1. CASBO 2016 Conference “Will New LCFF Base Revenues be Sufficient to Fund Your District's New Annual Costs?” Increasing Costs for New and Ongoing State & Federal Statutes, Regulations, and Policies Govern How Districts Use LCFF Dollars An Initiative of the California School Funding Coalition 1

2. Topics for Today’s Discussion  As LCFF Base revenue increases stabilize, will future revenues emulate the COLA increases of the past?  New and substantial “must fund expenditures” are being veiled by record revenue increases.  Multi-year projections indicate base revenues may be insufficient to pay for new expenditures.  Demonstrate tool which clearly “illustrates” the disparity between new base revenues and new costs.  Advocacy – “Ask” your legislators to begin the conversation of addressing the insufficiency of LCFF base funding now, not later. 2

3. 2013-14 Governor’s Budget Summary Development of the LCFF was guided by six principles: 1.Creating a funding mechanism that is equitable, easy to understand, and focused on the needs of students. 2.Implementing the formula in concert with funding increases for K ‑ 12 education. 3.Phasing in the formula over several years. 4. Paying schools back for deferrals and forgone cost ‑ of ‑ living adjustments through restoration of the deficit factor, and funding annual cost ‑ of ‑ living adjustments going forward. 5. Allow schools maximum flexibility in allocating resources to meet local needs. 6. Hold schools accountable for academic and fiscal outcomes. Source: 2013-14 Governor’s Budget Summary; pages 17,18; January 2013 3

4. Multi-Year Budget Projections – Developing Scenarios to Anticipate Future Revenues and Expenditures Steps for Developing Multi-Year Projections:  Determine - “Projected Revenues”  Include - “Must Fund Expenditures”  Analyze - “Projected Revenues” compared to “Must Fund Expenditures”  Develop - List of “Want to Fund Expenditures”  Establish - “Want to Fund” Priorities 4

5. Which will increase more over the next… Two Years? Four Years? Six Years? New LCFF Base Revenues Or New Annual Costs 5

6. Annual increases are based on the % of the “Gap to Target” funded; with the Gap % determined by the Governor/Legislature Annual increase has grown larger each year Will growth increases stabilize and emulate COLA increases as in pre-LCFF years? How will a Prop 30 replacement impact Revenues? 6 New LCFF Base Revenues

7. Increases in LCFF Base Revenue for Years One, Two, and Three 41,000 ADA; Average Annual Growth 450 7

8. Projections for Increases in Base Revenue for Future Years Department of Finance’s Projected Gap % 41,000 ADA; Avg. Growth 450 8 Why are increases smaller? Prior Years Extraordinary State Revenues Prior Years Statutory Paybacks Phasing out of Proposition 30 30% 12% 49% 52% 45% 6% 34% COLA

9. Projections for Increases in Base Revenue with Prop 30 Replacement Department of Finance’s Projected Gap % 41,000 ADA; Avg. Growth 450 9 COLA “Prop 30 Replacement” – Revenue projection based on avg. of $7B, using LAO est. revenue range of $5B to $12B; Upon initiative qualifying, a more detailed analysis will be released by LAO

10. Projections for Increases in Base Revenue Department of Finance’s Projected Gap % 41,000 ADA; Avg. Growth 0 10 30% 12% 49% 52% 45% 6% 34% COLA

11. Projections for Increases in Base Revenue with Prop 30 Replacement Department of Finance’s Projected Gap % 41,000 ADA; Avg. Growth 0 11 30% 12% 49% 52% 45% 6% 34% COLA “Prop 30 Replacement” – Revenue projection based on avg. of $7B, using LAO est. revenue range of $5B to $12B; Upon initiative qualifying, a more detailed analysis will be released by LAO

12. New State & Federal policies and programs implemented since the LCFF with “must fund” expenditures. Several “must fund” expenditures are increasing at annual % rates exceeding the cost-of-living (COLA). Certain new policies define in statutes “must fund” expenditures for 6 years or more. 12 New Annual Costs

13. New & Ongoing “Must Fund” Expenditures 13 LCFF Base Dollars LCFF Base Dollars Facilities Sick Leave Transportation Cap on Reserves The New Categoricals?

14. Three of the “Big 4” - Controlled by New Policies & Economic Forces 14 Total Compensation Salary Health Benefits Retirement National Average Annual Increase 5% to 8% Minimum Wage Mandates Salary Floor $15 for January 2022 COLA beyond STRS/PERS Mandated Employer Rate Increases to 19% for 20/21

15. STRS & PERS Five more years of significant annual employer increases Annual increases consume 25% to 100% of future annual increases in LCFF base revenue 15

16. Health Benefits National average annual increases range from 5% to 8% 16

17. Health Benefits - 2013 Rx Cost Increase 8x Greater than Inflation 17

18. Minimum Wage Adjustments - Statutorily establishes salary schedule floor and future increases - Fiscal impact varies by region Considerations for Evaluating Implementation Strategies Impact on the Total Compensation Package Varying Effect on Employee Groups Competition for Qualified Employees Union Perspective - Ripple Effect and Salaried Employees Impact of 2 x $ Minimum Wage = Exempt Threshold 18

19. Special Education – Local LCFF Base Dollars Fund 60% of Extra Cost 19

20. 20 Special Education – Total Expenditures for Extra Costs By Funding Source

21. Special Education – Growth in students requiring high cost services 21

22. New California Standards, Assessments, and Accountability Technology - Computer Adapted Assessment System Sufficient working computers for testing Robust and reliable network hardware for Internet access Appropriate and adequate support staff to maintain hardware Set asides to refresh existing hardware, infrastructure, and fund future technology due to growth Curriculum and Instruction - New State Standards Costs for textbooks aligned with new state standards Implementing additional new state standards and curriculum Ongoing Staff development New costs for enrollment growth 22

23. Other New or Ongoing “Must Fund” Expenditures 23 Several more are being considered during this legislative session

24. Projected Annual Expenditure Increases 24

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29. Share Your District’s Story Show that new LCFF Base revenues are insufficient - Develop detailed MYPs using DoF revenue projections and all “must fund” expenditures for the next four years or more. Explain the “must fund” expenditures - Cite the new policy/statute creating the “must fund”; explaining why each year they are increasing in cost. Advocate the need for sufficient LCFF Base funding - Ask your legislators to begin the conversation of addressing the insufficiency of LCFF base funding now, not later. Educate your employees, parents, and community groups as to the loss of Local Control over LCFF dollars and the insufficiency of Base funding to pay for new costs 29

30. “Ask your legislators to begin the conversation of addressing the insufficiency of LCFF base funding now, not later” Questions Ideas For more information contact: SteveWard@cusd.com 559-647-2562 cell 30