Proposed Budget Encinitas Union School District

Governor’s Budget This is a year that clearly puts substance ahead of process – virtually nothing in the development of the / month Budget has been normal The January Governor's Budget was released in December The and State Budgets were merged, amended, and adopted together in February Following the latest Budget adoption in state history last September, the February enactment of the Budget was by far the earliest Immediately after enactment, it was clear that the Budget was in need of substantial amendment The special election was held on May 19 with disappointing results The May Revision proposals have seeped out of the Capitol like molasses in December And of utmost importance, the economy and unemployment continue to get worse This is the backdrop for the 2009 May Revision 1

Governor’s Budget State revenues have fallen dramatically Expenditures continue to rise on the natural Borrowing has been more difficult and more expensive than ever before California continues to lose jobs More people demand social services – that won't be available – during a downturn There is no way to “trim around the edges” and not deal with the realities of the imbalance between state revenues and the cost of public services Nevertheless, there are more cuts to education and all other major areas of the Budget 2

Governor’s Budget Proposition 98 has been on a rollercoaster ride Cuts to the revenue limit Cuts to Categoricals Flexibility within remaining categorical funding Withdrawal of Public Transportation Funds with no backfill Addition of one-time federal funds Changes to federal MOE requirements And much more to be detailed later in the program What does it all mean? Less of everything for California's children Coupled with cuts to health and welfare programs, the most vulnerable Californians – mostly children – are in for a very tough year 3

Governor’s Budget & May Revision Features The already reduced 17-month Budget adopted in February is reduced by another $24.3 billion Major cuts to K-12 education, welfare, prisons, and higher education No suspension of Proposition 98 – not needed as funding floor has dropped No cost-of-living adjustment (COLA) and a huge deficit factor Lottery and other special election proposals appear to be dead More cuts to K-12 – $3.9 billion – between the February Budget and the May Revision Some additional flexibility anticipated, but not yet approved Even more funding deferred – placing an even greater burden on cash flow Dramatically lower funding for every aspect of government services 4

National Economy & California's Economy The current recession is the deepest since the Great Depression The recession began in December 2007 and is now 17 months old The U.S. unemployment rate is 8.9%, up from 5.8% in 2008 California's economy is suffering even more than the nation as a whole The state was at the epicenter of the sub-prime mortgage collapse Home building fell for the fourth consecutive year in 2008, with housing starts expected to be down 24% in 2009 The state's unemployment rate is among the highest in the nation at 11.2% in March 2009, up from 6.4% one year earlier Personal income is projected to decline 1.0% in 2009, the first time it has fallen since

General Fund Revenues The state economy drives General Fund revenues through three major taxes: personal income tax, sales and use tax, and corporation tax The collapse of the state and national economies has driven state tax revenues down Since enactment of the Budget Act on February 20, 2009, baseline revenues (i.e., revenues absent new policy proposals) have dropped further: -$3.4 billion in , a 3.8% shortfall -$8.9 billion in , a 9.1% shortfall The May Revision proposes to make up this shortfall with more program cuts, fee hikes, revenue accelerations, and borrowing 6

Borrowing Proposal Dropped The May 14 release included a proposal to borrow $5.5 billion from the capital markets through a RAW While in Washington, D.C., the Governor sought federal backing for California's RAWs His request was apparently turned down The Legislative Analyst said that using RAWs to balance the Budget, rather than for cash flow, “set a terrible precedent and was poor fiscal policy” On May 26, the Governor withdrew the RAWs and proposed instead $5.6 billion in additional cuts 7

Cuts Substitute for Borrowing The $5.6 billion in cuts include: Elimination of the California Work Opportunity and Responsibility to Kids (CalWORKs) program, saving $1.3 billion Reductions to the University of California (UC) and California State University (CSU) of $750 million Phase out of remaining Cal Grant programs, saving $173 million Cutting rehabilitative services for inmates, saving $789 million Other reductions totaling approximately $2.5 billion K-12 education was not targeted for cuts in this list However, cuts to UC and CSU will reduce the amount of federal American Recovery and Reinvestment Act (ARRA) funds that are available to K-12 education 8

