BUDGET STUDY COMMITTEE MEETING

March 9, 2016

3:00 - 4:30 p.m.

Campbell Conference Room – 3rd Floor, North Building

AGENDA I. Call to Order/Roll Call Superintendent Gundry II. Setting the Agenda Mark Skvarna, Business Services III. Review and Approval of Minutes – January 22, 2016 Mark Skvarna, Business Services IV. Overview of Fund Accounting and Unrestricted/Restricted Laurie Book, Internal Business Services Fund Balance as of January 31, 2016 V. Position Analysis Mark Skvarna, Business Services VI. Next Meeting – May 18, 2016 Superintendent Gundry VII. Adjourn Superintendent Gundry MEMBERS Jon R. Gundry, Superintendent/Committee Chair Darcie Green, Board Member Rosemary Kamei, Board Member Grace Mah, Board Member Claudia Rossi, Board Member (Alternate) Mary Ann Dewan, Deputy Superintendent Philip Gordillo, Chief Human Resources Officer Del Mallory, SEIU Steve Olmos, Chief Schools Officer Angelica Ramsey, Associate Superintendent Lesbia Reclosado, SEIU Mark Skvarna, Interim Chief Business Officer Earl Thaxton, ACE/CTA Lisa Vieler, ACE/CTA David Wu, Chief Technology Officer RECORDER Theresa Martinez

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BUDGET STUDY COMMITTEE

UNAPPROVED MINUTES JANUARY 22, 2016

I. Call to Order/Roll Call

Superintendent Gundry called the meeting to order at 3:06 p.m. Members Present Others Present Jon R. Gundry, Superintendent/Committee Chair Laurie Book, Director-Interim Internal Business Services Rosemary Kamei, Board Member (via phone) Tze-ki Lam, Controller-Internal Business Services Grace H. Mah, Board Member Theresa Martinez, Business Services (recorder) Philip Gordillo, Chief Human Resources Officer Steve Olmos, Chief Schools Officer Mark Skvarna, Interim Chief Business Officer

II. Setting the Agenda Trustee Grace Mah motioned to accept the January 22, 2016 agenda; motion seconded by Mr. Mark Skvarna; motion carried unanimously.

III. Review and Approval of Minutes – November 20, 2015 Superintendent Jon Gundry motioned to approve minutes of the November 20, 2015 meeting; motion seconded by Mr. Skvarna; motion carried unanimously.

IV. Governor’s Budget Proposal

Mr. Skvarna presented an overview of the education budget. Points of interest include: - The State increased its revenue estimates, but continues to underestimate Proposition 98

revenues for 2015-16 and 2016-17. - The State Budget Proposal for 2016-17 continues to reflect both stability for and growth in

education funding. - The Local Control and Accountability Plan (LCAP) remains a dominant governance document. - The State Budget does not include:

o a statewide school facilities bond or program; o new funding to address the increased employer contributions to CalSTRS and CalPERS (NOTE:

School districts in the county have been advised to project contributions not only in percentages, but also in dollars so as to truly reflect the actual compensation); and

o new funding for transportation.

Mr. Skvarna discussed challenges of the education budget: - The minimum guarantee for Proposition 98 has functioned as a maximum funding level, with the

Legislature rarely having passed a budget that appropriated more than the minimum level required by law.

- The Governor’s budget includes $1.2 billion discretionary one-time Proposition 98 funding, equal to about $214 per ADA. o Funds can be used for any one-time purpose. However, any funds received will offset state

obligations for any LEA with outstanding mandate requirements, consistent with the approach used in the 2014 and 2015 Budget Acts.

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- The Governor’s proposed 2016-17 State Budget for special education includes a 0.47% COLA, estimated at $2.50 per ADA.

- The Governor proposes a $1.6 billion Early Education Block Grant by consolidating various preschool programs and funding sources.

- Effective with the start of the 2016 plan year, all large employers with 50 or more full-time employees must offer health benefits coverage that is affordable and meets minimum value requirements to 95% of full-time employees and their dependents to age 26.

Due to the complexity of the budget development process and timing for Board approval, the adopted budget does not incorporate changes of the May Revise. After the Governor signs the State Budget Act, there are 45 days to update the budget to reflect those changes.

