2013-14 Budget Development Cycle September 20, 2012.

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Superintendent’s Budget Advisory

Committee

2013-14 Budget Development Cycle

September 20, 2012

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VISION STATEMENT

“TO CULTIVATE AND EMPOWER OUR STUDENTS TO BE ETHICAL, PRODUCTIVE, SUCCESSFUL AND CONTRIBUTING MEMBERS OF OUR GLOBAL SOCIETY”

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EMUHSDMission

StatementAdvocate, nurture and sustain a positive

school culture …challenging and rigorous, standards-based curriculum… that promotes achievement for all students;

Ensure management of the organization, … for a safe, efficient and effective learning environment … conducive to student learning and staff professional growth;

Collaborate with families and community members, respond to diverse community interests and needs,… ;

Model a personal and institutional code of ethics and develop professional leadership capacity.

3

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Board Priorities

Academic Excellence – Achievement for all Students

“Every Student, Every Minute, Every Day”

Safe & Effective Learning Environment

Fiscal Stability, Organizational Alignment & Transparency

Model Ethical Behavior and Grow Internal Capacity

Community Involvement & Collaboration4

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Agenda

Purpose of the BACProtocols and Ground RulesDefining a BudgetComponents of a School District

BudgetEconomic Update

State of the StateCurrent District Financial Position

Review of Unaudited Actual Results

Tax Initiative – Impacts

Next Steps5

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Purpose of the Budget Advisory Committee

Create broader understanding of the budget development process and its context

Further the effort toward transparency Promote community involvement and collaboration Provide input, discussion and consideration of budget

improvement opportunities Create accountability mechanism Carry recommendations for 2013-14 budget to the

Superintendent for his consideration Based on input, Superintendent then takes his

recommendations to Board

Develop restoration plan

Budget Committee functions in an advisory capacity only6

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BAC PROCESS

Understand the State and District Financial “picture”

Review District financial data Break into small groups Bring ideas to the larger group Get input from those you represent Identify opportunities for resource “repurposing” Review and prioritize Develop recommendations for Superintendent’s

review Develop restoration plan 7

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GROUND RULES

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Building Consensus

Consensus decision-making is

a group decision- making process

that seeks the consent, not

necessarily the agreement, of

participants and the resolution of

objections. It is not unanimity!”9

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CONSENSUS GOALS Agreement Seeking: Attempts to help everyone

get what they need!

Collaborative: Contribute to a shared proposal that meets the concerns of all group members, as much as possible

Cooperative: Reach the best possible decision for all of its members, rather than competing for personal preferences.

Egalitarian: All members of the group should be afforded, as much as possible, equal input into the process.

Inclusive: As many stakeholders as possible should be involved in the process.

Participatory: The process should actively solicit the input and participation of all members

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“Building Consensus”

Only one person speaks at a time; please do not interrupt while someone is speaking

Each person expresses their own views, rather than speaking for others at the table or attributing motives to them

Give others a fair chance to speak No personal attacks; Challenge ideas, not people! Everybody agrees to make a strong effort to stay

on track with the agenda and to move the deliberations forward

Everybody will seek to focus on the merits of what is being said, making a good faith effort to understand the concerns of others. Questions of clarification are encouraged; disparaging comments are discouraged

11

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Ground Rules , continued . . .

Concerns should be voiced when they arise, not later in the deliberations when a "surprise" objection is raised

Each person will seek to identify options or proposals that represent shared interests, without ignoring legitimate disagreements. Each person agrees to do their best to take account of the interests of the group as a whole

Each person reserves the right to disagree with any proposal and accepts responsibility for offering alternatives that accommodates their interests and the interests of others

Anyone who speaks to the media will speak only about their views. We ask that no member of the BAC speak on behalf of the group as a whole without permission of the group as a whole.

12

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BUDGET DEVELOPMENT CYCLE

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What is a School District Budget?