Revenue Limits for The May Revision recognizes the statutory COLA at 4.25%, down from an estimated 5.02% in the January Governor's Budget, but does not propose to fund it The May Revision proposes to cut revenue limits an additional $1.894 billion from the 2009 Budget Act level The new proposal will result in a base-revenue-limit-per-ADA reduction of 3.45% for the average district in May Revision Factors Statutory COLA 5.66%4.25% K-12 Deficit11.428%17.967% 9

Revenue Limit – Without Deficit In order to determine your district's funded revenue limit per ADA, you must first determine the undeficited revenue limit, i.e., the revenue limit including the statutory COLA The appropriate dollar amount must be added to your base revenue limit to determine your undeficited revenue limit per ADA in District Type Statutory COLA % % All Elementary Districts$315$250 All High School Districts$379$300 All Unified Districts$329$261 10

Special Education No reductions to special education funding in the May Revision The Governor proposes to fund $65 million for the Behavioral Intervention Plan (BIP) settlement agreement beginning in as ongoing funding The estimated per-ADA amount is $10.92 per ADA rolled into AB 602 funding Legislation is needed to fund the settlement Federal funding for special education is expected to increase by $53.5 million in based on the 2009 federal budget appropriation funding This funding is ongoing, and we will provide per-ADA funding amounts as soon as additional information becomes available This funding is in addition to ARRA funds 11

Recap of Flexibility To help offset the impact of categorical program and revenue limit cuts, the February 2009 Budget provided two types of flexibility: Ending balance sweeps – based on the ending balance for state categorical programs with specific exceptions These transfers may be executed in or , but do not include ending balances accrued after June 30, 2008 Transfer flexibility for 42 state categorical programs – funds may be transferred from eligible programs to any other educational purpose Permitted as of through Plus relaxation of K-3 Class-Size Reduction caps and timelines for purchasing State Board-approved instructional materials 12

Recap of Flexibility Plus Updates – Tier III Categorical Programs Funding for 42 programs are permitted to be shifted to any other education purpose as of through CDE has indicated that this funding will be provided as unrestricted funding and that LEAs may use locally defined codes to track the funds In addition, SBX3 4 stated that a public hearing is required as a condition of exercising the allowed flexibility; however, CDE has clarified that a hearing is required to receive the funds for the affected programs This hearing need not be a separate hearing, but may be addressed as part of the regular budget adoption hearing process 13

President Obama signed the 2009 Federal Budget in March 2009; funding will be built into California's State Budget The 2010 Budget proposal is in beginning stages of negotiations with Congress (Actual) 2009 (Estimated)% Change President's Proposed 2010 Title I, Part A, Basic Grant$6.6 billion 0%$5.1 billion Title II, Part D (Enhancing Education Through Technology) $267 million$270 million0.7%$100 million Title III (Language Acquisition)$700 million$730 million4.2%$730 million Title IV (Safe and Drug Free Schools)$295 million 0%$ 0 Title V (21st Century Learning Centers)$1.08 billion$1.13 billion4.6%$1.13 billion Special Education (Part B)$10.9 billion$11.5 billion5.5%$11.5 billion Note: California's share is approximately 10% Federal Budget Proposals 14

Effectively Using New Federal Stimulus Funds 6-32 Examples of Effective UsesUses that Should Be Avoided Professional Development Afterschool/Summer School Supplemental instruction materials Education technology and hardware to support data analysis Construction, modernization, renovation, or repair (allowed with SFSF) Payoff outstanding postemployment retirement benefit or other debt (may be allowed with SFSF) Hiring staff on a permanent basis Purchasing vehicles* Building athletic facilities* Maintenance costs* Long-term reserves – the funds must be expended within a few years* Adding nonmandatory special education service Paying for core requirements with Title I funds* Title I dollars at non-Title I-eligible schools* * These items are prohibited by federal law 15

