School District Budgeting 101

April 12, 2011

Steven Lawrence, Ph.D., Superintendent

Bryan Richards, Chief Financial Officer

Purpose of Meetings

1. Clearly define our funding sources

2. Clearly define how the State budget crisis has affected the district

3. Clearly define what we have already done to address the budget crisis

4. Develop next steps to address the State budget crisis

Section I--Unrestricted Funding

1. What two categories can you break school funding into and how can you spend those funds?

2. What is the Revenue Limit?

3. What does ADA stand for?

4. What are the two primary factors that have led to our significant decrease in general unrestricted funding?

School Funding Unrestricted – We sometimes refer to our

unrestricted funding as our “general fund.” This is funding that can be used for any educational purpose.

Restricted – We sometimes refer to restricted funds as categorical funds. Restricted funds are local, state and federal funds that have to be applied for a defined purpose of group of students.

Unrestricted & Restricted Totals

Unrestricted = $200,375,469

Restricted = $94,514,600

Mt. Diablo Unified School District Unrestricted General Fund Revenues Before Contributions

2010-11 Total = $200,375,469

Interfund Transfers In0.8%

Revenue Limit66.5%

Revenue Limit Contributed to

Restricted15.7%

Federal Revenue0.2%

State Revenue15.6%

Local Revenue1.3%

Key Parts to the District Unrestricted budget Revenue Limit

Local Property Taxes State Aid

Lottery Tier 3 Categoricals

Unrestricted -- The Revenue Limit Revenue Limit = Property Taxes + State Aid

received as dollars per unit of Average Daily Attendance (ADA) As property taxes rise, state aid falls and vice versa Once 100% of property taxes cover a district’s

revenue limit they become a “Basic Aid” (self funded) districts (Beverly Hills, Carmel, Palo Alto) about 130 districts statewide

Currently, our MDUSD property taxes cover approximately 60% of our revenue limit funding

Unrestricted -- The Revenue Limit Why do districts receive different Revenue Limits and is

Mt. Diablo high or low? Revenue Limit was first established in 1971 with the

California Supreme Court finding around Serrano vs Priest. In 1983, Serrano II determined State had met funding obligation despite a funding variance from district to district.

In 2008/09 Mt. Diablo received $6,371 per ADA in base revenue limit was $40 less than the State-wide average of $6,411. This $40 would have generated approximately $1.3 million additional funding for the district. (Currently, we receive $5206 in base revenue limit.)

Unrestricted—Revenue Limit Funding ADA = Average Daily Attendance (one

student attending school every day = 1 ADA) On average our ADA is (.95 x our enrollment)

which means on any given school day 95% of our students are in attendance.

Revenue Limit Funding = RL x ADA

Important Terms Legislative Analyst’s Office (LAO)

Independent group that provides budget projections and analysis of Governors’ budget proposals and adopted budgets

Proposition 98 Approved by the voters in 1988 it was supposed to create

a stable minimum annual funding level for K-14 school agencies and established Test 1 and 2 to determine funding level. In 1993 Prop 98 was amended to include a Test 3 for years the State revenues declined.

Deficit Factor The difference between where we are supposed be funded

under Prop 98 Test 2 and where we are actually funded under Test 3. It is supposed to be repaid in years where state tax revenue grow faster than personal income.

Unrestricted--Revenue Limit per ADA MDUSD Revenue Limit Funding per ADA

7,0296,864

5,5285,125

6,109

6,371 6,3466,453

6,571

6,703

5,2065,306

5,413

5,5435,6765,630

4,948

5,188 5,2835,389

5,5185,651

5,2905,165

5,0444,945

4,856

5,780

4,556 4,639

4,733 4,846

4,963

4,8214,7084,598

4,5074,426

5,206

5,079

4,200

4,700

5,200

5,700

6,200

6,700

7,200

Year

Do

llars

$ p

er

AD

A Revenue Limit

Actual 10-11State BudgetProp 11-12 Pass

Prop 11-12 Fail

Prop 11-12 Susp

Prop 11-12 LAO

Average Daily AttendanceP-2 ADA

33,146

31,40131,672

31,973

32,26232,31732,608

33,305

33,518

34,349

34,321

31,000

31,500

32,000

32,500

33,000

33,500

34,000

34,500

35,000

P-2 ADA

ADA decline

Our average decline over 10 years has been 300 students per year

A loss of 300 students with the current Revenue Limit of $5206 is $1.56 million

This is equivalent of reducing 26 teachers per year

Unrestricted--RL x ADA = Revenue Limit Dollars

Total Revenue Limit (in dollars)

