1. Public Education’s Point of Reference for Making Educated Decisions Since 1975 State Budget and School District Impact Presented by Sierra Sands Unified School District January 21, 2010 Ron Bennett President and CEO

2. 1 U.S. Economic Outlook The broader national economy may be turning the corner The rate of job loss has slowed considerably Job growth, although likely weak, may occur by the end of the year Home sales are rising The stock market is up 60% from its March 2009 low Third quarter U.S. gross domestic product (GDP) increased 2.2%, the best showing since the recession began

3. 2 U.S. Economic Outlook 2008 2009 Source: U.S. Bureau of Economic Analysis, November and December 2009

4. 3 California’s Economy While there are signs of recovery, the California economy will suffer from high unemployment The state’s unemployment rate is 12.3%, compared to 10% for the U.S. as a whole Other factors that will impair the recovery include: Very weak construction and manufacturing sectors Continuing drought Political gridlock in Sacramento Public schools typically see improvements 18 months after recovery begins

5. 4 Employment Trends – December 2007 to November 2009 Source: California Employment Development Department Metropolitan Areas Industrial Sectors (Jobs in Thousands)

6. 5 State Budget Developments On January 8, 2010, the Governor acknowledged a Budget deficit of $6.3 billion for the current year Current-year revenue collections are short about $2 billion Numerous Budget assumptions are at risk Sale of the State Compensation Insurance Fund Budgeted savings in the Department of Corrections Lawsuits pending on Governor’s vetoes, redevelopment agency (RDA) shift, social services cuts, and state worker furloughs

7. 6 General Fund Revenues Falling Short 2008-09 2009-10

8. 7 State Budget Developments The 2010-11 Budget has a built-in shortfall of an additional $13.3 billion, even if all of the current-year assumptions were realized One-time solutions fall away in 2010-11 Caseload growth continues, regardless of revenue situation Statutory increases will reemerge for some areas of government

9. 8 Governor’s Budget Proposals As part of the Governor’s Budget Proposals for 2010-11, the Governor proposes for the current year: No midyear cuts to local school district budgets A sweep of unspent K-3 CSR (class-size reduction) funds to be taken at state, not district, level And for 2010-11: A cut of $1.5 billion to K-12 targeted to “administrative expenses” Application of a negative cost-of-living adjustment (COLA) of -.38% to the revenue limit

10. 9 Revenue Reductions The total direct reductions to be applied for Sierra Sands USD are: Deduction of negative COLA, -$24 per ADA ongoing Deduction of proposed 2010-11 revenue limit, -$201 per ADA ongoing Total loss of revenue from Governor’s proposals, $225 per ADA ongoing (more than $1.3 million ongoing loss for Sierra Sands USD) The bottom line: The state can only spend what it collects in revenues and borrowed funds If conditions deteriorate further, pressure will mount for midyear cuts during 2010-11

11. Per-ADA Revenue Volatility 10

12. 11 What Should Districts Do – Start Early How early should you start developing the annual district budget? Early enough to determine staffing needs If reducing staff due to declining enrollment or other needs to balance the budget, will there need to be layoffs? March 15 for certificated staff; 45 days for classified Will natural attrition be sufficient and in the right positions? Will there need to be early efforts to recruit quality staff? Hard-to-fill staffing areas Growing or steady enrollments

13. 12 What Should Districts Do – Start Early How early should you start developing the annual district budget? Early enough to take action on budget reductions Waiting several months or a year will cause budget problems to multiply And be more difficult to resolve One dollar cut in the current year: Adds one dollar to the ending balance Saves two dollars by the end of the next year Saves three dollars by the end of the next year, and so on

14. 13 What Should Districts Do – Start Early How early should you start developing the annual district budget? Early enough to allow adequate opportunity for input, review, and revision by constituents Budget managers, including categorical programs Budget Committee Board of Education Others All in order to meet state deadlines Establish budget timelines in a Board-approved budget calendar

15. 14 Early Retirement Incentives Why consider an early retirement incentive program? To accelerate retirement rates above normal attrition To reorganize staffing and programs To reduce staffing and provide ongoing savings Typically not cost beneficial for classified staff if offered separately Can be if in conjunction with certificated staff within private provider- or district-sponsored program

16. 15 Early Retirement Incentives Districts making staffing reductions may consider this as an option One retiree from the top of the salary schedule can save one or two jobs for the lowest paid teachers If savings are required on top of this, establish a minimum number of retirees for the program to be a “go”

17. What If Districts Need to Borrow From The State? – Avoid It What happens when a district can’t meet its financial obligations? AB 1200 and AB 2756 Progressive Intervention County Department of Education Fiscal Crisis and Management Assistance Team (FCMAT) Loss of Local Control Fiscal Advisor (stay and rescind power) State Trustee (loan is <200% of required reserves) State Administrator (loan is >200% of required reserves) Stays until loan is repaid Replaces Board and Superintendent Costs more (expensive services and loss of ADA) 16

18. Voter-Approved Option for Districts Parcel Taxes (Qualified Special Taxes) Alternative source of school district revenue Typically levied as a flat rate per parcel May contain exemptions or reduced rates for senior citizens Must be approved by at least two-thirds of those voting on the measure Typically assessed for five, seven, or ten years May include inflation adjustments Voters must approve extension when tax expires No restrictions on use Board may target specific needs in ballot language 17

19. 18 The Goal for Tough-Time Budgets When managing budgets in tough times, the overarching goals should be to: Minimize impact on programs and students Maximize progress toward district goals Keep all stakeholders informed of the budgetary impact of current challenges and district decisions Have as broad a based buy in to budget reductions as is realistic Keep the district financially healthy and prepared for the future... this too shall pass and we will see better days!

20. Public Education’s Point of Reference for Making Educated Decisions Since 1975 Thank you