1. Dick Anastasi Lydia Sellie Board Study Session December 8, 2009

4. Dick Anastasi Lydia Sellie Board Study Session December 8, 2009

7. Dick Anastasi Lydia Sellie Board Study Session December 8, 2009

8. Setting the Stage for 2010-11 …  State Situation  Non Basic Ed Funding  Cost of Living Allowance (COLA)  Student Achievement Initiative (I728)  Other Non-Basic Ed Programs  Levy Implications  Local Effort Assistance/Levy Equalization  Revenue and Expenditure Assumptions  Three Year Projections

9. State Situation Following slides were taken from an Office of Financial Management briefing of November 16, 2009. (Since that briefing, the state’s budget deficit total was increased to $2.6B for 2010-11)

10. Overview  Over past 18 months, Washington has seen the largest drop in revenue in recent memory.  Last session, state closed a $9 billion shortfall through:  cuts to programs and services  use of Recovery Act funds  fund transfers, including Rainy Day Fund  As revenue projections continue to decline, state will need to cut more to stay in balance.  Reduction options are limited by constitutional and federal spending mandates. This will narrow choices.

11. Solving $9 Billion Gap: Actions to balance budget Early reductions $.3 B

12. What Should We Expect? Revenue uncertainty continues According to Economic and Revenue Forecast Council:  State revenues will lag economic recovery  Job growth will lag economic recovery  Unemployment will remain high  Less revenue expected in 2009-11 than collected in 2007-09.

13. Majority of $31 Billion Budget Is Protected: Tied to state constitutional or federal requirements

14. Possible Areas for More Cuts: Non-Protected Budget  Mental health and developmental disabilities services: $1.6 billion  Prisons/community supervision of offenders: $1.6 billion  Care for low-income elderly: $1.3 billion  Economic support for low-income families: $1.1 billion  K-12 non-basic education funding (class size reduction, others): $635 million  Higher education: $500 million (most is financial aid)  Juvenile corrections: $198 million

15. Non Basic Education Funding Items  Cost of Living Allowance  Student Achievement Funds  K-4 Enhancement Funds  Learning Improvement Day  Gifted Education  Health Benefits Inflation  Local Effort Assistance

16. Cost of Living Allowances  Initiative 732 provided annual COLAs.  The Washington State Economic and Revenue Forecast Council projects annual COLA rates.  Legislature suspended COLA raises for both 2009 -10 and 2010-11  Because of additional time and stipends, state funding does not cover the total district cost of COLA.  COLA raises are not part of Basic Ed.

17. Student Achievement Funding  Initiative 728 provided Student Achievement Funding to schools.  Legislature reduced I-728 funding from $458/FTE in 2008-09 to $131/FTE in 2009-10. (This amounted to a funding loss of $6.28M.)  I-728 was primarily intended for class size reductions and focused help for struggling learners.  I-728 is not part of Basic Ed.

18. Other Non-Basic Education Programs  K-4 Enhancement – provides additional certificated staff in grades K-4 resulting in lower class sizes. Estimated impact: 27 Cert FTE (over $2M).  Learning Improvement Day – one remaining state funded professional development day for certificated staff. Estimated impact: $440,000.  Gifted Education – provides for programs for top 2.3% of students. Estimated impact: $171,000.  Health Benefits Inflation – estimated at 2.74%.

19. Local Effort Assistance/ Levy Equalization  LEA funding helps “property poor” districts who are unable to pass a full M&O levy.  Northshore does not receive LEA funds.  Changes in the levy formula, e.g. increasing the levy lid, will increase the state’s LEA costs.  The state began the biennium with an estimated $60M shortfall in LEA that has not been addressed. After the formula was re-evaluated this fall, the shortfall grew to $78M.

20. Levy Implications  All Non Basic Education programs listed above are included in establishing the district levy base.  As a result, any reduction in, or elimination of, funding for these programs will not only directly reduce funding but will result in a decrease in levy authority in the following years.

