Governor’s Budget Proposal for K 12 Educationfor K-12 Education

Presentation to the Board of EducationJanuary 27, 2009

State Fiscal Crisis

The widespread national economic downturn and the direThe widespread national economic downturn and the dire current state fiscal crisis are substantially impacting the ability of the State of California to sustain K-12 funding l llevels.

The Governor’s budget proposal for 2009-2010 containsThe Governor s budget proposal for 2009-2010 contains substantial reductions to educational funding for the current year (2008-2009) and significant cuts to revenue f 2009 2010 d h fi lfor 2009-2010 and the next two fiscal years.

REVIEW OF 2008-2009 ADOPTED BUDGET PLAN AND RESTORATIONS

Review of Major Items from October 28th

Board PresentationBoard Presentation

2008-09 Adopted Budget Planned Cuts, Reallocations and Funding ChangesThe District assumed that there would be no cost of

living increase to Revenue Limit for 2008-09. That d l f i l $1 000 000 irepresented a loss of approximately $1,000,000 in

unrestricted revenue for 2008-09.

The following changes were made to achieve a balanced budget:

• Elimination of General Fund Conference Budget -$26,000

• Reduce Advertising Budget by $10 000• Reduce Advertising Budget by $10,000• Moved Encroachment from Counselors to Safety

Grant - $33,000

2008-09 Adopted Budget Planned Cuts, Reallocations and Funding Changes (cont’d)_

• Reallocated Reading Specialists to Site Funds,reduced allocation for EL Aides at elementary -$72,300El t PE/M i t h i iti d f• Elementary PE/Music teachers reprioritized from Educational Foundation – reduction of aides – $93,500

• Transfer Drama and Screenwriting at High School to f g gArts Ongoing Grant Funds – $36,000

• Eliminated Transfer to Fund 20.0 for ARC - $102,142• Used Title II funding to support class sizes - $49,000

2008-09 Adopted Budget Planned Cuts, Reallocations and Funding Changes (cont’d)

• Eliminated Electrician position - $77,300• Eliminated 4th/5th Grade Aide support - $51,000• Reduce District Driver hours to 4.0 - $6,400• ASB Bookkeeper salary absorbed by ASB - $53,000• Reduction to School Business Certificated Days -

$41 500$41,500• Restructure of District Office staff for HR/Fiscal

Services - $62,000

2008-09 Adopted Budget Planned Cuts, Reallocations and Funding Changes (cont’d)

• Eliminate sections/Increase Class size ratios at High School - $141,000

• Transfer Crossing Guard Cost to City of El Segundo -$40 000$40,000

• Reduction of consultant cost - $20,000• Reduction of transfer to Routine Restricted f f

Maintenance - $40,000

• Total Changes from 2007-08 to 2008-09:

$954,142

Summary of Changes and Restorations October 28th Board Presentation Overview• Increased Revenue $665,610

– .6668% COLA to Revenue LimitElimination of 6 5% deficit to Categorical– Elimination of 6.5% deficit to Categorical

– City of El Segundo one-time $150,000

• Restored expenditures $479,425– Restore 50% of Upper grade aides – Add cost of Crossing guards for Sept and Octf g g f p– Increase contribution to Maintenance to 3% of expenditures– Restore Site funds for Reading Specialists– Restore full allocation of School Business Daysf f y– Restore $10,000 of Title II budget for staff development– Cover benefit increases and step and column

Uncertainties - 10/28/08 Board Presentation

The adoption of the 2008-2009 State budget represented the third latest budget in the history of the State and still had gapping holes in the structure.

• 2008-09– State Budget Structural Defect

C R Li i D fi i $(979 436)• Current Revenue Limit Deficit – $(979,436)• Mid Year Deficit/Cuts for 2008-09?

• 2009-102009 10– Release of 2009-10 Proposal by Governor in January, 2009– Assumption of no COLA – Deficit grows to???

