2013-14 budget development cycle september 20, 2012
TRANSCRIPT
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Superintendent’s Budget Advisory
Committee
2013-14 Budget Development Cycle
September 20, 2012
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VISION STATEMENT
“TO CULTIVATE AND EMPOWER OUR STUDENTS TO BE ETHICAL, PRODUCTIVE, SUCCESSFUL AND CONTRIBUTING MEMBERS OF OUR GLOBAL SOCIETY”
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EMUHSDMission
StatementAdvocate, nurture and sustain a positive
school culture …challenging and rigorous, standards-based curriculum… that promotes achievement for all students;
Ensure management of the organization, … for a safe, efficient and effective learning environment … conducive to student learning and staff professional growth;
Collaborate with families and community members, respond to diverse community interests and needs,… ;
Model a personal and institutional code of ethics and develop professional leadership capacity.
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Board Priorities
Academic Excellence – Achievement for all Students
“Every Student, Every Minute, Every Day”
Safe & Effective Learning Environment
Fiscal Stability, Organizational Alignment & Transparency
Model Ethical Behavior and Grow Internal Capacity
Community Involvement & Collaboration4
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Agenda
Purpose of the BACProtocols and Ground RulesDefining a BudgetComponents of a School District
BudgetEconomic Update
State of the StateCurrent District Financial Position
Review of Unaudited Actual Results
Tax Initiative – Impacts
Next Steps5
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Purpose of the Budget Advisory Committee
Create broader understanding of the budget development process and its context
Further the effort toward transparency Promote community involvement and collaboration Provide input, discussion and consideration of budget
improvement opportunities Create accountability mechanism Carry recommendations for 2013-14 budget to the
Superintendent for his consideration Based on input, Superintendent then takes his
recommendations to Board
Develop restoration plan
Budget Committee functions in an advisory capacity only6
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BAC PROCESS
Understand the State and District Financial “picture”
Review District financial data Break into small groups Bring ideas to the larger group Get input from those you represent Identify opportunities for resource “repurposing” Review and prioritize Develop recommendations for Superintendent’s
review Develop restoration plan 7
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GROUND RULES
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Building Consensus
Consensus decision-making is
a group decision- making process
that seeks the consent, not
necessarily the agreement, of
participants and the resolution of
objections. It is not unanimity!”9
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CONSENSUS GOALS Agreement Seeking: Attempts to help everyone
get what they need!
Collaborative: Contribute to a shared proposal that meets the concerns of all group members, as much as possible
Cooperative: Reach the best possible decision for all of its members, rather than competing for personal preferences.
Egalitarian: All members of the group should be afforded, as much as possible, equal input into the process.
Inclusive: As many stakeholders as possible should be involved in the process.
Participatory: The process should actively solicit the input and participation of all members
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“Building Consensus”
Only one person speaks at a time; please do not interrupt while someone is speaking
Each person expresses their own views, rather than speaking for others at the table or attributing motives to them
Give others a fair chance to speak No personal attacks; Challenge ideas, not people! Everybody agrees to make a strong effort to stay
on track with the agenda and to move the deliberations forward
Everybody will seek to focus on the merits of what is being said, making a good faith effort to understand the concerns of others. Questions of clarification are encouraged; disparaging comments are discouraged
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Ground Rules , continued . . .
Concerns should be voiced when they arise, not later in the deliberations when a "surprise" objection is raised
Each person will seek to identify options or proposals that represent shared interests, without ignoring legitimate disagreements. Each person agrees to do their best to take account of the interests of the group as a whole
Each person reserves the right to disagree with any proposal and accepts responsibility for offering alternatives that accommodates their interests and the interests of others
Anyone who speaks to the media will speak only about their views. We ask that no member of the BAC speak on behalf of the group as a whole without permission of the group as a whole.
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BUDGET DEVELOPMENT CYCLE
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What is a School District Budget?
