Budget Report

January 26, 2009

Prepared by the Business Office

Special Board Meeting

The State Budget shortfall is huge and growing

The Administration’s current estimate is $41 billion over the 17-month period of 2008-09 and 2009-10

A “normal” State Budget has expenditures of about $100 billion

So the shortfall equates to approx. 40% of a single year Budget or 20% of the combined expenditures for two years – either way, a huge number

Legislative Analyst’s Revenue Forecasts

General Fund Revenues(In Billions)

$80

$90

$100

$110

$120

$130

$140

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

LAO Nov 2007

LAO Nov 2008

Sources: Legislative Analyst’s Office, California’s Fiscal Outlook, November 2007 (p. 26) and November 2008 (p. 18)

A-17

General Fund Revenue Collapse

$103.0 $102.6 $102.6

$87.5

$102.6

$86.3

$75.0

$80.0

$85.0

$90.0

$95.0

$100.0

$105.0

2007-08 2008-09 2009-10

Baseline Revenue Projections1

(In Billions) 2008-09 Budget Act2009-10 Governor's Budget

1 Excludes new tax proposalsSource: 2009-10 Governor's Budget

A-26

2008-09 General Fund Budget

Revenue Sources

Federal Revenues

11%

Other State Revenue

21%

Other Local Revenue

2%

Revenue Limit Sources

66%

Note: The majority of our revenue comes from the State.

2008-09 General Fund Budget

Expenditures and Uses

Benefits21%

Salaries65%

Other1%

Supplies & Services

13%

Note: Personnel costs including salaries and benefits make up 86% of the budget.

Student Enrollment, K - 12

PERCENTSCHOOL YEAR ELEMENTARY MIDDLE TOTAL CHANGE

1999 - 00 47,174 20,651 24,255 92,080

2000 - 01 47,572 20,949 25,133 93,654 1.7%

2001 - 02 46,686 21,625 26,272 94,583 1.0%

2002 - 03 46,619 22,299 27,430 96,348 1.9%

2003 - 04 45,348 22,968 27,658 95,974 -0.4%

2004 - 05 43,744 22,876 28,198 94,818 -1.2%

2005 - 06 41,827 22,227 28,295 92,349 -2.6%

2006 - 07 40,619 21,793 28,148 89,668 -2.9%

2007 - 08 38,507 20,509 28,220 87,236 -2.7%

2008 - 09 (Projected) 37,640 20,048 27,585 85,273 -2.3%

ACTUAL AND PROJECTED

SENIOR HIGH

LBUSD 2008-2009 Adopted Budget

Approved on June 17, 2008

Balanced budget

Deficit spending

Met 2% reserve requirement

Included board-approved $40 million cuts

Assumptions were based on state fiscal projections at the

time

Board-Approved Budget Cuts

Date Amount For Fiscal Year

3-4-08 $19,818,000 08-09

2-19-08 $20,833,000 08-09

8-23-05 $19,757,518 05-06

1-18-05 $27,561,258 04-05 & 05-06

March 4, 2008 Board Action Reduction in BudgetReduce Summer School offering 800,000

Decrease site allocations by 10% 400,000

Reduction in Head Start and Child Development encroachment

1,300,000

Utilize Music and Library Block Grant 1,000,000

Fund Middle School Counselors with SSC carryover 1,200,000

Reduce substitute teacher rate by 10% 1,000,000

Raise Camp Hi-Hill fees 862,000

Butler configuration change -

Eliminate over-quota staff allocations at all schools 1,600,000

Reductions in Superintendent Office, Board of Education, Legal, and others

960,000

Shift in funding and reduction in School Safety 585,800

LBUSD Budget Reductions

March 4, 2008 Board Action, cont’d Reduction in BudgetReductions in Research and Testing 340,000

Reductions in vacant Counselor positions (Elem.) 515,000

Reductions in Elementary Office 154,000

Reduce Community Services program (Rec. Aides 20%) 788,000

Truancy Counseling Center reductions 87,000

Reduction in Student Placement Services positions 187,000

Close School Health Center on Atlantic 297,000

Reduce Student Activity subsidy by 20% 63,000

Shift funding for Bethune and other reductions 112,000

Cut back on Middle School Sports 111,000

Reductions to Personnel Commission budget 353,000

Reductions in HRS 213,000

Cut back on high school support services 626,000

Eliminate extra-curricular transportation for high schools 39,000

CAMS program cutbacks 436,000

Shifts and reductions in High School Office 74,000

LBUSD Budget Reductions, cont’d

LBUSD Budget Reduction, cont’d

March 4, 2008 Board Action, cont’d Reduction in BudgetReductions in Curriculum Services (Instructional resources) 210,000

