1. Introduction to District Budgets Lodi Unified School District MARCH 8, 2011 Prepared by: Tim Hern & Staff

2. Topics What is a Budget Budget Forms Budget v. Cash (Money) How did we get Here AB 1200 AB 2756 Budget Time-line Expenditure, Revenues and Reserves Budget and Priorities

3. District Budgeting Operates Within a Set Framework

4. “ It’s clearly a budget. It’s got a lot of numbers in it.” — President George W. Bush Reuters, May 5, 2000 1

5. What is a Budget? First priority is to be fiscally sound: –Represents the total estimated revenues and the maximum expenditures authorized by the Board The budget must also balance: –The expectations with state and federal academic performance –Community expectations for services that schools should provide –Staff expectations around their compensation and working conditions –Board / District’s Strategic Plan with all other needs –The state’s legal requirements for fiscal solvency A budget is a living, breathing document. It is not concrete, it will change as the year progresses in both expenditures and revenues 2

6. Budget Forms? In simplest form: A proposed plan for revenues and expenditures for the following fiscal year In typical form: A proposed plan for revenues and expenditures in a format that meets county and state requirements In optimum form: A policy document to reflect the philosophy of the Board, the Administration, the Education Community A financial plan: To show where you've been and where you are going An operations guide: To guide administrative decisions and actions throughout the year A communications device: To share with the community the strengths and challenges of the instructional program 3

7. Money, Money, Money Money takes a variety of different forms in a budget: Revenues – includes general funds / unrestricted and categorical / restricted resources –Expenditures – one-time vs. ongoing, capital vs. noncapital, centralized vs. site level, – to name just a few But, bottom line, a budget is all about money –Good budgets add up financially and educationally Optimally expenditure are within +\- 2 % of any budget The right dollars are spent at the right time on the right stuff Budget is not cash –State deferrals (now 33.5%) have misaligned Budgeted Revenues Borrowing cash to meet budgeted expenses adds additional expense to operations and removes resources from the operational budget. Anticipated cost of TRAN $294,240 for two notes of $27,865,000 4

8. California School Finance Historical Timeline 1978 Proposition 13 2011 and beyond AB 1200 1979 Gann Limit 1983 Senate Bill 813 1984 State Lottery 1988 Proposition 98 1974 K-14 Collective Bargaining 1971 Serrano Priest 1972 Senate Bill 90 1992-95 Economic Recession 1995 Adoption of K3 CSR 1996-99 School Reforms 2000 Restored Deficit Funding Prop 39 2000 2003 Williams Settlement 2004 AB 825 Categorical Reform AB 2756 2004 Proposition 98 Suspended Another Suspension of Proposition 98? 1971 1979 1978 197219831984 1988 1992 1974 1996 1999 20002003 2004 1995 20082003 1991 5

9. Understanding the State’s Funding of Public Schools Revenues are limited (aka Revenue Limit) 1968—Lawsuit filed by attorneys representing parent, John Serrano, against Ivy Baker Priest, the State Treasurer at that time, for the state’s violation of the constitution’s “equal protection” rights of pupils  Revenue was largely funded through local property tax.  Higher property wealth districts generally had better educational opportunities than lower wealth districts 6

10. Understanding the State’s Funding of Public Schools, cont. 1972—SB 90 passed in response to the State Supreme Court ruling in the Serrano vs. Priest lawsuit.  Revenue limit controls were established with maximum revenues set at the current amount of general purpose state and local aid being received at that time. Unique Revenue Limit  Annual adjustments for inflation were applied. 7

11. Understanding the State’s Funding of Public Schools, cont. 1972—SB 90, cont.  A statutory formula was used to determine the amount of state aid, differences between the RL and state aid were made up with local property taxes.  Districts had the authority to levy additional local property taxes for unreimbursed mandates, such as unfunded Special Education costs. 8

12. Understanding the State’s Funding of Public Schools, cont. 1974--CA Superior Court ruled that the state must reduce funding inequities between districts to “considerably less than $100 per pupil” by 1981.  Districts who were able to meet the revenue limit without state aid were still to receive a minimum of $120* per ADA from the state (Basic Aid Districts) * As of 2003/04, the state meets this through state categorical funding. 9

13. Understanding the State’s Funding of Public Schools, cont. 1978—Proposition 13 enacted.  State reduced property taxes by an average of 60%.  General purpose tax revenues taken from property taxes capped at 1% and had to support all government agencies.  Changes to assessed values could occur through property sales and property improvements 10

14. Understanding the State’s Funding of Public Schools, cont. 1978—Proposition 13 enacted. (cont.)  Property values could be increased using the prior year’s CPI level, not to exceed 2% per year.  School districts no longer allowed to levy local property taxes for general purpose costs (mandated services including Special Education)  State now had to make up the difference between the revenue limit and local property taxes, including adjustments for inflation. 11

15. Understanding the State’s Funding of Public Schools, cont. 1979—Proposition 4, GANN Limits  State’s appropriation limit (spending) can not grow faster than inflation and the change in population.  Limited the state’s ability to fund districts beyond the established revenue limit formulas.  New educational programs, unfunded mandated programs, and greater equalization measures had to stay within the newly imposed limit. 12

16. Understanding the State’s Funding of Public Schools, cont. 1983—SB 813, school finance reform movement passed.  New programs added: longer school year & day, mentor teachers, increased salaries for new teachers, increased funding for instructional materials, and 10 th grade counseling  A statutory COLA formula for the revenue limit was created using the U.S. Department of Commerce’s Implicit Price Deflator  Districts under the statewide average revenue limit amount would receive equalization aid 13

