South Whittier School District Update on State Budget Act 2008- - - PowerPoint PPT Presentation

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South Whittier School District Update on State Budget Act 2008- 2009

Febr uar y 24, 2009

• Dr. Er ich Kwek, Super int endent

David A. River a, Assist Supt – Business Ser vices

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St at e Budget Crisis: I mpact t o Educat ion Funding

Latest I nf ormation

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Legislat ive Analyst ’s Revenue For ecast s

General Fund Revenues

(I n Billions)

$103 $109 $117 $125 $133 $93 $86 $90 $95 $101 $99 $103 $80 $95 $110 $125 $140

2007- 08 2008- 09 2009- 10 2010- 11 2011- 12 2012- 13

LAO Nov 2007 LAO Nov 2008

Sources: Legislative Analyst’s Of f ice, Calif ornia’s Fiscal Outlook, November 2007 (p. 26) and November 2008 (p. 18)

Expected loss in revenues is approx $118 Billion

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St at e Budget Crisis: I mpact t o Educat ion Funding

• Signif icant reduct ions in

st at e revenues lead t o drast ic reduct ions in f unding f or educat ion (Prop 98 Minimum Guarant ee)

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St at e Budget Crisis: I mpact t o Educat ion Funding

• Target ed reduct ions

t ally over $8 Billion

• Erases past

def iciencies owed t o Educat ion (Test 1)

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In collaboration with Blattner & Associates

2008- 09 & 2009- 10 State Budget: I nitial Analysis

(February 20 version)

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• ACSA and t he K-adult consult ing f irm of Tot al School

Solut ions (TSS), in collaborat ion wit h Bob Blat t ner and Associat es, have developed an init ial analysis of t he recent ly enact ed 2008-09 mid-year reduct ions and 2009-10 St at e Budget

• ACSA members and ot her educat ion leaders are

welcome and encouraged t o ut ilize t his inf ormat ion in t heir LEAs and communit ies

About this document

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• Af t er a long delay, t he 2008-09 and 2009-10 st at e

budget package f inally came t oget her amidst a whirlwind of deal making and polit ical drama

• Budget bill language has only recent ly become

available – our init ial analysis is derived f rom brief ings wit h legislat ive st af f , f loor analyses, and review of available budget language

• I t is subj ect t o f urt her clarif icat ion as inf ormat ion

becomes available

• I t is int ended t o provide an init ial management and

programmat ic perspect ive on maj or reduct ions and policy f lexibilit y wit hin Proposit ion 98

Overview and Caveats

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• Even wit h a budget package f inally in place, t he st at e’s f inancial condit ion

remains crit ical

• Fact ors educat ion leaders should cont inue t o wat ch out f or:

– The st at e’s credit rat ing is at j unk bond st at us – below t hat of Louisiana – St at e revenues are proj ect ed t o cont inue dropping t hrough 2009 and int o 2010 – The st at e will cont inue t o experience cash f low dif f icult ies – which will likely become our dif f icult ies

• K-adult educat ion will experience hist oric mid-year and budget year reduct ions
• I f revenues cont inue t o drop, addit ional 2009-10 reduct ions are possible

– We’ll have a bet t er f eel f or t his as we get closer t o t he May Revision

The St at e of Things: Fluid as Quick Sand

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Why This Budget Crisis is Dif f erent

Six element s make t his budget crisis unlike any ot her – and mor e challenging:

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A chronic st ruct ural budget gap has exist ed most of t his decade



The economics are dif f erent – t his economic downt urn is widespread and t he worst we have seen since t he Great Depression



There are more budget “lock-ins” t han bef ore



Our polit ics are deadlocked – gerrymandered legislat ive dist rict s, polit ical polarizat ion among Democrat s and Republicans, t erm limit s, et c.



