1. Second Interim Report 2012-13 Anaheim City School District March 15, 2013 Darren Dang Assistant Superintendent, Administrative Services

2. Topics  Proposition 30  Local Control Funding Formula  Financial Status (Second Interim)  Cash Flow Concerns  Help ACSD Balance Our Budget 3/13/132

3. Passage of Proposition 30  A Big Thank You for your support to public education  Prevented cuts of $420 / student or $7.9M  No new money for 2012-13 but did free up money for the state to spend in 2013-14  Per student funding for 2012-13 is still 10% below 2007-08 level 3

4. Local Control Funding Formula 4 LCFF WSF Favors low income districts Tiered Funding Restores Deficit & Deferrals 1 st year 2013-14: $6,678 per ADA $416/ADA increase ($7.7M) in 1 st year Full implemen tation: 2020-21 $11,656 1 st year 2012-13: $6,445 per ADA Proposal wasn’t adopted Full implemen tation: 2017-18 $12,162 LCFF = Local Control Funding Formula. WSF = Weighted Student Funding. $6,940 for 2013-14

5. LCFF – Managing Expectations  If adopted, ACSD will benefit from the Local Control Funding Formula  Policy Committee could delay implementation to 2014-15  Governor’s January Proposal is just the very first step of long journey  A lot of things could change, and probably will, between now and then  Budgeting 1.65% COLA, $1.5M instead of $7.7M LCFF 5

6. Multi-Year Financial Summary 2012-13 2 nd Interim 2013-14Projected2014-15Projected Total Revenue $152,253,146$153,330,370$156,790,659 Total Expend. $158,067,611$163,237,883$169,814,745 Net change ($5,814,465)($9,907,513)($13,024,086) Beg. Balance $21,990,983$16,176,518$6,269,005 Ending Bal. $16,176,518$6,269,005($6,755,081) Economic Uncertainties $4,742,028 3% 3%$4,897,1363%$5,094,4423% Designated Funds $2,784,476$2,869,077$2,806,682 Undesignated / (Shortfall) $8,650,014($1,497,208)($14,656,205) 6

7. Why Expenditures Increase By $5.1M in 2013-14 3/13/137 No Furlough Days (restored 8 furlough days in 2012-13 to 0 for 2013-14) +$4.0 M Step and Column Increases +$1.3 M Other Adjustments - $0.2 M Total Expenditure Increase +$5.1 M

8. Why Expenditures Increase By Another $6.6M in 2014-15 3/13/138 Class size restored to 28:1 per contractual agreement +$3.2 M Step and Column Increases +$1.3 M 10% Health & Welfare Increase +$2.0 M Other Adjustments +$0.1 M Total Expenditure Increase +$6.6 M

9. Multi-Year Financial Summary  Even with 8 furlough days this year, ACSD is overspending by $5.8 Million  Next year 2013-14, expenditures exceed income by $9.9 Million –After depleting our reserve savings of $8.5 Million, still short $1.5 Million  In 2014-15, expenditures exceed income by $13 Million –Budget shortfall of $14.7 Million over next two years  If Local Control Funding Formula is adopted, it will solve our revenue problem but we can’t count on it. 3/13/139

10. How Did We Get Here  Significant Declining Enrollment –Lost over 3,000 students since 2001-02  State Funding Cuts Over Last 5 years –$50 Million in total State funding cuts  Increasing Special Education Costs –Federal Government underfunding Special Education by a total of $109M over last 10 years  Deficit Spending 3/13/1310

11. Unsustainable Structural Budget Problem 11

12. Impact of Deficit Spending: Diminishing Cash 12 Source: Orange County Department of Education

13. Cash Balance Without Borrowing 13 projected

14. Precarious 2013-14 Cash Situation 14 Note: Need to add additional working capital reserve of $8.5 M

15. Cash Flow Prognosis  Chronic Deficit Spending over past 5 years has slowly depleted our cash reserves  It will take us multiple years to address our cash problem  Margin for error is razor thin in 2013-14  Continued deficit spending will put ACSD at serious risk for cash insolvency in 2014-15  We need to have a plan to address deficit spending until our revenue problem improves 15

16. We Need Your Help  While we are hopeful that the Governor’s proposal will help solve our $14.7 Million problem,  We need to have a balanced budget over the next two years  We need your help with ideas: –Email to: budget@acsd.us budget@acsd.us 3/13/1316

17. For More Information  http://www.acsd.k12.ca.us/ 3/13/1317