The district’s budget begins July 1 of each year as its starting point and ends on June 30

Starting Point = Beginning Balance – How the district ended from the previous year

Ending Point = Ending Fund Balance – How the district ended (or will end) the current year

Restrictions, Designations, Assignments & Commitments

14

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The Budget Reporting Cycle

Adopted

Budget (2012-

13) 1st Interim Financi

al Report

Budget Worksh

op

2nd Interim

Financial Report

Budget Worksh

op

Preliminary

Budget

Adopted

Budget (2013-

14)

June

December

January

Feb - March

April - May

January

July

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State Required Budget Cycle

Adopted Budget - Board must adopt on or before July 1st

Interim Reports

First Interim - Board must approve 45 days after October 31 (by December 15)

Second Interim - Board must approve 45 days after January 31 (by March 15)

Unaudited Actual Results

Board must approve on or before September 15

16

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Appropriations; Budgeting Carryovers

Evaluate

Spending &

Adjust

Expenditures

Closing of Books Unaudited

Actual Results

Adopted Budget

Working Budget

Projection

A LIVING DOCUMENT

September

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Definition of Terms

A number of terms are used throughout this presentation that require definition.· Working Budget -- represents the original 2012-

13 Adopted Budget adjusted for board-approved appropriations as well as budgeting of prior year carryover.

· 2012-13 Projection – calculation as to what revenues, expenditures and ending balances will be as of June 30, 2013. It is based on evaluating current spending patterns.

· Interim Reports – reports required by the Sate of California identifying the financial condition of the District at a specified time during the fiscal year

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Definition of Terms

· Undesignated Reserves –that portion of the Ending Balance that is unrestricted in its use. This should be distinguished from Restrictions, Commitments or Designations which represent those parts of the ending balance that are “set aside” or legally restricted for a specific purpose.

· Structural Deficit – A fundamental imbalance in revenues vs. expenditures, as opposed to one based on short-term factors such as one-time revenues or expenditures

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Fundamental Considerations in Developing a Budget

The educational programs and services that represent the board’s goals and priorities

The services and staffing necessary to support these programs

The revenues available to carry out the educational programs

The expenditures necessary to implement the educational program

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Budget Assumptions Form the fundamental basis for the creation of the

budget Address the most common mathematical elements

of the document Includes decisions regarding:

Enrollment and ADA Staffing formulas and class size requirements or

limitations Statutory or funded COLAs Collective Bargaining Agreements Federal or State funding provisions (triggers,

funding reductions, etc.) Lottery funding Site budget allocations New or revised programmatic requirements Identification of the “core” educational program

One of the most critical elements in developing a budget

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BAC Budget Development Process(What Will We Be Doing?)

Budget Calendar is published at the beginning of the fiscal year

Detailed timeline of events Anticipate meeting every two to four weeks Subgroups (recommendations)

Focus on the priorities of those you represent – obtain input

Identify potential budget improvements Final recommendations by January

Superintendent Takes his final recommendations to Board

Restoration Plan22

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Budget Workshops

Will occur intermittently throughout the budget development process

Represents opportunity to align budget allocation decisions with Board of Trustees’ policy decisions

Look for board confirmation in terms of budget priorities vs. current resource allocations Explain and Review Governor’s budget

Bring forward final recommendations for approval

Public Hearing and Final Adoption 23

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Summary

Budget is a “living” document

Changes occur just after adoption

“Be its master, not its slave”

A “tool” for success

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Budget DevelopmentRevenues

Revenue Limit Sources (major funding source for EMUHSD )

Base Revenue Limit (BRL) times ADA

Revenue Limit (RL) = State Aid and Property Taxes

Deficit Factor must be considered

Federal

Other State

Local

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Revenue Limit – THE BASICS

Enrollment generates ADAFor 12-13, we estimate that 9,930

enrollees will generate approximately 9,537 units of ADA

Enrollment has been on the decline for the last four years; and is anticipated to continue to decline over the foreseeable future At least through 2018 based upon latest

demographic projections by Davis Demographics

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Average Daily Attendance (ADA)

Average Daily Attendance is equal to the number of pupils actually attending classes who are enrolled for at least the minimum school day

Example: 10 students attending school for ½ year equals 5 ADA

ADA times funded Base Revenue Limit ($’s per student per year) equals Revenue Limit dollars – the District’s major source of revenue!

