EGEA PRESENTATION TO EGUSD SCHOOL BOARD JANUARY 17, 2012 Budgeting, Bargaining and its Effects

School Services Presentation  School Service presentation only focused on expenditures.  General agreement with exceptions on School Services expenditures report  Complete picture would have included revenues  EGEA’s major disagreement is over budgeting philosophy regarding revenue forecasts employed.

 EGEA acknowledges the difficulties we have all faced with cuts and the continued uncertainty in funding education, the huge increases in cost of health care, and the need for fiscal solvency.  EGEA also acknowledges the positive decisions that EGUSD has made since the economic difficulties starting in  Using Reserves and Federal Stimulus money in and to save people and programs  Creating an early retirement program to keep less senior employees  Collaborating on the 2 year agreement  Paying one time stipend, from Federal Jobs money Problem Solving during Difficult Times

However… The decisions that have been made the past year has caused great anxiety, resentment, distrust and the destruction of the positive relationship between the District and EGEA and between the District and its employees. WHY?

History  EGUSD projected a need to cut $60 million for and  EGUSD and EGEA signed a 2 year agreement  EGEA members sacrificed over $ 20 million PER YEAR in concessions including furlough days, compensation cuts, loss of lottery compensation, freeze in column, increased health care co-pays  In addition, class sizes were raised, programs were reduced leading to over 200 EGEA positions eliminated  EGEA members vote 89% to ratify agreement

Budget vs. Reality  District projected ending fund balance of around $15 million for (Original Budget)  District received federal jobs funds- allocates ½ to employees  State allocated an additional $17 million for Deferral  District ended with $46. 8 million ending fund balance (Unaudited Actuals)  District projections off by over $30 million

History  In the beginning of 2011, the District projected an additional $40 million loss of revenue for based on a projected Base Revenue Limit ADA cut of $679.  School Services only recommended using a cut of around $330 BRL ADA. Many Districts used this number, less, or no cuts.  The amount of actual cuts to the District for will be around $3 million dollars.  Projected $40 million in cuts. Reality $3 million.

Budget Projections Have Consequences  District presented Plan A (flat funding) and Plan B ($40 million cut). District acts on Plan B.  Board approved over $34 million Budget reductions in March includes class size 30-1, increased secondary class size, eliminated computer resource teachers, reduction in library and counseling services, health care cap and elimination of lottery compensation  Over 800 certificated staff received preliminary layoff notices- some with over 10 year experience in the District  Over 400 certificated staff are actually laid off  Fortunately, all the certificated employees had the opportunity to return after the state budget was signed.

Plan A  The District operated under plan B until State Budget was signed in June, then switched back to Plan A.  Plan A- If flat funding, maintain staffing levels, AND a Health Care Cap and the elimination of lottery compensation.  Even though the District received (will receive) over $45 million dollars in unanticipated revenue after we made our 2 year agreement and will have an ending fund balance of over $60 million, the District felt it necessary to continue to demand a health care cap and loss of lottery for the Contract.

Unrestricted Ending Fund Balance

Why?  What is the District’s rationale?  Have to PLAN for the worst and HOPE for the best.  The District’s hands are tied because of decreased state funding and increased cost in health. Here We Go Again  It is not planning for the worst- it is planning for the worst-worst, worse case  Important decisions are being made based on extreme and unrealistic projections

Projected Cuts vs Actual Cuts

Cuts in Funding

Cuts In Funding 2

What to Do Now?  EGEA understands the District has to plan for the uncertainty of the State budget based on possible cuts to education next year  EGEA understands the problems of increased cost in health care.  EGEA does NOT understand the continual use of extreme projections, that never come true, and lead to the continual threat of lay-offs, increased class sizes, reduction in important educational services and a health care cap.  Start protecting educational services and treat your employees with respect.

Current Economic Trends  “State’s jobless rate eases a bit - Unemployment in California is falling, as the economy seems to be emerging from its spring-summer slumber.”  - Sacramento Bee November 19, 2011  “Jobless rates drop- Regions is Lowest in 2 1/2 years…; State trend also good.” - Sacramento Bee December 17, 2011  “The job market is looking healthier, and UCLA forecasters say the California economy is finally kicking it up a notch.” - Sacramento Bee December

Economic Reports Legislative Analyst’s Office (LAO) November 11th Report  “By making very difficult budgetary decisions- including trigger cuts- the legislature and the Governor have strengthened the states fiscal condition considerably.”  $12.8 Billion budget problem for and  Forecast Proposition 98 minimum guarantee increase of $4 Billion for  Forecast Proposition 98 minimum guarantee increase of 4%-5 % for each of the next 5 years

Trigger Cuts California Department of Finance Revenue Forecast/Determination December 2011  Revenue shortfall for $2.2 billion and not $3.6 billion in LAO report  Trigger Cuts- $248 Home to School Transportation; $79.6 million Proposition 98  Around $3 million cut for EGUSD and not the projected$13-17 million cut

Governor’s Budget Proposal  Governor’s Proposed Budget January 2012  “California fiscal condition is improving. A year ago, the state faced an immediate $26.6 billion shortfall and future estimated annual budget gaps of $20 billion. This year the state faces a $9.2 billion budget problem and the future budget gaps of $5 billion or less.”  Tax increase or not  Depends of how state legislature acts  Given light of economic trends, recent economic data, the District needs to re-evaluate its extreme revenue projections.

Where Do We Go From Here?  We must recognize each other’s interests and positive intents.  We must double our efforts to reach an agreement before March 15 th to avoid lay-offs.  We should recognize an agreement as possible even without new taxes if more probable and realistic forecasts are employed.  We must not forget our own educational imperatives while dealing with budget restrictions.  EGEA has always been willing to do what it could to properly support the needs of the entire District and will continue to do so.