GOVERNOR BROWN’S BUDGET PROPOSAL January 19, 2012 RAMONA UNIFIED SCHOOL DISTRICT

Acknowledgment  Many of the numbers and slides contained in this presentation are from the Governor’s Budget Workshop presented by School Services of California, Inc., which staff attended on January 18, 2012, in Garden Grove, California

Theme of the Governor's Proposal  A repeat of the current year budget  A budget which starts with one funding level, but then could have automatic changes during the middle of the year  In other words, a budget with built-in Triggers if new revenues do not materialize  The whole budget revolves around new temporary taxes which are hoped to be approved by California voters

What Is Proposed for Ramona  Whether the ballot measure passes or fails, the following will be certainties in the Governor’s proposed budget  No COLA for  Was predicted to be 3.19% increase to revenue limits  No COLA means a reduction of $839,000 in revenues to Ramona for next year  The current multi-year has this revenue in it  State aid for transportation will not be funded  Both home-to-school and special-education funding  The loss of both of these funding sources will mean a loss of $624,000 in revenue to Ramona

What Is Proposed for Ramona  Transitional Kindergarten will not be funded  The age for kindergarten eligibility will be moved back a month, from December to November  Funding loss to Ramona could be $199,000 for the full year  A total of $200 million to fund mandated block grant  The Governor’s budget proposes wide sweeping reform to mandates  Includes elimination of nearly half of all existing mandates  Possibility of $200,000 in additional revenues

What Is Proposed for Ramona  The weighted student funding proposal  Governor proposes that schools be given a single amount of unrestricted funding adjusted for student demographics, such as English Learners or students eligible for free or reduced lunch  Categorical programs would be transitioned into the unrestricted funding over a five-year period and the money will be completely flexible  What is the weighted average, which categorical programs will be affected, or how they will be phased in are all unknowns  With a shift, there certainly will be school districts that receive more money and school districts that will receive less money  Plan with current programs and the dollars and regulations with each of those programs

New Taxes  The centerpiece of Governor Brown’s budget is a $6.9 billion tax increase  Establishes the “education protection account” for revenues derived from temporary, five-year tax increases:  Half-cent sales tax increase  Increases personal income tax rates on annual earnings of more than $250,000  Proposition 98 would go from $47.6 billion to $52.5 billion, a $4.9 billion increase

Why is Education Flat Funded?  How does a nearly $5 billion increase in Proposition 98 provide no real growth in funding for schools? The answer is deferrals.  $2.4 billion is used to maintain current-year spending levels – the cost of maintaining existing programs after the deferral  $2.5 billion buys down K-14 interyear deferrals by moving the state expenditures back into the current year  Buying down deferrals increases cash available in the budget year and can reduce borrowing costs, but does not increase spending authority

Revenue Limit Funding if Taxes Fail  If these higher taxes are not enacted, the Governor’s Budget proposes midyear cuts of $2.4 billion for K-14 education, or about $370 per ADA  At this point, there are few details on how this reduction would be implemented  $370 multiplied by the ADA of 5,805  Would reduce our funding for next year by:  $2,147,000

First Interim Multi-Year Projections Revenue46,217,38746,102,06046,993,484 Expenses49,905,24051,075,90852,456,308 Difference (3,687,853) (4,973,848) (5,522,824) Carryover Expenses 3,342,85200 Reserve Fund Above 3% Min. 986, Beg Balance 8,194,395 2,149,690 (2,824,158) Ending Balance2,149,690 (2,824,158) (8,346,982) 10

With Governor’s Proposed Budget  Trigger cut in current year  $389,000  No COLA for next year  $839,000  Elimination of Transportation Funding  $624,000  Transitional Kindergarten – Loss of revenue  $199,000  Mandated Costs Reimbursement  $200,000  Our practice will continue of budgeting zero dollars in

Revenue45,828,38744,640,06045,471,484 Expenses49,905,24051,075,90852,456,308 Difference (3,687,853) (6,435,848) (6,984,824) Carryover Expenses 3,342,85200 Reserve Fund Above 3% Min. 986, Beg Balance 8,194,395 1,760,445 (4,752,403) Ending Balance1,760,445 (4,675,403) (11,660,227) 12 Multi-Year Projections with Triggers and Governor’s Proposal

Revenue45,828,38742,493,06043,324,484 Expenses49,905,24051,075,90852,456,308 Difference (3,687,853) (8,582,848) (9,131,824) Carryover Expenses 3,342,85200 Reserve Fund Above 3% Min. 986, Beg Balance 8,194,395 1,760,445 (6,822,403) Ending Balance1,760,445 (6,822,403) (15,954,227) 13 Multi-Year Projections with Triggers and Loss of $370 per ADA

Managing Cash  Managing cash continues to be a high stakes game  If you run out of cash, the game is over  Prepare cash flow projections for all funds  To maintain a strong cash position:  Prepare cash flow projections for all scenarios With “trigger” cuts With the reinstatement of deferrals

The State’s Road to Adoption  This Budget has a long way to go before it becomes law  There will be resistance to the tax initiative  The weighted student formula is a “work in progress”  The home-to-school and special education transportation cut is a political “hot potato”  There is resistance by the Legislature to make further cuts  The Budget relies on improved economic projections  But cash continues to come in low  And unemployment remains high  There is plenty of room for negotiations before final adoption

Ramona’s Next Steps  Staff does not have any recommendations to the Board tonight  Other information is needed, San Diego County Office of Education will give options and directions for 2 nd Interim and budget adoption  Staff needs to “fine tune” the numbers  Develop and present a plan for discussion and approval to “right size the financial ship”