Deferrals

What are the Budget Assumptions for EUSD for ? 7-3

Key Budget Assumptions Following are key budget assumptions for based on the Governor’s Budget: 17 DescriptionEstimated Funding Levels Average Daily Attendance (ADA)Based on 5, ADA Estimated Property Tax$33,414,748 (Approx. $197K than ) District of Choice funding It is anticipated that the funding is going to be continued (an estimated amount of $222,666) Revenue Limit COLA4.25% with % Deficit Basic Aid “Fair Share”A negative impact of $180 per ADA or $953,935 Mandated Cost ReimbursementNo Funding is anticipated except two mandates Special Education income based on AB 602 Funding COLA Level Funding as Lottery Funded at $121 per ADA -$ Unrestricted, $11.50 Prop. 20 (Restricted)

Key Budget Assumptions DescriptionEstimated Funding Levels K-3 CSR$1,071 full day Gifted and Talented Education$7.25 per ADA (After the Deficit) Instructional Materials Block Grant $54.10 after the deficit per prior year CBEDS Special Education Mandated Cost Settlement$4.25 per ADA (Year 8 of 10) Summer School Core, Remedial Intervention $3.97 per pupil hour. However, planning on 43% reduction in funding in Transfer-In for General Operating budget expenses from Special Reserve and Employees Post-Employment Reserve Funds $1,544,294 18

Budget Assumptions Annual Property Liability Premium of $239,059 Total Regular Ed. FTE budgeted is 242 Step and Column is budgeted for Certificated and Classified employees No salary increases included for any bargaining units 20:1 for K-3 and 31:1 for 4-6 Maintain retiree benefits as they now exist Employer Labor Related Costs: STRS8.25% PERS/PERS Reduction 13.02% Social Security6.20% Medicare1.45% SUI0.30% Workers Comp % Health & Welfare $10,680 19

Budget Assumptions Utilities Increase of 15% Funding of $35,000 for safety monitor positions State Funding of Deferred Maintenance of $186,043. District match of $275,500 will be suspended for one year only Site allocation of $34.50 per prior year CBEDS enrollment (will be adjusted at CBEDS) Site allocation of $5.30 per prior year CBEDS enrollment for Media books and supplies 10 days of teacher sick leave per FTE Custodial supplies of $300 per classroom Routine Restricted Maintenance to be funded at 2.5% of total General Fund expenditures if district match toward Deferred Maintenance Fund is suspended for one year Transportation expense of $471,749 20

Governor’s Budget Flexibility Proposals & EUSD The Governor’s Budget includes a number of proposals to provide districts with added flexibility to mitigate the impact of Budget reductions Proposed flexibility options include: Reducing required reserves for economic uncertainty – half of required amount for (Definitely the reserve must maintain as established in district philosophy) Reducing Routine Restricted Maintenance (RRM) reserve from 3% to 1% (The district has reduced RRM approximately by.5% for One year only) Eliminating required Deferred Maintenance match (The district will save an estimated $275,500 for One year only) Allowing for complete flexibility of categorical funds Utilizing prior-year restricted fund reserves, with certain limitations Note: The Governor’s Proposal has many flexibility opportunities; however, caution should be used in adding back expenditures in future years 21

Average Daily Attendance Kindergarten Grade 1-32,2042,2072,2752,216 Grade 4-6 2,3522,2822,3212,343 Special Ed Total ADA5,3945,2295,3725,326 CBEDS5,6255,4495,5625,549 % of ADA

Unrestricted General Fund Revenues, Expenditures, and Changes in Fund Balance June 30, 2009

Unrestricted General Fund Revenues

Unrestricted General Fund Expenditures

Components of the Ending Fund Balance June 30, 2009

Restricted General Fund Revenues, Expenditures, and Changes in Fund Balance June 30, 2009

Restricted General Fund Revenues

Restricted General Fund Expenditures

General Fund Expenditures (Unrestricted & Restricted)

District Expenditures by Function

Child Nutrition Fund June 30, 2009

Deferred Maintenance Fund June 30, 2009

Special Reserve-Non Capital Fund June 30, 2009

Special Reserve Fund For Post Employment Benefits June 30, 2009

Capital Facilities Fund June 30, 2009

Special Reserve-Capital Outlay Fund June 30, 2009

Paul Ecke Central Trust Fund June 30, 2009

Self Insurance Fund June 30, 2009

THANK YOU!