Budgeting in a Difficult Economy...

A CALIFORNIA PERSPECTIVE

Budgeting in a Difficult Economy...

Presented to…Arizona Association of School Business Officials25th Annual Spring Conference – Laughlin, NVApril 4, 2009Hardy Childers – AASBO President 1987Deputy Superintendent/CBO (RET)Oak Grove School DistrictSan Jose, CA

Acknowledgment…Certain of the technical

data/slides provided by School Services of California and

certain of the Arizona-specific background/slides provided by

Paradise Valley and Mesa Public Schools

2

Agenda

What is happening in the economy? In Arizona and the Nation The California Perspective

How bad is it and how long will it last?Okay, it’s bad… How do we deal with it?

Some critical things to do and a few strategies…

Choose your poison… some specifics…Parting thoughts

AASBO Annual Spring Conference - April 4, 2009

3

Is It A Recession???

“The Business Cycle Dating Committee of the National Bureau of Economic Research identified December 2007 as the peak month, after determining that the subsequent decline in economic activity was large enough to qualify as a recession.”


OK… I guess that makes it official!

4

Arizona’s Revenue Is Declining

0

2

4

6

8

10

12

Planned

2008-09

Actual 2008-

09

Estimated

2009-10

Revenue Total (Billions) Spending


5

In Arizona… Recent Article in The Republic

“Many school districts in the Valley are planning big staffing and program cuts as they prepare to absorb millions of dollars of lost education funding.”

“State-imposed cuts are compounding budget problems for many districts, which are already dealing with failed bonds and overrides, decreased tax revenue, and funding cuts due to declining enrollment.”

“Districts are planning for the worst because they have to reduce costs in time to meet a fast-approaching budget deadline without knowing exactly by how much their state funding might be reduced.”


K-12 Arizona Education Funding Has & Will Experience Cuts

IN 2008/09 K-12 EDUCATION WAS CUT $133 MILLION.

THE ESTIMATED CUTS TO K-12 EDUCATION IN 2009/10

IS ESTIMATED TO BE BETWEEN $470 MILLION AND $1.4

BILLION


Budget Cuts or Revenue Increases?

“[HOUSE APPROPRIATIONS CHAIR JOHN KAVANAGH SAID THAT HE AND

MOST REPUBLICANS ARE UNWILLING TO CONSIDER TAX HIKES, EVEN

TEMPORARILY, INSTEAD OF FURTHER SPENDING CUTS.

“I’M NOT GOING DOWN THE TAX ROAD UNTIL THE SITUATION IS SO

DIRE THAT THERE’S NO OTHER ALTERNATIVE,’’ HE SAID. “AND I’M NOT

PREPARED TO CONCEDE THAT AT THIS POINT.’’ ” --EAST VALLEY TRIBUNE, FEBRUARY 1, 2009


8

Potential State Education Budget Cuts

The following budget cuts have been proposed by state legislators:

Phase out of Career Ladder Elimination of Young Learner and Full-Day

Kindergarten Eliminate annual increase of 2% in funding Base Funding was decreased 2.6% this year and

will be decreased even more in the next budgetFunding to offset utility bills may not be

providedSoft Capital will be eliminated or significantly cut


9

The Budget Crisis Is Hurting All Sectors and States


10

The “Bottom Line” in California

For the combined budget years 2008-09 and 2009-10, A SHORTFALL IN FUNDING FOR THE $102B STATE BUDGET OF $41.6 BILLION…

Yes, that’s a “B”


11

Or Is There A “Bottom Line” in California???

On March 13th the Legislative Analyst released a report showing the recently adopted state budget as falling short by “BILLIONS of dollars…”

Specifically, $8 BILLION dollars short of the projections which showed the state to be almost $42 BILLION short!!!


Let me do a quick calculation… $42B + $8B = $50

B

12

Revenue Limit Adjustments The 2009 Budget Act enacted a series of reductions to the

revenue limit, which makes 2008-09 and 2009-10 among the most complex years for California school finance It eliminates the 0.68% COLA funded in the 2008 Budget Act,

resulting in a zero COLA It provides a zero COLA for 2009-10 It imposes cuts to the revenue limit for both 2008-09 and 2009-10

For a final result of…

2008-09 2009-10 (est.)