140,000,000

150,000,000

160,000,000

170,000,000

180,000,000

190,000,000

200,000,000

10/11 Budget

11/12 Pass

11/12 Fail

11/12 Susp

11/12 LAO

QuestionsThink, pair, share

1. What two categories can you break school funding into and how can you spend those funds?

2. What is the Revenue Limit?

3. What does ADA stand for?

4. What are the two primary factors that have led to our significant decrease in general unrestricted funding?

Section II Unrestricted Funding Continued

1. What are the major funding sources that make up the unrestricted general fund revenue?

2. Has the lottery saved us?

3. What makes Tier III categoricals different from Tier I and II?

4. What percentage of the general fund unrestricted budget goes towards salary and benefits?

Other Unrestricted State Funding SourcesUnrestricted Lottery

Approximately $110 per ADA for our district Currently used 100% toward teachers’ salaries to

partially offset deficits from the State

State Categoricals In 2008/09 the Legislature divided State categorical

programs into three tiers. Tier 1 Categoricals (restricted) retained their original

classification and maintained their full level of funding Tier 2 Categoricals (restricted) remained tied to their original

purpose but were cut by 20% Tier 3 Categoricals (unrestricted) These programs were cut

20% AND deemed unrestricted Board may use toward any instructional purpose after holding a public

hearing under SBX3-4 (annually at budget adoption and as changes are proposed)

List of Tier 3 CategoricalsMorgan Hart Grade 9 CSR

Community Day School

Cal-Safe Academic Support

Cal-Safe Child Care & Development

PE Teacher Incentive

Alt Certification for Intern Teachers

Nat'l Board Certified Teacher Incentive

Community-Based English Tutor

School Safety/Violence Prevention

Arts & Music Block Grant

CAHSEE Intensive Instruction

Supplemental School Counseling

Gifted & Talented Education

Instructional Materials Realignment

High-Priority Schools Grant (defunded)

HP Schools:SAIT & Corr Action

CA Peer Assist & Review (PAR)

Staff Dev: Math&Reading (AB466)

Principal Training (AB75)

Specialized Secondary Supplemental

AB825-Pupil Retention Block

AB825-Teacher Credentialing

AB825-Prof Dev Block Grant

AB825-Targeted Instructional

AB825-School & Library Improvement

Adult Education

Deferred Maintenance

SBX3-4 Sweep (old one time funds)

Tier III Categoricals For each site team we have provided a

spreadsheet that shows all of the Tier III funding sources: How much we receive How much has been swept How much is left What the left over funding is used for

Please take a moment to review the Tier III spreadsheet with your team.

On the 3x5 cards write down any questions that you have about Tier III funds

Mt. Diablo Unified School District Unrestricted General Fund Revenues Before Contributions

2010-11 Total = $200,375,469

Interfund Transfers In0.8%

Revenue Limit66.5%

Revenue Limit Contributed to

Restricted15.7%

Federal Revenue0.2%

State Revenue15.6%

Local Revenue1.3%

Unrestricted Local Revenue

The district generates funding through interest, redevelopment agency fees, fingerprinting fees, facility use fees, etc.

Unrestricted General Fund Revenue Revenue Limit Sources $ 164,735,676 Federal Revenue 337,273 Other State Revenue 31,194,239 Other Local Revenue 2,535,869 Interfund Transfers In 1,572,413 Total Revenue 200,375,469 Less: Net Contrib. to RGF (31,393,058) Net Available Revenue $ 168,982,411

Mt. Diablo Unified School DistrictUnrestricted General Fund Expenditures and Transfers Out

2010-11 Total = $164,531,616

Certificated Salaries53.12%

Classified Salaries12.04%Employee Benefits

19.31%

Books and Supplies4.53%

Interfund Transfers Out

1.90%

Capital Outlay0.07%

Services & Operating9.03%

Unrestricted General Fund Expenditures Certificated Salaries $ 87,399,211*

Classified Salaries 19,807,654* Employee Benefits 31,778,504* Books & Supplies 7,447,827 Services & Operating 14,860,512 Capital Outlay 112,424 Other Outgo 0 Interfund Transfers Out 3,125,484 Total Expenditures $ 164,531,616

*84.5% of the unrestricted General Fund goes toward salary and benefits

Section II QuestionsThink, pair, share

1. What are the major funding sources that make up the unrestricted general fund revenue?

2. Has the lottery saved us?

3. What makes Tier III categoricals different from Tier I and II?

4. What percentage of the general fund unrestricted budget goes towards salary and benefits?

Restricted Funding

Section III Restricted Funding QuestionsThink, pair, share:

Can you take Title I-III funds to help balance the general fund reductions?

