November 13, 2014

November 4, 2014 Election – Passage of Proposition 2 – Prop 98 Rainy Day Reserve – Public School System Stabilization Account (PSSSA) – Effective Budget Adoption

Full Repayment of Prop 98 Maintenance factor Prop 98 must be calculated using Test 1 Prop 98 must not be suspended Capital gains taxes must be greater than 8% of State General Fund revenues – All of the above conditions must be met.

If met, the Cap on Reserves would be no greater than twice the minimum MVSD 3% or 6% maximum reserve levels Exemption from County Superintendents – Statement substantiating extraordinary circumstances requiring higher reserve – Provide amounts associated with extraordinary circumstances – Provide documentation that no other resources are available – *Exemption limited to two of three consecutive years

 Financial flexibility to absorb unanticipated expenditures without significant disruption to educational programs.  Protection against exposure to significant one-time outlays such as disasters, lawsuits, or material audit findings.  Protection against the volatility of state revenues.  Protection against the volatility of property tax revenues for basic aid districts.

Why have reserves greater than the minimum? Cont…  Cash management / avoiding the cost of borrowing cash.  Protection against declining enrollment.  Protection against the expiration of parcel taxes.  Protection to cover increases in fixed and statutory costs.  Financial flexibility to shift resources as priorities set through the LCAP process change.  Planning for major projects such as information technology upgrades or deferred maintenance.

CalSTRS Rate Projections per Education Code – Employer Contribution at 8.88% at 10.73% at 12.58% at 14.43% at 16.28% at 18.13% at 19.1% Revised LCAP template to be approved November 14

Negotiations Federal Sequestration Reductions SMAA (Formerly Medi-Cal Administrative Activities – More information January 2015