Statutory COLA 5.66% 5.02%

K-12 Deficit7.844

%13.094

%County Office of Education Deficit 7.839% 13.360%


13

2009-10 Deficit Applied

Apply 2009-10 deficit factorof 13.094% to your undeficited2009-10 RL per ADA

$5,400

$5,600

$5,800

$6,000

$6,200

$6,400

$6,600

$6,800

2009-10 Revenue LimitBefore Deficits

2009-10 Revenue LimitAfter Deficits

$6,638 $6,638

2009-10COLA

No 2009-10COLA

2008-09COLA

No 2008-09COLA

2008-09 RLCut

Funded Revenue

Limit

District "A's"

Funded Revenue Limit of $6,000

$309

$64

$329

$167

$5,769

2009-10 RL

Example for District “A”Funded RL= $6,638 x (1.0 – 0.13094)= $6,638 x 0.86906= $5,769

$869 LESS than formula…


14

Revenue Limit Deficit Factor

8.14

0%

11.0

10%

10.1

20%

8.80

1%

8.80

1%

8.80

1%

6.99

6%

0.00

0%

0.00

0%

0.00

0%

3.00

2%

2.14

3%

0.89

2%

0.00

0%

0.00

0%

7.84

4%

13.0

94%

0.000%

2.000%

4.000%

6.000%

8.000%

10.000%

12.000%

14.000%

1993

-94

1994

-95

1995

-96

1996

-97

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10 es

t.


15

Scope of the Adopted State Budget

The 2009-10 Budget Act includes both 2008-09 and 2009-10 The actions proposed for the current year, 2008-09, are incorporated in the

Budget

The enacted 2009-10 Budget also meets statutory requirements as a completed Budget for 2009-10

This historic early adoption was necessary to conclude legislative agreements for both years simultaneously The state has met its obligation to adopt a 2009-10 Budget prior to

June 30, 2009

But it is unlikely that this Budget will escape the need for significant revisions

We are in uncharted waters as we watch the Legislature and the Governor deal with changes to a Budget that has already been enacted


16

Major Revisions for 2008-09New taxes and other revenues to be implemented as

soon as possible; Increased borrowing to occur

Reductions to all state-funded programs – especially education

Some categorical program flexibility has been granted for the current year; cuts are now evenly split between revenue limit and categorical programs

Schools lose the 0.68% cost-of-living adjustment (COLA) and more in the current year

No relaxation of the Designated Reserve for Economic Uncertainties requirement


17

Major Provisions for 2009-10 State continues to raise taxes, borrow, and cut programs

Budget is dependent upon voter approval in a special election

Education again loses COLA and more, and takes further reductions to categorical funding Flexibility in K-3 Class-Size Reduction (CSR) is much less than proposed by

the Governor Other categorical flexibility continues Again, the cuts are split between the revenue limit and categorical programs

Managing budgets will be difficult Partly because of known cuts and partly because of uncertainty regarding

future modifications to the State Budget

Cash management continues to be a growing issue County office of education (COE) oversight resources will be spread

thin

We will have the highest deficit factor in California’s history


18

Per-ADA Revenue Volatility

Per-ADA Revenue Change

-15%

-10%

-5%

0%

5%

10%

15%

1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Year

Incr

ease

to th

eB

ase

Rev

enue

Lim

it Pe

r A

DA

Average


19

Other Factors

The progress of the economy is key to recovery

Job creation is essential as employment numbers get worse

Uncertainty abounds relative to the federal stimulus package (American Recovery and Reinvestment Act) and how it affects education “in a specific way”

How the losses to Proposition 98 are treated in the future is a huge factor – “PAY BACK” OR “NEW BASE”???

Neither California nor the feds have relaxed any student performance standards or expectations


20

General Fund Budget “Solutions”

Solutions(in billions)

Expenditure Cuts

Revenue Increases

Federal Stimulus Funds

Borrowing

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

2008-09 and 2009-10

$957 million (2%)

$5.4 billion (13%)

$12.5 billion (30%)

$7.9 billion (19%)

$14.9 billion (36%)

Vetoes

$41.6 billion


Oh yeah, it’s now$50B!

