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

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Operating Budget Fiscal Year 2020-21

First Reading – June 23, 2020

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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 priorities

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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

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Influences on budget outlook

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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

10.2% 6.7% 4.3% 1.5%

• 2.1%

10.6% 8.9% 2.8% 6.0% 5.0% 8.0% 7.0% 7.0%

• 4.0%
• 2.0%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 8/31/19 Actual 8/31/20 Forecast 8/31/21 Forecast 8/31/22 Forecast 8/31/23 Forecast Operating Budget Revised Projection Begin Expenditure Reductions

First proceeds from 2022 EP&O Levy will be spring 2023 $2.5 million net reductions planned for 2021-22

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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

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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

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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

10.6% 10.0% 6.0% 6.0% 6.0% 8.9% 2.8% 6.0% 5.0% 8.0% 7.0% 7.0%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 8/31/19 Actual 8/31/20 Forecast 8/31/21 Forecast 8/31/22 Forecast 8/31/23 Forecast Operating Budget Previous Projection Begin Expenditure Reductions Maintain Minimum Fund Balance (4.1.a) Previous Target

First proceeds from 2022 EP&O levy will be spring 2023 2020-21 fund balance drops from 10% to 6%

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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

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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

Enrollment COVID added Engagement Registration and Attendance Traditional Funding 2020-21 Funding?

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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

Enrollment Educational Programs and Operations Levy General Education, Special Education, CTE and EL

2020-21 Funding

2021-22 Funding F&RPL Percentage 2020-21 Funding Enrollment and Assessed Value Learning Assistance Program and Title

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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

Staffing and Hiring Contracts Issued Enrollment Projections Notice

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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

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General Fund

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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

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General Fund – summary

2019-20 actual beginning balance was $33,083,051

General Fund Budget 2019-20 Budget 2020-21 Difference % Change 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)

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General Fund – enrollment

Enrollment increase due to anticipated growth

October 1 Headcount Budget 2019-20 Budget 2020-2021 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 Annual Average FTE Budget 2019-20 Budget 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

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General Fund – revenues

Budgeted revenues

 Local levy increases based on maximum voter approved level  State revenues higher due to enrollment and 1.6 percent IPD increase  State special purpose lower due to regionalization and transportation

Revenues Budget 2019-20 Budget 2020-2021 Difference % Change Local Taxes 39,406,906 46,526,400 7,119,494 18.1 Local Non-Tax 12,419,437 11,235,077 (1,184,360) (9.5) S tate General 203,266,426 206,453,210 3,186,784 1.6 S tate S pecial Purpose 62,841,424 61,569,109 (1,272,315) (2.0) Federal General Purpose 60,000 55,000 (5,000) (8.3) Federal S pecial Purpose 15,698,800 15,422,416 (276,384) (1.8) R evenues from Other E ntities 2,541,284 2,758,530 217,246 8.5 Transfers and Other S

• urces

2,650,000 3,050,000 400,000 15.1

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General Fund – revenues

Budgeted revenues

 State dollars fund 77.2 percent of district programs  Federal dollars fund 4.5 percent of district programs  Local levy funds 13.4 percent of district programs

State general purpose (59.5%) State special purpose (17.7%) Local taxes (13.4%) Local non-tax (3.2%) Federal general purpose (<.1%) Federal special purpose (4.5%) Other revenues and sources (1.7%)

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General Fund – revenues

Maintenance, supplies, and operating costs (MSOC)

 MSOC expenditures that exceed revenues are charged to local levy  MSOC funds for CTE and special education are accounted for separately

General Education MSOC Amount R evenues 24,682,569 E xpenditures* 25,275,963 R evenues Over (Under) E xpenditures (593,394)

*Amount includes programs 01,02,03,97 and objects 5,7,8,9; and excludes contingency expenditures

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General Fund – expenditures

Budgeted expenditures program summary

 Includes salary and benefit increases  Special education higher due to enrollment and program needs  CTE and categorical increases include estimated 2019-20 carryover  Community services includes early learning programs

Expenditures by Program Budget 2019-20 Budget 2020-2021 Difference % Change Basic E ducation 247,527,918 253,937,152 6,409,234 2.6 S tate S pecial E ducation 44,715,600 47,650,365 2,934,765 6.6 Federal S pecial E ducation 4,945,882 4,619,610 (326,272) (6.6) Career & Technical E ducation 16,878,978 17,783,871 904,893 5.4 Categorical 30,227,394 31,091,529 864,135

