second interim budget highlights 2008-09. we now have a severe crisis in education within three...
TRANSCRIPT
Second Interim Budget Highlights2008-09
We Now Have a Severe Crisis in Education
Within three years of the passage of Proposition 13, education spending in California dropped from the top five to last in the nation
We have created an unreasonable expectation – the nation’s highest standards for student achievement and one of the lowest funding levels
Proposition 98, the 1988 voter-approved constitutional amendment, was intended to provide a stable and growing source of funding for K-14 education
In recent years, it has done neither
In 2004-05, the Governor and the Legislature suspended the guarantee by $2 billion
When the current-year Budget was enacted, Proposition 98 was manipulated to provide flat funding from 2007-08
Now we have seen a collapse of the guarantee as state tax revenues have collapsed
Revenue Limit Cuts
Governor’s Budget Agreement:
2008-09 Statutory Revenue Limit $6,193.18
2008-09 First Interim Revenue Limit $5,861.41 – 5.357% deficit
2008-09 Second Interim Revenue Limit $5,707.39 – 7.844% deficit
Loss of $154.02/pupil or ($436,692)
2009-10 Statutory Revenue Limit $6,502.18
2009-10 Revenue Limit $5,650.78 – 13.094% deficit
Loss of ($697,440) in 2009-10 including declining enrollment
Tier II & Tier III State Categorical Cuts
Governor’s Budget Agreement 15.4% reduction:
CBET $4,768
English Language Acquisition Program $5,482
School Safety & Violence Prevention $7,798
Arts & Music Block Grant $7,430
Ag Voc Ed $4,995
Supplemental Counseling $13,860
GATE $3,287
Instructional Materials $25,936
Professional Development Block Grant $19,279
Targeted Instructional Improvement Block Grant $12,064
School & Library Improvement Program $42,514
Tier II & Tier III State Categorical Cuts Continued
Governor’s Budget Agreement 4.5% reduction in 2009-10:
Additional reduction of $46,550 in 2009-10
2 year loss of $193,963 in State revenue for categorical programs
The budget eliminates funding for the High Priority Schools Grant Program one year before the scheduled end of the grant period
Resulting in a $114 million cut
Affecting 408 schools in 170 school districts
$199,200 loss for our district
What a Difference Between First and Second Interim
First SecondInterim Interim
12/18/2008 3/19/2009 Difference
Revenue Limit Sources 15,424,662 14,987,970 (436,692) Federal Revenue 2,078,442 2,078,442 - State Revenue 5,219,076 5,071,663 (147,413) Local Revenue 270,350 328,686 58,336
Total Revenue 22,992,530 22,466,761 (525,769)
Certificated Salaries 10,697,188 10,677,909 (19,279) Classified Salaries 4,082,680 3,968,997 (113,683) Employee Benefits 4,373,543 4,322,499 (51,044) Books and Supplies 2,273,614 2,173,743 (99,871) Services 1,775,668 1,775,151 (517) Capital Outlay 23,169 18,174 (4,995) Other Outgo 60,000 60,000 - Support/Ind. Cost (82,536) (82,536) -
Total Expenditures 23,203,326 22,913,937 (289,389) `
Transfers Out (111,345) (111,345) -
Net increase in Fund Balance (322,141) (558,521) (236,380)
Beginning Balance, July 1 1,590,529 1,590,529 -
Projected Ending Balance 1,268,388 1,032,008 (236,380)
Flexibility and Opportunity
The Budget offers fiscal and program flexibility through 2011-12
Ability to transfer state categorical funding to the unrestricted General Fund for Tier III programs
Can eliminate Tier III programs and continue to receive funding
Will need an exit strategy when flexibility goes away in 2012-13
Eliminate Deferred Maintenance match requirement
Reduce routine restricted maintenance set-aside requirement from 3% to 1%
While the flexibility is welcomed, keep in mind that not all programs are included
Exempted programs include:
Federally funded programs
Tier I & Tier II State Programs
Flexibility and Opportunity
The Untouchables – Tier I and II
Economic Impact Aid – No Cut and No Flexibility
Special Education – No Cut and No Flexibility
K-3 CSR – No Cut and No Flexibility
Child Nutrition – No Cut & No Flexibility
Agricultural Vocational Education – Cut & No Flexibility
English Language Acquistion Program – Cut & No Flexibility
Must hold a Public Hearing informing public before we utilize flexibility transfers
2009 School Services Financial Projection Dartboard
Factor 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
Statutory COLA (use for K-12 and COE Revenue Limit)
5.66% 5.02% 0.70% 2.30% 2.50% 3.00%
K-12 Revenue Limit Deficit7.844%
13.094% 13.094% 13.094% 13.094% 13.094%
Special Education COLA (on state and local share only)
0.00% 0.00% 0.70% 2.30% 2.50% 3.00%
State Categorical COLA (including adult education and ROC/P)
-15.38% -4.46% .70% 2.30% 2.50% 3.00%
California CPI 1.9% .8% 1.90% 2.30% 2.80% 3.20%
California LotteryBase $ 109.50 $ 109.50 $ 109.50 $ 109.50 $ 109.50 $ 109.50
Prop 20 $ 11.50 $ 11.50 $ 11.50 $ 11.50 $ 11.50 $ 11.50
Interest Rate for Ten-Year Treasuries 2.90% 3.00% 3.40% 3.90% 4.30% 4.50%
The State’s Cash Crisis Is Now Our Cash Crisis
The state, like school districts, has high and low cash points
In a typical year, the state borrows just as districts do when they issue Tax Revenue Anticipation Notes (TRANs)
But the condition of the financial markets makes it more difficult for borrowers of all types
Especially a state that has a $40 billion shortfall, chronic deficit spending, an emergency in the current year, and the second lowest credit rating in the nation
So, the reason the state is running out of cash is not because it does not have a Budget, but because:
It is spending cash much faster than revenues are coming in
It anticipates that it will not be able to borrow
Apportionment Cash Flow
Tough economic times push the state's cash flow issues to schools
February apportionment & CSR deferred to July
March apportionment reduced by 9/12ths of the deficit to catch up
June apportionment deferred to July
July apportionment deferred to October
August apportionment deferred to October
What Is Next?
Third Interim in May
Will have more accurate ending balance estimates from hiring & spending freeze
Will identify available balances to be transferred from Tier III programs to the General Fund
Will hold a public hearing to notify of the use of flexibility
Special election on May 19th