What is the concern around supplanting? What are the State Tier I and II categoricals and

can we “sweep” them to fund other programs?

Restricted Funds Special Education

Federal, State, Local

Federal Revenue Titles I-III School Improve Grants (SIG) Other Grants

State Revenue Tier 1 & 2 Categoricals Instructional Materials Lottery Other Grants

Transportation

Community Day School

Special Education Under the Federal Individuals with Disabilities

Education Act (IDEA) we are responsible to provide a free and appropriate education in the least restrictive environment for all students.

We receive Federal and State funding to meet the IDEA requirements. However, the Feds are supposed to fund 40% of our Special Education budget and they currently provide 15%. Because of this underfunded Federal mandate we have to contribute funds from our General fund.

Special Education

According to the Contra Costa County Office of Education Annual Financial Reports: In 08-09 our Special Education Budget was

$79,168,440 or 27.41% of our total (unrestricted +restricted) budget.

In 09-10 our Special Education Budget was $83,005,828 or 29.38% of our total budget.

Restricted—Title I-III Federal funds Title I are Federal funds targeting lower socio-

economic students. We receive these funds based on annual reporting using our “Free and Reduced” lunch numbers. These funds are utilized at the district level and dispersed to our elementary and middle schools that have 65% or more students on Free and Reduced lunches to serve these students educational needs.

Title II funds are professional development funds that can be used district-wide

Title III funds target English Learner students At the district level we use Title I-III funds along with

EIA to pay for 90% of our Student Achievement and School Support Division.

Restricted -- Title I & III With Title I – III funds we have to be careful about

the issue of supplanting. Supplanting occurs when you use Title I-III funds to fund personnel or programs in Title I schools and you use district funds to pay for the same personnel or programs in other schools.

For example: If you had a vice principal in all middle schools could

you save district funds by paying for the vice principal in Title I middle schools out of Title I? No. However, you could add an additional vice principal

using Title I funds.

Restricted--State Categoricals – Tier 1 In 2008/09 the Legislature divided State categorical

programs into three tiers. Tier 1 Categoricals retained their original classification

and maintained their full level of funding State Lottery (Unrestricted and Restricted) K-3 Class Size Reduction (Unrestricted, flexibility in the

application of the penalty) Special Education (Restricted) ASES – After School (Restricted) TUPE (Restricted) Child Nutrition (Other Funds) QEIA (Restricted) Economic Impact Aid (EIA)—We also have to be concerned

about the supplanting issue with EIA funds.

Tiered State Categoricals – Tier 2 Tier 2 Categoricals 08/09 remained tied to

their original purpose but funding was cut by 20% Pupil testing (STAR, CAHSEE, CELDT) ELAP – English Language Acquisition

Effective 2010-11 this program has been folded into Economic Impact Aid (EIA)

Partnership Academies Transportation

Transportation We are required to provide home to school

transportation for students on IEPs with identified transportation needs.

We also currently provide transportation for: Students living in Bay Point and Pittsburg who

attend Mt. Diablo HS Students overflowed from their home school Students who apply for School of Choice through

the No Child Left Behind regulations (this is paid out of Title I funds).

Community Day School

We are required to provide an appropriate educational opportunity for students who have been expelled by the district. This can either be through a County program or a district program. Currently, students attend either Diablo Day in Concord or Golden Gate in Martinez.

