Transcript 2014-15 45-Day Budget Update Presentation

Ventura Unified School District
45 Day Budget Update
Themes for the State Budget
Overall budget policy decisions continue to be
reflective of slow but steady economic
improvement
State revenues surge for a variety of reasons,
but:
 The Department of Finance (DOF) lowers its forecast for 2015-16
Local Control Funding Formula (LCFF) funding levels significantly
 The revenue volatility is coming into play
 There are no statutory or constitutional guarantees for out-year Local
Control Funding Formula (LCFF) funding levels
The story is on the expenditure and reserve
side of the equation
Expenditures Increases
 California State Teachers’ Retirement System (CalSTRS)
contributions go up for employers, employees, and the state
beginning in 2014-15. The biggest impact is on the employer
contribution which will increase each year and represent a total
increase of 4.33% by 2016-17, the third year of the multiyear
projection
 Beginning in 2015-16, California Public Employees’ Retirement
System (CalPERS) rates increase
 Some districts are struggling with progress toward class-size
requirements
After six years of deficit spending and few salary
increases, budget stress is still a major factor
 Salary demands and poor understanding of the LCFF create pressure for
negotiations
Competing State Revenue Forecasts
 Like last year, the Administration’s revenue forecast was
lower than the forecast of the Legislative Analyst’s Office
(LAO), the Legislature’s fiscal advisor
 For 2013-14 and 2014-15 combined, the LAO forecast was $2.8
billion in additional revenues
 Both houses of the Legislature initially assumed the higher LAO
forecast and augmented 2014-15 expenditures accordingly
 Ultimately, however, the Budget Conference Committee adopted the
Administration’s revenue forecast and sent Governor Brown a
Budget based largely on his May Revision expenditure plan
 Postscript to 2013-14 revenues – in the end, the LAO’s
forecast was closer than the Administration’s, with
revenues coming in roughly $5 billion more than
budgeted
Proposition 30 Taxes Are Temporary
 Proposition 30, approved by voters in November 2012, temporarily
increased the state sales tax and income tax rates for high-income
earners to address state revenue shortfalls stemming from the Great
Recession
 The higher rates boosted revenues $7.1 billion in 2013-14 and are
forecast to provide $7.4 billion in 2014-15
 Unless extended by the voters, these higher taxes will expire as follows:
 The 0.25% sales tax increase expires in 2016 (i.e., the 2016-17 fiscal year)
 The personal income tax increase expires in 2018 (i.e., the 2018-19 fiscal year)
The Rest of the Budget
Major items in the non-Proposition 98 side of the
State Budget are:
 A contribution of $1.6 billion to the Budget Stabilization Account
in 2014-15, pursuant to Proposition 58
 $2.4 billion to fund Medi-Cal costs primarily due to
implementation of the Affordable Care Act (ACA)
 $872 million of Cap and Trade auction proceeds to help reduce
greenhouse gases
 $142.2 million each to the University of California and California
State University, the second installment of 5% annual increases
over four years
Major Proposition 98 Changes –
Deferrals
 The level of the Proposition 98 guarantee in the enacted State Budget
is the same as proposed in the Governor’s May Revision
 The Legislature, however, increased 2014-15 spending above the
May Revision by reducing funding for the buy back of apportionment
deferrals
 The Governor proposed to buy back all K-14 deferrals at a cost of
$6.1 billion ($5.5 billion for K-12 and $593 million for community colleges)
 The Legislature reduced the deferral buy back by $1 billion, expending
these funds instead on one-time and ongoing programs
 However, the 2014-15 State Budget includes a trigger provision tied to General
Fund revenues that directs revenue collections in excess of the forecast level to
be used to buy back the remaining deferrals
($900 million for K-12 and $94 million for community colleges)
2014-15 LCFF Funding Provisions
The adopted State Budget increases
gap funding for the LCFF in 2014-15
$4.75 billion in the final budget, up from $4.5
billion in the Governor’s Budget proposal
Gap closure is estimated at 29.56% in 2014-15
(per the DOF)
Combined with elimination of 12.0017% of the
gap in 2013-14, the new formula will be over
one-third of the way to full implementation after
the first two years
LCFF Increase
2014-15 LCFF growth provides an
estimated average increase in per-pupil
funding of 11.6%, or $803 per unit of ADA
As always, keep in mind that the LCFF
increases of individual LEAs can vary
significantly from the average
Amounts actually received range from
zero to just over 18%
VUSD Increase
8.93% or $597 per unit of ADA
Base Grant Entitlement Calculation
 2014-15 target entitlement calculation
 Grade span per-pupil grants are increased for the 0.85% statutory
cost-of-living adjustment (COLA) – unchanged from the May Revision
Factors
2013-14 Base Grant per ADA
COLA @ 0.85%
Base grants – 2014-15
K-3
4-6
7-8
9-12
$6,952
$7,056
$7,266
$8,419
$59
$60
$62
$72
$7,011
$7,116
$7,328
$8,491
Grade Span Adjustments
 Grade span adjustments (GSAs) for K-3 Class-Size Reduction (CSR) and 912 Career-Technical Education (CTE) are additions to the base grant
 CTE is unrestricted; class size GSA requires progress toward maximum site
average enrollment of 24 students in K-3 classes*
Factors
K-3
4-6
7-8
9-12
Base grants – 2014-15
$7,011
$7,116
$7,328
$8,491
Adjustment percentage
10.4% CSR
-
-
2.6% CTE
$729
-
-
$221
$7,740
$7,116
$7,328
$8,712
Adjustment amount
Adjusted grant per ADA
*Charter schools are not required to meet the maximum site average to receive K-3 GSA
Supplemental and Concentration Grants
 Supplemental and concentration grants are calculated based
on the percentage of district enrollment accounted for by
English learners (EL), free and reduced-price meal (FRPM)
program eligible students, and foster youth
Factors
K-3
4-6
7-8
9-12
Adjusted grant per ADA
$7,740
$7,116
$7,328
$8,712
20% supplemental grant
$1,548
$1,423
$1,466
$1,742
50% concentration grant
(for eligible students
exceeding 55% of
enrollment)
$3,870
$3,558
$3,664
$4,356
What Does the LCFF Mean for
Ventura Unified?