Ms. Laurie Book reviewed illustrations for the Santa Clara County Office of Education (SCCOE) Local Control Funding Formula (LCFF) budget projections. There are two funding calculations: County LCFF Transition Calculation and County LCFF Target Entitlement. The SCCOE is funded on the higher amount of the two funding calculations. The LCFF Transition Calculation does not receive a COLA. Under the Transition Calculation, all components of the calculation remain static year-to-year except: - Alternative Education ADA; - Property taxes; and - Excess Tax Amount. Under the LCFF Target Entitlement, all components increase by COLA year-to-year except: - Add-on amounts remain static; - Alternative Education ADA changes year-to-year; and - Unduplicated Pupil Count for County Funded Community Schools also changes year-to-year.

Mr. Skvarna pointed out that the LCFF entitlement for Home-to-School Transportation does not cover all costs. Ms. Book reviewed the financial projection dartboard prepared by School Services of CA. - Multiyear projections are required by AB 1200 and AB 2758 and can change any time the

underlying factors change. - State Lottery projections for the current year and the out years include:

o $181 per ADA ($140 for unrestricted Lottery revenue and $41 for Proposition 20 revenues). - The Lottery Commission will provide updated projections for the 2016-17 fiscal year in June 2016.

V. Next Meeting

The next Budget Study Committee Meeting is scheduled for March 9, 2016. Agenda items include: - Overview of Fund Accounting and Unrestricted/Restricted Fund Balance - Position Analysis

VI. Adjournment Trustee Mah motioned to adjourn; motion seconded by Superintendent Gundry; meeting adjourned at 3:50 p.m.

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Budget Study Committee MeetingInternal Business ServicesBusiness Services Branch

March 9, 2016

Presentation Items

• Overview of Fund Accounting

– 3 Fund Categories

– 6 SCCOE Fund Types

– 23 County School Service Sub‐Funds

– Other SCCOE Funds

• Standardized Account Code Structure (SACS) Components

– Resource

– Goal

– Function

• CSSF – Restricted & Unrestricted Fund Balance as of Second Interim, 1/31/16

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Overview of Fund Accounting

• According to General Accepted Accounting Principal (GAAP):

– A fund is defined as a fiscal and accounting entity with a self‐balancing set of accounts 

– It records cash and other financial resources 

– It records all related liabilities and balances 

– Funds are segregated for the purpose of carrying on specific activities, special regulations, restrictions, or limitations. 

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An Overview of Fund Accounting

There are 11 types of funds, SCCOE has 6 funds within 3 categories:

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Fund Category Fund Type SCCOE Funds

I. Governmental Funds

1. General Fund/CSSF2. Special Revenue Funds

3. Capital Projects Fund4. Debt Service Fund

Funds 800‐990 Fund 100Fund 120Fund 130    Fund 350Fund 560

II. ProprietaryFunds

5. Internal Service Fund Funds 67X:Workers’ CompOPEB; Benefits

III. Fiduciary Funds 6. Agency Fund Funds 750, 760, 780

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An Overview of Fund Accounting• Governmental Funds 

– Used to account for activities that are governmental in nature

– Governmental activities include education of pupils 

– Operation of food service and child development programs

– Construction and maintenance of school facilities

– Repayment of long‐term debt

• General Fund/CSSF 

– Is the main operating fund of the LEA

– SCCOE has 23 sub‐funds within the General Fund

– It is used to account for all activities not accounted for in another fund

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General Fund / County School Service Fund

• The 01 General Fund / County School Service Fund (CSSF) is a governmental fund containing the following 23 sub‐funds:

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800 Support Services

801 Facilities Fund

802 Reserve for Vacation

810 Regional Services / SELPA

820 Special Education

830 Commercial Revolving Interest

850 Environmental Education

860 Head Start Grant

870 Migrant Education

88X Federal/State Grants

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General Fund / County School Service Fund

• CSSF Sub‐funds continued:

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890 Technology Services

920 Alternative Education – Community Schools

93X Contract Services

940 Alternative Education – Institutional Schools

950 Special Education – State

990 Transportation

Other SCCOE Funds

• Besides the 01 General Fund / County School Service Fund (CSSF), the SCCOE also accounts for the following funds:

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Fund # Fund Name Fund Type

100 Special Education Pass‐Through Fund (SELPA) G

120 Child Development G

130 Cafeteria Special Reserve Fund G

350 County Schools Facilities Fund G

560 Debt Services G

670 Self Insurance – Workers Comp., OPEB, Benefits P

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An Overview of Fund Accounting

• Restricted programs or activities: 

– Funded from revenue sources subject to constraints imposed by external resource providers 

– Or by law through constitutional provisions or enabling legislation. 

