1. Governor’s Proposed Budget & Considerations Under Study 2010-2012 Upland Unified School District January 12, 2010 rev. 1/19/10

2. GOVERNOR’S PROPOSED BUDGET January 8, 2010  “Proposal protects education” Q: Does the music match the words? A: It depends…  No mid-year cuts to K-14, in spite of a major budget gap  Prop 98 guarantee funded in 2009-10 & 2010-11, but the formula leads to cuts of $2 billion in 2010-11 – real cuts must be made  Proposal promises to “fully fund” the statutory COLA, but COLA is actually negative and results in a funding loss  Higher costs + Loss of one-time revenue  BOTTOM LINE: The assumptions upon which this report have been prepared appear to be in-line with the Governor’s initial budget proposal until more is known

3. GOVERNOR’S PROPOSED BUDGET The devil’s in the details... This proposal includes:  Imposes cuts for central office administrative costs  Eliminates the regulations giving laid off teachers the first priority in substitute assignments at their per diem rate  Moves the March 15 th layoff notice provision to 60 days after adoption or amendment of the state budget  Changes in the law that would allow the LEA to lay off, assign, reassign, transfer, and rehire teachers without regard to seniority, but “in the interest of retaining the best teachers.” (subject to local collective bargaining)  References to other comprehensive school reforms to eliminate “statutory and regulatory barriers to student achievement.” The proposal provides few clues on this.  “Eliminates barriers” to contracting out district services

4. GOVERNOR’S PROPOSED BUDGET Commentary  Legislative Analyst’s Office, January 12, 2010 The LAO stated that, while it is reasonable to assume the state will secure some new federal funding and flexibility, the chances that California will receive all of what the Governor seeks from Washington is almost non-existent. The LAO believes that the federal relief will be BILLIONS less than the Governor built into his budget proposal.  School Services of California, January 12, 2010 Based on information provided by California’s Department of Finance, revenue limits could be reduced by an additional $201 per ADA for unified districts on top of the negative COLA and deficit factor.

5. First Interim Budget (Dec. 2009) 2009-102010-112011-12 Revenues$83,056,528$85,990,733$86,019,486 Expenditures$96,694,067$90,995,982$86,242,974 Increase/Decrease In Fund Balance ($13,637,539)($5,005,249)($223,488) Beginning Fund Balance$21,854,621$8,217,082$3,221,833 Ending Balance$8,217,082$3,211,833$298,8345 Less: Restricted Reserves($7,421,428)($2,879,879)($2,737,289) Unrestricted Balance$795,654$331,954$251,056 Solvency Solutions Needed for Positive Ending Balance $9,652,187$8,048,861$4,610,418 The $12 million question: How will we make this next round of crippling cuts??? The $12 million answer: Through a combination of Cabinet Cuts, Board Decisions and Negotiated Solutions.

6. Level 1: Cabinet Funding Decisions BUDGET ACTION2009-102010-112011-12 Spending Freeze $150,000-0- Utilize ARRA – federal stimulus funds $2,716,000$1,389,383-0- Utilize State Categorical “Tier III” provision -0-$1,328,391$1,000,000 Utilize “Categorical “Sweep” provision (07-08 balances) $1,100,000$1,000,000$690,000 D.O. administrative staff cuts and reallocations $295,000 Eliminate state categorical contribution to summer school (federal funds only) -0-$161,000 Reduce deferred maintenance transfer $100,000 TOTAL$4,361,000$4,273,774$2,051,000

7. Level 2: Board Considerations CONSIDERATION2010-112011-12 Increase from 24:1 to 29:1 in Grades K-3 (Estimate of 23 FTE) $825,133 Certificated bargaining unit retirement incentive (calculated based on 60% replacement) $450,000 Eliminate instrumental music program (2 FTE) $201,749 Eliminate elementary PE (3.6 FTE, 4 aides) $324,141 Freeze step and column salary increases for all employees (becomes a deferred expense) $700,000 Reduce district contribution to stipends for extra-curricular (current $446,000) $100,000

8. Level 2: Board Considerations cont. CONSIDERATION2010-112011-12 Eliminate district contribution toward County Probation Officer $25,000 Eliminate bus transportation at secondary schools $60,000 Reduce custodial services to every other night cleaning ( 1 FTE=$57,298) TBD Reduce health tech staffing at schools (1 FTE = $43,073) TBD Reduce school library techs (1 FTE = $21,488) TBD TARGET AMOUNT:$2,300,000

9. Level 3a: Negotiable Solutions Extend Current MOU Agreements through 2012 MOU AGREEMENT2010-112011-12 Increase average class size from 29 to 31 in Gr. 4-12 $795,000 Reduce work year by two days for all employees $500,000 TARGET AMOUNT $1,295,000

10. Level 3b: Negotiable Solutions New Considerations for 2010-12 CONSIDERATION2010-112011-12 Further cut work year for all employees by up to 6 additional days (reduce student days from 180 to 175; plus eliminate 1 pre-service day) $250,000 per day 6 = $1.5 m Maintain current general fund contribution toward employee health and welfare benefits $908,804 Eliminate release time provision for grades 4-6 due to equitable class size in K-6 This savings is reported in Level 2: Elementary PE ($324,141) Eliminate step and column increases for the next two years $700,000 Across-the-board salary rollback (1% = $483,000) TBD TARGET AMOUNT:$3,000,000

11. SUMMARY OF CONSIDERATIONS 2010-112011-12 Estimated Target:$8,048,861$4,610,098 LEVEL 1: Cabinet Decisions$4,273,774$2,051,098 LEVEL 2: Board Target$2,300,000 LEVEL 3a: MOU Agreements$1,295,000 LEVEL 3b: Negotiable Target$3,000,000 Estimated Totals:$10,868,774$2,051,000 TOTAL: $12,919,774

12. SUMMARY OF CONSIDERATIONS For $15 million in reductions

13. Beware of the “Revenue Cliff”  If not addressed, the loss of State flexibility provisions, combined with the expenditure of Federal Stimulus Funds, will leave millions of dollars in ongoing, but unfunded, expenses.  Fiscal experts are predicting that the state economy will not fully recover until 2015. The prospect of mid-year as well as additional annual reductions must be considered.  Bold action, taken early, allows the district and its employees to weather the storm and control its destiny – while providing options to make positive corrections if the scenario improves.

14. Next Steps  Continue to work with: Employee Associations - Budget Road Shows at all schools/depts - Open negotiations Parent Groups, Community Partners - “Budget Watch” publication - Town Hall Meetings: January 21, 7 p.m. at UJHS February 1, 7 p.m. at PJHS  Deadlines: Education Code (42127, 42130) By March 15, 2010: Adopt 2 nd Interim Budget By June 30, 2010: Adopt Final District Budget for 2010/11 thru 2012/13

15. E-mail your ideas and questions to: budget@upland.k12.ca.us