• 2010-11– 3.50% COLA

GOVERNOR’S PROPOSAL FOR 2008-2009

Mid C t•Midyear Cuts • Deferrals of Revenue Limit

Governor’s Proposal 2008-2009 Mid-Year Reductions

• No Cost of Living Adjustment (COLA)– Elimination of .6668% COLA $(139,290)

• Application of 4.5% additional deficit $(895,300)

Additional Loss of 2008-09 Revenue Limit $(1,034,590)

• Add 4.710% Deficit at Adoption $(979,436)

Total Cost of 2008-09 Revenue Limit Deficits $(2,014,026)

Deferrals of RevenueThe Governor proposes to defer payment of revenue limit for February to July, 2009

• Revenue Limit makes up nearly 70% of total income• Revenue Limit makes up nearly 70% of total income

• February apportionment is largest payment of revenue limit –approximately 13% - 15% of total revenue limit – This will be an impact to cash flow of $1,804,568 for ESUSDimpact to cash flow of $1,804,568 for ESUSD

• In addition to the June apportionment that was moved during the 2004-05 budget crisis and the Class Size Reduction funds that have b b d i t J l t ti thi if th G ’ lbeen bumped into July starting this year, if the Governor’s proposal is adopted, over $3,300,000 in revenue will now be deferred to July.

• Deferrals affect cash flow and interest earnings

• District must borrow to have sufficient cash to cover expenses but loans must be repaid by end of fiscal year on June 30th

• Reserves are critical to cover cash needsReserves are critical to cover cash needs

Schedule of Reserve AccountsFUND RESERVE AMOUNT 7/1/08

General Fund – Unrestricted – Fund 01.0 $2,481,488

Reserve for Non-Capital Expenditures - Fund 17.0 $555,197

Reserve for Post Employment Benefits – Fund 20.0 $1,402,387

l A il bl f G l d C h lTotal Reserves Available for General Fund Cash Flow and Expenditure $4,439,072

Add for Cash Flow Only:

General F nd Restricted F nd 01 0 $1 144 651General Fund – Restricted – Fund 01.0 $1,144,651

Deferred Maintenance – Fund 14.0 $949,274

Bond Fund – Fund 21.0 $378,903

Developers’ Fees – Fund 25.0 $458,424

County Facilities – Fund 35.0 $2,528,728

Total Reserves Available for General Fund Cash Flow but must be repaid by June 30th $9.899,052

Flexibility for 2008-09

Understanding the extreme hardship of making cuts mid-year, the Governor’s Proposal allows school districts to use restricted funds (categorical) for their general fund expenses in the current year.fund expenses in the current year.

The District has identified approximately $300,000 in one-time funds that could be transferred to backfill the shortfall in revenue in 2008-09. But this solution offers no relief in 2009-10.offers no relief in 2009 10.

Federal Government to the RescueEven if the Federal Government is able to send funds from

the economic stimulus package to California, 2% of our l i l h $500 000 i d i d f f d ltotal income or less than $500,000 is derived from federal

funds.

These funds are very limited in flexibility since they are part of the NCLB legislation and are not part of the Governor’s proposal for flexibilityGovernor s proposal for flexibility.

In addition, if these are not permanent changes to the f di l l f th thi ifunding levels for these resources, this is a one-year “fix,”and not a multi-year solution to our ongoing fiscal crisis.

General Fund Revenue – 2nd InterimJune 30, 2009

2 0%

16.7% 11.7% Revenue Limit Sources 69.4%

2.0% Federal 2.0%

69.4%State 16.7%

C t d L l 11 7%County and Local 11.7%

GOVERNOR’S PROPOSAL FOR 2009-2010

No COLA, Further Reduction of Revenue Limit, Shorten School Year to 175 days, CSR Flexibility

2009-2010 Revenue Limit

• Continuation of 2008-2009 mid-year cut to revenue limit – Loss of COLA plus additional 4.5% = 9.685%

• Cost of Living Adjustment for 2009-2010 is offset by deficit to eliminate it 5 02%deficit to eliminate it - 5.02%

• Further Reduction of the revenue limit by 2.5%f y

• Total deficit grows to 16.161%

• Loss in Revenue Limit funding is $(3,455,700)

Instructional School Year Proposal

• The Governor proposes to eliminate the requirement for the 180 day instructional calendar to 175 days of instruction to offset the additional 2 5% in revenueinstruction to offset the additional 2.5% in revenue limit deficit.