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Restricted (Categorical) vs. Unrestricted Funding

General Fund Contribution to a Restricted Program (a.k.a. “encroachment”)

Maintenance of Effort – Supplement vs. Supplant

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Budget DevelopmentExpenditures (1000’s)

Certificated SalariesAll certificated staff including teachers,

counselors, nurses, librarians, certificated administrators

Step & column movement

Substitute costs

Extra duty/Co-curricular Stipends

Hourly Program salaries

Supplemental Hourly, Saturday School, etc.

29

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Budget DevelopmentExpenditures (2000’s)

Classified Salaries

Includes clerks, aides, custodians, maintenance staff, secretaries, bus drivers, campus supervisors, district administrative staff

Extra service assignments

Step & Column costs

Substitutes

Overtime 30

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Budget DevelopmentExpenditures (3000’s)

Employee Benefits Health & Welfare (Medical, Dental, Vision, Life)

Per Employee $ 18,550*

Statutory Benefits – Cert 12.047%, Class 23.017%

Retirement (STRS, PERS, Social Security)

Medicare

Unemployment Insurance & Workers Compensation

*Maximum = United HealthCare HMO, Family Delta PPO and Family Vision; PPO “Cap” is Kaiser HMO Amount

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Budget DevelopmentExpenditures (4000’s)

Textbooks

Instructional & non-instructional supplies

Books & SuppliesSchool site funding formulas

Department allocations

Non-capitalized equipment ≤ $5,000

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Budget DevelopmentExpenditures (5000’s)

Services & Other Operating ExpendituresTravel

Dues & Memberships

Utilities

Insurance

Contracts & ConsultantsAudit expense

Legal fees

Other33

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Budget Development Expenditures

(6000’s & 7000’s)

Capital Outlay (over $5,000)Building/site improvement costs

Capitalized equipment

Other Outgo/Transfers Out/Other UsesIndirect Costs

Debt service payments

Transfers to other fundsDeferred Maintenance Match

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STATE BUDGET IMPACTS

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Governor’s Budget2012-13 Fundamentally dependent upon voters taking

action to adopt a new round of temporary taxes – Prop 30 0.25% increase in the sales tax higher tax rates for the state's wealthiest ($250k – Indiv.

$500k – Married)

Cost of Living Adjustment (COLA) — Not funded for 2012-13

Significant “trigger” cuts to school revenue limits if Governor Brown's tax initiative fails (over $500 per student)!

Buy down of approximately $2.1 billion in deferrals if Governor tax initiative passes.

No new funding for education. 36

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DISTRICT FINANCIAL DATA

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Budget Assumptions for MYP

2012-13 financial information forms the basis and starting point for 2013-14's preliminary budget

Statutory COLA 3.24% in 2012-13 (unfunded) Rev. Limit deficit factor for 12-13 is 22.272% (Note: If the

tax measure fails in November, deficit factor will increase to 28.814% or an additional $4.9M reduction in funding – Add to already $16.6M underfunding!

Projected enrollment and ADA decline of approximately 126 students

Impact of all contract settlements has been incorporated

38

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Enrollment , ADA and “Yield” on

Enrollment

2003-4 2004-5 2005-6 2006-7 2007-8 2008-9 2009-10

2010-11

2011-12

2012-13(Bud.

)

2003-4 2004-5 2005-6 2006-7 2007-8 2008-9 2009-10

2010-11

2011-12

2012-13(Bud.

)

Enrollment

10,254 10,446 10,608 10,379 10,614 10,476 10,320 10,170 10,056 9,930

Avg. Daily Attendance

NaN NaN NaN NaN NaN 9848 9885 9824 9733 9537

Yield ADA/Enr.

NaN NaN NaN NaN NaN 0.940053455517373

0.957848837209302

0.965978367748279

0.967879872712808

0.960422960725075

9,300

9,700

10,100

10,500

92.8%

93.8%

94.8%

95.8%

96.8% 10,254

10,446 10,608

10,379 10,614

10,476 10,320

10,170 10,056

9,930

9,8

67

9,8

58

9,8

24

9,7

22

95

37

Enrollment Avg. Daily Attendance Yield ADA/Enr.

