2014-15 First Interim Financial Report

Board of Education December 9, 2014

The Board Approves the District’s First Interim Financial Report and Resolution Reflecting the District’s Budget Status from July 1 through October 31, 2014

December First Interim Submittal Out of Sync with January Timing for Governor’s Budget Proposal First Interim Must Be Based on Current Level Funding Assumptions

Education Code §42130 Requires Approval in a public session by December 15, 2014 The Board is Also Certifying That the District’s Projected Financial Outlook for 2014-15, 2015-16 and 2016-17 is One of the Following Certifications:

Positive– District Will Be Able to Meet Its Financial Obligations Qualified– District May Not Be Able to Meet Its Financial Obligations Negative– District Will Be Unable to Meet Its Financial Obligations

Staff Recommends No Change From Second Interim Status (2013-14) Qualified Status for First Interim Report 2014-15

Due to insufficient information in December 2014 prior to Governor’s January budget proposal

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Why Qualified? No Status Change Since Second Interim, 2013/14 December’s First Interim Submission out of sync with January Timing for Governor’s Proposed Budget

“Sustainable Qualified” Updated Deficit Projections by Staff will be prepared in January

Implications of Remaining Qualified Requires Third Interim Report to SDCOE only if not Positive by Second Interim SDCOE Advanced Review of all Bargaining Agreements SDCOE Approves Requests for Short Term Lending (TRANs)

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* San Diego County Office of Education (SDCOE) and School Services of California (SSC) 4

REVENUE ASSUMPTIONSDescription 2014/15 2015/16 2016/17LCFF Funding Model Funded ADA 104,818 103,268 101,697 COLA* 0.85% 2.19% 2.14% Funding Gap* 29.56% 20.68% 25.48%

Grade Span Adjustment (GSA) $(8.0) MilFederal : Impact Aid $8.0 Mil $8.0 Mil $8.0 MilOther State Mandated Cost Reimbursement $3.8 Mil $ 3.7 Mil $ 3.7 Mil Mandated Cost Reimbursement (one-time) $7.1 Mil Lottery* (GFU- $128; GFR- $34) $162/ADA $162/ADA $162/ADALocal : Interest 0.36% 0.36% 0.36%

Transfers InRedevelopment Agency (RDA) $10.3 Mil $10.3 Mil $10.3 MilSale of Property $28.4 MilVision $1.4 MilRetiree $0.4 Mil $0.4 Mil $0.4 Mil

5 * Subject to change based on negotiation

EXPENSE ASSUMPTIONSDescription 2014/15 2015/16 2016/17Salaries Step and Column: Cert / Class 1.79% / .65% 2.06% / .65% 2.06% / .65% Restoration: Cert Non-Mgmt / Cert Mgmt / Class* 5% / 2% / 0% 0% / 0% / 0% 0% / 0% / 0% Reinstate Furlough Days: Cert/Class* .54% / 0% 0% / 0% 0% / 0%STRS 8.88% 10.73% 12.58%PERS 11.77% 12.60% 15.00%

Health & Welfare Premiums 7.00% 7.00% 7.00%Materials & Supplies (Consumer Price Index- CPI) 2.10% 2.30% 2.50%Contracted Services (CPI) 2.10% 2.30% 2.50% Utilities 5.00% 5.00% 2.00%Implemented Board Solutions/Budget Deficit $106.4 Mil $81.4 Mil $88.1 MilTransfers Out

Liability Insurance $3.5 Mil $3.5 Mil $3.5 MilProperty Insurance $3.3 Mil $3.3 Mil $3.3 MilChild Development $3.5 Mil $2.0 Mil $2.0 MilRetiree $0.6 Mil $0.6 Mil $0.6 Mil

Contributions Special Education $191.8 Mil $193.2 Mil $196.2 Mil Restricted Routine Maintenance (RRM) $27.8 Mil $36.4 Mil $36.4 Mil Community Day School $1.8 Mil $2.0 Mil $2.1 Mil Transportation $10.1 Mil $10.2 Mil $10.3 Mil

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Description 2014/15 2015/16 2016/17Economic Uncertainties- 2% $24.0 Mil $23.4 Mil $23.7 MilUnexpended Set-Asides and Reserves:

Mandates $7.1 Mil $0 Mil $0 MilSchool designated contributions $4.5 Mil $4.5 Mil $4.5 Mil

Stores Inventory $1.7 Mil $1.7 Mil $1.7 MilPrepaid Expenses $0.9 Mil $0.9 Mil $0.9 MilRevolving Cash Funds $0.06 Mil $0.06 Mil $0.06 MilSubtotal $38.26 Mil $30.57 Mil $30.86 Mil

