1. 2006/07 FIRST INTERIM FINANCIAL REPORT December 12, 2006

2. Our Mission is to: Accelerate gains in student performance. Provide safe, orderly & well-maintained schools. Strengthen parent, community, business & higher education support. Boost employee morale. Secure adequate funding for our schools. 1 2006/07 FIRST INTERIM FINANCIAL REPORT General Fund – Unrestricted Agenda Agenda  Purpose  Revenue Considerations … 2006/07  Expenditure Considerations … 2006/07  Major Assumptions … 2007/08 – 2008/09  Multi-Year Projections … 2006/07 – 2008/09  Targeted Ending Balance … 2006/07

3. Our Mission is to: Accelerate gains in student performance. Provide safe, orderly & well-maintained schools. Strengthen parent, community, business & higher education support. Boost employee morale. Secure adequate funding for our schools. 2 2006/07 FIRST INTERIM FINANCIAL REPORT General Fund – Unrestricted Purpose The Board Must Approve the District’s First Interim Financial Report on the Budget Status as of October 31, 2006  California Education Code 42130 Requires Approval by December 15, 2006 The Board is Also Required to Certify to the State That the District’s Projected Financial Condition is one of the Following:  Positive Certification... will be Able to Meet Financial Obligations  Qualified Certification … may not Meet its Financial Obligations  Negative Certification … will be Unable to Meet its Financial Obligations Recommend Positive Certification

4. Our Mission is to: Accelerate gains in student performance. Provide safe, orderly & well-maintained schools. Strengthen parent, community, business & higher education support. Boost employee morale. Secure adequate funding for our schools. 3 2006/07 FIRST INTERIM FINANCIAL REPORT General Fund – Unrestricted Revenue Considerations Actual Enrollment Declined Less Than Projected  Gained Back 580 Students Received the Planned State Funded COLA of 5.92% Obtained Additional Equalization Aid of $1.1m Unexpectedly Received Significant One-Time Mandated Cost Reimbursement Revenue of $39.0m

5. Our Mission is to: Accelerate gains in student performance. Provide safe, orderly & well-maintained schools. Strengthen parent, community, business & higher education support. Boost employee morale. Secure adequate funding for our schools. 4 2006/07 FIRST INTERIM FINANCIAL REPORT General Fund – Unrestricted Expenditure Considerations Provided for 5.78% Salary Increase Retroactive to 7/1/06 Achieved.78% Mid-Year Health and Welfare Benefits Cost Savings Made Additional Bus Replacement Deposit of $1.5m Using One- Time Mandated Cost Reimbursement Revenue Set Aside Special Reserve for $30.0m Mandated Cost Reimbursement Revenue  Must Anticipate Possible State Controller’s Office Audit

6. Our Mission is to: Accelerate gains in student performance. Provide safe, orderly & well-maintained schools. Strengthen parent, community, business & higher education support. Boost employee morale. Secure adequate funding for our schools. 5 2006/07 FIRST INTERIM FINANCIAL REPORT General Fund – Unrestricted Expenditure Considerations (Continued) Subsidizing Existing Programs - Unplanned Additional Needs  Special Education ………………………………………. $5.5m  Child Development ……………………………………... $2.0m  Community Day School (ALBA) ……………………….. $0.9m Funding Emergent Programs - New Requirements  School Site IT Support Teams ………………………….. $1.0m  Twain Satellite at Morse Site............................................ $0.6m  Arabic Program at Carver Site ………………………….. $0.6m Unbudgeted Expenditure Growth … $10.6m

7. Our Mission is to: Accelerate gains in student performance. Provide safe, orderly & well-maintained schools. Strengthen parent, community, business & higher education support. Boost employee morale. Secure adequate funding for our schools. 6 2006/07 FIRST INTERIM FINANCIAL REPORT General Fund – Unrestricted Major Assumptions – 2007/08 & 2008/09 Factored in Forecasted Enrollment Decline for Seventh (2007/08) & Eighth (2008/09) Consecutive years Considered Projected State Funded COLA  Applied Fall 2006 “School Services CA” Dartboard  * COLA Subject to Drop to 3% - 4% Range Based on new Dept. of Commerce Data  * Legislative Analyst Office November 2006 Report Projects 3.8%  Will Update as Appropriate in Second Interim Report 2007/08 2008/09 -2,000 -2,000 +4.7% * +2.8%

8. Our Mission is to: Accelerate gains in student performance. Provide safe, orderly & well-maintained schools. Strengthen parent, community, business & higher education support. Boost employee morale. Secure adequate funding for our schools. 7 2006/07 FIRST INTERIM FINANCIAL REPORT General Fund – Unrestricted Major Assumptions – 2007/08 & 2008/09 Planned for Annual Health & Welfare Cost Increase  Applied Inflation Factor to 2006/07 Actuals Continued Funding of 2006/07 5.78% Salary Schedule Increase Maintained Annual Salary Schedule Step Progression  Other Salary Adjustment Subject to Board/Superintendent Direction  Sustained 2006/07 Existing Program Subsidies & New Program Requirements (Refer to Page 5) 2007/08 2008/09 +10% +10% Yes Yes +1.5% +1.5% $10.6m $10.6m

9. Our Mission is to: Accelerate gains in student performance. Provide safe, orderly & well-maintained schools. Strengthen parent, community, business & higher education support. Boost employee morale. Secure adequate funding for our schools. 8 2006/07 FIRST INTERIM FINANCIAL REPORT General Fund – Unrestricted Major Assumptions – 2007/08 & 2008/09 Increased Special Education Requirement  Subsidized Special Education Total Compensation Included Previous Board Approved Actions to Transfer Expenditures for Capital Outlays, Early Retirement Payments, School Police, & Non-Capital Equipment to Other Funds Key Take-Away: Continually Working With Operational and Instructional Staff to Understand, Assess, and Price out old Programs and new Initiatives … K – 8 Vision, Truancy Center, Custodial Services, etc. 2007/08 2008/09 $5.6m $3.6m Yes Yes

10. Our Mission is to: Accelerate gains in student performance. Provide safe, orderly & well-maintained schools. Strengthen parent, community, business & higher education support. Boost employee morale. Secure adequate funding for our schools. 9 2006/07 FIRST INTERIM FINANCIAL REPORT General Fund – Unrestricted Multi-Year Projection ($ MILLIONS)

11. Our Mission is to: Accelerate gains in student performance. Provide safe, orderly & well-maintained schools. Strengthen parent, community, business & higher education support. Boost employee morale. Secure adequate funding for our schools. 10 2006/07 FIRST INTERIM FINANCIAL REPORT General Fund – Unrestricted Targeted 2006/07 Ending Balances