21

Revenue IncreasesRevenue increases are broad based

One-cent increase in state sales tax effective April 1, 2009

0.50% increase in the Vehicle License Fee rate (from 0.65% to 1.15%)

Fee nearly doubles

Reduction in Dependent Credit beginning with 2009 tax year

Increase in the personal income tax rate beginning in the 2009 tax year

Businesses are spared increases in direct taxesAASBO Annual Spring Conference - April 4, 2009

22

Borrowing and Transfers

The Budget continues to rely on one-time revenues from borrowing to maintain ongoing programs This borrowing totals $11.4 billion

$5.9 billion from a Revenue Anticipation Warrant (RAW) to be repaid in 2010-11 – or through use of federal stimulus dollars The Legislative Analyst’s Office (LAO) warns that this may

violate Proposition 58, which prohibits borrowing for budgetary purposes

Sufficient federal stimulus funds would cancel the RAW $5 billion to securitize the growth in Lottery revenues

Voter approval of Proposition 1C is required and the credit markets must accept this

$433 million from special fund loans and transfers that must be repaid


23

Major Expenditure Solutions

Program Cuts

(In millions)

2008-09 2009-10 Total

Proposition 98 Reductions $6,393 $2,919 $9,312

Proposition 10 Shift – Children and Families Act — 608 608

UC and CSU Reductions 132 656 788

State Employee Compensation 333 834 1,167

No Federal SSI COLA Pass Through 80 487 567

Proposition 63 Shift – Mental Health Services Act — 227 227

Other (213) 2,398 2,185

Totals $6,725 $8,129 $14,854

Education funding reduced from formula funding by Over $9 BILLION for 08-09 and 09-10…


24

Special Election Ballot IssuesSix propositions have qualified for the May 19, 2009, statewide special election ballot – the first three are most significant for local educational agencies (LEAs)

Proposition 1A: State Finance

Increases the size of the state’s “rainy day” fund and requires above-average revenues to be deposited into it

Proposition 1A and 1B are joined at the hip

If Proposition 1B is approved, a portion of the fund would be transferred to fund supplemental payments to K-14 education

Proposition 1B: Education FinanceRequires supplemental payments of $9.3 billion over time, commencing in 2011-12, in lieu of Maintenance Factor amounts related to fiscal years 2008-09 and 2009-10

If passed, this proposition guarantees that education funding will be restored

If it fails, we must pursue reimbursement by other means

Proposition 1C: California State LotteryAllows Lottery to be modernized to improve its performance

LEAs would no longer receive funding based on Lottery sales, but would continue to receive per-ADA amounts equal to what they received in 2008-09

If this proposition fails, there is a $5 billion hole in the Budget

Proposition 1D: Budget Act of 2008: California Children and Families Act: Use of Funds: Services for ChildrenTemporarily allows the redirection of existing money to fund health and human service programs for children of up to five years of age

Proposition 1E: The Mental Health Services Act: Proposition 63 AmendmentsRedirects specified Mental Health Services Act monies for fiscal years 2009-10 and 2010-11 to support a pre-existing mental health program


25

Impact of Uncertain Election Results

Much of the State Budget is contingent upon success of ballot measures If Proposition 1A, relating to the Budget Stabilization Fund,

fails: K-14 schools will not automatically get the additional $9.3 billion in

maintenance factor amounts Will pursue those monies through alternative means

Temporary tax increases included in ABX3 3 will expire one or two years earlier than if voters approve Proposition 1A

The Budget relies on issuance of Lottery securitization bonds to generate $5 billion – creates a shortfall if Proposition 1C fails But credit markets may not be interested Recent poll indicates that 61% of likely voters oppose the idea of

borrowing against future State Lottery income Voters may not want to divert monies from initiatives they

previously passed

If Propositions fail, the May Revision could include more cuts


26

May Revision Will Be Delayed

Normally, the statutory May Revision is completed by May 15 of each year Includes updated economic data

Statutory COLA for Proposition 98 is recomputed and finalized

Governor amends his January Budget to reflect economic and other changes if desired

Legislature uses the May Revision as a representation of the Governor’s final proposal before adoption

This year will be different Special election on May 19 affects Budget significantly

Budget has already been enacted

State law amended to move statutory date for May Revision to as late as June 8


27

Risks to the BudgetThe state and national economies continue to fall

Forecasters are expecting the downturn to last through 2009, rather than turn around later this year

