Second Interim Report March 19, 2015 Lagunitas School District

Agenda State Budget Process Key Assumptions LCFF, Budget and MYP Prudence and Next Steps

State Budget Process January Governor’s proposed budget for budget year February Legislative Analyst review with comments April Statutory COLA recalculated May “May Revise” reflects tax adjustments June 15 (or later) Final adopted State budget COLAs, “gap” funding Potential additional programs, or funding changes November Legislative Analyst Report (LAO Report) Projections for next year based on tax collections and economic predictors Governor’s proposed budget for next budget year…

Local Control Funding Formula (no more RL) Beginning fiscal year 2013-14, K-12 finance system is replaced with a new Local Control Funding Formula (LCFF). For school districts and charter schools, the LCFF creates base, supplemental, and concentration grants in place of most previously existing K-12 revenues, including revenue limits and most state categorical programs. Lagunitas School District will no longer have state revenues such as, but not limited to, Class Size Reduction (CSR), Economic Impact Aid (EIA), Tier III programs and Transportation. In addition, major revenue sources such as one-time Common Core will be expiring in 2014-15

Basic Aid vs LCFF District is entitled to a calculated Entitlement Comprised of property taxes and State Aid If Property taxes fill the bucket, and overflow, the district keeps the overflow $$ and doesn’t need State Aid District is entitled to a calculated Entitlement Comprised of property taxes and State Aid When property taxes don’t fill the bucket, the State makes up the shortfall with State Aid

Lagunitas SD Still Basic Aid In 2013-14, property taxes were greater than the calculated LCFF entitlement, so property taxes overflowed the bucket and the district was better off than with LCFF funding From 2015-16 to 2016-17, the increases in LCFF funding are expected to exceed the increases in property taxes, so the difference between the two funding models tightens Estimating that the District will continue to be funded through property taxes in the current and subsequent years But given the volatility of predicting property tax increases , ADA changes and “gap funding” percents, the District could be funded by property taxes or LCFF State Aid by 2016-17 The District will get whichever funding mechanism provides more dollars; there is no ‘penalty’ for not being basic aid

Key Budget Assumptions All step and column adjustments, vacancies and hired staff are reflected in budget Using current year P-1 ADA Using LCFF funding formula, including 0.85% COLA and 29.15% “gap” funding for current year Property Taxes per info from County of Marin Current level of allocated SELPA revenues included All prior categorical program revenues and costs that are now part of LCFF (transportation, EIA, Tier III) have been moved to Unrestricted General Fund All K-3 class sizes are assumed to be at, or making proportional progress toward, 24:1 for GSA funding Increased STRS and PERS rates, per State Budget

LCFF Components Grade span base grants Add-ons for K-3 CSR, called Grade Span Adjustments (GSA) Every site must average no more than 24:1 by target date, and make “proportional” progress toward that goal every year, or have alternative contract language in place Even basic aid districts are expected to comply Supplemental grants – 20% additional Concentration grants – 50% additional of unduplicated count above 55% Our unduplicated percent is estimated 19% for 2014-15

Second Interim Budget

Changes Since First Interim Small changes since First Interim

Total General Fund Revenues Almost all of the district’s revenues are property taxes or parcel taxes

Total General Fund Expenditures Salaries and Benefits Total 75% of Total Expenditures and 82% of Unrestricted Expenditures Only

Education Protection Act (EPA) EPA expenditures, while part of State Aid for LCFF districts, is additional funding for basic aid districts

Contributions to Restricted Programs The Unrestricted General Fund contributes to the food services program, over and above the level of funding provided by the state and federal government, and food sales

Multi-Year Assumptions LCFF – used DOF/FCMAT gap funding rather than SSC District assumed to be basic aid in 2016-17 by only $10,000 Flat ADA and enrollment assumed Step and Column included One FTE teacher will be funded from parcel tax revenues instead of general purpose funds (i.e. property taxes) in 2015-16 & 2016-17 Increased STRS costs by 1.85% and PERS costs by .83%/2.4% of salaries, each year Removed one-time revenues and expenditures

STRS and PERS Required Increases Regardless of additional revenues in the future, the State- required contributions to employee retirement systems are escalating

LCFF Supplemental/Concentration Funds The MYP includes additional General Purpose funding in the LCFF Funding revenue line Assumed property tax increases of 3.5% and 3.0% each year New Supplemental/Concentration targeted funds to prioritize through LCAP process are part of this total gap funded increase Total Supplemental/Concentration funding (MPP - minimal proportionality percentage) is to go toward providing services to the almost 19% identified students But, these don’t have to be “new” expenditures; the District already provides resources to these students in the form of aides, English Learner (EL) services, and former EIA expenditures

Deficit Spending Trends The District has been deficit spending many of the last years This will need to stop soon District finance committee has been working to identify ways to balance the budget going forward

Multi-Year Projections (MYP)

MYP Assumption Footnotes

Property Tax Changes Property taxes are beginning to increase at a greater rate; however, care must be taken to not be overly aggressive in assumptions

Other Funds All funds are projected to end with a positive fund balance

Uncertainties and Prudence Flat Enrollment and ADA Affordable Care Act (ACA) Future textbook adoptions with no designated “textbook” monies Eventual downturn in the economy (every 8-10 years whether we like it or not) Keep larger than required reserves for unpredictable annual gap funding or changes in property taxes District has a 3% set-aside for this purpose Proposition 30 taxes are set to expire: Sales tax of .25% increase expires in 2016 (2016-17 fiscal year) Personal income tax increase in 2018 (2018-19 fiscal year) Deal with volatility through increased reserves and/or conservative revenue assumptions

Second Interim Certification Per AB 1200 The Second Interim projection indicates that, as defined in AB 1200, “the district may not be able to meet its financial obligations for the current fiscal year and subsequent two years.” The District is self-certifying as “Qualified”

Next Steps May Revise of the Governor’s budget proposal will update COLAs, gap funding, program changes and provide further direction A “third interim” look at the budget will happen in May LCAP and Budget adoption in June

Questions