Transcript Slide 1
What to Cut When You Can’t
Cut Anymore: The Board’s
Role in Balancing the Budget
Presented by
Maureen Evans
Associate Vice President
School Services of California, Inc.
Penny Ranftle
Board Member
Poway USD
Ron Bennett
President and CEO
School Services of California, Inc.
Celia Jaffe
Board President
Huntington Beach CSD
Overview
Current climate
Comparative data
Board’s role – revenue and expense
Use of budget advisory committees
School closure(s)
Long-range financial planning goal
1
Current Climate
The Economy
Powerful economies do great things, and they generate a lot of
tax revenue
In past years, revenue growth was estimated at 4% to 6%
annually
In 2000, it was more than 20%!
And now, it is dropping like a rock – flat revenues would be
a plus
Past revenue growth allowed:
The state to avoid cuts to any major expenditure areas
Full funding of statutory and formula-driven increases
Increases in important areas, including education
An on-time budget
Yes, high revenue growth is a good thing!
But, it is now also a thing of the past – way past
3
The Economy
In 2007-08, the choice between raising revenues or making a
reduction in spending did not have to be made
The outlook for 2008-09 – and beyond – is a bit more clouded
Revenue projections are much weaker – high year-to-year
growth is simply not sustainable over the longer term
The Budget assumed 2008-09 state revenues increase only
slightly
Reflects that much of the jump in revenues in 2005-06
and 2006-07 is assumed to be one time
But revenues are coming in well below forecasts
4
K-12 Revenue Limits – An
Overview
Look at the “Revenue Limit Roller Coaster”
January’s Governor’s Budget proposed a 10% cut to
education
Flexibility in spending was promised
By the May Revision, the cut was reduced
Revenue limits were maintained from 2007-08
Categoricals were to be cut by 6.5%
By the September Budget Enactment, education was flat
funded
A tiny COLA, 0.68% was provided
Flexibility was not included in the Budget
Just one month later, the Governor announced the Special
Session to deal with declining revenues
What should we plan for given all these changes?
5
Structural Budget Shortfall
Remains
The Legislative Analyst predicts major budget problems ahead
The state cannot “grow its way” out of this problem
Even with minor revenue growth, the budget gap swells
The message for us is – the status quo may be as good as it
gets for a while
6
Governor Calls Special Session
Purpose of the Special Session – to reduce the budget deficit
The Governor proposes to do this:
By cutting expenditures
$2 billion to $4 billion for education for this year,
2008-09
0.68% COLA would be “unfunded”
Additional cut to revenue limit of about $300 per
average daily attendance (ADA)
By adding revenues
Largest source is proposed 1.5% sales tax increase
7
Proposition 98 Projections
Proposition 98 simply isn’t growing fast enough to provide a
COLA
Proposition 111 allows the state to short education during
bad times
Most of the 5.66% COLA for 2008-09 has already been
deficited
The Governor’s proposal would take back the
remaining 0.68%
We recommend districts also plan for a zero COLA for
2009-10
8
Proposition 98 Projections
By 2009-10, the absence of two COLAs would cause the deficit
to be more than 10% – we would get only 90¢ on the dollar
We forecast that if that happens, about 500 districts go
“Qualified” or “Negative” financially
We will fight for the COLAs but need a plan to live without
them
9
Comparative Data
How Do You Know If You’ve
Cut Everything?
Use of comparative data to find area of opportunity
Compare to similar-type district
Unified
Elementary
High
Compare to similar-size districts
Compare to districts with similar revenues
Compare to districts with similar enrollment patterns
Examine numbers and types of employees
Examine expenditure patterns
Examine class size
11
How Is Your District Different?
Why?