The district’s budget begins July 1 of each year as its starting point and ends on June 30
Starting Point = Beginning Balance – How the district ended from the previous year
Ending Point = Ending Fund Balance – How the district ended (or will end) the current year
Restrictions, Designations, Assignments & Commitments
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The Budget Reporting Cycle
Adopted
Budget (2012-
13) 1st Interim Financi
al Report
Budget Worksh
op
2nd Interim
Financial Report
Budget Worksh
op
Preliminary
Budget
Adopted
Budget (2013-
14)
June
December
January
Feb - March
April - May
January
July
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State Required Budget Cycle
Adopted Budget - Board must adopt on or before July 1st
Interim Reports
First Interim - Board must approve 45 days after October 31 (by December 15)
Second Interim - Board must approve 45 days after January 31 (by March 15)
Unaudited Actual Results
Board must approve on or before September 15
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Appropriations; Budgeting Carryovers
Evaluate
Spending &
Adjust
Expenditures
Closing of Books Unaudited
Actual Results
Adopted Budget
Working Budget
Projection
A LIVING DOCUMENT
September
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Definition of Terms
A number of terms are used throughout this presentation that require definition.· Working Budget -- represents the original 2012-
13 Adopted Budget adjusted for board-approved appropriations as well as budgeting of prior year carryover.
· 2012-13 Projection – calculation as to what revenues, expenditures and ending balances will be as of June 30, 2013. It is based on evaluating current spending patterns.
· Interim Reports – reports required by the Sate of California identifying the financial condition of the District at a specified time during the fiscal year
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Definition of Terms
· Undesignated Reserves –that portion of the Ending Balance that is unrestricted in its use. This should be distinguished from Restrictions, Commitments or Designations which represent those parts of the ending balance that are “set aside” or legally restricted for a specific purpose.
· Structural Deficit – A fundamental imbalance in revenues vs. expenditures, as opposed to one based on short-term factors such as one-time revenues or expenditures
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Fundamental Considerations in Developing a Budget
The educational programs and services that represent the board’s goals and priorities
The services and staffing necessary to support these programs
The revenues available to carry out the educational programs
The expenditures necessary to implement the educational program
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Budget Assumptions Form the fundamental basis for the creation of the
budget Address the most common mathematical elements
of the document Includes decisions regarding:
Enrollment and ADA Staffing formulas and class size requirements or
limitations Statutory or funded COLAs Collective Bargaining Agreements Federal or State funding provisions (triggers,
funding reductions, etc.) Lottery funding Site budget allocations New or revised programmatic requirements Identification of the “core” educational program
One of the most critical elements in developing a budget
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BAC Budget Development Process(What Will We Be Doing?)
Budget Calendar is published at the beginning of the fiscal year
Detailed timeline of events Anticipate meeting every two to four weeks Subgroups (recommendations)
Focus on the priorities of those you represent – obtain input
Identify potential budget improvements Final recommendations by January
Superintendent Takes his final recommendations to Board
Restoration Plan22
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Budget Workshops
Will occur intermittently throughout the budget development process
Represents opportunity to align budget allocation decisions with Board of Trustees’ policy decisions
Look for board confirmation in terms of budget priorities vs. current resource allocations Explain and Review Governor’s budget
Bring forward final recommendations for approval
Public Hearing and Final Adoption 23
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Summary
Budget is a “living” document
Changes occur just after adoption
“Be its master, not its slave”
A “tool” for success
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Budget DevelopmentRevenues
Revenue Limit Sources (major funding source for EMUHSD )
Base Revenue Limit (BRL) times ADA
Revenue Limit (RL) = State Aid and Property Taxes
Deficit Factor must be considered
Federal
Other State
Local
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Revenue Limit – THE BASICS
Enrollment generates ADAFor 12-13, we estimate that 9,930
enrollees will generate approximately 9,537 units of ADA
Enrollment has been on the decline for the last four years; and is anticipated to continue to decline over the foreseeable future At least through 2018 based upon latest
demographic projections by Davis Demographics
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Average Daily Attendance (ADA)
Average Daily Attendance is equal to the number of pupils actually attending classes who are enrolled for at least the minimum school day
Example: 10 students attending school for ½ year equals 5 ADA
ADA times funded Base Revenue Limit ($’s per student per year) equals Revenue Limit dollars – the District’s major source of revenue!