The st at e’s revenue syst em is highly volat ile



Enormous social and demographic changes – our governance syst em has not kept pace wit h t he rapid changes occurring in Calif ornia

All of these remain in place going into 2009- 10

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A Growing State Def icit (in Billions)

($6. 1) ($9. 8) ($14. 5) ($16. 0) ($24. 3)

Nov 2007 Jan 2008 Feb 2008

Source: Kern Count y Superint endent of Schools – Michael Hulsizer, 2009

May 2008

( $ 1 7 .2 ) ($41. 6)

Dec 2008

The state’s structural def icit has increased exponentially as state revenues have declined due to worsening economic conditions

July 2007

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A Tumultuous Decade: $13. 4 Billion in Lower Prop 98 Spending

Sour ce: Ker n Count y Super int endent of Schools – Michael Hulsizer , 2009

2001-02 $2. 2 Billion Total

• $583 Million (Mid-Year Reduct ions)

Febr uar y 2002 (High P r ior it y School Gr ant s, Teaching as A P r ior it y Block Gr ant s, Cer t if icat ed St af f P er f or mance Awards, Ener gy Gr ant s, 9t h Gr ade CSR, Cal-Saf e)

• $503 Million (P

r ior -Year Rever sions) J une 2002 Backf ill of Adult Educat ion Reduct ions

• $1.124 Billion (Cat egor ical Def er rals)

J une 2002 2002-03 $2. 61 Billion Total

• $1.3 Billion (J une Appor t ionment Def er r al)

Mar ch 2003

• $460 Million (K-12 Funding Reduct ions)

May 2003

• $734 Million (K-12 P

r ior -Year Rever sions t o Backf ill Cut s) J une 2003 2003-04 $1. 468 Billion

• $1.048 Billion (P

r ior -Year Rever sions t o f und Def er r al) J une 2004

• $341 Million (P

r ior -Year Rever sions t o Fund TI G Gr ant s J une 2004 and Child Car e)

• $127 Million (New Feder al I DEA Funds t o backf ill

J une 2004 r educed St at e Special Educat ion cont r ibut ion)

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A Tumultuous Decade: $13. 4 Billion in Lower Prop 98 Spending

Sour ce: Ker n Count y Super int endent of Schools – Michael Hulsizer , 2009

2007-08 $507 Million

 $211 Million in Cur rent -Year Reversions February 2008  $295.4 Million in Pr ior-Year Reversions February 2008

2008-09 $6. 572 Billion

 $2 Billion (RL and cat egorical reduct ion, no COLA) February 2009  $2.8 Billion (Februar y RL/ CSR/ CC Appor t ionment Def er ral) Februar y 2009  $1.1 Billion (Use of Pr ior-Year Prop. 98 “Set t le-Up”) February 2009  $619 million (Home-t o-School Funding Swap) February 2009  $153 million Prop. 98 Reversions February 2009

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I mplications to K- Adult Funding

• Pr oposit ion 98 f unding is dir ect ly linked t o

t he over all healt h of st at e r evenues

• All LEAs will f ace a pr olonged st at e of f iscal

uncer t aint y t hr ough 2010-11

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I mplications to K- Adult Funding

• The f ollowing t hreat s remain a possibilit y during t his

t imef rame:

Addit ional revenue limit reduct ions Zero COLAs t hru 2010-11 Apport ionment def errals and subsequent cash f low dif f icult ies Furt her reduct ions t o cat egorical program f unding Proposals t o manipulat e Proposit ion 98 f unding Limit ed st at e school const ruct ion f unding

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The Budget “Correction” Package: State Budget I I f or 2008- 2009

• This proposal is a t wo-year package:

– 2008-09 mid-year K-adult r educt ions and f unding def er r als – 2009-10 budget pr oposal (w/ addit ional r educt ions and def er r als)

• Lowers t he Proposit ion 98 f unding level

in t he current and budget years

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The Budget “Correction” Package: State Budget I I f or 2008- 2009

• Requires vot er approval of f ive special

elect ion ballot proposals

– All of t hem have t o pass in or der f or t he plan t o hold t oget her – One of t hem includes f ut ur e r est or at ion of t he Pr oposit ion 98 maint enance f act or – Pr op. 1C – Special elect ion scheduled f or May 19