State tax revenues, in turn, may drop below forecast

State voters may reject the securitization of the State Lottery (Proposition 1C) and the transfer of special fund money to the General Fund (Propositions 1D and 1E), which account for $5.8 billion

Caseloads in the state’s safety net programs could exceed budgeted levels, especially as residents lose jobs and income

Weakened credit markets may have no appetite for California’s Lottery borrowing or short-term bonds


Oh yeah… and there is that additional $8 Billion shortfall projected by the LAO

28

Agenda

What is happening in the economy? In Arizona and the Nation The California Perspective





29

The Economy in Perspective The United States economy has been in recession since December 2007

A depression is a severe downturn that lasts several years The Great Depression was characterized by the following:

Beginning in 1929, it lasted through the 1930s The unemployment rate reached 25% Wages fell 42% U.S. GDP fell 8.6% in 1930, 6.4% in 1931, and 13% in 1932

Despite the dismal state of the current economy, it is nowhere near the conditions of the 1930s

Not the first “crisis” either… The Lonnnnng Depression of 1872-1897, The Panic of 1893, The Stock Market Crash of 1929, The OPEC Oil Crisis & Runaway Inflation of the 1970’s, The Savings & Loan Crisis and Recession of the 1980’s

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real Gross Domestic Product (GDP), real income, employment, industrial production, and wholesale/retail sales


30

How Long Will It Last???

Remember the Business Cycle Dating Committee of the National Bureau of Economic Research???

They were asked “How long does the committee expect the recession to last?”


The response??? “The committee does not forecast.”

31

Implications of Employment Trends

Employment is a broad measure of the health of the economy

It reflects the number of people working and thus earning income

California’s unemployment rate, which stands at 10.1%, fluctuates due to layoffs and hiring, but also as a result of the job market outlook

Discouraged job seekers may withdraw from the labor market

The recession of the early 1990s saw a loss of 624,200 jobs between June 1990 and February 1993, with the unemployment rate peaking at 9.9%

It took six years to regain the June 1990 employment level

California has lost more than 400,000 jobs since April 2008

Losses are expected to continue through 2009


32

Recent Employment Trends

California Monthly Employment 2008(In Millions)

16,800

16,900

17,000

17,100

17,200

17,300

Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

Source: Employment Development Department; Historical Civilian Labor Force, January 23, 2009


33

California’s Long-Term Employment Trends

California Employment Since 1990(In millions)

12,000

13,000

14,000

15,000

16,000

17,000

18,000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Housing andMilitary Reduction

Dot ComBust

Housing andCredit Collapse

Source: Employment Development Department; Historical Civilian Labor Force, January 23, 2009


34

Agenda

What is happening in the economy? In Arizona, the Nation, in California





35

Some strategies/practices that workSometimes it’s “Back to Basics”

Communicate, communicate, communicate… “No Surprises” School/Department and Community Meetings

“The more they know the sooner, the better it will be for everyone”

Multi-Year Projections, Position Control and Enrollment Tracking MYPs - “You’ll never get there if you don’t have a map” Position Control - If you don’t control hiring, nothing else will help Enrollment Tracking - It’s why we’re here and the lifeblood of our

revenue stream

Budget Committee Process “Getting stakeholder involvement is key – plus, it helps you survive the

fallout”


36

Reporting CycleThe “Public Formalities” Are Important

Preliminary Review of Assumptions – January/Early Spring

Review Budget Assumptions – MayDistrict Budget Adopted – Late JunePrior Year Annual Report - SeptemberFirst Interim – December (Actuals Thru October)Budget Year Second Interim – March

(Actuals Thru January)Preliminary Review of Assumptions

-– January/Early Spring


37

Face TimeGetting in Front of Stakeholders

School/Department Staff Meetings Throughout the school year, EVERY year

Community Updates Several times a year – EVERY year “Superintendent’s Forums”

Key Committees/Operating Groups Parent Advisory Groups Staff Working Groups (Leadership Team) Bargaining Units

Inform parents and community by periodic updates in school newsletters and website


38

““Long-range planning does not deal with Long-range planning does not deal with

future decisions, but with the future of future decisions, but with the future of

present decisions.”present decisions.”