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Restricted (Categorical) vs. Unrestricted Funding
General Fund Contribution to a Restricted Program (a.k.a. “encroachment”)
Maintenance of Effort – Supplement vs. Supplant
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Budget DevelopmentExpenditures (1000’s)
Certificated SalariesAll certificated staff including teachers,
counselors, nurses, librarians, certificated administrators
Step & column movement
Substitute costs
Extra duty/Co-curricular Stipends
Hourly Program salaries
Supplemental Hourly, Saturday School, etc.
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Budget DevelopmentExpenditures (2000’s)
Classified Salaries
Includes clerks, aides, custodians, maintenance staff, secretaries, bus drivers, campus supervisors, district administrative staff
Extra service assignments
Step & Column costs
Substitutes
Overtime 30
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Budget DevelopmentExpenditures (3000’s)
Employee Benefits Health & Welfare (Medical, Dental, Vision, Life)
Per Employee $ 18,550*
Statutory Benefits – Cert 12.047%, Class 23.017%
Retirement (STRS, PERS, Social Security)
Medicare
Unemployment Insurance & Workers Compensation
*Maximum = United HealthCare HMO, Family Delta PPO and Family Vision; PPO “Cap” is Kaiser HMO Amount
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Budget DevelopmentExpenditures (4000’s)
Textbooks
Instructional & non-instructional supplies
Books & SuppliesSchool site funding formulas
Department allocations
Non-capitalized equipment ≤ $5,000
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Budget DevelopmentExpenditures (5000’s)
Services & Other Operating ExpendituresTravel
Dues & Memberships
Utilities
Insurance
Contracts & ConsultantsAudit expense
Legal fees
Other33
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Budget Development Expenditures
(6000’s & 7000’s)
Capital Outlay (over $5,000)Building/site improvement costs
Capitalized equipment
Other Outgo/Transfers Out/Other UsesIndirect Costs
Debt service payments
Transfers to other fundsDeferred Maintenance Match
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STATE BUDGET IMPACTS
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Governor’s Budget2012-13 Fundamentally dependent upon voters taking
action to adopt a new round of temporary taxes – Prop 30 0.25% increase in the sales tax higher tax rates for the state's wealthiest ($250k – Indiv.
$500k – Married)
Cost of Living Adjustment (COLA) — Not funded for 2012-13
Significant “trigger” cuts to school revenue limits if Governor Brown's tax initiative fails (over $500 per student)!
Buy down of approximately $2.1 billion in deferrals if Governor tax initiative passes.
No new funding for education. 36
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DISTRICT FINANCIAL DATA
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Budget Assumptions for MYP
2012-13 financial information forms the basis and starting point for 2013-14's preliminary budget
Statutory COLA 3.24% in 2012-13 (unfunded) Rev. Limit deficit factor for 12-13 is 22.272% (Note: If the
tax measure fails in November, deficit factor will increase to 28.814% or an additional $4.9M reduction in funding – Add to already $16.6M underfunding!
Projected enrollment and ADA decline of approximately 126 students
Impact of all contract settlements has been incorporated
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Enrollment , ADA and “Yield” on
Enrollment
2003-4 2004-5 2005-6 2006-7 2007-8 2008-9 2009-10
2010-11
2011-12
2012-13(Bud.
)
2003-4 2004-5 2005-6 2006-7 2007-8 2008-9 2009-10
2010-11
2011-12
2012-13(Bud.
)
Enrollment
10,254 10,446 10,608 10,379 10,614 10,476 10,320 10,170 10,056 9,930
Avg. Daily Attendance
NaN NaN NaN NaN NaN 9848 9885 9824 9733 9537
Yield ADA/Enr.
NaN NaN NaN NaN NaN 0.940053455517373
0.957848837209302
0.965978367748279
0.967879872712808
0.960422960725075
9,300
9,700
10,100
10,500
92.8%
93.8%
94.8%
95.8%
96.8% 10,254
10,446 10,608
10,379 10,614
10,476 10,320
10,170 10,056
9,930
9,8
67
9,8
58
9,8
24
9,7
22
95
37
Enrollment Avg. Daily Attendance Yield ADA/Enr.
