Transcript CASBO 2nd Session

California Association of
School Business Officials
Annual Conference 2008
Budget Update
Hoping for the Best—Planning for the Worst
Presented by:
Joel Montero, Chief Executive Officer
Anthony Bridges, Deputy Executive Officer
Barbara Dean, Deputy Administrative Officer
Roberta Mayor, Chief Management Analyst
Andy Prestage, Management Analyst
Overview
• Current state budget issues
• District budget issues
• Definition of “financially troubled”
• How to stay out of trouble
• California Budget Update??
• Question and answers
Basic Economics
• The national economy and state budget
• Lack of consumer confidence
• A correction in the housing market
• Construction and unemployment
• Proposition 93 and California politics
• Is it revenue or expense?
• The perfect storm???
Current State Budget Issues
• The January budget—state of emergency and 45 days
• Current-year and budget-year strategies
• The LAO analysis - February 22
• March 15 notices—August 2008—flexible??
• The status of Proposition 98
• Proposition 93
• Revenue collections - - - YTD $1.2 billion less than projected
• May Revise - - - any relief?
District Fortunes Rise and Fall with the Economy
• The number of qualified districts in the state is growing
• A district is qualified when it is determined that it may not be
able to meet its financial obligations in future fiscal years
• The number of negative certification districts is growing
• A district is negative when it is determined that it will not meet
its financial obligations in the current and future fiscal years
• The number of budget disapprovals by COEs appears to be
increasing
• The state’s budget forecasts create reasons for concern
District Fortunes Rise and Fall with the Economy
2007-08 first-interim certifications
• Positive
936
• Qualified
29
• Negative
7
versus
2007-08 second-interim certifications (Feb. 2008)
• Positive
491
• Qualified
308
• Negative
138
• Pending
38
District Fortunes Rise and Fall with the Economy
versus
2007-08 second-interim certifications (April 2008)
• Positive
849
• Qualified
107
• Negative
13
• Pending
3
So, what really occurred between these three
reporting points?
Seven-Year Comparison of Interim Certifications
Third Interim?
• The term “third interim report” does not exist in the
Education Code, but is often used to describe the
requirement in Section 42131(e)
• Legal requirements
• Governing Board of each district filing qualified or
negative certification at second interim shall provide
financial statement projections of the district’s fund and
cash balances to the County Superintendent
Third Interim – What is Required?
• Fund and cash balances
• Current-year projections
• All funds
• Time line
• No later than June 1
• Period ending April 30
• Reporting format
• No standard
• Work with county office
• Recommend using SACS software
end-of-year projection
Cash Management Strategies
• Internal borrowing between funds
• Ed Code 42603
• Last 120 days – pay back next fiscal year
• Borrowing from county office
• Ed Code 42621 and 42622
• Borrowing from County Treasurer
• Ed Code 42620
• Deadline is last Monday in April
What is “Financially Troubled?”
• A financially troubled district:
• May have a history of deficit spending
• May have qualified or negative interim reports
• May have its budget disapproved by the county office of
education (COE)
• May not be able to conform to multiyear projection standards
• May not have enough cash to meet its obligations
• Probably has poor oversight and monitoring of its finances
• May have all of the above!
• In short, a district that cannot meet state standards on its own
What Can Districts Do Now in Anticipation
of an Uncertain Fiscal Environment?
• Review the FCMAT Alert (www.fcmat.org):
• Plan—Current plus two years
• Review staffing impacts
• Update enrollment/ADA projections
• Spend restricted dollars first and conserve cash
• Identify one-time revenue and expense
• Delay making decisions regarding new ongoing costs
• Review health-and-welfare plans
What Can Districts Do Now in Anticipation
of an Uncertain Fiscal Environment?
• Review the FCMAT Alert (www.fcmat.org):
• Review contracted services
• Charge all programs and funds allowable indirect/direct
costs
• Use categorical flexibility options
• Review home-to-school transportation
• Update multiyear projections
• Build reserves
• Don’t panic
• Hope for the best—Plan for the worst
Failure to Follow Through on Budget Decisions
• Difficult budgets require difficult decisions
• The board may take considerable public criticism for making them
• Once the 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 the
board and Superintendent to revisit the budget
• Bad news does not get better with age – if the cuts can’t be made,
develop a new plan early
Budget Update—Where are we Today??
• The Governor’s January Budget
• The May Revision—May 14th (Teleconference May 16th)
• What We Know
• What We Don’t Know
CALIFORNIA ASSOCIATION of SCHOOL BUSINESS OFFICIALS
ANNUAL CONFERENCE 2008
Questions and Answers
For technical assistance or to download this
PowerPoint presentation,
visit www.fcmat.org