Compare your district revenues and expenditures to the
correct district type
2006-07
Unified
High
Elementary
$ Per
% of
$ Per
% of
$ Per
% of
Revenue Area
ADA
Total
ADA
Total
ADA
Total
Revenue Limit $5,907.76 62.86% $6,945.82 69.90% $5,706.90 63.54%
Federal
758.13 8.07%
557.56 5.61%
713.83 7.95%
Other State
2,212.45 23.54% 1,733.22 17.44% 1,841.09 20.50%
Other Local
Subtotal
520.12
$9,398.46
Your District
$ Per
% of
ADA
Total
5.53%
700.42 7.05%
720.10 8.02%
100% $9,937.02 100% $8,981.92 100%
Source: 2006-07 State-Certified Reports: J-90, CBEDS, SACS
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How Is Your District Different?
Why?
2006-07
High
Unified
Expenditure Area
Elementary
Your District
$ Per ADA % of Total $ Per ADA % of Total $ Per ADA % of Total $ Per ADA % of Total
Certificated
Non-Mgmt. Salaries
$3,937.12
43.98%
$3,869.51
41.42%
$3,745.70
43.99%
Classified
Non-Mgmt. Salaries
1,235.87
13.81%
1,363.22
14.59%
1,123.00
13.19%
498.00
5.56%
492.56
5.27%
487.91
5.73%
1,682.39
18.51%
1,711.40
17.74%
1,534.61
17.71%
Books & Supplies
478.25
5.34%
508.25
5.44%
468.11
5.50%
Services and Other
Operating Exp.
893.18
9.98%
873.66
9.35%
817.36
9.60%
57.26
0.64%
69.14
0.74%
50.79
0.60%
170.22
1.90%
453.89
4.86%
286.88
3.37%
$8,952.29
100%
$9,341.63
100%
$8,514.36
100%
Management
Salaries
Employee Benefits
Capital Outlay
Other Outgo
Total Expenditures
Source: 2006-07 State-Certified Reports: J-90, CBEDS, SACS
13
Class Sizes/Staffing
Many districts have increased or may be considering increasing
class sizes but be aware of constraints
Class-Size Reduction incentives
Legal limits
Contractual limits
Grade
Level
Target
Actual
Contract
Limit
Maximums per Education Code
Sections 41376 and 41378
Statewide*
19.7
Kindergarten – average class size not to exceed
31 students; no class larger than 33 students
and grades 1-3 average class size not to exceed
30 students; no classes larger than 32
4-8
27.5
Grades 4 through 8 – current fiscal-year average
number of pupils per teacher not to exceed the
greater of the statewide average number of
pupils per teacher in 1964 (29.9) or the district’s
average number of pupils per teacher in 1964
9-12
27.7
No limit
K-3
*Source: 2006-07 State-Certified CADIE
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Where Can I Find Comparative
Data?
SSC offers state-certified comparable data for comparison and
analysis
Other resources for comparative data:
www.cde.ca.gov/ds/sd/cb/dataquest.asp
www.ed-data.k12.ca.us
15
The Board’s Role –
Revenue and Expense
You Have Limited
Flexibility in Revenues
Revenue areas that can be influenced by the district –
examples:
Revenue limits
Special emphasis on ADA tracking and improvement
Federal revenues
Application for programs and grants
Application for impact aid (PL-874)
Other state revenues
Application for special programs
Application for programs and grants
Application for mandated costs
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You Have Limited
Flexibility in Revenues
Other local revenues and financing sources
Interest income
Voted parcel taxes (operating funds)
Maintenance assessment districts
District property disposal and lease income
Community foundations and grants
Developer fees (capital facilities)
Voted bonds (capital facilities)
Fees for transportation, food services, or athletic
competitions
18
You Have Dramatic Flexibility in
Allocating Expenditures
Expenditures areas that you control
Organization of administrative staff
Assistant superintendents, directors, principals, and
assistant principals
Compensation of district staff
Salary level and methodology of compensation
Benefit support and types offered
Range of programs offered
Gifted and Talented Education (GATE), Economic
Impact Aid (EIA), Peer Assistance and Review (PAR)
Preschool, community schools, opportunity schools
19
You Have Dramatic Flexibility in
Allocating Expenditures
Design of categorical programs
Flexibility for delivery is very significant
Class size for instructional programs
Class size by grade levels and programs
Continuation of low-enrolled programs
Curriculum and instructional methods
Course offerings and program emphasis
Staffing levels for support programs
Health, psychological, counseling, etc.