““Long-range planning does not deal with Long-range planning does not deal with

future decisions, but with the future of future decisions, but with the future of

present decisions.”present decisions.”

——Peter DruckerPeter Drucker

Multi-Year Projections Are CRITICAL


39

Purpose

To provide for effective distribution of resources and to promote ongoing fiscal stability, plan three to five years into the future Deterrents

Lack of predictability in state actions Potential state deficits Variable local nontax income (e.g., leases, interest, foundations) Difficult to predict the results of collective bargaining Difficult to predict a “turning point” More work (“just another way to be wrong”)

Two forecast realities: A forecast “is not a mandate for the future” All forecasts contain a “margin of error”


40

Purpose

But financial projections can provide a basis for: Evaluating service delivery options Measuring the financial impact of major decisions made

throughout the year Analyzing the future-year impact of current-year decisions Educating the community and district employees on critical issues

And be the cornerstone of the district's long-range financial plan, no matter which of the following stages the district is in or heading toward Growth stage: revenues, enrollment Maintenance stage: maintaining service and infrastructure Retrenchment stage: cut-backs, reorganization


41

Underscoring the View that MYP’s are Critical…In California, Fiscal Certification Now Required

for all District Employment Contracts

Superintendent and Chief Business Official must certify in writing Costs of bargained agreement can be met for the term of

the agreement Certification shall itemize any budget revision necessary Public document provided prior to final adoption of the

agreement

If contract adopted, budget revisions “shall” be adopted with the next interim report

If revisions are not adopted, the county “shall” issue qualified or negative certification

The end of “illusory” cuts


42

During a prior budget crisis, based on MYP’s it became apparent that we needed a plan to “weather the coming budget storm”

Closing two schools, saving $900,000 per year in operating costs and, ultimately, generating $1 million in operating revenue

Reducing budgets – starting with a total of $2 million in cuts in next two years, and another $1.25 million in the third year, eliminating deficit spending over three years

Take advantage of State budget law “flexibility” options which allows a lower “reserve” (1.5% instead of 3%) for two years only – a “one time” source of funds

Bridge the shortfall by using “one time moneys” to cover the short term operating budget deficits


A Plan to Bridge and Build…

43

Implementing the Plan

Community and staff meetings – educate about budget, explain need for school closures, explain school closure process, explain how the school closures are just a component of the overall plan…Reorganize district level operationsAdjust/reduce staffing to match enrollment; increase class sizes as necessaryGenerally… “Bridge” fund where possible, with goal of matching district expenditures to projected revenueAlso important… Educate (lobby) local legislators regarding impacts of their decisions, meet with service clubs to enlist support of community business leaders, participate in public support rallies when appropriate


The Budget Committee

“An” Approach

45

Budget CommitteeCan be a valuable tool


Properly constituted and employed, a Budget Committee can better ensure…•The “reality” of proposed actions•The longer term “viability” of the budget plan developed•The “credibility” of the plan with the Board of Trustees and stakeholders

46

“An” Approach to Use of a Budget CommitteeBudget Committee Membership


Chairperson (CBO)

Facilitator

Asst Supt, Human Resources

Director, Learning Communities

Director of Modernization

Lead Principals (3), Learning Communities

Asst Supt, Educational Services

Director, Maintenance, Operations & Transportation

Coordinator, Purchasing, Warehouse & Publications

Director, Business Services

Union Presidents (3)

Coordinator, Maintenance & Operations

Director, Special Education

Director, Educational Services

Lead Principal, Intermediate Schools

EVERY operating area in the district was represented by managers and others to ensure full representation and clear understanding of impact of its recommendations…

Community members (and Board members) are NOT included as members, as the Board members will make the ultimate decisions. Community input is gathered through community and committee meetings and brought to Budget Committee meetings…

It is a committee of the superintendent, thus not subject to Brown Act (public meetings laws)

47

Provides for the Provides for the future viability of the school districtfuture viability of the school district. All decisions reached in the current . All decisions reached in the current year must take into consideration the essential requirement that the future of the district year must take into consideration the essential requirement that the future of the district must be preserved to ensure the availability of educational opportunities for the following must be preserved to ensure the availability of educational opportunities for the following years and future generations. In short, excessive "mortgaging" of the future of the Oak years and future generations. In short, excessive "mortgaging" of the future of the Oak Grove School District is not acceptable.Grove School District is not acceptable.