Financial Services Reductions 4,180,000

Business Services Reductions 1,326,000

Total $19,818,000

LBUSD Budget ReductionsFebruary 19, 2008 Board Action Reduction in Budget

Increase in mega-item shift 1,200,000

Suspend quota bulletin 16,000,000

Reduce number of Asst. Principals 1,066,000

Redirect income from wireless contract 300,000

Program realignment at Tucker 900,000

Staff moving from 12 months to 11.05 months 667,000

Reduction of over-quota classified staff at y/r schools

400,000

Freeze all new hires for support staff TBD

Reduce Strategic Planning staff 300,000

Total $20,833,000

First Interim Report Assumptions

COLA for Revenue Limit--.68% for FY 08/09, 0% for

FY 09/10, 3.5% for FY 10/11

COLA for Categoricals and Special Education—0%

for FY 08/09, 0% for FY 09/10, 3.5% for FY 10/11

Declining enrollment

Positive cash conditions based on current information

Anticipated budget cuts of $20 million in FY 09-10

and $28 million in FY 10-11

First Interim Report Did Not Include:

08/09 Mid Year Revenue Cuts

Current assumption of 2010-2011--more

likely to be 0%, not 3.5%

Governor’s Approach to 2009-10

Governor continues to deal with a growing problem – $28 billion to $41 billion in just two months

Across-the-board cuts in all areas of government, but by far the heaviest cuts are to education

The Proposition 98 floor has fallen dramatically in parallel with state revenues

Suspension is not needed to make approx. $7.5 billion in cuts to education

A-29

Governor’s Proposal—Jan. 09

Eliminate .68% COLA

Reduce Revenue Limit by 4.5%

Defer February 2009 Revenue Limit and

Class Size Reduction apportionments to

July 2009 (cash impact)

Fiscal Year 2008-2009

Governor’s Proposal—Jan. 09

Use state categorical funds for any purpose

Reduce Routine Restricted Maintenance Account

requirement from 3% of General Fund to 1%

Eliminate Deferred Maintenance match

Reduce state requirement for reserves to half

2008-2009 Flexibility

Governor’s Proposal—Jan. 09

Eliminate COLA from 5.02% to 0%

Reduce Revenue Limit by <2.8%>

Allow reduction of school year by 5 days

Eliminate High Priority School Grant

program

Fiscal Year 2009-2010

ComparisonDescription 1st Interim

Report

Jan. 09 Governor’s

Proposal

COLA

.68%--08/09

0%--09/10

3.5%--10/11

0%--08/09

0%--09/10

Revenue Limit cut None

4.5%--08/09

2.8%--09/10

High Priority Schools Grant Yes Eliminate in 09/10

Flexibility with state categorical funds Very little Yes

Apportionment deferred to July (cash) None Yes

Governor’s Approach to 2009-10 The 0.68% COLA included in the adopted Budget for 2008-09 is eliminated

and additional amounts to be cut from Proposition 98 in the current year

The overall reduction to Proposition 98 proposed for 2008-09 is about $6.3 billion

For 2009-10, the Governor’s proposals include:

COLA is declared at 5.02%, but not funded

Revenue limit deficit is imposed at <16.161%> of new base revenue limit

Categorical and other flexibility is proposed to help school agencies deal with the loss of funding

Between the two years, education loses both COLA and another $7.5 billion

A-30

Fewer Dollars = Fewer Days? The Governor has proposed cutting back the work year for state employees,

as well as for schools and students

As part of the Governor’s proposal, the state would:

Permit schools to drop from a minimum of 180 days of instruction to 175 days (five fewer days)

Reduce funding for revenue limits by $1.092 billion, or an additional 2.8%

The Governor’s proposal reduces revenue and makes it possible to legally reduce expenditures

But, ultimately, LEAs would need to renegotiate contracts to realize expenditure savings

D-5

Impact on LBUSD Budget

Based on the assumptions in the Governor’s Proposed Budget:

LBUSD needs to reduce expenditures and/or raise revenues by $70 million.

This number will change when the legislature and Governor reach agreement on State Budget Legislation.

What’s Proposed for the Rest of the Budget? Health and Human Services expenditures are reduced by $1.025 billion

(3%)

Major reductions include

$668.7 million for various eligibility and benefit changes in Medi-Cal

$79.1 million by suspending the July 2009 CalWORKs COLA

$1.247 billion in Supplemental Security Income/State Supplementary Payment (SSI/SSP) by reducing the grant to the federally required minimum and eliminating Cash Assistance Program for Immigrants

$384.2 million from In-Home Supportive Services program

A-35

What’s Proposed for the Rest of the Budget? Department of Corrections and Rehabilitation is reduced by $841.9 million (8.7%)

including:

$598.4 million for prison and parole reforms

Eliminating parole for nonserious, nonviolent, nonsex offenders

$181.2 million for local public safety grants

Legislature: reduced by $24.9 million (10%)

