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 2

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) 3

REVENUE ASSUMPTIONS Description

LCFF Funding Model Funded ADA COLA* Funding Gap* Grade Span Adjustment (GSA) Federal : Impact Aid Other State Mandated Cost Reimbursement Mandated Cost Reimbursement (one-time) Lottery* (GFU- $128; GFR- $34) Local : Interest Transfers In Redevelopment Agency (RDA) Sale of Property Vision Retiree

2014/15

104,818 0.85% 29.56% $(8.0) Mil $8.0 Mil $3.8 Mil $7.1 Mil $162/ADA 0.36% $10.3 Mil $28.4 Mil $1.4 Mil $0.4 Mil

2015/16

103,268 2.19% 20.68% $8.0 Mil $ 3.7 Mil $162/ADA 0.36% $10.3 Mil

2016/17

101,697 2.14% 25.48% $8.0 Mil $ 3.7 Mil $162/ADA 0.36% $10.3 Mil $0.4 Mil $0.4 Mil * San Diego County Office of Education (SDCOE) and School Services of California (SSC) 4

EXPENSE ASSUMPTIONS Description

Salaries Step and Column: Cert / Class Restoration: Cert Non-Mgmt / Cert Mgmt / Class* Reinstate Furlough Days: Cert/Class* STRS PERS Health & Welfare Premiums Materials & Supplies ( Consumer Price Index- CPI ) Contracted Services (CPI) Utilities Implemented Board Solutions/Budget Deficit Transfers Out Liability Insurance Property Insurance Child Development Retiree

2014/15

1.79% / .65% 5% / 2% / 0% .54% / 0% 8.88% 11.77% 7.00% 2.10% 2.10% 5.00% $106.4 Mil $3.5 Mil $3.3 Mil $3.5 Mil $0.6 Mil

2015/16

2.06% / .65%

2016/17

2.06% / .65% 0% / 0% / 0% 0% / 0% 10.73% 12.60% 7.00% 2.30% 2.30% 5.00% $81.4 Mil 0% / 0% / 0% 0% / 0% 12.58% 15.00% 7.00% 2.50% 2.50% 2.00% $88.1 Mil $3.5 Mil $3.3 Mil $2.0 Mil $0.6 Mil $3.5 Mil $3.3 Mil $2.0 Mil $0.6 Mil Contributions Special Education Restricted Routine Maintenance (RRM) Community Day School Transportation $191.8 Mil $27.8 Mil $1.8 Mil $10.1 Mil $193.2 Mil $36.4 Mil $2.0 Mil $10.2 Mil $196.2 Mil $36.4 Mil $2.1 Mil $10.3 Mil * Subject to change based on negotiation 5

Description

Economic Uncertainties- 2% Unexpended Set-Asides and Reserves: Mandates School designated contributions Stores Inventory Prepaid Expenses Revolving Cash Funds

Subtotal 2014/15

$24.0 Mil $7.1 Mil $4.5 Mil $1.7 Mil $0.9 Mil $0.06 Mil

$38.26 Mil 2015/16

$23.4 Mil $0 Mil $4.5 Mil $1.7 Mil $0.9 Mil $0.06 Mil

$30.57 Mil 2016/17

$23.7 Mil $0 Mil $4.5 Mil $1.7 Mil $0.9 Mil $0.06 Mil

$30.86 Mil

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* Projected Fiscal Year 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15* 2015-16* 2016-17* SDUSD Average ADA 111,862 110,836 110,347 109,241 107,486 106,110 104,818 103,268 101,697 % Change Year Over Year (.92)% (.44)% (1.00)% (1.61)% (1.28)% (1.22)% (1.48)% (1.52)% 7

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

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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 9

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 10

2013/14 Carryover Budget Solutions Bay Terraces #11 Camp Elliott #3 Stevenson Elementary 2013/14 Carryover Budget Solutions 2014/15 New Sales Benchley Cleveland Real Estates Sales FY 2014-15 ANTICIPATED REVENUE

ORIGINAL BUDGET (millions)

$2.40

$2.70

$8.60

$13.70

TBD TBD $7.30

$21.00

GROSS REVENUE (millions) NET REVENUE (millions) OVERAGE (millions) CLOSE DATE

$2.70

$2.70

Board Action Not To Sell Property $13.20

$15.90

$13.10

$15.80

$0.30

($2.70) $4.60

$2.20

Nov. 3 2014 N/A Dec. 15, 2014 $15.90

$15.80

$2.20

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.