• Unrestricted revenues are those funds whose uses are not subject to external or legal constraints and may be used for any purposes not prohibited by law. 

• Programs funded by a combination of restricted and unrestricted sources, are accounted for and reported as restricted when:

– The contribution of unrestricted resources is required as a condition of funding or is necessary to operate the program

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An Overview of Fund Accounting

• Proprietary funds 

– Are used to account for activities that are more business‐like than government‐like in nature 

– Business‐type activities include those for which a fee is charged to external users or to other organizational units of the LEA, normally on a full cost‐recovery basis 

– Proprietary funds are generally intended to be self‐supporting 

• Internal service funds

– Are used to account for goods or services provided on a cost reimbursement basis to other funds or departments within the LEA 

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An Overview of Fund Accounting

• Fiduciary funds 

– Are used to account for assets held by the LEA in a trustee or agency capacity for others

• Agency funds 

– Are used to account for resources in which the LEA’s role is purely custodial. Examples are the Student Body Fund and the Warrant/Pass‐Through Fund 

– The SCCOE has Warrant/Pass‐Through Funds managed by DBAS 

– 750 Payroll Revolving Fund

– 760 Accounts Payable Revolving Fund

– 780 School Clearing Fund

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Standardized Account Code Structure (SACS)

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An Overview of Fund Accounting

• Within the general fund, restricted programs or activities must be identified, accounted for, and reported separately. 

• This requirement means that general fund activities will be divided into restricted and unrestricted segments. 

• This is achieved through the use of the resource field of the standardized account code structure. 

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Standardized Account Code Structure (SACS)– Components of Standardized Account Code Structure(SACS)

• Used by school districts and COE’s throughout California

• Determines where education funds come from and how they are used 

• SCCOE uses a 35 digit account code structure 

• 7 field components are required by CDE

• SCCOE has added 3 additional (not required) fields for a total of 10  

– Importance of 3 of the required account code components of SACS 

• Resource – tracks activities for reporting requirements; defines restricted from unrestricted programs

• Goal – groups costs by population, setting, and/or educational mode

• Function – describes activities or services preformed to accomplish a set of objectives or goal 

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Standardized Account Code Structure (SACS)

• SCCOE Account Structure (35 Digits)

• CDE 7 Fields Components (22 Digits)

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Fund Resource Proj Year Object SubObject Goal Function Cost Center Site Manager

XXX XXXX X XXXX XX XXXX XXXX XXXXXX XXX XXXX

3 4 1 4 2 4 4 6 3 4

Fund Resource Proj Year Object Goal Function Site

XX XXXX X XXXX XXXX XXXX XXX

2 4 1 4 4 4 3

• Tracks those activities funded with revenues that have special accounting or reporting requirements or are legally restricted.

• Resource Code Ranges: 0000‐1999, Unrestricted Resources 2000‐2999, Restricted RL Resources (Eliminated) 3000‐5999, Federal Restricted Resources 6000‐7999, State Restricted Resources 8000‐9999, Local Restricted Resources

• Examples: Unrestricted Lottery – 1100 Other Restricted Federal ‐ 5810

Resource ComponentFund Resource Proj Year Object SubObject Goal Function Cost Center Site Manager

800 1100 0 4300 00 5750 1110 900820 000 5700

120 5810 4 1160 83 0001 1000 409440 000 5400

3000‐9999Restricted Resources

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• The Goal defines an objective or a set of objectives for the LEAExamples: Regular classes, special education, and migrant education.  

• Allows the charging of instructional costs and support costs directly to the benefiting objectives.

• Applies to expenditure accounts, but is required for Special Education revenue accounts (Goals 5xxx).