Business, Transportation, and Housing – $399.2 million increase (+29.2%) due to proposed 1.5¢ sales tax rate increase

Debt service: $1.406 billion increase (+31.5%)

K-12 Education: $7.5+ billion decrease (~17%)

K-14 Education Spending and Budget ShortfallComparison of Major General Fund Expenditure Areas

1998-99 through 2009-10

(Dollars in Billions)

1998-991 2009-102 % Increase

K-14 (Prop. 98) Expenditures $35.2 $55.9 59%

Health & Human Services $15.3 $30.0 96%

Business, Transportation & Housing $0.4 $2.3 475%

Corrections $4.4 $9.6 119%

Resources $1.0 $1.92 92%

General Fund Revenues $57 $97.7 71%

1 Legislative Analyst’s Office. State Spending Plan: 1998-99. October 1998, Page 4, Revenues & Expenditures; p. 26 Proposition 98

2 Department of Finance. Overview of the Governor’s Budget: 2009-10. January 2009 (assumed all proposed budget solutions)

Is there any light

on the horizon?

Federal “Bail out” for Schools?

Title I-A Increase—$19.5 million

Construction—$45 million

Special Education—$11 million

2009

2010

Title I-A Increase—$19.5 million

Special Education—$12.7 million

What We Are Sure About:

Our assumptions won’t turn out to be

completely accurate. When the State

figures out its budget our estimates will

change.

There will be drastic reductions in education

funding.

Major Factors We are Watching:

Mid-year Budget Cuts

Federal Revenues

State Flexibility

District’s Response to Budget Crisis Suspend activities and spending

Implement hiring freeze

Eliminate overtime

Establish preliminary budget reduction target of $70 million

Reconvene Budget Advisory Committee

Increase communication

Solicit input and suggestion

Online survey

Special Board meeting on Budget

Key Assumptions

Certificated Step & Column +2.57%

Classified Step & Column +0.34%

Health & Welfare +10%

Enrollment Decline -2%

Benefits

  Unrestricted Restricted Total

STRS 22,626,931 9,033,201 31,660,132

PERS 7,811,394 4,032,890 11,844,284

OASDI/Medicare 9,237,463 4,520,166 13,757,629

Health & Welfare 49,870,488 25,335,527 75,206,015

Unemployment Insurance 1,052,883 458,585 1,511,468

Workers Comp 10,605,710 4,571,450 15,177,160

OPEB 6,921,638 3,257,557 10,179,195

TOTAL 108,126,507 51,209,376 159,335,883

Selected AreasFTE $ in Millions FTE $ in Millions

Payroll Office 21.00 $ 1.6 Teachers 4,277.11 $ 381.4

Nurses 54.90 5.6 School Office Staff 210.43 11.8

Librarians 51.90 5.1

Counselors 181.90 19.2 School Administration

Custodians 356.45 22.7 Certificated--Principals 89.00 12.6

Media Assistants 14.95 0.9 Cert.--Asst Principals 71.50 8.5

Certificated--Other 9.80 1.2

Office Administration Subtotal--Certificated 170.30 22.3

Certificated 63.95 9.1 Classified 179.30 12.5

Classified 188.80 20.0 Total--Schl Adm 349.60 34.9

Total--Office Adm 252.75 29.0

District * FTEDistrict Per Pupil Ratio

County Per Pupil Ratio

Long Beach Unified 210.9 418.1 230.8Santa Ana Unified 151.9 375.6 326.4Glendale Unified 81.3 332.5 230.8Garden Grove Unified 161.7 301.0 326.4Elk Grove Unified 216.9 287.2 240.1San Jose Unified 110.8 281.9 262.2Montebello Unified 121.4 275.9 230.8Sacramento Unified 187.6 258.2 240.1Fresno Unified 353.8 216.1 208.5San Bernardino City Unified 263.0 215.7 285.5San Francisco Unified 265.6 207.3 198.2San Diego Unified 657.4 200.1 258.2Los Angeles Unified 3,847.6 180.3 230.8Riverside Unified 248.7 175.2 268.2Oakland Unified 274.2 169.3 228.0

District Ratios

Why Fund Education?

“Educate and inform the whole mass of the

people...they are the only sure reliance for the

preservation of our liberty.”

Ask Thomas Jefferson:

Our Founding Fathers Knew a Lot About Surviving Hard TimesThomas Paine in “American Crisis”:

“These are the times that try men's souls.”

“Government, even in its best state, is but a necessary evil; in its worst state,

an intolerable one.”

“If there must be trouble, let it be in my day, that my child may have peace.”

A Last Thought from Thomas Jefferson

“When you reach the end of your

rope, tie a knot in it and hang on.”

……to be continued…….