2012Preliminary

February 10, 2011

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ForecastBudget

FY

Shortfall in state/local funding$250 to $275 million

What are we talking about?

Loss of Federal Funds939 positions

or at least $870 per student

ARRA (Title I, IDEA), EduJobs

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Why is this happening?

It’s called a Structural Deficit

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• 20% of central office staff• Block schedule & AVID funding• School staffing – 3%• Class size increase: Grades 1-3

(by 2)

• Administrative staffing• Textbook/supply budgets

What has already been cut?

A total of $375 million has been cutand 1,734 positions eliminated

Since 2007

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What about the Capital Funds?State is proposing to take a

total of $300 million from CCSD’s

Debt Service Reserve

Significant Federal tax issues with using for operations, among other

issues

Would require increase in property tax rate and/or non-economic bond

refinancing5

What would happen?

Current projections are that revenues will not be sufficient over the next 7 years to cover debt servicecosts.Thus, allof theexistingreserveis neededjust tomeetexistingcosts.

If $300 million is taken from Debt Svc. Reserve

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What would happen?

With $300 million taken from the reserve, CCSD would no longer be able to pay all required principalandinterestpaymentsstartingin 2013.

If $300 million is taken from Debt Svc. Reserve

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Assumes only existing bonds (no new bonds)

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What would happen?

To ensure that adequate funds are available to cover debt service costs, the debt service tax rate (currently $0.5534 per $100 of assessed value) would need to increase to whatever rate necessary to generate revenue sufficient to meet debt service obligations.

If $300 million is taken from Debt Svc. Reserve

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This is provided for, specifically, in law. And, CCSD’s debt service property tax rate has priority over other non-voter-approved local tax rates under the county-wide cap of $3.64 per $100 of value.

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What would happen?

As an alternative to increasing the property tax rate, the district could do a non-economic restructuring of its bonds, to push principal payments out an additional 10 years, when adequate property tax revenues would be sufficient.

If $300 million is taken from Debt Svc. Reserve

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There are significant problems with doing this:•Interest rates would be higher than existing bonds•The market for these restructured bonds may be very limited•Would need to pay interest for more years•Would reduce future construction capacity•Would likely adversely impact the district’s bond rating•Would be out of compliance with Board’s Debt Management Policy (which requires all refinancing of bonds achieve a minimum 3 percent net present value savings)

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What are other issues?

• State law would need to be changed to allow this

• $150 million per year of the state’s ‘guaranteed’ funding is coming from CCSD’s capital funds

• This is a one-time, stop-gap measure that will leave a big financial ‘hole” to fill in the next biennium

• This goes against promises made to voters in 1998

If $300 million is taken from Debt Svc. Reserve

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What about the revenue estimates?…used to calculate the debt service

impactConservative revenue assumptions were used to develop these estimates

…as is consistent with district practices when issuing bonds

and validated when seeking approval thruthe County Debt Management Commission,

the Oversight Panel for School Facilities,and the Board of School Trustees

The biggest revenue source (at least 76%) is property tax, which is projected todecline by 10.5% next year

…and without legislative changes, will be abated (limited) in its growth when property values begin

growing again

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State Funds - $196 million

Debt Service Funds + $150 million

Loss of room tax - $35 million

Property tax decrease - $48 million

Fund balance used up - $62 million

Employee Contractual provisions - $68 million(step, increments, PERS)

Why are we short $250-$275 million?

NOTE: This assumes no new revenue sources are identified

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$ 250-275 million =

How bad is it?

14 more students per class

or 33 less days in the yearor 16% cut in pay/benefits

or 95% of central officeA reduction of as many as 3,800

positionsNote: These are not recommendations, rather they are meant to quantify the magnitude of the projected shortfall

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When will we know?

Tentative budget must be adopted in April & the final budget in MayReduction-in-force

process must begin in AprilState funding will likely

not be known until June

Negotiated agreements roll forward

until bargained14

Our Strategy ?

Plan for theWorst

Work for theBest

Participate as a Team

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