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The Budget “Correction” Package: State Budget I I f or 2008- 2009

• Reduces curr ent year Proposit ion 98

f unding by more t han $6 billion – via mix of program reduct ions, def errals, and re-designat ion of f unds

* NOTE: Act ual RL r educt ion amount s will var y per LEA

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The Budget “Correction” Package: State Budget I I f or 2008- 2009

Program reduct ions t ot al is $1.9 billion – Eliminat es t he 0.68% COLA (No COLA f or 2008-09) – Remaining reduct ion is split :

• 50% (Revenue limit s)

– ($944 million) overall or about $160 per ADA*

• 50% (Across-t he-board Cut s)

– 15% reduct ions t o specif ied cat egorical programs

* NOTE: Act ual RL r educt ion amount s will var y per LEA

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2008- 09: Categorical Cuts and Flexibility

• Cat egorical programs are divided int o t hree t iers f or

purposes of prot ect ing some and providing f lexibilit y t o ot hers

• Changes are in ef f ect f or t his f iscal year and unt il

2012-13

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2008- 09: Categorical Cuts and Flexibility

Tier I :

–No f unding reduct ion, no program f lexibilit y, no st at ut ory requirement s waived (w/ except ion of CSR penalt y provisions)

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Tier I Programs

• No reduct ion and no f lexibilit y:
• 1. Child Development
• 2. Child Nut rit ion
• 3. Economic I mpact Aid
• 4. K-3 Class Size Reduct ion
• 5. Proposit ion 49 Af t er School Programs
• 6. Special Educat ion
• 7. Qualit y Educat ion I nvest ment Act
• 8. Home-t o-School Transport at ion

NOTE: We are researching if AVI D is a “Tier one” program

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K- 3 CSR – Revised Penalties

• Changes t o t he penalt y provisions of K-3 CSR should a class

exceed t he current rat io of 20.4 t o 1

• Maximum f unding is capped at 20 st udent s per class

– $1,071 x 20 St udent s = $21,420

St udent t o t eacher r at io Old Penalt y New Penalt y Up t o 20.44 0% 0% 20.45 – 20.94 20% 5% 20.95 - 21.44 40% 5% 21.45 – 21.84 80% 10% 21.85 – 22.44 100% 10% 22.45 – 22.94 100% 15% 22.95 – 24.94 100% 20% 24.95 + 100% 30%

• Required t o part icipat e in K-3 CSR as of December 10, 2008

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2008- 09: Categorical Cuts and Flexibility

Tier I I :

–Funding reduct ion of approximat ely 15% f rom 2008-09 previously enact ed levels, but no f lexibilit y, and programs are t o be operat ed according t o t he current requirement s

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Tier I I Programs

15% reduct ion and no f lexibilit y:

• 1. Adult s in correct ional f acilit ies
• 2. Part nership Academies
• 3. Apprent iceship Programs
• 4. St at e Test ing
• 5. English Language Acquisit ion Program
• 6. Agricult ure-Vocat ional Educat ion
• 7. Fost er Yout h
• 8. Chart er School Facilit ies Grant s
• 9. K-12 High Speed Net work
• 10. Mult i-Track YRE

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Tier I I I Programs

• 15% reduct ion but t ot al f lexibilit y t o shif t f unding

t o any ot her educat ional purpose (including t o unrest rict ed GF):

• All remaining K-adult Proposit ion 98 cat egorical

programs

• Tiers and associat ed f lexibilit y apply t o st at e

cat egorical programs only – not Federal

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2008- 09: Categorical Cuts and Flexibility

Tier I I I :

– Funding r educt ion of appr oximat ely 15% f r om 2008-09 levels, but wit h maximum f lexibilit y t o move f unding f or any educat ional pur pose – I ncludes St at e Pr ogr ams – Excludes Feder al Pr ogr ams