Provides for Provides for quality instructional and support programs and operations essential to student quality instructional and support programs and operations essential to student successsuccess. We must REMEMBER WHY WE EXIST, and continually re-evaluate what the . We must REMEMBER WHY WE EXIST, and continually re-evaluate what the "essential" programs are and strive to preserve those programs. We need to try to make "essential" programs are and strive to preserve those programs. We need to try to make cutting “away from the classroom” a priority consideration, but recognize that in a serious cutting “away from the classroom” a priority consideration, but recognize that in a serious financial crisis, it may not be possible to achieve the Committee’s objectives without financial crisis, it may not be possible to achieve the Committee’s objectives without making cuts which affect the instructional program.making cuts which affect the instructional program.

Preserves essential jobs, provides competitive salaries, benefits and working conditions, Preserves essential jobs, provides competitive salaries, benefits and working conditions, and otherwise "values" our employeesand otherwise "values" our employees. People are what our organization is all about. We . People are what our organization is all about. We exist to serve people and all of our people - managers, certificated and classified staff alike exist to serve people and all of our people - managers, certificated and classified staff alike - make it possible to provide for the children for whose educational benefit we ultimately - make it possible to provide for the children for whose educational benefit we ultimately exist. We must continue to evaluate staffing relative to program priorities and provide for exist. We must continue to evaluate staffing relative to program priorities and provide for staffing at the necessary and appropriate levels. We must recognize and show appreciation staffing at the necessary and appropriate levels. We must recognize and show appreciation for the efforts of our employees, while recognizing that in difficult financial times it may not for the efforts of our employees, while recognizing that in difficult financial times it may not be possible to achieve "optimum" staffing levels or to "reward" staff to the extent truly be possible to achieve "optimum" staffing levels or to "reward" staff to the extent truly deserved.deserved.

“An” Approach to Use of a Budget CommitteeBudget Committee Philosophy

As the budget development process is undertaken, the guiding philosophy of the Oak Grove School District will be to develop a budget which is in alignment with the District’s Vision and the Board’s Five Year Plan, and which meets the following basic objectives....


48

CONFIDENTIALITY. Free and open discussion must be promoted in order to provide for an environment which will CONFIDENTIALITY. Free and open discussion must be promoted in order to provide for an environment which will offer the greatest opportunity for generating the desired results. Accordingly, all discussion within the Budget offer the greatest opportunity for generating the desired results. Accordingly, all discussion within the Budget Committee must be considered confidential except such information mutually agreed to be released as a "work Committee must be considered confidential except such information mutually agreed to be released as a "work product" of the Committee. Specific positions taken and/or comments made by individual members of the product" of the Committee. Specific positions taken and/or comments made by individual members of the Committee are to remain confidential ‑ only Committee work products are to represent the efforts of the Committee are to remain confidential ‑ only Committee work products are to represent the efforts of the Committee.Committee.

PERSONALITIES. Discussions must not become "personal" in nature. Personal attacks will not be acceptable. In PERSONALITIES. Discussions must not become "personal" in nature. Personal attacks will not be acceptable. In addition, Committee members must strive to deal with all issues within the context of the "greater good" of the addition, Committee members must strive to deal with all issues within the context of the "greater good" of the Oak Grove School District and the District's ability to continue meeting it's mission and serve the students for Oak Grove School District and the District's ability to continue meeting it's mission and serve the students for which it exists as an entity.which it exists as an entity.

TIMELINE. The Budget Committee timeline must be observed and all deliberations held with the timeline in mind. TIMELINE. The Budget Committee timeline must be observed and all deliberations held with the timeline in mind. Committee members are encouraged to receive input from individuals/organizations not directly involved with the Committee members are encouraged to receive input from individuals/organizations not directly involved with the Budget Committee process, and, if determined to be appropriate and meaningful to the process, to bring such Budget Committee process, and, if determined to be appropriate and meaningful to the process, to bring such issues to the Committee for deliberation. However, "formal" opportunities to obtain such input will NOT be built issues to the Committee for deliberation. However, "formal" opportunities to obtain such input will NOT be built into the Budget Committee timeline.into the Budget Committee timeline.

