1. 1 West Contra Costa Unified School District December 17, 2014 2014-15 First Interim Financial Report

2. 2 First Interim 2014-15 Period Ending October 31, 2014 Updated Information on District Enrollment Latest Information from the State Utilizing the expenditure budget assumptions described in the Executive Summary and the LCFF Calculator provided by the State Information for all funds

3. Changes since Budget Adoption 3 Enrollment decline – Charter Schools – Demographic Estimate Change State rate of funding change toward the 8 year target Emerging information on the Local Control Funding Formula and Special Education Shift in STRS rate of increase

4. Enrollment Demographic Report New demographic study is incorporated in First Interim Previous report had growth of 1,348 students over the three year budget period of 2014-15 to 2016-17 New report has growth of 208 students over that same period This growth is offset by Charter enrollment estimates Charter School Estimate Three new charters entered the system after budget adoption and existing charter enrollment estimates were updated 2015-16 Enrollment decline estimate due to charters is 1,377 students 2016-17 Enrollment decline estimate due to charters 1,967 students As enrollment declines are estimated the number of students qualified toward Supplemental/Concentration funding also declines.

5. Enrollment Drives Revenue Comparison of Adopted Budget Assumption vs First Interim Report

6. Revenue Changes State Formulas impact revenue changes – The amount of funding as a % toward the 8 year full funding target has changed – Budget Adoption 2015-16 assumed District would receive 33.95% toward the target – First Interim 2015-16 assumes 20.68% Base year funding assumptions for LCFF related to former EIA grant shifts funding between Base and Supplemental Concentration

7. Revenue Changes 7

8. Target Calculations: 2014-15 West Contra Costa Unified 8 FactorsK-34-67-89-12 Base Grant$7,012$7,116$7,328$8,491 Grade Span Adds$729$221 Supplemental $1,156$1,063$1,095$1,302 Concentration $762$701$722$858 Targeted Goal $9,659$8,880$9,145$10,872 These targets are dependent upon State action each year and are subject to change. Full implementation of target funding is anticipated in 2020-21 school year.

9. Funding Estimate: 2014-15 West Contra Costa Unified 9 Target total for Base and Supplemental Concentration is $270,387,838 ACTUAL Funding Estimate for Base and Supplemental Concentration is $211,530,354 This year the District is estimated to receive 78% of the Targeted funding amount. The amount attributed between Base and Supplemental Concentration is a formula and not broken out by grade span.

10. Local Control Funding Formula First Interim 10 2014-15 target vs Phase in entitlement calculation This funding level assumes the State will fund the target “gap” 2014-15 29.56% - 2015-16 20.68% - 2016-17 25.48%

11. How far away is our target? 11 The LCFF has an 8 year implementation plan The 2014-15 Funding Target as of First Interim is $270 million The 2014-15 Estimated Funding $211 million – The Funding “Gap” is $59 million Each year the LCFF base grants are adjusted, but not necessarily funded. That will be a decision of the State Legislature based upon funds available.

12. 12 Multi Year Projection First Interim Report Unrestricted General Fund Chart in Thousands

13. 13 Multi Year Projection 2014-15 – Will meet 6% reserve with a combination of General and Special Reserve Funds 2015-16 – Will meet 3% reserve in General Fund and 2.4% in Special Reserve Fund 2016-17 – Will meet 3% reserve in General Fund and.70% in Special Reserve Fund

14. Assumptions Used for Multi-Year Projections Maintains …. – Programs currently in place – Exception of Grad Tutors – to be reconsidered in 2015-16 LCAP Increases – Driven costs on formulary such as step and column – LCAP costs by $3.2 million in 2015-16 – LCAP costs by $6.7 million in 2016-17 – Maintenance funding $4.8 million in accordance with State requirement beginning in 2015-16 Decreases – 34 Teaching staff based on estimated decline in enrollment in 2015-16 – 16 Teaching staff based on estimated decline in enrollment in 2016-17 Multi-Year Projection

15. Future Funding Estimates There is a higher level of volatility and risk in this funding model – Student Demographic Changes – Legislative Support must continue over time – Economic Stability and Growth

16. Expense Planning The District is deficit spending by an estimated $7.8 million as of First Interim Salary and Benefit Increases will be requested through bargaining Because of low funding over several years, demand is higher than the increased funding District must plan to reduce deficit spending

17. STRS Multi Year Rates 17

18. Retirement System Costs The increased cost to fund retirement system contributions will be escalating between $2.5 and $3 million per year This is roughly equivalent to a 2% raise for all employees The District pays for over 2300 retiree health care plans for those employees who were in a vesting status and/or retired prior to 2010 the annual cost is $18 million, which rises based upon health care premium rates

19. Structural Deficit Defined as having ongoing programs and financial commitments for a given year that exceed that particular year’s revenue Ending Fund Balance or Special Reserve Funds can be used to address the deficit 19

20. The Board needs to be aware of the use of one-time funds and prepare plans for reducing commitments as one-time funds are depleted 2014-15 the District has planned use of ending fund balance in the amount of $7.8 million 2015-16 the District has planned use of ending fund balance of $4.5 million plus Special Reserve of $4.3 million = $8.8 million 2016-17 the District has planned use of Special Reserve of $5.2 million 20 Structural Deficit

21. Reserves 3% Reserve for Economic Uncertainty is the standard for a District our size Due to the risk of volatility in funding the Board adopted a 6% reserve target with 3% in the General Fund and 3% in the Special Reserve fund With current revenue and expense assumptions that target will not be met in 2015-16 and 2016-17 By way of comparison a monthly payroll cost this school year can be as much as $12.2 million A 3% reserve is $9.7 million 21

22. Special Reserve Summary Special Reserve Fund – 17 First Interim Balance June 30, 2014$11,705,168 2015-16 use of Special Reserve$(4,292,207) 2016-17 use of Special Reserve$(5,238,619) Special Reserve Fund Balance Projection June 2017 $2,174,342

23. Fund Review Review of Budget Fund Schedules – Schedule 2 Adult Ed, Child Development, Deferred Maintenance, Special Reserve – Schedule 3 Building, Capital Facility, County School Facility, Special Reserve for Capital Outlay – All funds are estimated to have positive ending fund and cash balances for 14-15, moving in to the 2015-16 budget year

24. Next Steps 24 December 2014First Interim Budget Report 2015 JanuaryGovernor’s January Budget JanuaryBudget Study Session FebruaryGovernor’s Budget Review FebruaryBudget Study Session MarchSecond Interim Budget Report MarchDistrict Local Control Accountability Plan (DLCAP) committee Meeting AprilDLCAP Committee Meeting MayGovernor’s May Revised Budget MayPublic Hearing for LCAP JuneAdopt 2015-16 Budget and LCAP Financial reports available on the web http://www.wccusd.net/