Lora Duzyk Assistant Superintendent, Business Services

Discuss the District’s Second Interim Report AB1200 Fiscal Oversight – What is a Negative Certification? County Superintendent Intervention The District’s Fiscal Recovery Plan Next Steps 2

Second Interim Report Letter to the Board President dated 3/20/2013 “The district will be unable to meet its financial obligations in the subsequent fiscal year, and beyond…” Current Year Projected deficit spending of ($2.44 million) 2.7% Reserve for Economic Uncertainty Unable to qualify for County TRANS pool due to inability to pay $1.5 million in internal borrowing to cover cash shortfalls 3

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Second Interim Report Multi-Year Projection (as of February 28, 2013) “The district needs to cut a total $9.5 million during the two year period of to , representing a yearly average of 17.5% of unrestricted expenditures” Needed expenditure reductions = $4.2 million = $ 5.3 million 6

Second Interim Report Cash “The combination of internal borrowing and a Temporary Transfer of Funds from the County Treasury may be insufficient to cover district cash needs in fiscal year under the current budget projections.” Out of cash in April/May 2014 Projected cash need in = $3.8 million Projected cash payment from the state = $2.2 million 7

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Effective January 1, 1992 Expanded authority for the County Superintendent to intervene in financially troubled school districts Revised and standardized the budget development and interim reporting processes Addressed other issues related to fiscal accountability such as emergency apportionments, actuarial studies, approval of debt issuance and more Created the Fiscal Crisis and Management Assistance Team (FCMAT) 11

Positive – the district will meet its financial obligations for the current and two subsequent fiscal years Qualified – The district may not meet its financial obligations for the current or next two fiscal years Negative – The district will be unable to meet its financial obligations for the current or next fiscal year. 12

“3 rd Interim” for period ending April 30; file with the County Superintendent, Superintendent of Public Instruction and State Controller’s Office by June 1 st Limitations on debt issuance Possible downgrade by rating agencies resulting in higher borrowing costs Prior review and approval of collective bargaining agreements by the County Superintendent is required 13

Qualified status: the Board retains authority but may have compensation withheld for failure to provide information Negative status: County Superintendent appoints a fiscal advisor with stay and rescind authority over Board actions 14

The County Superintendent shall impose one or more of the following - EC (e): Impose a budget on a district Stay or rescind any action that is determined to be inconsistent with the school districts ability to meet its obligations for the current or subsequent fiscal years Assist in developing a financial plan to enable the district to meet its obligations 15

The County Superintendent shall …(cont’d) Assist in developing a budget for the following year Assign a fiscal advisor to perform any of the above on behalf Note that the school district would be required to pay 75% and the COE 25% of the expenses incurred for the fiscal advisor And all actions that are necessary to ensure that the district meets its financial obligations 16

All districts issuing Certificates of Participation (COPs) or revenue bonds must provide the County Superintendent with evidence of their ability to repay Districts with qualified or negative certifications may not issue these debt instruments without the County Superintendent first determining that the repayment of that debt is probable. The District will not be able to borrow when it can’t pay the funds back (projected April/May 2014). 17

All districts must disclose the costs of an agreement with an exclusive representative at a public meeting Districts with qualified or negative certifications are required to give the County Superintendent 10 days to comment on the agreement Negative - Fiscal Advisor may “Stay/Rescind” Board action on the agreement 18

The Fiscal Advisor: May be COE staff or an External Consultant Is the Advisor to the County Superintendent, not to the school district Has “Stay and Rescind” authority over board actions Does not initiate board actions Will sit on closed board sessions Cannot abrogate existing labor contracts 19

Fiscal Recovery Plan. The plan may include but not be limited to: Communication- All stakeholders! (Board, Leadership, Labor, Staff, Community – including parents, Policy makers, Legislators – anyone who will listen!) 20

Fiscal Recovery Plan, (cont’d.) Increase Revenues Increase ADA State Revenues/ LCFF Donations Grants 21

Fiscal Recovery Plan, (cont’d.) Decrease Expenditures Prepare for the worst/ hope for the best! Sooner vs. Later Spending and Hiring Freeze On-going vs. One-time 85% of total Unrestricted Expenditures are people and related costs 22