28 Tar get ed I nst r uct ional I mpr ovement Block Gr ant Adult Educat ion Regional Occupat ional Cent er s and P r ogr ams School and Libr ar y I mpr ovement Block Gr ant Supplement al I nst r uct ion I nst r uct ional Mat er ials Def er r ed Maint enance P r of essional Development Block Gr ant P r ogr am Supplement al School Counseling P r ogr am Char t er School Cat egorical Block Gr ant Teacher Cr edent ialing Block Gr ant High P r ior it y Schools Gr ant P r ogr am Ar t s and Music Block Gr ant Class Size Reduct ion - 9t h Gr ade School Saf et y Block Gr ant (8-12) P upil Ret ent ion Block Gr ant P r ogram CA High School Exit Exam-I nst r uct ional Suppor t and Ser vices CA School Age Families Educat ion Mat h and Reading P r of essional Development Gif t ed and Talent ed Communit y Day Schools Communit y -Based English Tut or ing P r ogr am P E Teacher I ncent ive P r ogr am Teacher Cr edent ialing St andar ds f or P r epar at ion and Licensing

Tier I I I Programs

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Tier I I I Programs

Peer Assist ance and Review School Saf et y Compet it ive Grant s Count y Of f ices of Educat ion - Fiscal Oversight Cert if icat ed St af f Ment oring Count y Of f ice of Educat ion - Williams Audit s Specialized Secondary Program Grant s Principal Training Program American I ndian Educat ion Cent ers Child Oral Healt h Assessment s Nat ional Board Cert if icat ion I ncent ives Advanced Placement Programs Bilingual Teacher Training American I ndian Early Childhood Educat ion Cent ers Reader Services f or t he Blind Civic Educat ion Teacher Dismissal Apport ionment CA Associat ion of St udent Councils Sanct ions Chief Business Of f icers Training P rogram

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AB 825 Block Grants

• Not sure what happens t o exist ing

AB 825 Block Grant provisions

• However, proposed Tier I I I

cat egorical f lexibilit y is broader – recommend LEAs t ake advant age

• f t hat proposal f irst

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I nstructional Materials Flexibility

• The proposal provides f or t he suspension of st at ut ory

requirement s f or LEAs t o purchase newly-adopt ed inst ruct ional mat erials f or 2008-09 and 2009-10

• COEs are relieved f rom t he r esponsibilit y of conf irming such

purchases during sit e visit s – but COEs will cont inue t o conduct sit e visit s f or purposes of det ermining suf f iciency

• LEAs t hat exercise t his f lexibilit y opt ion must st ill comply

wit h current st at ut es and requirement s (i..e. Williams Set t lement )

– Mat erials must be st andards-aligned – One set of mat erials per st udent – Mat erials in good condit ion – Dist rict s must cont inue t o hold annual hearings regarding suf f iciency per current law (Educat ion Code sect ions 60019 and 60119 remain in ef f ect )

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Pr ior Year Cat egor ical Balances (sweep ups)

• LEAs are aut horized t o access ending f und balances

as of J une 30, 2008 (and f rom t he 2007-08 FY only) f rom t he rest rict ed cat egorical program account s f or any educat ional purpose

• Following programs are excluded:
• Economic I mpact Aid
• Target ed I nst ruct ional I mprovement Grant s
• I nst ruct ional Mat erials
• Special Educat ion
• Qualit y Educat ion I nvest ment Act
• Calif ornia High School Exit Exam
• Supplement al I nst ruct ion
• Home-t o-School Transport at ion

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Other Flexibility

• Rout ine Rest r ict ed Maint enance Tr ansf er –

LEAs ar e aut hor ized t o r educe t r ansf er t o RRM account f r om 3% t o 1% of t ot al Gener al Fund