Level and type of support services
Custodial, maintenance, and transportation
20
You Have Dramatic Flexibility in
Allocating Expenditures
Type and location of facilities
Number, size, location, and grade level configuration
Community support programs
Use of facilities – when, where, costs
Recreational services and offerings
Conclusion
Determination of expenditures is local and historical – not
state controlled
Districts are revenue dependent and relatively expenditure
independent
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Achieving Proportional Reductions
Good planning is necessary to achieve balanced, proportional
reductions
Don’t allow “sacred cows”
Arbitrarily protecting one program necessitates even
greater cuts in others
Use comparative analysis to see how much stable districts of
comparable size spend on each major object and try to get to
that level
Don’t try to take all the cuts in just a few areas; spread the
impact
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Use of Budget
Advisory Committees
Budget Advisory Committees
Budget Advisory Committees can be helpful
Community buy-in
Additional resources and ideas
Political insulation
Publicity agents for successes
Budget Advisory Committee, however, require:
Strong, timely, committed staff resources
Good leadership/strong chairperson
Concrete, focused, short-term goals and projects
Membership balance – avoid organization dominance
25
Budget Advisory Committees
Use the budget committee to assist in budget reduction
analyses
Use short-focused areas:
“Prioritize these six expenditure augmentation proposals”
“Identify three district services, totaling an expenditure of
$500,000, that should be discontinued”
“Analyze one service area and identify how the service
could be provided less expensively”
“Develop a booklet that explains the district’s fiscal issues
to others”
“Identify one program area that has the highest measured
accomplishment for the least expense”
Do not leave the task open-ended; provide direction and focus
Always make a Budget Advisory Committee “advisory”
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School Closure(s)
Political Consideration in
Closing Schools
Closing a school is never popular, but may be necessary
You cannot please everyone – expect to hear from the
opposition
But you can follow a process that avoids the appearance of
being arbitrary or making a purely political decision
Establish and follow objective criteria
Maximum savings
Enrollment trends
Size
Proximity to other locations
Condition and type of facility
Access, traffic, and safety
Performance
29
Political Consideration in
Closing Schools
Timing – avoid holding discussions before school board
elections or when a bond or parcel tax is to appear on the
ballot
Allow time for meaningful hearings
Involve the community in planning
30
Long-Range Financial
Planning Goal
Long-Range Financial Planning
Multiyear projections – your guide to sound finance
Sometimes your first long-term goal is to survive the short
term
The multiyear projection needs to “work”
33
Failure to Consider the Multiyear
Impact of Budget Decisions
AB 1200/AB 2756 requires districts to consider the budget
impact of the current year and two subsequent years
Multiyear planning does not rely on a crystal ball – it is the
mathematical consequences of the actions of today
Most major budget failures can be traced to specific events
and decisions
The county office of education should intervene if your
multiyear projections are less than positive
We recommend you do a “sensitivity analysis” on your
projections
What happens if COLA assumptions go up or down?
What if ADA changes?
Failure to look to the future may ensure that your own “future”
ends
34
Failure to Follow Through on
Budget Decisions
Difficult budgets require difficult decisions
Those decisions are hard to make and sometimes the
Board takes considerable public punishment for making
them
But once those decisions have been made, they must be
implemented – but often they are not
Positions are not cut
Expenditures are not reduced
Failure to follow through, no matter how good the excuse,
requires that the Board and superintendent readdresses the
budget
Bad news does not get better with age – if the cuts can’t be
made, develop a new plan early
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Your End Goal –
“The Bottom Line”
Focus on critical issues in your district
Recognize current problems that must be addressed
immediately with the understanding that “we” (Board, staff,
and community) share in the good and difficult times
36
Thank you