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EMUHSDRevenue Limit
The statutory un-deficited Base Revenue Limit is $7,811 per ADABUT deficit factor of 28.814%! (including the
“trigger”) In 2012-13, being funded at $6,073 per
ADA – a gap of $1,738 or about $16.6 M!With “trigger” the gap grows $4.9M and
becomes $2,251 per ADA or $21.5M!Revenue Limit is largest funding source for
the districtAnticipate $54.2 Million in 2012-13 for El Monte
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Revenue Limit Sources; 54.2;
67%
Federal Revenue;
6.7; 8%
Other State Revenue; 10.9;
13%
Other Local Revenue; 6; 7%
Trans-fer In;
3.5; 4%
EMUHSD Budgeted Revenues($ Millions)
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es; 41; 45%
Class. Salaries; 14.4; 16%
Emp. Ben.; 19.4; 21%
Books &
Supp.; 3.8; 4%
Svcs. &
Other Oper.; 12; 13%
Other Outgo; 1.1; 1%
EMUHSD 12-13 Budgeted Expenditures
($ Millions)
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2010-11 2011-12 2012-13Actuals Actuals Working
Budget
BEGINNING BALANCE, July 1 $26.1 $17.8 $12.7
REVENUES $85.6 $87.8 $81.3
EXPENDITURES ($93.3) ($92.9) ($88.2)
Net Incr./(Decr.) in Fund Bal. ($7.7) ($5.1) ($6.9)
Audit Adj. ($0.6) $0.0 $0.0
ENDING BALANCE $17.8 $12.7 $5.8
Restrictions $0.6 $0.6 $0.3
Designations $3.1 $2.8 $2.6
Undesignated $14.1 $9.3 $2.9% Reserve 18.4% 13.0% 6.6%
EMUHSD General Fund(With Level II Reductions of $3.6 Million)
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General Fund Financial Statements
* Uses the Opening Balance based on 2011-12 Actual Results 44
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Statutory vs. FundedBase Revenue Limit Impact
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 $5,000
$5,500
$6,000
$6,500
$7,000
$7,500
$8,000
$6,754
$7,133
$7,433 $7,404 $7,568 $7,811
$6,573
$5,816
$6,074 $6,073
6073
5560
Statutory BRL Funded BRL
Loss of cost-of-living adjustment (COLA)$10.1 Million
Loss ofbaseline dollars$6.5 M to $11.4 M
BASELINE
Funded ADA
9,803 9,744 9,676 9,737 9,537FIVE-YEAR
TOTAL
Total R/L Loss
$5.5 Million
$15.8 Million
$12.9 Million
$14.7 Million
$16.6 ($21.5)Million
$65.2 ($70.5)
MILLION!! 45
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Cash Flow Issues
Approx. 42% of funding due in cash will not be paid until the next year
No categorical funds at least until end of October Adult Education Special Education State Categorical Programs, e.g., EIA
84% of the district’s Revenue Limit funding comes from State Aid (vs. property taxes). As a result, impact of state “deferrals” is greater at
EMUHSD
Borrow and use flexibility options from other funds, as necessary 46
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Cash Flow & Deferrals
Not only has funding been reduced by almost 30% per year(if initiative fails), but;
State is “deferring” the cash payment necessary to pay the bills!In 2012-13, the State will push $ 18.1
Million of cash for EMUHSD into 2013-14!That’s nearly 42% of District’s cash for the year!