• Def er r ed Maint enance – Eliminat es local

0.5% st at ut or y mat ch f or def er r ed maint enance

• Suspension is in place f or 5 year s

– 08/ 09, 09/ 10, 10/ 11, 11/ 12 and 12/ 13

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No Changes to the Following

• AB 1200/ 2756 Reserve f or Economic Uncert aint y

– Remains at 3% f or t he Dist rict

• Minimum number of inst ruct ional days & minut es

remain – Remains unchanged at 180 Days

• No suspension of K-adult mandat es as proposed by

t he governor – LEAs recommended t o cont inue processing claims and maint ain records

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Appor t ionment Def er r als: Delayed Cash Allocat ions

• February (2009) t o J uly (2009)

– $2 billion in Revenue Limit (ADA) apport ionment s

• Approx. $339 per ADA

– $570 million in K-3 CSR apport ionment s (1/ 2)

• J uly (2009) t o Oct ober (2009)

– $1.2 billion in K-14 apport ionment s (ADA)

• August (2009) t o Oct ober (2009)

– $1.5 billion in K-12 apport ionment s (ADA)

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2009- 10 Budget Reductions

• Eliminat es $2.5 billion in Proposit ion 98 f unding

– St at ut ory COLA of 5.02% – I ncreases t he Proposit ion 98 def icit f act or by 4.529%

• Addit ional cut s f rom Proposit ion 98 base (08/ 09)

– $265 million reduct ion t o revenue limit f unding

• Approx. $45 per ADA

– $265 million reduct ion t o cat egorical programs

• Across-t he-board reduct ions (4.9%) t o Tier I I & I I I

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Proposition 98 Out- year Funding

• The budget proposal includes several provisions t hat

will impact f ut ure Proposit ion 98 f unding: – Budget St abilizat ion Fund – ACA 3X 1 (Nielo) – Proposit ion 98 repayment plan – ACA 3X 2 (Bass) – Ot her ballot measures – Lot t ery Securit izat ion, St at e Spending Cap, Sales Tax I ncrease

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LEA Budget Planning

Assumpt ions f or budget planning:

• Work wit h your COEs t o det ermine t he f iscal crit eria necessary

f or AB 1200 Second I nt erim report s and mult i-year assumpt ions

• 2008-09 Mid-year r educt ions and apport ionment def erral are

likely t o remain unchanged

• 2009-10 K-adult reduct ions will be subj ect t o possible changes

depending on budget year revenue proj ect ions

• Furt her 2009-10 reduct ions are possible post May Revise if

revenues are below f or ecast

– NOTE: May Revision release post poned t o about May 25 or 26 due t o May 19 special elect ion

• LEAs will cont inue t o f ace t hreat s of addit ional apport ionment

def errals in 2009-10 and beyond Fiscal conditions will remain uncertain through 2010- 11

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Revenue Limit Def icit Factors: South Whittier School District (ADA)

• 2008-09: 7.844%
• 2009-10: 13.094%
• 2010-11:

13.094%

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Multi- year Projections

Recommend t hat LEAs proj ect and budget f or ZERO revenue limit COLA f or 2008-09 t hrough 2010-11 The st at e will likely not be in a posit ion t o f und RL COLA during t hese years Work closely wit h your COEs f or upcoming second int erim report s and 2009-10 budget development / adopt ion

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 The st at e will cont inue t o f ace cash f low dif f icult ies – as such, t hey will undoubt edly pass t heir problems on t o us (Dist rict s)  LEAs will f ace t he t hreat of f urt her educat ion f unding shif t s and/ or program f unding delays going int o t he budget year  LEAs should cont inue t o closely monit or t heir cash f low st at us on a mont hly basis  Problems in t he f inancial market s will likely equat e t o higher int erest cost s f rom borrowing  Begin preparat ions f or TRANs and/ or int ra-f und borrowing now

Future Threats to Cash Flow

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Federal Stimulus Package: What to Keep in Mind

