1. Morongo Unified School District 2014-2015 Proposed Budget
Board Work/Study
June 3, 2014

2. The May Revision in Broad Strokes
In January, education was the big winner, and in May that is still true, but with few additional gains
The state recognizes an additional increase of $2.4 billion in revenues, most of which are committed to:
Growth in the cost of Medi-Cal
Establishment of a Rainy Day Fund
No major increases are proposed for any area of the State Budget other than Medi-Cal, as compared to January
The combination of higher revenues and greater local control still offers significant prospects for improvement in education – but no real gains beyond the January proposals
The LCFF provides widely disparate increases
We expect increases to range from 0% to 20%, with an average of about 11% – that is a huge difference
2014 School Services of California, Inc.

3. 2014-15 Local Control Funding Formula
May Revision does not change the January proposal
$4.5 billion for continued implementation of the LCFF
Funding is estimated to close the gap between funding levels and LCFF full implementation targets by about 28%
Combined with elimination of 11.78% of the gap in , the new formula would be over one-third of the way toward full implementation after the first two years
LCFF growth provides an estimated average increase in per-pupil funding at May Revision of 10.7%, or $737 per average daily attendance (ADA)
Individual LEA experiences will vary
© 2014 School Services of California, Inc.

4. Governor’s Proposal for Funding CalSTRS
2-20
Governor’s Proposal for Funding CalSTRS
The Governor’s May Revision proposes to fully fund CalSTRS by
Plan kicks in immediately, beginning July 1, 2014
Contribution rate increases proposed for all three parties:
State contribution rate to increase from the current rate of % to 6.3% over three years
In addition, the state will continue to pay 2.5% of payroll annually for a supplemental inflation protection program
Employer contribution rate to increase from 8.25% to 19.1% over seven years (14-15 to 20-21)
Employee contribution rate to increase from 8% to 10.25% over three years
© 2014 School Services of California, Inc.

5. Potential CalSTRS Rate Increases
CalSTRS contribution rates and benefit levels are set in statute
Legislation is required to change the rates
Accelerating the timeframe to address the shortfall from to , the Governor proposes immediate contribution rate increases
Pre-PEPRA
Post-PEPRA
Year
Employer
Employee
State
Current
8.25%
8.00%
3.041%
Proposed
9.50%
8.15%
8.08%
3.45%
11.10%
9.20%
8.56%
4.89%
12.70%
10.25%
9.21%
6.33%
14.30%
15.90%
17.50%
19.10%

6. Potential CalPERS Rate Increases
The employer contribution to the California Public Employees’ Retirement System (CalPERS) for is %
“Classic” members continue to pay 7.00%
New members pay 6.00%, which may fluctuate from year to year
Employers should continue to rely on the estimated rates for and beyond
Actual
Projected
11.442%
11.771%
12.6%
15.0%
16.6%
18.2%
19.9%
20.4%
2014 School Services of California, Inc.

7. Expiration of Proposition 30 Taxes
2-21
Expiration of Proposition 30 Taxes
Proposition 30, approved by voters in November 2012, temporarily increased the state sales tax and income tax rates for high-income earners
This proposal was advanced by the Governor to address state revenue shortfalls stemming from the Great Recession
Unless extended by the voters, these higher taxes will expire as follows:
The 0.25% sales tax increase expires in 2016 (i.e., the fiscal year)
The personal income tax increase expires in 2018 (i.e., the fiscal year)
By , the state will no longer collect an estimated $7 billion related to the Proposition 30 tax rates
The loss of these revenues will suppress the growth in Proposition 98 under either a Test 1 or a Test 3 year
© 2014 School Services of California, Inc.

8. Unrestricted Fund Balance – Statewide Averages
5-12
Unrestricted Fund Balance – Statewide Averages
Unrestricted General Fund Balance Plus Fund 17 Special Reserve as a Percent of Total General Fund Expenditures
Unified School Districts
14.81%
Elementary School Districts
23.03%
High School Districts
19.27%
Source: CDE state-certified data
Reserve levels have remained relatively flat from through
This reflects prudent fiscal management during times of reduced funding.
Reserves help you through a tough financial time – but only temporarily since they are one-time funds.
2014 School Services of California, Inc.