39

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EMUHSDRevenue Limit

The statutory un-deficited Base Revenue Limit is $7,811 per ADABUT deficit factor of 28.814%! (including the

“trigger”) In 2012-13, being funded at $6,073 per

ADA – a gap of $1,738 or about $16.6 M!With “trigger” the gap grows $4.9M and

becomes $2,251 per ADA or $21.5M!Revenue Limit is largest funding source for

the districtAnticipate $54.2 Million in 2012-13 for El Monte

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Revenue Limit Sources; 54.2;

67%

Federal Revenue;

6.7; 8%

Other State Revenue; 10.9;

13%

Other Local Revenue; 6; 7%

Trans-fer In;

3.5; 4%

EMUHSD Budgeted Revenues($ Millions)

41

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es; 41; 45%

Class. Salaries; 14.4; 16%

Emp. Ben.; 19.4; 21%

Books &

Supp.; 3.8; 4%

Svcs. &

Other Oper.; 12; 13%

Other Outgo; 1.1; 1%

EMUHSD 12-13 Budgeted Expenditures

($ Millions)

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2010-11 2011-12 2012-13Actuals Actuals Working

Budget

BEGINNING BALANCE, July 1 $26.1 $17.8 $12.7

REVENUES $85.6 $87.8 $81.3

EXPENDITURES ($93.3) ($92.9) ($88.2)

Net Incr./(Decr.) in Fund Bal. ($7.7) ($5.1) ($6.9)

Audit Adj. ($0.6) $0.0 $0.0

ENDING BALANCE $17.8 $12.7 $5.8

Restrictions $0.6 $0.6 $0.3

Designations $3.1 $2.8 $2.6

Undesignated $14.1 $9.3 $2.9% Reserve 18.4% 13.0% 6.6%

EMUHSD General Fund(With Level II Reductions of $3.6 Million)

43

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General Fund Financial Statements

* Uses the Opening Balance based on 2011-12 Actual Results 44

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Statutory vs. FundedBase Revenue Limit Impact

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 $5,000

$5,500

$6,000

$6,500

$7,000

$7,500

$8,000

$6,754

$7,133

$7,433 $7,404 $7,568 $7,811

$6,573

$5,816

$6,074 $6,073

6073

5560

Statutory BRL Funded BRL

Loss of cost-of-living adjustment (COLA)$10.1 Million

Loss ofbaseline dollars$6.5 M to $11.4 M

BASELINE

Funded ADA

9,803 9,744 9,676 9,737 9,537FIVE-YEAR

TOTAL

Total R/L Loss

$5.5 Million

$15.8 Million

$12.9 Million

$14.7 Million

$16.6 ($21.5)Million

$65.2 ($70.5)

MILLION!! 45

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Cash Flow Issues

Approx. 42% of funding due in cash will not be paid until the next year

No categorical funds at least until end of October Adult Education Special Education State Categorical Programs, e.g., EIA

84% of the district’s Revenue Limit funding comes from State Aid (vs. property taxes). As a result, impact of state “deferrals” is greater at

EMUHSD

Borrow and use flexibility options from other funds, as necessary 46

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Cash Flow & Deferrals

Not only has funding been reduced by almost 30% per year(if initiative fails), but;

State is “deferring” the cash payment necessary to pay the bills!In 2012-13, the State will push $ 18.1

Million of cash for EMUHSD into 2013-14!That’s nearly 42% of District’s cash for the year!

Anticipate covering with use of County Pool, inter-fund borrowing and potential TRANs

47

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Cash Flow

Interventions:County PoolTRANsInter-fund

transfers

48

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Multi-Year ProjectionAssumptions

The following assumptions form the basis for the MYP:

Level II Board-approved budget reductions have not been enacted including:

Elimination of D.O. TOSA

Across-the-Board salary reduction for all staff of 3.545%

Enacting of 5 furlough days

Reduce SB65 Coordinator positions to 11 months

Eliminate winter break and spring break vacation days for clerical staff

TOTAL DOLLAR VALUE OF ABOVE __ $3.567 Million

Expenditures

based on current spending levels

adjusted for CPI in “out” years

LEVEL I reductions of $5.6M enacted as part of Fiscal Stabilization Plan49

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Multi-Year ProjectionWithout Level II Cuts