Restricted Funds continued

Local restricted grants Regional Occupation Program (ROP) – Funded

by the County Office of Education (COE) Site restricted donations for salaries or other

expenses

Mt. Diablo Unified School DistrictRestricted General Fund Revenue

2010-11 Total = $131,623,477

Federal Revenue28.76%

Revenue Limit5.37%

State Revenue28.93%

Other Sources1.01% Local Revenue

7.73%

Contribution from Unrestricted

28.19%

Restricted General Fund Revenue Revenue Limit Sources $ 7,071,893 Federal Revenue 37,860,149 Other State Revenue 38,076,288 Other Local Revenue 10,180,330 Other Sources (Bus COP) 1,326,000 Contribution from Unr. 37,108,817 Total Revenue $131,623,477

Section III QuestionsThink, pair, share: Can you take Title I-III funds to help balance the

general fund reductions? What is the concern around supplanting? What are the State Tier I and II categoricals and

can we “sweep” them to fund other programs?

Other District Funds

Other Restricted Funds of the District Funds for special purposes excluded from the

General Fund The other funds generally cannot pay expenses

of the General Fund Special Revenue Funds

Charter School – Fund 09 Adult Education – Fund 11 Cafeteria – Fund 13 Deferred Maintenance – Fund 14

Capital Projects Funds Building (Proceeds of local bonds for construction –

Measure C) – Fund 21 Capital Facilities (a.k.a. Developer Fees) – Fund 25

Other Funds of the District (cont’d) Capital Projects Funds (continued)

County School Facilities (State Allocations for construction) – Fund 35

Capital Project for Blended Component Units (Mello-Roos Measure A) – Fund 49

Debt Service Funds Bond Interest and Redemption (Measure C) – Fund 51 Debt Service for Blended Component Units (Mello-Roos

Measure A) – Fund 52 Foundation Private-Purpose Trust Fund

(Scholarship Fund) – Fund 73

Other Funds of the District

It is critical to understand that the above mentioned funds can not help us with the reduction to the Revenue Limit or other unrestricted funds

How can we legally utilize Measure C funds to help with the reductions to the general funds?1. Last October, we used Measure C funds to retire

$14 million in Certificate of Participation (COP) Debt. The district was paying $1.4 million annually on the debt service out of the general funds.

2. Last September we “swept” the remainder of the Deferred Maintenance and the carry over account, while still maintaining funds through Measure C to deal with critical facility needs.

3. We are putting in a centrally controlled watering system that is estimated to save $200,000 annually on our water bill that is paid out of unrestricted funding.

Measure C help continued4. Solar– The solar projected is estimated to save the

district more than $200 million over the 30 year expected life cycle of the solar panels.

5. We have built into the contract with SunPower a 20 year maintenance and performance guarantee.

6. Solar—In the first five years between PG&E bill savings and funding received from the California Solar Initiative we estimate more than $30 million in general fund revenue savings.

7. Combined these savings have allowed us to free up $8 million in our general fund budget beginning in the 2012/13 budget cycle.

QuestionsThink, pair, share Can we take revenue generated in our

cafeterias to help address the State budget crisis?

Can we take funds from either Measure Cs or Measure A to help address the State budget crisis?

Due to the State budget crisis does it make sense not to go forward with the solar project or other facility projects funded out of the Capital Projects Fund? (Why or why not?)

How has the District responded to the State budget crisis over the past three years?District Bargaining Groups and Associations:

CSEA – Teaching assistants & campus supervisors

CST—Office Support Staff DMA & SUPV—District administrators and

supervisors M&O—Maintenance, Custodians, Technology

Support, Bus Drivers, etc. MDEA—Teachers, nurses, speech pathologist MDSPA—Psychologists

Combined Response over 3 years Reduced CSEA by 47.93 FTE (-10.16%) Reduced CST by 51.27 FTE (-17.41%) Reduced M&O by 22.74 FTE (-5.48%) Reduced MDEA by 235.29 FTE (-12.42%) Increased MDSPA by 28.50 FTE +86.10%

Note: increase due to expansion of grant program Reduced DMA & SUPV by 43.2 FTE (-15.85%) Other sweeps and non-personnel cuts $24.98M

How has the district responded? 2008 (implemented in FY 2009):

Reduced CSEA by 17.12 FTE (-3.62%) Reduced CST by 7.18 FTE (-2.44%) and lowered

one position in Fiscal from Analyst to Sr. Clerk Reduced M&O by 26.16 FTE (-6.31%) Reduced MDEA by 54.12 FTE (-2.81%) Reduced MDSPA by 2.7 FTE (-8.16%) Reduced DMA & SUPV by 11.5 FTE (-4.22%) Other one-time non-personnel cuts $3.7M

Note: the above includes budget cuts and cuts due to declining enrollment and are net of any add-backs.