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Fiscal Year SDUSD

Average ADA

% Change Year Over

Year

2008-09 111,862

2009-10 110,836 (.92)%

2010-11 110,347 (.44)%

2011-12 109,241 (1.00)%

2012-13 107,486 (1.61)%

2013-14 106,110 (1.28)%

2014-15* 104,818 (1.22)%

2015-16* 103,268 (1.48)%

2016-17* 101,697 (1.52)% * Projected

Supplemental and Concentration Grants High-need eligible students

Low Income English Learners Foster Youth

Unduplicated Percentage Variable in the funding formula Current value is 62.5% Alternative family income surveys essential to receive funding

Data submittal to State due December 12 8

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Local Control Funding Formula requires school districts to make progress toward maintaining an average class enrollment of no more than 24 students for each school site in K-3 grades, unless a collectively bargained alternative annual average is agreed to by the school district

Individualized for each elementary school Dependent on State funding Can be changed based on a negotiated agreement with the teachers’ bargaining unit

Risk of $8 million penalty included in First Interim assumptions

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Governor’s Approved Budget $400.5 million towards funding of prior mandate claims on per average daily attendance basis

Can be used for one-time purposes District entitled to $7.1 million

Reflected in reserves for 2014-15 for purposes of 2015-16 deficit The State Controller will apply amounts against any balances of unpaid claims for reimbursement of state-mandated local programs in chronological order beginning with the earliest claim State Controller to pay in two installments

90% November 10% March

Continued Advocacy for 2015-16 Budget Current Balance due to the District is: $68.6 million

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According to Education Code 17462, the property sale proceeds have been utilized to offset an operational deficit for fiscal year 2014-15 and will not result in ongoing expenditures.

OVERAGE(millions)

CLOSE DATE

$0.30 Nov. 3 2014

($2.70) N/A

$4.60 Dec. 15, 2014$2.20

$2.20

2014/15 New Sales

FY 2014-15 ANTICIPATED REVENUE

Real Estates Sales Cleveland TBD

ORIGINAL BUDGET

(millions)

$2.40

$8.60

$21.00

GROSS REVENUE(millions)

$2.70

$13.20

$15.90

NET REVENUE(millions)

$2.70

$13.10

$15.80

$7.30

2013/14 Carryover Budget Solutions

Bay Terraces #11

Stevenson Elementary

Board Action Not To Sell PropertyCamp Elliott #3 $2.70

$15.80$13.70 $15.90

Benchley TBD

2013/14 Carryover Budget Solutions

Monthly Board Items Launch First Learning Cycle Safe and Well Maintained Facilities Physical Environments Social Environments Broad & Challenging Curriculum Quality Leadership Quality PD Supportive Environments that Value Diversity

Advisory Meetings DAC, DELAC, AAAE, LAC, CAC (SpEd), CAC (SDEA), GATE DAC, ASB President’s Council, CSEA/ POA Monthly Mtg, PTA Exec Bd, Panasonic Foundation, LCAP Large Group, LCAP Metrics

School Cluster Conversations

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Redirecting current resources to the classroom TK-3 Class Size Allocation High School Counselors Common Calendar Common Core Supports School Site Specialty Programs (Biliteracy, International Baccalaureate)

14 Multi-Year Projection involves hybrid approach to include 2015-16 deficit solutions

2014/15 2015/16 2016/17

DESCRIPTION PROJECTIONS PROJECTIONS

PROJECTIONS -1- -2- -3- -4-

Beginning Balance $95,981,513 $50,528,351 $30,573,659

Revenues 893,387,872 920,669,364 953,227,001

Expenditures (736,905,382) (781,455,660) (797,327,679) Budget Deficit Solutions 2015/16 81,360,944 Budget Deficit Solutions 2016/17 88,119,724

TOTAL EXPENDITURES (736,905,382) (700,094,716) (709,207,955)

Other Sources / Uses (201,935,652) (240,529,340) (243,727,046)

Ending Balance 50,528,351$ 30,573,659$ $30,865,659

SURPLUS/(DEFICIT) ($45,453,162) (19,954,692) 292,000

Required ReservesEconomic Uncertainties $24,019,000 $23,431,000 $23,723,000

Unexpended Balances / Set Aside - - - School Site Ending Balances 11,660,631 4,560,631 4,560,631 Stores 1,674,228 1,674,228 1,674,228 Prepaid Expenses 850,000 850,000 850,000 Revolving Cash 57,800 57,800 57,800

Total Required Reserve $38,261,659 $30,573,659 $30,865,659

Reserve (Shortfall) / Surplus $12,266,692 $0 $0

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2015-16 Potential Budget Solution Category Solutions in $ Millions

Mandates $(19.2)

Grant Development $(9.0)

Strategic Staffing – Position Review $(3.0)

Increase High School Enrollment $(3.1)

Early Childhood Enrollment $(2.5)

Concentrated Effort with Unduplicated Counts $(1.6)

Central Office Program Adjustments $(2.0)

Protection Fund Against Layoff/ Program Cuts $0.3

Program Adjustments/ Operational Adjustments $(41.3)

Total Potential Deficit $(81.4)M

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Fund Fund DescriptionBeginning

