1. 2011-12 Budget Update 2010-11 2nd Interim Assumptions
Presented February 8, 2011

2. Purpose:
Update on Budget
Confirm assumptions for nd Interim

3. State and National Economics
Economy is the key to everything
Business generates jobs, personal and corporate income, and capital gains
Government taxes those sources and funds education and other government services
Businesses are generating cash and profits, but they are not yet confident enough for expansion and hiring
The Feds plan to do less for states in terms of stimulus – no new funding is planned
But the state still has not recovered, and may not for a long time to come
Good news: Things have stopped getting worse and there is some improvement
Bad news: Full recovery may take until 2016, a year longer than was estimated last year
Slide Content Courtesy of School Services of California

4. The Governor’s Challenges
New Governor, new approach, same lousy environment
The Governor faces the biggest deficit ever faced by any governor in US history
And he inherits huge economic problems and a divided Legislature
All of his proposals are opposed by someone:
Republicans oppose new taxes
Democrats oppose spending cuts
Taxpayers oppose more debt
Most experts are saying:
This Budget cannot be balanced without taxes, spending cuts and maybe some debt
Slide Content Courtesy of School Services of California

5. Proposition 98 and The Education Budget
Because of suspension, Prop 98 is not a factor in , except for marking the maintenance factor
For , there is no proposal to suspend Prop 98
But if the temporary taxes are not extended, Prop 98 drops by $2.3 billion
The governor indicates he expects education to take that hit
Additionally, another $6 billion in solutions would need to be found
With the extension of taxes education is ‘flat-funded’ for (though ‘flat funded’ is $19 per ADA less)
No midyear cuts are proposed, so we keep the funding level in the enacted Budget through
Mandates are funded to the tune of $89 million
The maintenance factor, to be collected in some future “good year”, continues to grow
Slide Content Courtesy of School Services of California

6. Prior-Year Budget “Solutions”
Ongoing state expenditures have been funded with one-time revenue from:
$17.4 billion in federal stimulus funds
$8.3 billion in higher taxes
$6.5 billion from accelerated tax collections
$2.1 billion from redevelopment agencies
$1.7 billion in accounting changes from Medi-Cal and state payroll
Solutions that make future deficits worse:
$14.6 billion in Economic Recovery Bonds
$ 7.6 billion from securitization of tobacco lawsuit settlement
$ 5.5 billion in loans from special funds and local governments
$ 2.4 billion from sale of state buildings and mandate deferrals
Slide Content Courtesy of School Services of California

7. Prior-Year Budget “Solutions”
Slide Content Courtesy of School Services of California

8. Slide Content Courtesy of School Services of California
The Budget Gap
Assumed Federal funds $3.6
Budgeted, but not realized savings $1.7
Proposition 22 savings $1.6
Sunset of Temporary Taxes $7.2
Expiration of Federal stimulus $4.0
Other-one-time solutions $3.4
Revenue decline $3.1
Workload increase $2.1
Slide Content Courtesy of School Services of California

9. The Proposition 98 Dilemma
According to the LAO, the Proposition 98 guarantee falls to $47.5 billion in from $49.7 billion in the current year
The expiration of temporary taxes drives down the guarantee
In addition, baseline cost adjustments (enrollment growth, cost-of-living adjustment [COLA], and backfilling the one-time deferral savings) would require an additional $3.2 billion
The Governor’s Budget proposes flat funding for K-12 education if the temporary taxes are extended
The Legislature has the authority to extend the taxes; however, the Governor is calling for voter approval instead
A June 2011 ballot measure is proposed
Slide Content Courtesy of School Services of California

10. 2010-11 2nd Interim Assumptions
We will incorporate what is recommended by our County Office of Education
$349 per ADA reduction in Revenue Limit income if the extension of temporary taxes does not pass
~$862,800 reduction each year in forward
We already designated (reserved) the ‘new’ revenue we thought might not materialize – it won’t. So we can remove that designation in forward.
We will have a larger ending fund balance in (since we had reserved $573,456) and then lower ending fund balances in the two subsequent years (since our revenue limit income is reduced by $862,800 in and $1,725,

11. 2010-11 2nd Interim Assumptions
Education Jobs Funds (Resource 3205) & ARRA SFSF (Resource 3200):
At 1st Interim in December, we budgeted to move expenses from Resource 0000 to Resources 3200 & 3205 one time
- Moving only budget caused 1xxx and 3xxx object codes in Resource
0000 to be overdrawn (since we did not move actual expenses at 1st
Interim)
- Will prepare and process journal entries to move those expenses to the
Federal resources one time – which will reduce expenses in Resource
0000
No change to 2nd Interim Assumptions –just updating board on actual change to move the actual expenses against the budgets we changed at 1st Interim

12. 2010-11 2nd Interim Assumptions
ADA of (same as 1st Interim)
Increase EIA revenue (Resource 7090) +$31,596
Increase Mandated Cost revenue (Resource 0070) +$26,775
Adjust other categoricals per SJCOE/CDE advice on updated budgets (TBD). Will be defined in the 2nd Interim Assumption document presented at our March meeting
Adjust Special Ed budget for change in funding for Mental Health - $8,500 impact to Jefferson ESD

13. Next Steps 2nd Interim presented at March board meeting
Negotiations are ongoing and will not be completed until after June election
Dana and Mindy will continue to provide updates on any changes
Will provide additional details (and update multi-year projection) when 2nd Interim is presented