How has the district responded? 2009 (implemented in FY 2010):

Reduced CSEA by 0.8 FTE (-0.18%) Reduced CST by 15.34 FTE (-5.34%) Reduced M&O by 1.59 FTE (-0.41%) Reduced MDEA by 178.98 FTE (-9.56%) Increased MDSPA by 28.0 FTE +92.1%

Note: due to expanding the mental health collaborative grant Reduced DMA & SUPV by 28.5 FTE (-10.92%)

Also, DMA took 3-4 furlough days (-1.64%) Other non-personnel cuts and one time sweeps and

transfers of $15.88M

Note: the above includes budget cuts and cuts due to declining enrollment and are net of any add-backs.

How has the district responded? 2010 (implemented FY 2011):

Reduce CSEA by 30.00 FTE (-6.61%) Reduce CST by 28.75 FTE (-10.58%)

(includes work year reduction FTE adjustments) Increase M&O by 5.01 FTE +1.30% Reduce MDEA by 6.09 FTE (-0.36%) Increase MDSPA by 3.2 FTE +5.48% Reduce DMA & SUPV by 3.2 FTE (-1.38%) $5.4M in other tier 3 sweeps and other cost

reductions

Note: the above includes budget cuts and cuts due to declining enrollment and are net of any add-backs through first interim.

What has the District done to address the State budget crisis Please review the spreadsheets that have

been provided for each school team that identify the actual positions and programs that have been reduced over the past three years.

The ongoing issues Board adopted cuts requiring negotiation:

1.64% (3 days) cut of work year for 2009/10 and 2010/11 DMA in 2009/10; DMA, MDEA and CSEA in 2010/11

3.83% (7-9 days) cut of work year for 2011/12 – 2012/13 Limit health care costs to 2010 rates

Implemented for DMA and CSEA. MDEA already has a cap. Eliminate vacation buyouts Proration of health benefits for part-time employees

DMA and CSEA members hired after April 1, 2011. Based on seven hour work day with a minimum of four hours a day

Over the last three years we have received more than $20 million in additional one-time Federal dollars. We do not anticipate any Federal help this year.

Compounding rate increases Kaiser % Increase

0.0%

10.0%10.0%10.0%10.0%6.8%23.3%

4.8%8.0%9.2%10.7%9.8%16.1%17.8%

296.4%

260.3%

227.6%

197.8%170.7%

45.3%

68.8%85.3%

105.2%123.9%

141.9%153.4%

0.0%

40.0%

80.0%

120.0%

160.0%

200.0%

240.0%

280.0%

320.0%

Year

Per

cen

t

y/yinc

incsince02

MDUSD Benefit CostsHealth, Dental, Vision, and Post-Retirement Benefits

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,00020

01/0

2

2002

/03

2003

/04

2004

/05

2005

/06

2006

/07

2007

/08

2008

/09

2009

/10

2010

/11(

b)

2011

/12(

b)

2012

/13(

b)

2013

/14(

b)

Year

Am

ou

nt

General Fund

Besides cutting what can be done? Get local legislatures to sign a resolution that they

will not suspend Prop 98 Work to get a revenue enhancement on the

November ballot Historically districts have only utilized parcel taxes to

generate additional revenue. The challenge is the 66.67% vote necessary to pass a parcel tax.

City of Santa Monica passed a sales tax in November that Richmond is modeling a June sales tax after.

The polling over the past two years and the Measure C passage rate indicates an approximate 60% support rate for revenue enhancements.

Back to State Budget Crisis Issues Under the Governor’s January Budget proposal we

would have been reduced by $18 per ADA or $587,000 (plus we would have had to budget for decreasing enrollment)

At the Second Interim in March we were instructed by the County Office of Education to budget for a $350 reduction in ADA which assumed that Prop 98 would remain in place even if the tax extensions did not go through. This would be equivalent to an $11.3 million annual reduction.

Now we are being told that a total reductions budget could result in a $850 reduction in ADA which would be $27.4 million reduction (a total deficit of 32.47%). This reduction to the revenue limit would be the equivalent

of closing school at the end of April.

Next Steps Questions What are the main ideas that you got out of

this presentation? Could you make this presentation at your

site? If not, what additional information/clarification

do we need to provide you? In order to start developing ideas around

revenue enhancements and/or reductions what additional information/data do you need?

Thank you for your attention!