Anticipate covering with use of County Pool, inter-fund borrowing and potential TRANs
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Cash Flow
Interventions:County PoolTRANsInter-fund
transfers
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Multi-Year ProjectionAssumptions
The following assumptions form the basis for the MYP:
Level II Board-approved budget reductions have not been enacted including:
Elimination of D.O. TOSA
Across-the-Board salary reduction for all staff of 3.545%
Enacting of 5 furlough days
Reduce SB65 Coordinator positions to 11 months
Eliminate winter break and spring break vacation days for clerical staff
TOTAL DOLLAR VALUE OF ABOVE __ $3.567 Million
Expenditures
based on current spending levels
adjusted for CPI in “out” years
LEVEL I reductions of $5.6M enacted as part of Fiscal Stabilization Plan49
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Multi-Year ProjectionWithout Level II Cuts
IF: Tax Initiative Fails (12-13 Beg. Balance $12.7 M)
Year 2012-13 2013-14 2014-15
Revenues $80.9
$81.6 $82.5
Expenditures $91.8
$92.2 $93.5
To Balance Budget ($10.9)
($10.6) ($11.0)
Ending Balance $1.8
($8.8) ($19.8)
% Reserve 1.6%
IF: Tax Initiative Passes (12-13 Beg. Balance $12.7 M)
Revenues $85.7 $86.4 $87.2
Expenditures $91.8 $92.2 $93.5
To Balance Budget ($6.1) ($5.8)
($6.3)
Ending Balance $6.6 $0.8
($5.5)
% Reserve 6.8% 0.4%
50
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Comparative Reserve Percentages for Neighboring Districts
2011-12
EMUH
SD
Whitt
ier U
HSD
Arcad
ia
Wes
t Cov
ina
Clare
mon
t
Mon
tebell
o
South
Whitt
ier
Basse
tt
Azusa
Unifi
ed
Rosem
ead
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Simple Average -- 19.4%
Based on Unaudited Actual Results for 2011-12Based on Estimated Actual Results for 2011-12Based on Second Interim Report for 2011-12
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What Will the Future Bring?
How will the Tax Initiative impact EMUHSD?REGARDLESS of what happens to the tax
initiative, cuts will be necessary during the 2013-14 budget development process!!
Approximately $6.1Mil if Tax passes!Approaching $11.0 Mil if Tax fails!
*GOAL = Gen. Fund Balanced Budget (Rev=Exp.) by 2013-14!
How many more years of state financial instability?
What will occur with categorical flexibility?52
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Major Reduction Options
Value of One (1) Furlough Day
$287.4KValue of One % Salary Reduction
$593.0K1
Classified Layoffs (Total Salaries)
$13.8M Reduce Adult Ed. Funding (Total Funding)
$9.3M Freeze Benefits “Cap” @ $10,000 annually
$1.2M
1This value does not include the statutory benefits which will be provided at a later date.
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$ Value of One Furlough Day
by Employee Group
Adult Ed; 6725; 2%CMCEE; 12820; 4%
CSEA; 57988; 20%
DO Admin.; 20732; 7%
EMUEA; 185448; 65%
ROP; 3699; 1%
Adult Ed CMCEE CSEA DO Admin. EMUEA ROP
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$ Value of One Percent Salary Reduction
by Employee Group
Adult Ed; 12362; 2% CMCEE; 32154;
5%
CSEA; 138040; 23%
DO Admin.; 42492; 7%
EMUEA; 361311; 61%
ROP; 6658; 1%
Adult Ed CMCEE CSEA DO Admin. EMUEA ROP
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Major Reduction Options Valuescontinued . . .
Incr. Counselor Ratio to 500:1
$1.2MIncrease student/teacher ratio to:
Ratio $ Value31:1 $1.0M32:1 $1.7M33:1 $2.4M34:1 $3.1M35:1 $3.5M
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Challenges
District has a structural imbalance between revenues and expenditures!
Pass or fail – Significant budget reductions must be made to address
Balancing the budget is IMPERATIVE!
Failure of tax initiative ADDS approximately $4.9 M to problem!
The risk of insolvency is great!
Collaboration amongst all stakeholders is the KEY!57
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Preparation & Communication
Your role is crucial!Priorities and paradigms are likely to be
challenged!Reach out to the people you represent! Identify important opportunities for budget
improvements for what will be a difficult 2013-14 budget cycle!
Senior mgmt. conducting informational mtgs. w/ staff @ each site – October
Includes Supt, A/Supt – Personnel and CBO58
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Next Steps
District to provide detailed financial information based on request
Make your requests ASAP!
BAC to review District budgets/ programs
Breakout groups to develop budget reduction opportunities
Get input from those you represent
Working toward consensus
Final recommendations to Superintendent
Superintendent takes his final recommendations to the Board
Restoration Plan59
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0011 0010 1010 1101 0001 0100 1011Next Meeting - Thursday, October 18th
(Tentative)
6:00 -8:00 PM
LOCATION – Boardroom
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