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Goal ComponentFund Resource Proj Year Object SubObject Goal Function Cost Center Site Manager

800 1100 0 4300 00 5750 1110 900820 000 5700

120 5810 4 1160 00 0001 1000 409440 000 5400

InstructionFunction: 1000

Occupational Therapists 

Function: 3140

General Education, 

Pre‐KGoal: 0001

• Goal Code Ranges: Undistributed (0000)

General/Regular Education, Pre‐K, K‐12 (0001‐1999)

Reserved for Future State Definition (2000‐2999)

Other Instructional (3000‐4999)

Special Education (5000‐5999)

ROC/P (6000‐6999)

Other Goals (7000‐9999)

• Examples: Special Education, Age 5‐22, Severely Disabled – 5750

General Education, Pre‐K ‐ 0001

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Goal Component (continued)Fund Resource Proj Year Object SubObject Goal Function Cost Center Site Manager

800 1100 0 4300 00 5750 1110 900820 000 5700

120 5810 4 1160 00 0001 1000 409440 000 5400

1000‐6999Instructional Goals

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• Describes the activities or services performed to accomplish a set of objectives or goal All expenditures must be coded to a function (Optional for Revenue and Balance 

Sheet accounts)

• Function Classification: Undefined (0000) Instruction (1000‐1999) Instruction Related Services (2000‐2999) Pupil Services (3000‐3999) Ancillary Services (4000‐4999) Community Services (5000‐5999) Enterprise (6000‐6999)                                                     General Administration (7000‐7999) Plant Services (8000‐8999)                        Other Outgo (9000‐9999) 

• Examples: Special Education: Separate Classes –1110 Instruction ‐ 1000

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Function ComponentFund Resource Proj Year Object SubObject Goal Function Cost Center Site Manager

800 1100 0 4300 00 5750 1110 900820 000 5700

120 5810 4 1160 00 0001 1000 409440 000 5400

CSSF Fund Balance: Restricted & Unrestricted

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CSSF – Restricted Fund Balances

• Followings are the CSSF restricted funds (restricted by resource) and their balances as of 1/31/16 Second Interim

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Fund # Fund Name Amount

801 Facilities Fund – Routine Restricted Maintenance Account $2,497,145

810 Regional Services / SELPA ‐0‐

820 Special Education ‐0‐

850 Environmental Education 1

860 Head Start Grant ‐0‐

870 Migrant Education ‐0‐

88X Federal/State Grants ‐0‐

93X Contract Services 12,599

950 Special Education – State ‐0‐

Total Restricted Fund Balance as of 1/31/16 Second Interim $2,509,745

CSSF – Unrestricted Fund Balances• Followings are the CSSF unrestricted funds

• However, a portion or all of their fund balances are restricted by fundrequirements/assignment (green) or board policy (blue)

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Fund # Fund Name Amount

800 Support Services* (Breakdown on next slide) $32,477,740

801 Facilities Fund ‐ 1% Board Policy Transfer 9,160,486

801 Facilities Fund ‐ Deferred Maintenance 2,672,084

802 Reserve for Vacation 2,951,745

830 Commercial Revolving Interest 30,226

88X CTE Professional Development 130,000

890 Technology Services 5,325,133

920 Alternative Ed – Community ‐0‐

940 Alternative Ed – Institutions ‐0‐

990 Transportation ‐0‐

Total Unrestricted Fund Balance as of 1/31/16 Second Interim $52,747,414

*See next page

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CSSF – Unrestricted Fund Balances• Fund 800 Support Services fund balance by assignments:

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Fund 800 Support Services Unrestricted Fund Balance as of 1/31/16 $32,477,740

Less Assignments:

Revolving Cash 25,000

Stores 230,408

Board Designation ‐ Legal 176,000

Redevelopment (RDA) Revenue 5,233,578

$5.1 Designation (State Aid) 5,168,697

STRS for H1B1 Items: 2003‐2010 742,471

Property & Liability / Safety 300,000

Paid Sick Leave Law AB1522, 1/1/2015 700,000

Balance Remaining to Budget – Board Approved 1‐Time Funding 360,000

1% Board Approved Facility Transfer 2,324,279

Outstanding Mandate Claims (1‐Time Funding) (Environmental Ed Construction) 2,289,821

Support Services Unrestricted Fund Balance Less Assignments $14,927,486

CSSF – Unrestricted Fund Balances

• Portions of Support Services fund balances are restricted by assignment (continued):

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Support Services Unrestricted Fund Balance Less Assignments $14,927,486

Less: 4% Reserve Requirement (9,297,116)

Support Services Unassigned / Unappropriated Amount as of 1/31/16 Second Interim $5,630,370