 4,865 29 0.6 High (9-12) 5,250 5,297 47 0.9 R unning S tart/Other 375 390 15 4.0 Total 20,309 20,407 98 0.5 17