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2014-15 Second Interim Board of Trustees March 17, 2015 1.

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Presentation on theme: "2014-15 Second Interim Board of Trustees March 17, 2015 1."— Presentation transcript:

1 2014-15 Second Interim Board of Trustees March 17, 2015 1

2 Second Interim - Certification The district’s Board of Trustees shall certify in writing whether or not the district is able to meet its financial obligations for the remainder of the fiscal year and, based on current forecasts, and for the two subsequent fiscal years. The certification shall be classified as positive, qualified, or negative, pursuant to standards and criteria adopted by the State Board of Education (EC §33127). The District is certifying Positive at Second Interim

3 State Economic Conditions February Revenues Exceed the Forecast (School Service of California – March 2014) General Fund revenues for February 2014 are exceeding Governor Jerry Brown's Budget projections, with total tax collections coming in above the forecast level by 25.6%, or $825 million. Total General Fund revenues for the first seven months of the fiscal year are also exceeding the revised forecast, albeit by a lesser percentage, with tax receipts running $965 million, or 1.6%, ahead of the Governor's Budget estimate. The personal income tax for February provided the bulk of the increase over estimated revenues, at $2.049 billion, which is $716 million (53.7%) higher than what was estimated. California unemployment rate expected to fall to 8.4% in 2014, one percentage point higher than the forecast for the U.S. rate. Sales and use tax was short in February by $23 million, while corporate tax exceeded the forecast by $86 million Sales of single-family homes were essentially flat in January as compared to December.

4 PCOE Guidance and Common Message Every school district’s situation is unique, and in such a dynamic and uncertain operating environment, there are key aspects to maintaining fiscal solvency and protecting the integrity of educational programs that apply to all districts: Maintain reserve greater than minimum 3% Make reasonable, supportable and conservative assumptions Maintaining adequate reserves to allow for unanticipated circumstances (with the adequate level based in part on each LEAs unique situational assessment). Maintaining fiscal flexibility by limiting commitments to future increased expenditures based on projections of future revenue growth, and/or establishing contingencies that allow expenditure plans to be changed if needed. Do not use one-time resources for on-going commitments Categorical programs should be self-sustaining and not encroach on Unrestricted General Fund

5 Second Interim Update – 2014-15 Budget Each year our budget is continually revised as new information becomes available and assumptions are modified. Changes from District’s First Interim Budget:  Changes for final LCFF GAP funding percentages, State and Federal program revenues.  Changes in 2014-15 staffing, position control, benefits and updates of new grants or final revenue allocations  Updated programs that require General Fund contribution – State Preschool and Special Education costs 5

6 2014-15 Budget Second Interim 6

7 First Interim vs. Second Interim 7

8 Major Revenue Changes to Budgeted Deficit Since First Interim Budget 8

9 Major Expenditure Changes to Budgeted Deficit Since First Interim Budget 9 Continued on next slide

10 Major Expenditure Changes to Budgeted Deficit since First Interim Budget 10

11 Enrollment Trends 11  Before 2014-15, enrollment and ADA increased by 67% and 69% respectively over the last 10 years (2003-04 to 2013-14).  For the 2014-15 school year, the District experienced a decline in enrollment at the K-5 grade level. The District is projecting 2014-15 enrollment and ADA to be less than 2013-14.  We have projected an enrollment increase of 67 students in fiscal years 2015-16 and 2016-17, representing a 1% growth.  The ADA rate is projected to be 95.5% in the 2014-15, 2015-16 and 2016-17 fiscal years.

12 Projected ADA vs. Funded ADA – Declining Enrollment Adjustment 12 The above graph shows how the District is funded when there is a decline in current year enrollment/ADA from the prior year. Districts are funded from the higher of their current year ADA or their prior year ADA.  For the 2014-15 school year, the District will be funded under the declining enrollment funding model. Funding will be based on our 2013-14 actual ADA as our 2014-15 ADA will be less. This allows a one year financial cushion, whereby the District does not have to incur that whole funding loss in one year and give it time to grow out of the decline.  It is important to recognize that the district will receive no more additional funding unless we gain more than 67 students than we currently have right now as we are still funded from the 2013-14 ADA of 6,425 and not 6,358 as is projected for 2014-15. Those additional new students will still be served but with no additional revenue to support the increased enrollment until that enrollment count goes beyond 6,425.

13 Contributions to Restricted Programs 13 Some categorical programs require contributions from the district unrestricted funds as the funding received does not cover the expenditures for that specific program. A summary of the change in contributions from First Interim budget to First Interim budget is summarized below.

14 14

15 MYP - Budget Assumptions - Revenues 15

16 MYP - Budget Assumptions - Expenditures 16

17 Multiple Year Projections 17 Positive Certification – Adequate reserves and cash for all three years LCFF Funding includes Projected GAP Funding per DOF and FCMAT LCFF Calculator Salaries include step & column cost, no negotiated salary increase and increasing STRS & PERS employer contribution rates In 2015-16 includes transfer of $750,000 Wetlands Reserve back to Fund 17 - Special Reserve

18 Components of Fund Balance 18 Economic Uncertainty Surplus may be used to support future year’s budget deficits - BUT it is One- Time LCFF GAP Funding reserves based risk assessment Reserve for Future LCFF Supplemental Expenditure Increases Deficit Spending in 2014-15 (includes prior year c/o). Balanced Budget in 2015-16 and 2016-17 due to projected LCFF GAP Funding Reserve for Special Education Program Support Positive Certification – Adequate reserves and cash for all three years

19 Cash Flow 2014-2015, 2015-2016 and 2016-2017 ( with TRANS financing in all years) 19

20 PCOE Common Message - Summary The Governor’s Budget proposal significantly increases funding to education in 2015-16 and continues to demonstrate his commitment to funding the LCFF. There is a substantial amount of one time funding proposed. Most notably, his proposal is just that, a proposal. The Legislative process will carry out over the next few months and there will most likely be changes in the details of the proposal before the State Budget is adopted in June. Every district receives differing amounts of revenue and has its own particular set of financial risk factors. It is important all school dsitricts continue to assess their individual situations and plan accordingly to maintain fiscal solvency. 20

21 Next Steps  Changes that the Board should expect before 2015- 16 Budget Adoption In June include:  District Attendance Reporting (P-2) – April 2015  2013-14 Actual -2 ADA may drive change in 2015-16 Projected Funded ADA due to declining enrollment funding protection  Multi-year projections updated to reflect Governor’s 2015-16 May Revision  Update LCFF assumptions for 2015-16 and future years  Update on Federal, State and local funding notifications  Updated projected ending Fund Balance Reserves based on year end projections and actuals spent to date  Governor’s May Revision – May 2015 21

22 Staff recommends the Board of Trustees certify the Second Interim report as positive. 22 Recommendation:


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