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
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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
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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
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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
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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
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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
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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
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Thank you