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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 12

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)

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DESCRIPTION

-1 Beginning Balance Revenues Expenditures Budget Deficit Solutions 2015/16 Budget Deficit Solutions 2016/17 TOTAL EXPENDITURES Other Sources / Uses

Ending Balance 2014/15 2015/16 2016/17 PROJECTIONS PROJECTIONS

-2 -3-

PROJECTIONS

-4 $95,981,513 $50,528,351 $30,573,659 893,387,872 920,669,364 953,227,001 (736,905,382) (781,455,660) 81,360,944 (797,327,679) (736,905,382) (700,094,716) 88,119,724 (709,207,955) (201,935,652) (240,529,340)

$ 50,528,351 $ 30,573,659

(243,727,046)

$30,865,659 SURPLUS/(DEFICIT)

Required Reserves Economic Uncertainties Unexpended Balances / Set Aside School Site Ending Balances Stores Prepaid Expenses Revolving Cash

Total Required Reserve Reserve (Shortfall) / Surplus ($45,453,162) (19,954,692) 292,000

$24,019,000 11,660,631 1,674,228 850,000 57,800

$38,261,659 $12,266,692

$23,431,000 4,560,631 1,674,228 850,000 57,800

$30,573,659 $0

$23,723,000 4,560,631 1,674,228 850,000 57,800

$30,865,659 $0

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

2015-16 Potential Budget Solution Category

Mandates Grant Development Strategic Staffing – Position Review Increase High School Enrollment Early Childhood Enrollment Concentrated Effort with Unduplicated Counts Central Office Program Adjustments Protection Fund Against Layoff/ Program Cuts Program Adjustments/ Operational Adjustments Total Potential Deficit

Solutions in $ Millions

$(19.2) $(9.0) $(3.0) $(3.1) $(2.5) $(1.6) $(2.0) $0.3

$(41.3) $(81.4)M 15

Fund

01 11 12 13 14 15 20 21 25 35 40 51 67

Total Fund Description

General Fund Adult Education Child Development Cafeteria Special Revenue Deferred Maintenance

Beginning

$

Balance

126,616,646 225,753 15,273 2,960,704 180,859 Pupil Transportation Equipment 478,470 1,618,803 Building Fund Capital Facilities Fund Bond Interest & Redemption Self Insurance Fund 477,284,219 40,116,507 County School Facilities Fund 92,563,283 Special Reserve - Capital Projects 9,896,987 232,399,201 75,734,614

$ 1,060,091,319 Revenue

$ 1,095,456,032 648,600 20,791,663 62,992,553 640 583,300 3,855 1,308,300 30,093,882 2,212,701 26,462,843 158,634,438 24,311,567

$ 1,423,500,374 Expenses

$ (1,189,889,469) (633,230) (26,046,141) (63,266,242) (91,163) (231,931,215) (21,507,182) (9,308,073) (3,530,620) (155,091,549) (24,081,493)

$ (1,725,376,377) Trans In/ (Trans Out)

$ 29,544,611 5,254,476 177,456 (12,000,000) (28,431,543) 5,455,000

$ Ending Balance

$ 61,727,820 241,123 15,271 2,687,015 181,499 970,607 1,800,114 246,661,304 36,703,207 85,467,911 4,397,667 235,942,090 81,419,688

$ 758,215,316

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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 17

Actual Projected JUL AUG SEPT OCT $74,61 $50,83 $98,22 $95,04 NOV DEC JAN FEB MAR APR MAY JUN $73,82 $220,42 $199,26 $162,01 $153,36 $140,60 $133,99 $92,39 $225,0 $200,0 $175,0 $150,0 $125,0 $100,0 $75,0 $50,0 $25,0 $ Monthly Payroll

April and May deferrals eliminated. June deferred.

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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% 19

Step

1 2

Task

Monthly LCAP Presentations and Community Advisory Meetings Board Approval of First Interim Report- BOARD ACTION 3 6 7 4 5 8 9 Vision 2020/ LCAP Planning (finalize priorities with LCAP Planning Team) Governor’s Proposed Budget Released Superintendent Report on 2015/16 Budget Solutions Adjustments Release of SBB Budget Workbooks Board Approval of 2nd Interim Report BOARD ACTION Board Approval of 3rd Interim Report BOARD ACTION Board Adoption of 2014/15 Budget and LCAP-BOARD ACTION

Date

September 2014 – June 2015 Dec 9, 2014 Dec 2014 – Jan 2015 mid-January Jan 20, 2015 Feb 2015 Mar 15, 2015 May 15, 2015 June 30, 2015 20

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 21

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