10
District Name – 2014-15
2014-15 LCFF
Per ADA Funding
Projected
2014-15 ADA
Projected 2014-15 LCFF
Total Revenue
$7,286
16,924
$123,309,149
CalSTRS Rate Increases – May Revision
 In a significant departure from his stated plan in January, Governor
Jerry Brown announced in May that he intended to fully fund
CalSTRS in about 30 years
 Contribution rate increases were proposed as follows:
 State rate increases 4.311% over three years
 Employer rate increases from 8.25% to 19.1% over seven years
 Employee rate increases from 8% to 10.25% over three years
 Education management stakeholders expressed concern that the
increase was too much, too soon
 CalSTRS testified that it could not yet accommodate two different
employee contribution rates (pre- and post- Public Employees’
Pension Reform Act [PEPRA])
 As a result of this feedback, the Legislature proposed a smaller
employer rate increase during the first three years and a uniform
employee rate for 2014-15
CalSTRS Rate Increases –
Schedule
 The final plan has a
smaller employer
contribution rate increase
in 2014-15 and consistent
increases up to final
implementation
 Once the statutory rates
are achieved, CalSTRS
will have the authority to
increase or decrease the
employer and state
contribution rates
Year
Employer
Pre-PEPRA
Employees
Post-PEPRA
Employees
2014-15
8.88%
8.15%
8.15%
2015-16
10.73%
9.20%
8.56%
2016-17
12.58%
10.25%
9.205%
2017-18
14.43%
10.25%
9.205%
2018-19
16.28%
10.25%
9.205%
2019-20
18.13%
10.25%
9.205%
2020-21
19.10%
10.25%
9.205%
CalPERS Rate Increases – Background
 With assets totaling more than $300 billion, CalPERS is the nation’s
largest public pension fund
 While not ideal, the CalPERS system is in a relatively strong funding
position
 Total Fund – 69.6% funded (as of June 30, 2012)
 Schools and community colleges – 80.5% funded (as of June 30, 2013)
 CalPERS is able to stay ahead of the curve because the Board has
some authority to increase rates
 In February 2014, CalPERS adopted new demographic assumptions
based on member longevity
 As a result, employer and state contribution rates will increase
 With new assumptions, CalPERS aims to fully fund the system –
eliminating the unfunded liability – in about 30 years
CalPERS Rate Increases – Actual and
Projected
 The employer contribution to CalPERS is increasing from 11.442% in 2013-14
to 11.771% in 2014-15
 “Classic” members continue to pay 7.00%
 New members pay 6.00%, which may fluctuate from year to year based on the PEPRA
requirement to pay half the normal cost rate
 Estimates of the resulting future contribution rate increases for school
employers are as follows:
Actual
Projected
2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21
11.771% 12.6%
15.0%
16.6%
18.2%
19.9%
20.4%
Next Steps
Now that the State Budget has been adopted, the
District needs to make budget adjustments within
45 days
 By Monday, August 4, 2014
Clarify assumptions
 Are revenue adjustments needed?
 LCFF gap closure increases from the May Revision
 Are expenditure adjustments needed?
 CalSTRS
General Fund
2014-15 Budget Changes Based on State Adopted Budget
VUSD Budget
Adoption
State Budget
Adoption
Difference
1. Local Control Funding Formula (LCFF)
28.05%
Estimated Impact of Gap
Funding Change
29.56%
$
122,787,579
$
123,309,149
$
521,570
2. Increased Lottery Revenue Estimate
Unrestricted - $126 to $128 / ADA
$
Restricted - $30 to $ 34 / ADA
$
2,409,100
573,600
$
$
2,447,400
650,100
$
$
38,300
76,500
$
636,370
Reduced Cost
$
$
434,847
434,847
Total General Fund Increase in Fund Balance
$
1,071,217
Total General Fund Budgeted Expenditures + Transfers Out
% Increase
$
154,030,200
0.70%
Additional Funding
3. Change in CalSTRS Estimate
$
9.500%
(6,662,985)
$
8.880%
(6,228,138)
Child Development Fund
State Preschool Program
Ventura Unified School District
Increase in Child Development Fund - State Preschool
2013-14 Rate
2014-15 Rate
$
$
Child Days of Enrollment
34.38 per child per day
36.10 5% Increase
32,207 per Contract
2013-14 Funding
2014-15 Funding
$
$
1,107,280
1,162,640
Increase
$
55,360