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2013-14 Budget Development Cycle September 20, 2012.

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Presentation on theme: "2013-14 Budget Development Cycle September 20, 2012."— Presentation transcript:

1 2013-14 Budget Development Cycle September 20, 2012

2 “ TO CULTIVATE AND EMPOWER OUR STUDENTS TO BE ETHICAL, PRODUCTIVE, SUCCESSFUL AND CONTRIBUTING MEMBERS OF OUR GLOBAL SOCIETY ”

3 EMUHSD Mission Statement  Advocate, 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. 3

4 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 & Collaboration 4

5 Agenda  Purpose of the BAC  Protocols and Ground Rules  Defining a Budget  Components of a School District Budget  Economic Update  State of the State  Current District Financial Position Review of Unaudited Actual Results Tax Initiative – Impacts  Next Steps 5

6 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 only 6

7 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

8 GROUND RULES

9 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

10 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 10

11 “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 11

12 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. 12

13 BUDGET DEVELOPMENT CYCLE 13

14 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 14

15 Adopted Budget (2012-13) 1st Interim Financial Report Budget Workshop 2 nd Interim Financial Report Budget Workshop Preliminary Budget Adopted Budget (2013-14) June December January Feb - March April - May January July 15

16 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 16

17 New Appropriations; Budgeting Carryovers Evaluate Spending & Adjust Expenditures Closing of Books Unaudited Actual Results Adopted Budget Working Budget Projection A LIVING DOCUMENT September 17

18 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 18

19 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 19

20 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 20

21 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 21

22 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 Plan 22

23 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

24 Summary  Budget is a “living” document  Changes occur just after adoption  “Be its master, not its slave”  A “tool” for success 24

25 Budget Development Revenues  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 25

26 Revenue Limit – THE BASICS  Enrollment generates ADA  For 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 26

27 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! 27

28 Restricted (Categorical) vs. Unrestricted Funding  General Fund Contribution to a Restricted Program (a.k.a. “encroachment”)  Maintenance of Effort – Supplement vs. Supplant 28

29 Budget Development Expenditures (1000’s)  Certificated Salaries All 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. 29

30 Budget Development Expenditures (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

31 Budget Development Expenditures (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 31

32 Budget Development Expenditures (4000’s) Textbooks Instructional & non-instructional supplies Books & Supplies School site funding formulas Department allocations Non-capitalized equipment ≤ $5,000 32

33 Budget Development Expenditures (5000’s) Services & Other Operating Expenditures Travel Dues & Memberships Utilities Insurance Contracts & Consultants Audit expense Legal fees Other 33

34 Budget Development Expenditures (6000’s & 7000’s) Capital Outlay (over $5,000) Building/site improvement costs Capitalized equipment Other Outgo/Transfers Out/Other Uses Indirect Costs Debt service payments Transfers to other funds Deferred Maintenance Match 34

35 STATE BUDGET IMPACTS

36 Governor’s Budget 2012-13  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

37 DISTRICT FINANCIAL DATA

38 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 38

39 Enrollment, ADA and “Yield” on Enrollment 39

40 EMUHSD Revenue Limit  The statutory un-deficited Base Revenue Limit is $7,811 per ADA  BUT 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 district  Anticipate $54.2 Million in 2012-13 for El Monte 40

41 EMUHSD Budgeted Revenues ($ Millions) 41

42 EMUHSD 12-13 Budgeted Expenditures ($ Millions) 42

43 2010-112011-122012-13 Actuals 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) 43

44 General Fund Financial Statements * Uses the Opening Balance based on 2011-12 Actual Results 44

45 Statutory vs. Funded Base Revenue Limit Impact Loss of cost-of- living adjustment (COLA) $10.1 Million Loss of baseline dollars $6.5 M to $11.4 M BASELINE Funded ADA 9,8039,7449,6769,7379,537 FIVE-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

46 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

47 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 47

48 Cash Flow Interventions: County Pool County Pool TRANs TRANs Inter-fund transfers Inter-fund transfers 48

49 Multi-Year Projection Assumptions 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 Plan 49

50 Multi-Year Projection Without Level II Cuts IF: Tax Initiative Fails (12-13 Beg. Balance $12.7 M) Year2012-132013-142014-15 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

51 Comparative Reserve Percentages for Neighboring Districts 2011-12 Simple Average -- 19.4% Based on Unaudited Actual Results for 2011-12 Based on Estimated Actual Results for 2011-12 Based on Second Interim Report for 2011-12 51

52 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

53 Major Reduction Options  Value of One (1) Furlough Day$287.4K  Value of One % Salary Reduction$593.0K 1  Classified Layoffs (Total Salaries) $13.8M  Reduce Adult Ed. Funding (Total Funding) $9.3M  Freeze Benefits “Cap” @ $10,000 annually $1.2M 1 This value does not include the statutory benefits which will be provided at a later date. 53

54 $ Value of One Furlough Day by Employee Group 54

55 $ Value of One Percent Salary Reduction by Employee Group 55

56 Major Reduction Options Values continued...  Incr. Counselor Ratio to 500:1$1.2M  Increase student/teacher ratio to: Ratio$ Value  31:1$1.0M  32:1$1.7M  33:1$2.4M  34:1$3.1M  35:1$3.5M 56

57 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

58 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 CBO 58

59 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 Plan 59

60 Next Meeting - Thursday, October 18 th (Tentative) 6:00 -8:00 PM LOCATION – Boardroom 60


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