21. Current Levy Legislation  State levy lid is currently set 24% with a number of districts “grandfathered” at higher rates.  Currently, there is legislation allowing districts to include in their levy base formula, COLA and I728 monies suspended or reduced in the 2003-05 school years. This provision will expire after 2011.  Last session’s HB 1776 would have modified the levy formula to continue these in the levy base plus the 2009-11 suspended COLA and reduced I728 funding.  If this is not renewed, levy collection limits will be reduced.

22. Northshore Situation  Last year we believed we looked at the “worst case” scenario and still state revenue projections continued to plummet.  However, we need to make assumptions in order to start planning for the 2010-11 budget and beyond.  Assumptions will change as new information or guidance is obtained.

23. State Budget “Milestones”  December 8?, 2009 - Governor’s budget released  January 11, 2010 - Legislative session begins  February 5, 2010 - State economic forecast  February 12, 2010 – State revenue forecast  March ?, 2010 – House budget released  March ?, 2010 – Senate budget released  March 11, 2010 – Legislative session ends/ Conference budget released

25. Revenue Assumptions  Enrollment: Continued enrollment decline for first few years with possible increase in third. Estimated decrease of 144 FTE in 2010-11, 136 in 2011-12, and then a 75 FTE increase in 2012-13.  COLA: Suspended in 2010-11, 1.7% in 2011-12, and 2.1% for 2012-13. Figures based on Washington State Economic and Revenue Forecast Council and biennial (2009-11) budget.  Transportation: No change.  Inflator: 4.0% all years.  I-728: Eliminated in 2010-11.  K-4 ratio: Remains the same.  Learning Improvement Day: No change.  Gifted funding: No reduction.  Health Benefits: State will provide an inflation increase.

26. Expenditure Assumptions  Labor Settlements: Additional 3% for NSEA in 2010-11 (third and final year of current CBA).  COLA: 0% in 2010-11, expected 1.7% in 2011-12 and 2.1% in 2012-13 if funded. Catch-up provisions (09-11 biennium, and possibly 2003-05 biennium) may be addressed in legislative session starting in January.  Permissive Benefits: Increase in state funding has been slightly less than 3%. Similar increases expected.  Utilities: Total utilities to have slight increases. Most variability in fuel and electricity/natural gas. Total increase across all utilities estimated at 4% per year.  Staffing: A slight decrease in staffing costs due to projected enrollment declines.  Pension Costs: Rates from the Office of the State Actuary. Rates nearly double in July 2011.

27. Northshore School District Three Year Revenue and Expenditure Projection No I728 in 2010-11

28. Northshore School District Three Year Revenue and Expenditure Projection No I728 in 2010-11

29. Northshore School District Three Year Revenue and Expenditure Projection No I728 in 2010-11

30. Northshore School District Three Year Revenue and Expenditure Projection No I728 in 2010-11

31. Revenue Assumptions Basic Education Only  Enrollment: Continued enrollment decline for first few years with possible increase in third. Estimated decrease of 144 FTE in 2010-11, 136 in 2011-12, and then a 75 FTE increase in 2012-13.  COLA: Suspended for all three years.  Transportation: No change.  Inflator: 4.0% all years.  I-728: Eliminated in 2010-11.  K-4 ratio: Eliminated in 2010-11.  Learning Improvement Day: Eliminated in 2010.  Gifted funding: Eliminated in 2010.  Health Benefits: No inflationary increase.

32. Expenditure Assumptions Basic Education Only  Labor Settlements: Additional 3% for NSEA in 2010-11 (third and final year of current CBA).  COLA: 0% in 2010-11, 2011-12, and 2012-13  Permissive Benefits: No increase in Health Benefits.  Utilities: Total utilities to have slight increases. Most variability in fuel and electricity/natural gas. Total increase across all utilities estimated at 4% per year.  Staffing: A slight decrease in staffing costs due to projected enrollment declines.  Pension Costs: Rates from the Office of the State Actuary. Rates nearly double in July 2011.

33. Northshore School District Three Year Revenue and Expenditure Projection State Funding of Basic Education Only

34. Northshore School District Three Year Revenue and Expenditure Projection State Funding of Basic Education Only

35. Northshore School District Three Year Revenue and Expenditure Projection State Funding of Basic Education Only

36. Discussion