1 West Contra Costa Unified School District December 17, First Interim Financial Report

2 First Interim Period Ending October 31, 2014 Updated Information on District Enrollment Latest Information from the State Utilizing the expenditure budget assumptions described in the Executive Summary and the LCFF Calculator provided by the State Information for all funds

Changes since Budget Adoption 3 Enrollment decline – Charter Schools – Demographic Estimate Change State rate of funding change toward the 8 year target Emerging information on the Local Control Funding Formula and Special Education Shift in STRS rate of increase

Enrollment Demographic Report New demographic study is incorporated in First Interim Previous report had growth of 1,348 students over the three year budget period of to New report has growth of 208 students over that same period This growth is offset by Charter enrollment estimates Charter School Estimate Three new charters entered the system after budget adoption and existing charter enrollment estimates were updated Enrollment decline estimate due to charters is 1,377 students Enrollment decline estimate due to charters 1,967 students As enrollment declines are estimated the number of students qualified toward Supplemental/Concentration funding also declines.

Enrollment Drives Revenue Comparison of Adopted Budget Assumption vs First Interim Report

Revenue Changes State Formulas impact revenue changes – The amount of funding as a % toward the 8 year full funding target has changed – Budget Adoption assumed District would receive 33.95% toward the target – First Interim assumes 20.68% Base year funding assumptions for LCFF related to former EIA grant shifts funding between Base and Supplemental Concentration

Revenue Changes 7

Target Calculations: West Contra Costa Unified 8 FactorsK Base Grant$7,012$7,116$7,328$8,491 Grade Span Adds$729$221 Supplemental $1,156$1,063$1,095$1,302 Concentration $762$701$722$858 Targeted Goal $9,659$8,880$9,145$10,872 These targets are dependent upon State action each year and are subject to change. Full implementation of target funding is anticipated in school year.

Funding Estimate: West Contra Costa Unified 9 Target total for Base and Supplemental Concentration is $270,387,838 ACTUAL Funding Estimate for Base and Supplemental Concentration is $211,530,354 This year the District is estimated to receive 78% of the Targeted funding amount. The amount attributed between Base and Supplemental Concentration is a formula and not broken out by grade span.

Local Control Funding Formula First Interim target vs Phase in entitlement calculation This funding level assumes the State will fund the target “gap” % % %

How far away is our target? 11 The LCFF has an 8 year implementation plan The Funding Target as of First Interim is $270 million The Estimated Funding $211 million – The Funding “Gap” is $59 million Each year the LCFF base grants are adjusted, but not necessarily funded. That will be a decision of the State Legislature based upon funds available.

12 Multi Year Projection First Interim Report Unrestricted General Fund Chart in Thousands

13 Multi Year Projection – Will meet 6% reserve with a combination of General and Special Reserve Funds – Will meet 3% reserve in General Fund and 2.4% in Special Reserve Fund – Will meet 3% reserve in General Fund and.70% in Special Reserve Fund

Assumptions Used for Multi-Year Projections Maintains …. – Programs currently in place – Exception of Grad Tutors – to be reconsidered in LCAP Increases – Driven costs on formulary such as step and column – LCAP costs by $3.2 million in – LCAP costs by $6.7 million in – Maintenance funding $4.8 million in accordance with State requirement beginning in Decreases – 34 Teaching staff based on estimated decline in enrollment in – 16 Teaching staff based on estimated decline in enrollment in Multi-Year Projection

Future Funding Estimates There is a higher level of volatility and risk in this funding model – Student Demographic Changes – Legislative Support must continue over time – Economic Stability and Growth

Expense Planning The District is deficit spending by an estimated $7.8 million as of First Interim Salary and Benefit Increases will be requested through bargaining Because of low funding over several years, demand is higher than the increased funding District must plan to reduce deficit spending

STRS Multi Year Rates 17

Retirement System Costs The increased cost to fund retirement system contributions will be escalating between $2.5 and $3 million per year This is roughly equivalent to a 2% raise for all employees The District pays for over 2300 retiree health care plans for those employees who were in a vesting status and/or retired prior to 2010 the annual cost is $18 million, which rises based upon health care premium rates

Structural Deficit Defined as having ongoing programs and financial commitments for a given year that exceed that particular year’s revenue Ending Fund Balance or Special Reserve Funds can be used to address the deficit 19

The Board needs to be aware of the use of one-time funds and prepare plans for reducing commitments as one-time funds are depleted the District has planned use of ending fund balance in the amount of $7.8 million the District has planned use of ending fund balance of $4.5 million plus Special Reserve of $4.3 million = $8.8 million the District has planned use of Special Reserve of $5.2 million 20 Structural Deficit

Reserves 3% Reserve for Economic Uncertainty is the standard for a District our size Due to the risk of volatility in funding the Board adopted a 6% reserve target with 3% in the General Fund and 3% in the Special Reserve fund With current revenue and expense assumptions that target will not be met in and By way of comparison a monthly payroll cost this school year can be as much as $12.2 million A 3% reserve is $9.7 million 21

Special Reserve Summary Special Reserve Fund – 17 First Interim Balance June 30, 2014$11,705, use of Special Reserve$(4,292,207) use of Special Reserve$(5,238,619) Special Reserve Fund Balance Projection June 2017 $2,174,342

Fund Review Review of Budget Fund Schedules – Schedule 2 Adult Ed, Child Development, Deferred Maintenance, Special Reserve – Schedule 3 Building, Capital Facility, County School Facility, Special Reserve for Capital Outlay – All funds are estimated to have positive ending fund and cash balances for 14-15, moving in to the budget year

Next Steps 24 December 2014First Interim Budget Report 2015 JanuaryGovernor’s January Budget JanuaryBudget Study Session FebruaryGovernor’s Budget Review FebruaryBudget Study Session MarchSecond Interim Budget Report MarchDistrict Local Control Accountability Plan (DLCAP) committee Meeting AprilDLCAP Committee Meeting MayGovernor’s May Revised Budget MayPublic Hearing for LCAP JuneAdopt Budget and LCAP Financial reports available on the web