LEGAL ISSUES. Recommendations presented by the Budget Committee must follow known laws and regulations.LEGAL ISSUES. Recommendations presented by the Budget Committee must follow known laws and regulations. DIRECTION. The Budget Committee is a committee of the superintendent, with the "charge" to provide options DIRECTION. The Budget Committee is a committee of the superintendent, with the "charge" to provide options

and make recommendations to the superintendent who, in turn, will recommend a budget to the Board of Trustees. and make recommendations to the superintendent who, in turn, will recommend a budget to the Board of Trustees. As such, the Committee may be provided additional direction and may from time to time be directed to deal with As such, the Committee may be provided additional direction and may from time to time be directed to deal with specific matters and/or undertake specific activities as determined by the superintendent.specific matters and/or undertake specific activities as determined by the superintendent.

MEETINGS/FORMAT. Meetings will be scheduled as needed. A facilitator will assist the chairman with planning MEETINGS/FORMAT. Meetings will be scheduled as needed. A facilitator will assist the chairman with planning and conducting meetings and will also serve as a participating member of the Committee.and conducting meetings and will also serve as a participating member of the Committee.

DECISION-MAKING. Decisions will be made by consensus, i.e., everyone can "live with" the decision. The DECISION-MAKING. Decisions will be made by consensus, i.e., everyone can "live with" the decision. The fallback decision-making process will be majority vote (with no vote count to be announced).fallback decision-making process will be majority vote (with no vote count to be announced).

“An” Approach to Use of a Budget CommitteeBudget Committee Rules


49

The safety of students, staff and community must always be The safety of students, staff and community must always be acknowledged as an overarching priority in the District.acknowledged as an overarching priority in the District.

Cuts should be kept as far away from the classroom as possible.Cuts should be kept as far away from the classroom as possible.Layoffs of personnel should be avoided to the maximum extent Layoffs of personnel should be avoided to the maximum extent

possible. Personnel reductions should be handled through attrition possible. Personnel reductions should be handled through attrition and/or transfer to other open positions within the District whenever and/or transfer to other open positions within the District whenever possible.possible.

Efforts should be made to “balance” current recommendations for Efforts should be made to “balance” current recommendations for reduction with past recommendations which have been reduction with past recommendations which have been implemented.implemented.

In addition to and/or in further support of guidance provided within the Superintendent’s charge, the In addition to and/or in further support of guidance provided within the Superintendent’s charge, the Committee has traditionally agreed upon a number of parameters to be considered as it goes about Committee has traditionally agreed upon a number of parameters to be considered as it goes about the Charge. The Committee acknowledges that it is not always possible to meet the objectives the Charge. The Committee acknowledges that it is not always possible to meet the objectives implied by the parameters in a pure sense, but agreed that their consideration would be critical to implied by the parameters in a pure sense, but agreed that their consideration would be critical to the process.the process.

“An” Approach to Use of a Budget CommitteeBudget Committee Parameters


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Consistent with the principles and objectives embodied within the District vision, and in support of the Board/Superintendent Goals as reflected in the Five Year Plan, the Budget Committee is charged to... 1) Maintain and further develop awareness of the financial condition of the District, including an awareness of budget factors in recent years which have resulted in our current situation, as well as the specific status of the current year budget and the budget assumptions being applied in the development of next year’s budget. I am requesting that the Budget Committee review and discuss the implications of the identified factors and budget development assumptions relative to the multi-year projections and provide feedback and recommendations to the Superintendent through the Committee report.

2) Recommend and prioritize for consideration a combination of revenue increases and expenditure reductions which have the effect of improving the Unrestricted General Fund operating position for the budget year by no less than $750,000. I also request that deliberations continue in anticipation of the potential need for further cuts in subsequent school years, evaluating the potential to identify a total of $1.5 million in savings if that becomes necessary in the coming year(s).

Although given the severity of the budget crisis I still cannot ask that any programs be excluded from consideration, the class size reduction program (K-3 CSR), the Visual-Performing Arts programs (4-6 VPA) and after-school sports at the intermediate schools are to be considered high priorities for retention if at all possible. To the extent possible, personnel reductions should be handled through transfer to compatible positions and/or attrition.

