1. Long Range Planning Model Finance and Audit Committee
September 22, 2016

2. Long Range Planning Model
Review Updated 8 Year Budget Model Plan
Revenue Assumptions
Expenditure Assumptions
Discuss net result of assumption refinements
Comments and discussion on assumptions and model

3. Modeling Objectives and Highlights
Purpose of 8-Year Model: Determine revenue shortfall resulting from expiration of Measure C (2010) and “business as usual” operations
Year 1 ( ) Projections vs. Adopted Budget (16-17): Revenues same, expenditures approx. $1.7M higher
Key change: Negotiated compensation increases (both 15/16 and 16/17)
Years 2-8: New projections based on long-term historical averages and trends
Secured property tax growth: Reflects current 8-year cycle-average growth rate
Key salary assumptions
(1) Constant class sizes (i.e., 2 new teachers per year)
(2) Salary increases: placeholder based on historical average increases
Any government mandated increases in revenues or expenditures are reflected, as appropriate (e.g., PERS/STRS growth, COLA, per student growth)
All other revenues and expenditures are subject to inflation (i.e., CPI)
Year 5 ( ) shortfall: $4.9M, vs. $6.0M shortfall presented at May 10, 2016 Board Meeting following vote on Measures A and C
The $4.9M shortfall includes $900K in reductions (i.e., $5.8M vs. $6.0M apples-to-apples)

4. Revenue Assumptions for 8-Year MYP
Secured Property Tax
Unsecured Prop Tax
$44.6M*
Property Tax ($25.8M, 58% of total)
Secured Property Tax
6.1% annual growth based on current 8-year historical CAGR (2007/08 to 2015/16), reduced by 0.76% each year starting in 2020/21 (down to 3% growth in 2023/24)
Resulting projected growth for 2015/16 to 2023/24 is 5.1% per annum
Unsecured Property Tax
3.3% per annum, based on the average 8-year CAGR over the period 1992/93 to 2015/16
See next two slides for further detail
*Total Revenue does not include Interfund Transfers

5. Secured Property Tax: Historical YOY Growth
8-9 Year Real Estate Cycles
Secular Slowdown in Growth Rate
Analysis of historical property tax revenue from 1992/93 through 2015/16
Projections based on 8-year compound annual growth rates (CAGRs), to normalize for cyclicality

6. Secured Property Tax: Rolling 8-Year CAGRs
Easier to see long-term cycle-average trends with rolling 8-year CAGRs
Growth rates have been declining since the 8-year period ending
To reflect this decline, projections use the most recent 8-year CAGR for years 2-4 (6.1%), with gradual decreases in the growth rate beginning in year 5 (down to 3% growth in year 8)

7. Unsecured Property Tax: Historical YOY Growth
No clear / consistent cyclicality
Projections use the average 8-year CAGR for the entire historical data set (3.3%)

8. Revenue Assumptions for 8-Year MYP
Other LCFF
$44.6M
Other LCFF ($2.6M, 6% of total)
SELPA
Increased by COLA as projected by School Services of California
Minimum State Aid
Held constant by law
Education Protection Account
Increased at flat rate of $200 per student based on enrollment growth
The EPA is on the November 2016 ballot for renewal. Current funding goes away in 2018/19
Deferred Maintenance
Grows at 10 year CPI average of 2.5%
Note this is a revenue transfer out into Fund 14

9. Revenue Assumptions for 8-Year MYP
Other State ($4.2M, 9% of total)
Mandated Block Grants and Lottery
Per student amount increased for student enrollment growth through 2020/21
State STRS on Behalf (Pass-Through)
Adjusted to match staffing
State Mandated Block Grant Debt Repayment
No monies budgeted beyond 2016/17
Based on State fiscal health and owned debt on Mandated Block Grants
Other Local ($11.5M, 26% of total)
Parcel Tax
Measure C not renewed
Other Parcel Tax revenues grow with CPI
MPAEF
Grows with enrollment
Other State
Parcel Taxes
Other Local
$44.6M

10. 8-Year Revenue Projections
8Y CAGR
$55.8M
2.9%
1.0%
$44.6M
-0.9%
-0.4%
-4.6%
Other Local
3.1%
1.2%
Parcel Taxes
2.9%
Federal
Other State
Other LCFF
Unsecured Prop Tax
5.1%
Secured Property Tax
Although robust growth in secured property taxes is projected to continue, the other 46% of MPCSD’s revenues are declining on average

11. Expenditure Assumptions for 8-Year MYP
Salaries
$43.4M
Salaries ($28.9M, 67% of total)*
Addition of 2 teachers annually  maintains current class sizes
No other staffing additions
Placeholder for salary increases for all units, based on 10 year historic average
Additional assumptions
Ongoing retirements and resignations, similar to recent experience
Ongoing compensation increases for advancing tenure and education (i.e., “Step and Column”)
*Salaries for 2015/16 do not include recent one-time compensation increase which will be paid in fiscal year 2016/17.

12. Expenditure Assumptions for 8-Year MYP
Employee Benefits
Other Expenditures
$43.4M
Employee Benefits ($8.5M, 20% of total)
Health and benefits growth of 7% annually
STRS and PERS grow to 19.1% for both by 2020/21 (from 10.7% and 11.9% in 2015/16)
Not included: Additional SRTS and PERS growth beyond 2020/21. STRS can increase another 1% annually up to 20.25%. PERS Board can increase or decrease rates as needed.
Other Expenditures ($5.9M, 14% of total)
2016/17 budget includes $900K in reductions
Grow 2016/17 budget by CPI (2.5% per annum)
Includes: Books and Supplies, Other Operating Expenses, and Capital Outlay

13. 8-Year Expenditure Projections
8Y CAGR
$62.8M
4.7%
0.2%
9.0%
$43.4M
Other Expenditures
Employee Benefits
4.1%
Salaries

14. Model Comparison to Prior
January Model
2015/16
2016/17
2017/18
2018/19
2019/20
2020/21
2021/22
Total Revenue
$42.3M
$43.2M
$43.0M
$44.4M
$46.0M
$47.6M
Total Expense
42.6M
44.6M
47.1M
49.1M
51.2M
53.6M
Surplus/(Deficit)
($0.3M)
($1.5M)
($4.0M)
(4.7M)
($5.2M)
($5.9M)
Reserve, Economic Uncertainty
$7.0M
$6.9M
$4.2M
($0.1M)
($5.3M)
($11.3M)
September Model
2015/16
2016/17
2017/18
2018/19
2019/20
2020/21
2021/22
Total Revenue
$45.3M
$45.0M
$46.9M
$49.0M
$51.1M
$52.8M
Total Expense
47.1M
48.5M
51.0M
53.6M
56.0M
58.2M
Surplus/(Deficit)
($1.7M)
($3.4M)
($4.1M)
($4.5M)
($4.9M)
($5.3M)
Reserve, Economic Uncertainty
$8.1M
$5.9M
$2.0M
($2.4M)
($7.3M)
($12.7M)

15. Risks and Opportunities
Renewal of Proposition 30: $600,000 risk
STRS/PERS growing beyond 2020/21(up to 1.2% risk)
Additional One time State funding opportunity
Foundation Donations
Reevaluation of the $900,000 in reductions in 2016/17
Special Education

16. What does this mean? Operating Deficit is $5.3M by 2021/22
District Economic Uncertainty Reserves fall below 10% in 2018/19
District can not sustain current operations financially beyond 2018/19

17. Next Steps