IF: Tax Initiative Fails (12-13 Beg. Balance $12.7 M)

Year 2012-13 2013-14 2014-15

Revenues $80.9

$81.6 $82.5

Expenditures $91.8

$92.2 $93.5

To Balance Budget ($10.9)

($10.6) ($11.0)

Ending Balance $1.8

($8.8) ($19.8)

% Reserve 1.6%

IF: Tax Initiative Passes (12-13 Beg. Balance $12.7 M)

Revenues $85.7 $86.4 $87.2

Expenditures $91.8 $92.2 $93.5

To Balance Budget ($6.1) ($5.8)

($6.3)

Ending Balance $6.6 $0.8

($5.5)

% Reserve 6.8% 0.4%

50

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Comparative Reserve Percentages for Neighboring Districts

2011-12

EMUH

SD

Whitt

ier U

HSD

Arcad

ia

Wes

t Cov

ina

Clare

mon

t

Mon

tebell

o

South

Whitt

ier

Basse

tt

Azusa

Unifi

ed

Rosem

ead

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Simple Average -- 19.4%

Based on Unaudited Actual Results for 2011-12Based on Estimated Actual Results for 2011-12Based on Second Interim Report for 2011-12

51

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What Will the Future Bring?

How will the Tax Initiative impact EMUHSD?REGARDLESS of what happens to the tax

initiative, cuts will be necessary during the 2013-14 budget development process!!

Approximately $6.1Mil if Tax passes!Approaching $11.0 Mil if Tax fails!

*GOAL = Gen. Fund Balanced Budget (Rev=Exp.) by 2013-14!

How many more years of state financial instability?

What will occur with categorical flexibility?52

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Major Reduction Options

Value of One (1) Furlough Day

$287.4KValue of One % Salary Reduction

$593.0K1

Classified Layoffs (Total Salaries)

$13.8M Reduce Adult Ed. Funding (Total Funding)

$9.3M Freeze Benefits “Cap” @ $10,000 annually

$1.2M

1This value does not include the statutory benefits which will be provided at a later date.

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$ Value of One Furlough Day

by Employee Group

Adult Ed; 6725; 2%CMCEE; 12820; 4%

CSEA; 57988; 20%

DO Admin.; 20732; 7%

EMUEA; 185448; 65%

ROP; 3699; 1%

Adult Ed CMCEE CSEA DO Admin. EMUEA ROP

54

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$ Value of One Percent Salary Reduction

by Employee Group

Adult Ed; 12362; 2% CMCEE; 32154;

5%

CSEA; 138040; 23%

DO Admin.; 42492; 7%

EMUEA; 361311; 61%

ROP; 6658; 1%

Adult Ed CMCEE CSEA DO Admin. EMUEA ROP

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Major Reduction Options Valuescontinued . . .

Incr. Counselor Ratio to 500:1

$1.2MIncrease student/teacher ratio to:

Ratio $ Value31:1 $1.0M32:1 $1.7M33:1 $2.4M34:1 $3.1M35:1 $3.5M

56

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Challenges

District has a structural imbalance between revenues and expenditures!

Pass or fail – Significant budget reductions must be made to address

Balancing the budget is IMPERATIVE!

Failure of tax initiative ADDS approximately $4.9 M to problem!

The risk of insolvency is great!

Collaboration amongst all stakeholders is the KEY!57

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Preparation & Communication

Your role is crucial!Priorities and paradigms are likely to be

challenged!Reach out to the people you represent! Identify important opportunities for budget

improvements for what will be a difficult 2013-14 budget cycle!

Senior mgmt. conducting informational mtgs. w/ staff @ each site – October

Includes Supt, A/Supt – Personnel and CBO58

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Next Steps

District to provide detailed financial information based on request

Make your requests ASAP!

BAC to review District budgets/ programs

Breakout groups to develop budget reduction opportunities

Get input from those you represent

Working toward consensus

Final recommendations to Superintendent

Superintendent takes his final recommendations to the Board

Restoration Plan59

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0011 0010 1010 1101 0001 0100 1011Next Meeting - Thursday, October 18th

(Tentative)

6:00 -8:00 PM

LOCATION – Boardroom

60