3) Share with constituents your knowledge of the district’s budget and financial condition (always in a manner consistent with what the Budget Committee deems appropriate and consistent with process). Recommend effective ways for the information to be shared on a district-wide basis.

“An” Approach to Use of a Budget CommitteeSuperintendent’s “Charge”


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Meetings (6-10) held January through March. Committee provided with detailed budget and operational data;

information updated as State budget evolving; committee-requested information always provided

Primary focus was placed on identifying amount of program cost reductions and/or revenue increases specified in “Charge”

Also identified additional areas of reduction for possible future consideration

Several iterations of brainstorming and “winnowing” of lists of identified reductions/revenue increases

Impacts of proposals were explored in depth; “plus/minus charts” prepared for each proposal; candid discussions held with assurance of confidentiality; provisions made for advocacy of proposals and arguments against by members.

Priorities were developed using consensus and “majority rule” modelsThe list of cuts forwarded to the Superintendent was approved by

consensus.

“An” Approach to Use of a Budget CommitteeWork Process Flow


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Agenda






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Choose Your Poison - Budget CutsA “Compendium” of Options for Reducing Costs

Close/consolidate unneeded schools A MAJOR presentation unto itself…

Administrative staff reductions – consolidation of services Reduce salaries “across the board” Reduce staffing and/or hours in district and school support

areas Reduce Special Education services Reduce English Language Development services Increase class sizes – regular education, special education Reduce access to use of vacant portable classrooms “General line item” budget reductions – supplies, services,

etc. Reduce staff development and new teacher support Reduce school site per student allocation for instructional

materials Reduce maintenance and grounds positions


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Reduce 12 month school clerical positions to 11 Reduce bus routes, transportation office support Eliminate Librarians and reduce library support staff Reduce custodians (reduce services, consider team

cleaning) Implement energy efficiency plans – get rid of

refrigerators, space heaters, etc. Increase speech and other “special services” case loads Shift costs to categorical programs Reduce nursing/health aide services Reduce counseling services Reduce IT support services Reduce duplication costs – bid “cost per copy” services Reduce contracted services – perform with existing staff Reduce cell phone costs


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Replace higher level staff with clerical staff Re-enroll all employees/dependents covered by health

insurance Implement health care cost containment measures

implemented Provide lower payments in lieu of health coverage for dual

covered staff members Early retirement incentive program – “CAUTION” Freeze hiring No overtime Freeze step and/or column Revise boundaries to reduce transportation Operate internal garbage removal services Reduce conferences and travel Don’t substitute for clerical absences Reduce retiree benefits


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Better manage workers compensation reducing costs Reduce legal fees – no attorneys at bargaining sessions Electronic attendant instead of receptionist Eliminate “encroachment” of categorically funded

programs Reduce/eliminate music, band, PE, sports programs Reduce number of periods offered – Intermediate and

high schools Eliminate/reduce prep time Reduce work year for staff Close “nonessential” central/support offices during school

breaks Add “furlough days” for support staff


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Choose Your Poison - Budget CutsOR… Some Revenue Options

Parcel tax election Bond election – offset certain M&O costs by modernizing

facilities Charge/increase fees for services – Transportation, Enrichment

Studies Charge/increase fees for extracurricular activities - Sports,

Music, Art Bond election – offset certain M&O costs by modernizing

facilities Improve enrollment and/or attendance Implement fee for service child care programs Sell “excess capacity” services (transportation, garbage

collection, printing, delivery, etc.) to other school districts or public entities

Charge maximum indirect costs to categorical programs Lease/rent excess facilities


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Agenda






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Some Parting Thoughts…

“YOU are CRITICAL to getting the job done right” Whether the current budget crisis passes sooner or later, we have

to deal with it NOW… It CAN be done and WILL be done… If not by us, perhaps by someone less able to do it effectively

When you think things are bad, and need a lift, check out what’s happening with your neighbor to the west! You will see that it can be done and good things can

continue

“This Too Shall Pass”AASBO Annual Spring Conference - April 4, 2009

60AASBO Annual Spring Conference - April 4, 2009

Budgeting in a Difficult Economy...

Documents

annual increase

funding cuts

state funding

arizona education funding

funding base funding

stateimposed cuts

program cuts

lost education funding