• Reducing the school year by 5 days would reduce District costs – but the bargaining contracts require that our employees be paid for all 180 days of instruction unless negotiated with the employee bargaining unit.

• The District cannot unilaterally cut the work year and pay to teachers and staff.

Class Size Reduction Flexibility• To backfill shortfall in revenue limit, the Governor

proposes to allow Districts to staff classrooms at hi h d h i i h fi i lhigher student to teacher ratios without financial penalty.

• This proposal would assume that the Class Size Reduction funds would be structured into a block grant

d dd d D ’ land added to a District’s revenue limit.

• The District would have the flexibility to allocate the• The District would have the flexibility to allocate the resources based on the priorities set at the local level.

Declining Enrollment• The District is currently benefitting financially from

declining enrollment.

• District is paid on previous year’s ADA but only has to staff on current year’s enrollment levelsstaff on current year s enrollment levels.

• But the District’s enrollment levels out in 2011-2012.

El Segundo USD Historical Data for P2 ADA

3182 31913,200

3,250

3054

3108 31013121

30653,100

3,150

3054

30142994

2 950

3,000

3,050

2909

2,850

2,900

2,950

2,750

2,800

02 03 03 04 04 05 05 06 06 07 07 08 08 09 09 10 10 11 11 1202-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12

Revenue Limit - Summary2009-10 Revenue Limit per ADA $ 6,788.44Proposed Deficit of 16.161% $(1,103.05)2009-10 Net Amount per ADA $ 5,650.392005-06 Revenue Limit per ADA $ 5,550.48Percentage Increase in ADA 1.8%Percentage Increase in ADA 1.8%

2005-06 Average Cost per FTE for Teacher $ 62,6262009 10 A C FTE f T h $ 72 8752009-10 Average Cost per FTE for Teacher $ 72,875Percentage Increase in Cost per Teacher 16.4%

We will be building a budget with 2005-06 revenue levels and 2009-10 costs

Total Shortfall for 2009-2010The District’s expenditures will exceed

revenues by $2,500,000revenues by $2,500,000

FTE 28

Classified Staff

Teachers

FTE 49

FTE 28

Classified Administrators FTE 7

Certificated Administrators FTE 10

0 1000000 2000000 3000000

Next StepsAlthough we may not know the final result of the state’s fiscal crisis and

the state’s budget until late fall, all school districts are required to adopt a balanced budget for the next school year by June 30, 2009.

– State Budget will most likely not be in place by then

– LACOE will require we use assumptions in the May revise if that is the latest data and proposal

As you can see, building the district budget based on assumptions that have yet to be validated is a very challenging process.

Developing the budget requires:Developing the budget requires:

– Clarifying assumptions

• How much revenue?

• What flexibility options will be acted upon?

• How will expenditures change

Preparing for the worse case scenarioPreparing for the worse case scenario

SummaryThe Legislature now needs to act on the Governor’s proposal.

Absent action on their part, the District will adopt their budget based on the assumptions in the May Revise from the p y fGovernor.

In all likelihood, we will not have a state adopted budget until the p gstart of the school year.

Although this budget process is not new to school districts, the magnitude of the reductions caused by the national and state fiscal crisis is new.

Th d i f b l d b d f 2009 2010 i i kThe adoption of a balanced budget for 2009-2010 is going to take a combination of strategies and changes to the way that our schools and staffing levels are currently structured.

Impact on ESUSDWith the current proposal by the Governor:

• Must reduce 2008-2009 budget by $1,000,000• Must reduce 2009-2010 budget by $2,500,000

Developing the 2009-2010 budget will take community, parents educators students staff and all stakeholdersparents, educators, students, staff, and all stakeholders working together creatively and realistically to continue to prepare our students for the challenges of the 21st

tcentury