2016-17 Second Interim March 14, 2017

Statutory Requirements Public Disclosure of Financial Status: Budget by July 1 Two Interim Updates by Dec 15 and March 15 Interims provide opportunity to reflect changes since Budget Adoption and revised projections Must Certify Financial Condition Positive = Will meet financial obligations in current and two subsequent fiscal years Qualified = May not meet financial obligations in current and two subsequent fiscal years Negative = Will not meet financial obligations in current and one subsequent fiscal year Qualified and Negative require additional reporting and results in LACOE oversight interventions

Lynwood USD Second Interim Details Positive Certification We will have sufficient funds to meet financial obligations and maintain minimum 3% reserves in 2016-17 through 2018-19

Budget Preparation Timeline JUNE LCAP and Budget Adoption JUNE State Budget Adoption DECEMBER First Interim Adoption JANUARY Governor’s Budget Proposal FEBRUARY Budget Preparation Starts MARCH Second Interim Adoption MAY LCAP and Budget Public Hearings MAY Governor’s May Revision to the Budget Proposal JUNE LCAP and Budget Adoption

Areas of Significant Change from First Interim STRS and PERS Increases Average Daily Attendance 2017-18 Proposed Funding - 1.48% COLA Other Multi-year Considerations

STRS and PERS Increases Both PERS and STRS were significantly underfunded $80.4 billion shortfall State’s solution was to increase the State, employee, and employer contribution beginning in 2014-15 Employer contribution increases by the largest amount over 8 years and funds most of the shortfall State total increase is 4.311% over 3 years Employee total increase is between 2.10% and 1.105% over 3 years Will restore STRS and PERS shortfalls within 30 years In January, the Governor acknowledged the $80.4 billion shortfall within CalSTRS, but did not provide a proposal to address the shortfall CalSTRS is projected to run out of money in 2046 Difference for employee rates is for employees in plan prior to reform and after (benefits are slightly different)

STRS and PERS Increases General Fund Impact (millions) 13-14 14-15 15-16 16-17 17-18 18-19 19-20 20-21 STRS % 8.25% 8.88% 10.73% 12.58% 14.43% 16.28% 18.13% 19.20% PERS % (est.) 11.442% 11.771% 11.85% 13.89% 15.5% 17.1% 17.7% 18.6% 19.7% 20.4% 21.10% Annual Increase - $0.5 $1.3 $1.8 $1.7 $1.9 $1.2 Cumulative Increase $3.6 $5.3 $7.0 $7.2 $8.7 $9.0 $10.0 $10.2 Compounded Increase $2.3 $5.9 $11.2 $18.2 $18.4 $26.9 $27.5 $36.9 $37.7 In January, the Governor acknowledged the $80.4 billion shortfall within CalSTRS, but did not provide a proposal to address the shortfall CalSTRS is projected to run out of money in 2046

Average Daily Attendance Declining enrollment trend is projected to continue District is paid on greater of current or prior year’s ADA *funded based on prior year ADA 2015-16 2016-17 2017-18 2018-19 14,022 13,648* 13,460*

Average Daily Attendance Each ADA generates approximately $11,000 in unrestricted funding 2017-18 loss in funding is $4.1 million 2017-18 and 2018-19 projections assume staffing is aligned with staffing ratios 2017-18 cost savings of $2.5 million 2018-19 cost savings of $1.4 million

2017-18 Governor’s Budget Proposal 2017-18 projected Statewide revenues are now $953 million less than previously projected 1.48% COLA funded only Additional increases in funding that were previously proposed are eliminated $3.9 million decrease in District revenues from what was projected at First Interim

2017-18 Governor’s Budget Proposal The 1.48% COLA is not sufficient to fund ongoing increases in salaries and benefits costs Description Amount 1.48% COLA- LCFF Increase $2.0 million Step and Column salaries increases (1.5%) $(1.5 million) STRS and PERS Increase $(1.7 million) Difference $(1.2 million)

2016-17 Second Interim Projections   2016-17 2017-18 2018-19 Revenues: 134,720,420 129,751,278 132,337,977 Expenditures 133,632,207 133,851,847 135,586,821 Increase/(Deficit) 1,088,213 (4,100,569) (3,248,844) Beginning Fund Balance 15,864,354 16,952,567 12,851,997 Ending Fund Balance 9,603,153 % Reserves 8.46% 6.75% 3.74%   2016-17 2017-18 2018-19 Revenues: 134,106,250 132,594,969 132,369,362 Expenditures 133,530,703 133,534,522 135,343,630 Increase/(Deficit) 575,547 (939,553) (2,974,268) Beginning Fund Balance 15,864,354 16,439,901 15,500,349 Ending Fund Balance 15,500,348 12,526,081 % Reserves 9.23% 5.91% 3.07% Salaries costs were scrubbed in 2016-17 - $250 thousand in savings from budgeted but unfilled positions – added back in 017-18 One month’s salaries and benefits are about $11.65 million

Other Considerations 2016-17 One-time funds that will not recur Discretionary funds - $2.9 million ERP - $650,000 College Readiness - $627,000 Educator Effectiveness Grant - $292,000 Increases in Special Education costs 2016-17 P-2 ADA Report Governor’s Budget Proposal May Revision Contributions to restrict programs dropped $500K for 2016-17 from First Interim Salaries budgeted for 2016-17 were adjusted for salaries savings from positions that were budgeted but not yet filled. These costs savings were reversed in the out years to reflect the assumption that they would eventually be filled. Restricted revenues were adjusted to reflect up-to-date state and federal rates and factors resulting in a decrease in revenues. This created deficit spending of $2 million in restricted programs. The net impact on the available reserves is a decrease of a little more than $1 million ($1.2 million) with the % reserves dropping from 9.23% to8.46%

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