2.9

Community S ervices 3,037,777 3,160,640 122,863 4.0

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General Fund – expenditures

Budgeted expenditures by program

 Nearly 76 percent of expenditures are basic education and CTE  Special education spending is 14.6 percent  Categorical (grant) programs are 8.7 percent

Basic Ed (70.9%) Special Ed (14.6%) Career & Technical Ed (4.9%) Categorical Programs (8.7%) Community Services (0.9%)

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General Fund – expenditures

Budgeted expenditures by program detail

Program Budget 2019-20 Budget 2020-21 Difference

REGULAR INSTRUCTION 01 | Basic Education 190,275,041 197,391,100 7,116,059 02 | Alternative Learning Experience 4,088,995 4,356,128 267,133 03 | Dropout Reengagement 806,208 806,207 (1) 00 | TOTAL REGULAR INSTRUCTION 195,170,244 202,553,435 7,383,191 SPECIAL EDUCATION INSTRUCTION 21 | Special Education, Supplemental, State 42,539,148 47,650,365 5,111,217 22 | Special Education, Infants and Toddlers, State 2,176,452

• (2,176,452)

24 | Special Education, Supplemental, Federal 4,945,882 4,619,610 (326,272) 20 | TOTAL SPECIAL EDUCATION INSTRUCTION 49,661,482 52,269,975 2,608,493 VOCATIONAL EDUCATION INSTRUCTION 31 | Vocational, Basic, State 12,676,280 13,643,029 966,749 34 | Middle School Career and Technical Education, State 4,065,753 4,030,430 (35,323) 38 | Vocational, Federal 136,945 110,412 (26,533) 30 | TOTAL VOCATIONAL EDUCATION INSTRUCTION 16,878,978 17,783,871 904,893

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General Fund – expenditures

Budgeted expenditures by program detail (continued)

Program Budget 2019-20 Budget 2020-21 Difference

SKILLS CENTER INSTRUCTION 40 | TOTAL SKILLS CENTER INSTRUCTION

• COMPENSATORY EDUCATION INSTRUCTION

51 | Disadvantaged (formerly Remediation) ESEA Disadvantaged, Federal 3,537,783 3,537,205 (578) 52 | School Improvement, Federal Other Title Grants under ESEA, Federal 834,411 748,315 (86,096) 55 | Learning Assistance Program (LAP), State 7,660,974 7,930,263 269,289 56 | State Institutions, Centers and Homes, Delinquent 60,000 60,000

• 58 | Special and Pilot Programs, State

2,018,257 2,302,787 284,530 64 | Limited English Proficiency, Federal 471,386 532,935 61,549 65 | Transitional Bilingual, State 5,024,652 5,214,452 189,800 69 | Compensatory, Other 136,140 129,138 (7,002) 50 and 60 | TOTAL COMPENSATORY EDUCATION INSTRUCTION 19,743,603 20,455,095 711,492 OTHER INSTRUCTIONAL PROGRAMS 73 | Summer School 508,000 428,000 (80,000) 74 | Highly Capable 613,110 620,532 7,422 79 | Instructional Programs, Other 1,454,664 1,624,624 169,960 70 | TOTAL OTHER INSTRUCTIONAL PROGRAMS 2,575,774 2,673,156 97,382

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General Fund – expenditures

Budgeted expenditures by program detail (continued)

Program Budget 2019-20 Budget 2020-21 Difference

88 | Child Care / Early Learning 2,319,112 2,504,984 185,872 89 | Other Community Services 718,665 655,656 (63,009) 80 | TOTAL COMMUNITY SERVICES 3,037,777 3,160,640 122,863 SUPPORT SERVICES 97 | District-wide Support 36,207,681 37,499,220 1,291,539 98 | School Food Services 7,908,017 7,963,278 55,261 99 | Pupil Transportation 16,149,993 13,884,497 (2,265,496) 90 | TOTAL SUPPORT SERVICES 60,265,691 59,346,995 (918,696)

TOTAL PROGRAM EXPENDITURES 347,333,549 358,243,167 10,909,618

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General Fund – expenditures

Budgeted expenditures by object summary

 Includes salary and benefit increases  Lower MSOC reflects:  Removal of transportation carryover contingency  Categorical and CTE spending adjustment to salaries and benefits