17. Understanding the State’s Funding of Public Schools, cont. 1988--Proposition 98 was an initiative created by the educational community and passed by the voters. This is a constitutionally protected part of the state budget. Guaranteed minimum funding levels for K-14 public schools were established. 14

18. Understanding the State’s Funding of Public Schools, cont. Suspension, Maintenance Factor, and Restoration  Suspension of the minimum guaranteed funding level occurs when Test 3 is triggered based on lower than normal state revenues  Suspension can also occur at will by a 2/3 vote of the Legislature and the Governor’s signature 15

19. AB 1200 Oversight by County Office of Education and the State Superintendent of Public Instruction Including Stay and Rescind Authority given to a County appointed Fiscal Expert Budget must be submitted on State Forms Requires a Public Hearing before Adoption Within 45 days of State Budget adoption any major changes to the District adopted budget must be approved by the board. Requires the COE to Examine and determine if it meets the State Board of Education Standards and Criteria Determines if the District will meet its financial obligations in the fiscal year and multi-year Certifies Budget Positive, Qualified or Negative (Self Certification) Takes Corrective Steps to return district to a going concern Requires Unaudited Actual, Independent Audit, First and Second Interim Report 16

20. AB 2756 This bill gives County Offices of Education additional oversight authority over the LEA and strengthens AB 1200. The bill requires the district superintendent, chief business official, president of the school board, and any other member of the school board voting in support of a labor agreement to certify that the school district can meet the costs incurred during the term of the agreement. The county Superintendent of School has the authority to reject any labor agreement that is deemed to be fiscally unsound. Existing law provides standards and criteria to be used by local educational agencies in the development and management of annual budgets. This bill require the Superintendent of Public Instruction, the Controller, and the Director of the Department of Finance to update these standards and criteria. Gives authority to SPI to take control of School District, when a state loan is required, Appoint Trustee, suspend Board Authority (advise only) and Removal of District Superintendent 17

21. Budget Time-line July 1Fiscal Year Starts SeptemberUnaudited Actual Budget December 15Independent Audit to Board October 15First Interim Report (Multi-Year) January 10Governor’s Budget Budget Development Starts SBAC / Board defines priorities March 15Second Interim Report Multi-Year Based on Gov. Bud. May ReviseKnown Changes to the Gov. Bud. June 15Legislature to pass budget for Governors’ signature June 30 (no later than)Public Hearing and Board Approval Budget submitted to County Office SJCOEAccepts, warns, or rejects 18

22. Lodi Revenues 2009-10 Actual Base Revenue Limit 61.8% –of which 72% comes from state and –28% comes from local property tax Federal Revenue 10.9% Restricted –Special Ed –NCLB - RTTT –Vocational and Technology –Safe and Drug Free Schools Other State Revenue 24.7% Restricted and Unrestricted (Tier III Flexibility) –Special Ed –Home to School Transportation –Economic Impact Aid –Class Size Reduction –Lottery –QEIA –Categorical Other Local Revenues 2.5% –Fees for Service –Sales –Interest 19

23. Lodi Expenditures 2009-10 Actual $232,500,876.72 All Salaries and Benefits equal 87.789% 20

24. Reserves Reserves need to be transparent –They must define what they are intended for GASB 54 – In the age of deferrals, currently 33.5%, they are needed for cash flow –If they are used they are one time –They are mandated by the state –A 3% reserve does not cover 1 month of salary 21

25. District Priorities Core Supplemental Enhanced Resource Restricted (first)\Unrestricted The district must define core to have an effective budget. The budget directs limited resources to it own, state and federal defined priorities (Core). 22

26. Programs Affected by Categorical Reductions Tier I – No Reduction, No Flexibility After School Education and Safety Advancement via Individual Determination Child Development Child Nutrition Economic Impact Aid Federal Resources K-3 Class Size Reduction Pupil Transportation Quality Education Investment Act School Bus Replacement Special Education State Lottery, including Proposition 20 Tobacco Use Prevention Education (TUPE) Tier II – Funding Reduction, No Flexibility Adults in Correctional Facilities Ag Voc Ed Programs Apprentice Programs Charter School Facility Grants Foster Youth Educational Services English Language Acquisition Program Multi-Track Year Round Grant Program Partnership Academies 23

27. Programs Affected by Categorical Reductions Tier III – Reduction and Flexibility Administrator Training Program (AB 430) Adult Education Advanced Placement Grant Alternative Credentialing Arts and Music Block Grant Bilingual Teacher Training CAHSEE Intervention Grants CalSAFE Center for Civic Education Certificated Staff Mentoring Program Charter Schools Categorical Block Grant Child Oral Health Assessments COE Williams Audits Community Based English Tutoring (CBET) Community Day Schools Counselors, Grades 7-12 Deferred Maintenance Education Technology Gifted and Talented Education (GATE) High Priority Schools High School Coaching Training Indian Education Centers Immediate Intervention/ Underperforming Schools Program (II/USP) Instructional Materials Fund International Baccalaureate Math & Reading Training (SB 472) Morgan-Hart Class Size Reduction National Board Certification Incentive Peer Assistance and Review (PAR) Physical Education Teacher Recruitment Grants Professional Development Block Grant Pupil Retention Block Grant Readers for the Blind ROC/P SAIT and Corrective Actions School and Library Improvement Block Grant School Safety Block Grants (Carl Washington) School Safety Consolidated Competitive Grant Specialized Secondary Programs State Assessments (STAR, CAHSEE, CELDT, etc.) Supplemental Hourly Programs Targeted Instructional Improvement Block Grant Teacher Credentialing Block Grant Teacher Dismissal Apportionments 24