• I t ’s a silver lining in an ot herwise dark cloud, but keep

t hings in perspect ive: – I t is one-t ime money - t reat it t hat way – LEAs won’t see t he money unt il af t er J uly 1, 2009 – I t doesn’t solve t he st at e’s long t erm st ruct ural budget gap – Help t o of f set budget year reduct ions and give LEAs addit ional programmat ic and f iscal opt ions

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Financial Analysis: South Whittier School District

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South Whittier School District: Enrollment Decline

• Like most dist r ict s t hr oughout t he st at e, Sout h

Whit t ier School Dist r ict f ir st exper ienced enr ollment decline in 2003-04 f iscal year

• The level of enr ollment / ADA (r ounded) decline is

as f ollows:

• 03-04

(32)

• 04-05

(134)

• 05-06

(218)

• 06-07

(128)

• 07-08

(197)

• 08-09

75 Proj ect ed

• 09-10

0 Proj ect ed

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“We have already lost 15% of our customers”

(32) (167) (385) (513) (707) (637) (637)

• 800
• 600
• 400
• 200

03-04 04-05 05-06 06-07 07-08 08-09 (Est ) 09-10 (Est )

Mont e Vist a 489 Kids Los Alt os & Lake Marie = 715 Kids

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• 2008- 09

–Estimated impact ($1. 0 Million)

• 2009- 10

–Estimated impact ($1. 6 Million)

Governor’s Budget Proposal

• 2010- 11

–Estimated impact ($2. 0 Million) –Total Loss in Funding is ($4. 6 Million)

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Updat e Dist rict Financial Proj ect ions

• 3. P

r oj ect ions have been inspect ed and conf ir med by ext er nal audit or s (VTD).

• 2. As of 2010-11, t he Dist r ict will ant icipat e a negat ive f und balance of $4.32 Million.
• 1. Or iginal pr oj ect ions alr eady included $350 Thousand in reductions f or 09/ 10.

Foot not es:

Not Met Not Met Not met

State Mandated Minimum Fund Balance (3%)

• $4. 32 Million
• $2. 53 Million
• $597 Thousand

Available Reserves (General Fund)

2010- 11 2009- 10 2008- 09 Af ter Proposed Cuts (Jan) 5.00% 3.55% 4.53%

Fund Balance %

Met Met Met

State Mandated Minimum Fund Balance (3%)

$1. 59 Million $1. 13 Million $1. 50 Million

Available Reserves (General Fund)

2010- 11 2009- 10 2008- 09 Bef ore Proposed Cuts (Dec)

48 45% 5% 9% 6% 3% 9% 3% 10% 4% 3% 0% 3%

Teachers Consult ant s (Rest ) Classif ied Mgmt (Cert ) Mgmt (Class) St at ut ory Benef it s Ot her Healt h/ Welf are Books and Supplies Transport at ion Legal/ Audit / Consult ant s Ut ilit ies

South Whittier School District: Expenditure Chart f or 2008- 09

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Spending Analysis f or 2008- 09: $4. 6 Million = 14% of District Budget

$ 20.83 63% $ 6. 32 19% $ 6.01 18%

Salaries Benef its Discretionary Spending

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Conclusions:

We need to adjust our budget by $4. 6 million! More Revenues + Expenditures Reductions = Target

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District Action Plan: 5 Step Plan

• 1. Program Flexibilit y and Transf ers
• 2. Administ rat ive St af f ing Reduct ions
• 3. Sit e Consolidat ion
• 4. Service Reduct ions
• 5. Program Reduct ions

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District Action Plan: Plan I mplementation

• I mplement at ion Timeline

–LACOE Mandat ed Guidelines (2nd I nt erim due Mar 15)

• Requir ed Boar d Act ion t o adj ust cost s f or t he

Dist r ict t o r emain solvent

• Super int endent and CBO Cer t if icat ion t o comply

wit h AB 1200 Repor t ing Requir ement s

• Mandat ed Timeline f or not icing wor k f or ce

–March 15t h f or Cert if icat ed Personnel –45 Day Not ice f or Classif ied Personnel –Adopt ion of Resolut ions