Expenditures by Object Budget 2019-20 Budget 2020-2021 Difference % Change Certificated S alaries 161,481,651 170,688,185 9,206,534 5.7 Classified S alaries 50,112,582 53,124,200 3,011,618 6.0 E mployee Benefits/Payroll Taxes 79,723,196 84,090,475 4,367,279 5.5 S upplies and Materials 14,817,595 13,536,810 (1,280,785) (8.6) Purchased S ervices 38,403,369 35,415,247 (2,988,122) (7.8) Travel 304,016 290,268 (13,748) (4.5) Capital Outlay 2,491,140 1,097,982 (1,393,158) (55.9)

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General Fund – expenditures

Budgeted expenditures by object

 Nearly 86 percent of budgeted expenditures are salaries and benefits  Remainder are Maintenance Supplies and Operating Costs (MSOC)

Certificated salaries (47.6%) Classified salaries (14.8%) Employee benefits/payroll taxes (23.5%) Supplies and materials (3.8%) Purchased services (9.9%) Travel (0.1%) Capital outlay (0.3%)

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Other Funds

Associated Student Body (ASB) Fund Debt Service Fund Capital Projects Fund Transportation Vehicle Fund

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Associated Student Body Fund

2019-20 actual beginning balance was $1,225,684

 ASB budget proposals were provided to the board on May 22  No changes to the budget have occurred since that time

Associated Student Body Budget 2019-20 Budget 2020-21 Difference % Change Beginning Fund Balance 996,271 1,024,967 28,696 2.9 Total Revenues 2,490,737 2,720,616 229,879 9.2 Total Expenditures 2,646,756 2,923,618 276,862 10.5 Ending Fund Balance 840,252 821,965 (18,287) (2.2)

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Debt Service Fund

2019-20 actual beginning balance was $34,484,507

 Expenditures for principal and interest payments are consistent with bond repayment schedules  Anticipates fall sale of $50 million bond for capital construction

Debt Service Budget 2019-20 Budget 2020-21 Difference % Change Beginning Fund Balance 32,400,000 30,700,000 (1,700,000) (5.2) Total R evenues 60,345,841 56,587,000 (3,758,841) (6.2) Total E xpenditures 61,474,110 58,134,411 (3,339,699) (5.4) Ending Fund Balance 31,271,731 29,152,589 (2,119,142) (6.8)

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Capital Projects Fund

2019-20 actual beginning balance was $68,692,721

 Anticipates fall sale of $50 million bond

Capital Projects Budget 2019-20 Budget 2020-21 Difference % Change Beginning Fund Balance 61,068,021 40,289,259 (20,778,762) (34.0) R estricted 46,715,386 25,602,281 (21,113,105) (45.2) Committed 14,352,635 13,444,512 (908,123) (6.3) Assigned to Fund Purposes

• 1,242,466

1,242,466 R evenues and Other Proceeds 28,767,708 71,486,758 42,719,050 148.5 E xpenditures 74,928,849 53,299,532 (21,629,317) (28.9) Operating Transfers Out 2,650,000 3,050,000 400,000 15.1 Ending Fund Balance 12,256,880 55,426,485 43,169,605 352.2 R estricted 2,452,707 51,787,895 49,335,188 2,011.5 Committed 8,684,094 3,638,590 (5,045,504) (58.1) Assigned to Fund Purposes 1,120,079

• (1,120,079)

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Capital Projects Fund

Major projects

 $5,737,000 Woodside Elementary School modernization  $3,800,000 Elementary Classroom Additions  $1,750,000 Everett High School classrooms and cafeteria modernization  $1,250,000 Madison Elementary School modernization

Technology initiatives

 $9,302,000 Device life-cycle management and upgrades  $3,503,000 1:1 mobile devices  $2,601,000 Technology infrastructure

Other

 $3,516,000 Property purchases  $2,708,000 Roofing and flooring replacements  $2,050,000 Replace synthetic turf at memorial stadium  $1,900,000 Parking lot expansions  $1,490,000 Portable classrooms  $1,585,000 HVAC upgrades

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Transportation Vehicle Fund

2019-20 actual beginning balance was $205,817

 Provides capacity for the purchase of up to four buses  State depreciation revenues are paid in August

Transportation Vehicle Budget 2019-20 Budget 2020-21 Difference % Change Beginning Fund Balance 172,000 316,500 144,500 84.0 Total Revenues 112,500 121,000 8,500 7.6 Total Expenditures 210,000 319,500 109,500 52.1 Ending Fund Balance 74,500 118,000 43,500 58.4

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Questions?