Balance Revenue ExpensesTrans In/

(Trans Out) Ending Balance01 General Fund 126,616,646$ 1,095,456,032$ (1,189,889,469)$ 29,544,611$ 61,727,820$ 11 Adult Education 225,753 648,600 (633,230) - 241,123 12 Child Development 15,273 20,791,663 (26,046,141) 5,254,476 15,271 13 Cafeteria Special Revenue 2,960,704 62,992,553 (63,266,242) - 2,687,015 14 Deferred Maintenance 180,859 640 - - 181,499 15 Pupil Transportation Equipmen 478,470 583,300 (91,163) - 970,607 20 Special Reserve - Retiree Benef 1,618,803 3,855 - 177,456 1,800,114 21 Building Fund 477,284,219 1,308,300 (231,931,215) - 246,661,304 25 Capital Facilities Fund 40,116,507 30,093,882 (21,507,182) (12,000,000) 36,703,207 35 County School Facilities Fund 92,563,283 2,212,701 (9,308,073) - 85,467,911 40 Special Reserve - Capital Projec 9,896,987 26,462,843 (3,530,620) (28,431,543) 4,397,667 51 Bond Interest & Redemption 232,399,201 158,634,438 (155,091,549) - 235,942,090 67 Self Insurance Fund 75,734,614 24,311,567 (24,081,493) 5,455,000 81,419,688

Total 1,060,091,319$ 1,423,500,374$ (1,725,376,377)$ -$ 758,215,316$

General Fund Unrestricted- Continue to monitor Real Estate Sales and Attrition savings to avoid exceeding budget and creating negative cash balance. Need to ensure correct identification of Free and Reduced, Foster and English Learner students to avoid potential loss of revenue of LCFF implementation. ROP funding shortfall from County could create local contribution from Unrestricted Reserves

General Fund Restricted- Continue to monitor Federal Sequestration to avoid exceeding budget and creating local contribution from General Fund Unrestricted. Potential funding concerns with ROP apportionments. Potential further Sequestration remains a risk for federal funding in 2015/16.

Continued Resolution Omnibus Bill

Child Development Fund 12- Potential General Fund Unrestricted Local Contribution due to decline in enrollment, excess staffing due to no layoffs and contract compliance

Cafeteria Fund 13- Ongoing discussions with CDE, State Auditor and Federal representatives, regarding Audit Findings

State School Facilities Fund 35- Need to sustain Ending Fund Balance for loans to GFU for cash flow needs and source for TRANS alternative liquidity

Property Management Fund 40- Continue to monitor expenditures to avoid negative fund balance

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Monthly Payroll

18 April and May deferrals eliminated. June deferred.

$-

$25.0

$50.0

$75.0

$100.0

$125.0

$150.0

$175.0

$200.0

$225.0

JUL AUG SEPT OCT NOV DEC JAN FEB MAR APR MAY JUN Actual $74.61 $50.83 $98.22 $95.04 Projected $73.82 $220.42 $199.26 $162.01 $153.36 $140.60 $133.99 $92.39

Mill

ions

Passed by voters on November 4, 2014 Amended State Constitution on rules for the Budget Stabilization Act, known as the state Rainy Day Fund, and created a new state reserve for schools known as the Public School System Stabilization Account New rules define how State pays down debt and saves money in reserves Senate Bill 858, Section 27, as part of state budget, became operational when Proposition 2 passed. SB 858 establishes maximum budget reserves for school districts, including caps on the combined assigned and unassigned ending fund balance

Upon the first deposit to the State Public School System Stabilization Account , the district’s maximum reserve would be capped at 4%

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Step Task Date 1 Monthly LCAP Presentations and Community Advisory

Meetings September 2014 – June 2015

2 Board Approval of First Interim Report- BOARD ACTION Dec 9, 2014

3 Vision 2020/ LCAP Planning (finalize priorities with LCAP Planning Team)

Dec 2014 – Jan 2015

4 Governor’s Proposed Budget Released mid-January

5 Superintendent Report on 2015/16 Budget Solutions Adjustments

Jan 20, 2015

6 Release of SBB Budget Workbooks Feb 2015

7 Board Approval of 2nd Interim Report- BOARD ACTION

Mar 15, 2015

8 Board Approval of 3rd Interim Report- BOARD ACTION

May 15, 2015

9 Board Adoption of 2014/15 Budget and LCAP-BOARD ACTION

June 30, 2015

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December First Interim Submittal Out of Sync with January Timing for Governor’s Budget Proposal

First Interim Must Be Based on Current Level Funding Assumptions Staff Will Update Deficit Projections Immediately After January Budget proposal

Detailed 2015-16 Budget Solutions List to be Presented to the Board in Mid-late January

Tight Timeline For Budget Development: January – February Stakeholder Communications Solutions Implementation Decisions to Board in late January More Centralized Budget Preparation for School Sites

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