9. Assumptions 5% on-going increase in salary
STRS and PERS rates will increase for the District in the Budget year.
Step and Column increases for all employees eligible for those increases:
Certificated - $457,736
Classified - $129,680
Management - $56,326
Health and Welfare Benefits increases
Slight Enrollment increases (50 students) with the corresponding increase in Average Daily Attendance (ADA).
English/language arts (ELA) adoption is in expenditures for
Staffing increases due to enrollment, K-3 Grade Span Adjustment (Class Size Reduction), and program adjustments (Early Intervention, Intervention, Special Education)
(2) On-Campus Intervention Teachers (one at each high school)
A computer lab aide at each school (15)
Health Technicians (3)
Autism Teacher at East-end of District
Special Education Program Specialist
Behavior Intervention Specialist
Class Size Reduction teachers to bring sites at or near 24:1 site average in Kindergarten-Third grades
Two high school math teachers
Reserves are not available one time expenditures

11. LCFF Calculator…..v15.2a (May 15, 2014)
First row is Calculated LCFF Target….14-15, 15-16, with stead but small increases each year
Third row is the LCFF Floor…..showing the same

12. LCFF Calculator…..v15.2a (May 15, 2014)
The summary provides a side-by-side comparison of the four LCFF years.
The election and post election years are strong with $6.9 and $6.6 million increases.
The third year (second out year) shows a much more modest growth of $3.4 million
This slower growth definitely affected the District ending balance for
The Education Protection Account (EPA) affects the funding for schools in a cash flow manner only. The EPA funds are paid to the District at the end of each quarter to restore funding taken at the beginning of the quarter.
Property tax estimates remain fairly stable
You can see the amount of LCAP funding removed from the total “Phase-In Entitlement” to provide categorical funding for the three identified groups in the LCAP.

14. Revenue
The State Budget proposal included growth of approximately 10.7%
You can see it in the “LCFF Sources” line of the budget:
13-14……$53,693,270.00
14-15……$60,569,660.00
Total increase of…….$6,876,390.00
As you continue down column F you can see the increase is quickly negated by lost revenue in “Federal,” “Other State Revenue,” and “Other Local Revenue.”
The actual “Total Revenue” increase is……$2,998, (remember the 5.77% compensation increase in will increase expenditures by $2,863,625.00)
The District started the year with Transportation as a add-on of $2,152, The Governor pushed Transportation into the LCFF as part of the formula before the “Phase-In” calculation and the District suffered a $700, loss.
Special Education was another big loser with losses in both Federal and State Funding streams.
Minus the LCAP funding of $4,302,065 (LCAP funding is removed from the total base funding…$60.5 million - $4.3 million)(LCAP is $5 million in and $3.7 million in 16-17)

17. Expenditures and Contributions
Transportation
13-14 at $2.1 million Costs at $3.2 million
14-15 at $1.4 million Costs at $3.5 million
Loss of $700K + Increase of $300K = $1 million of additional funding
 Special Education
Increase in cost to $550,090 including the $264,105 shift to “disproportionality” funding
Special Education Transportation $129,000 increase to 14-15
Additional Staffing (approximate increase of $1.2 million)
(2) On-Campus Intervention Teachers (one at each high school)
A computer lab aide at each school (15)
Health Technicians (3)
Autism Teacher at East-end of District
Special Education Program Specialist
Behavior Intervention Specialist
Class Size Reduction teachers to bring sites at or near 24:1 site average in Kindergarten-Third grades
Two high school math teachers
English/language arts adoption $2.2 million in the 4000s

18. Expenditures and Contributions
5% on-going increase in salary approximately $2,863,625.00
STRS and PERS rates will increase for the District in the Budget year.
STRS $545,001 (8.25% to 9.50%)
STRS $1, (9.50% to 11.10%)
STRS $1,285,450 (11.10% to 12.70%) (19.10% by 20-21)
STRS total for three year budget - $2,849,644
PERS $23,168 (11.442% to %)
PERS $83,668 (11.771% to 12.6%)
PERS $166,437 (12.6% to 15%) (20.4% by 20-21)
14-15 Step and Column increases for all employees eligible for those increases:
Certificated - $457,736
Classified - $129,680
Management - $56,326
Health and Welfare Benefits increases are hard to calculate and could, potentially, be very expensive. Employees will begin to qualify for health care in the following 12 month benefit period. The system is designed to shift the financial burden for health care from Medi-Cal to employers for employees working part-time or using sub work to make an eight hour day.

20. Cash Flow and Ending Fund Balance
Cash is back and it is good…..  The State has returned to the traditional payment schedule (5% in July, 5% in Aug, and the rest of the months the District will receive 9%)
Beginning Cash in at $10.9 million… Ending Cash at $4.8 million
Ending Fund Balance has changed rather dramatically. The estimated ending balance for will increase by about $3.5 million at Unaudited Actuals time.
The District has spent a goodly portion of the reserve that kept the District healthy during the Recession.
The Ending Fund Balance is approximately 17% for if you include the estimated carryover balance of $3.5 million
The projected Ending Fund Balance for with the same carryover would drop to 11%.
The 17% Ending Fund Balance would give the District two months of expenditures as a reserve (if you include the 3% required reserve). This is the amount recommended by California School Boards Association.