Transcript State Budget and School District Impact Presented by Sierra Sands

Sierra Sands Unified School District
January 21, 2010
State Budget and School District Impact
Presented by
Ron Bennett
President and CEO
Public Education’s Point of
Reference for Making
Educated Decisions
Since 1975
U.S. Economic Outlook
The broader national economy may be turning the corner
The rate of job loss has slowed considerably
Job growth, although likely weak, may occur by the end of the year
Home sales are rising
The stock market is up 60% from its March 2009 low
Third quarter U.S. gross domestic
product (GDP) increased 2.2%,
the best showing since the
recession began
1
2
U.S. Economic Outlook
U.S. GDP
4.0%
(Percent Change)
2.2%
2.0%
0.0%
-0.7%
-2.0%
-4.0%
-2.7%
-6.0%
-5.4%
-6.4%
-8.0%
3rd Quarter
4th Quarter
1st Quarter
2008
Source: U.S. Bureau of Economic Analysis, November and December 2009
2nd Quarter
2009
3rd Quarter
California’s Economy
While there are signs of recovery, the California economy will suffer from
high unemployment
The state’s unemployment rate is 12.3%, compared to 10% for the
U.S. as a whole
Other factors that will impair the recovery include:
Very weak construction and manufacturing sectors
Continuing drought
Political gridlock in Sacramento
Public schools typically see improvements 18 months after recovery begins
3
Employment Trends – December 2007 to
November 2009
Orange
County
-6.6%
San Diego
-4.7%
Los Angeles
-9.6%
Sacramento
-9.0%
-3.0%
San
Francisco
Metropolitan Areas
Source: California Employment Development Department
4
Construction
-283
-206
Manufacturing
-118
Financial
Service
Leisure & Hospitality -70
Government -28
Industrial Sectors (Jobs in Thousands)
State Budget Developments
On January 8, 2010, the Governor acknowledged a Budget deficit of
$6.3 billion for the current year
Current-year revenue collections are short about $2 billion
Numerous Budget assumptions are at risk
Sale of the State Compensation Insurance Fund
Budgeted savings in the Department of Corrections
Lawsuits pending on Governor’s vetoes, redevelopment agency
(RDA) shift, social services cuts, and state worker furloughs
5
6
General Fund Revenues Falling Short
General Fund Revenues
($ amounts in billions)
$14
12.9
$12
12.1
$10
Projected
9.4
$8
$6
$4
5.3
5.3
5.1 5.2
8.6
5.8 5.6
$2
$0
May
June
2008-09
July
August
2009-10
September
Actual
State Budget Developments
The 2010-11 Budget has a built-in shortfall of an additional $13.3 billion,
even if all of the current-year assumptions were realized
One-time solutions fall away in 2010-11
Caseload growth continues, regardless of revenue situation
Statutory increases will reemerge for some areas of government
7
Governor’s Budget Proposals
As part of the Governor’s Budget Proposals for 2010-11, the Governor
proposes for the current year:
No midyear cuts to local school district budgets
A sweep of unspent K-3 CSR (class-size reduction) funds to be taken at
state, not district, level
And for 2010-11:
A cut of $1.5 billion to K-12 targeted to “administrative expenses”
Application of a negative cost-of-living adjustment (COLA) of -.38% to
the revenue limit
8
Revenue Reductions
9
The total direct reductions to be applied for Sierra Sands USD are:
Deduction of negative COLA, -$24 per ADA ongoing
Deduction of proposed 2010-11 revenue limit, -$201 per ADA ongoing
Total loss of revenue from Governor’s proposals, $225 per ADA ongoing
(more than $1.3 million ongoing loss for Sierra Sands USD)
The bottom line:
The state can only spend what it collects in revenues and borrowed
funds
If conditions deteriorate further, pressure will mount for midyear cuts
during 2010-11
10
Per-ADA Revenue Volatility
Per-ADA Revenue Change
Increase to the
Base Revenue Limit Per ADA
15%
Average
10%
5%
0%
-5%
-10%
-15%
1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Year
2010 © School Services of California, Inc.
What Should Districts Do – Start Early
How early should you start developing the annual district budget?
Early enough to determine staffing needs
If reducing staff due to declining enrollment or other needs to
balance the budget, will there need to be layoffs?
March 15 for certificated staff; 45 days for classified
Will natural attrition be sufficient and in the right positions?
Will there need to be early efforts to recruit quality staff?
Hard-to-fill staffing areas
Growing or steady enrollments
11
What Should Districts Do – Start Early
How early should you start developing the annual district budget?
Early enough to take action on budget reductions
Waiting several months or a year will cause budget problems to
multiply
And be more difficult to resolve
One dollar cut in the current year:
Adds one dollar to the ending balance
Saves two dollars by the end of the next year
Saves three dollars by the end of the next year, and so on
12
What Should Districts Do – Start Early
How early should you start developing the annual district budget?
Early enough to allow adequate opportunity for input, review, and
revision by constituents
Budget managers, including categorical programs
Budget Committee
Board of Education
Others
All in order to meet state deadlines
Establish budget timelines in a Board-approved budget calendar
13
Early Retirement Incentives
14
Why consider an early retirement incentive program?
To accelerate retirement rates above normal attrition
To reorganize staffing and programs
To reduce staffing and provide ongoing savings
Typically not cost beneficial for classified staff if offered separately
Can be if in conjunction with certificated staff within private provider- or
district-sponsored program
Early Retirement Incentives
15
Districts making staffing reductions may consider this as an option
One retiree from the top of the salary schedule can save one or two jobs
for the lowest paid teachers
If savings are required on top of this, establish a minimum number of
retirees for the program to be a “go”
What If Districts Need to Borrow From
The State? – Avoid It
What happens when a district can’t meet its financial obligations?
AB 1200 and AB 2756
Progressive Intervention
County Department of Education
Fiscal Crisis and Management Assistance Team (FCMAT)
Loss of Local Control
Fiscal Advisor (stay and rescind power)
State Trustee (loan is <200% of required reserves)
State Administrator (loan is >200% of required reserves)
Stays until loan is repaid
Replaces Board and Superintendent
Costs more (expensive services and loss of ADA)
16
Voter-Approved Option for Districts
17
Parcel Taxes (Qualified Special Taxes)
Alternative source of school district revenue
Typically levied as a flat rate per parcel
May contain exemptions or reduced rates for senior citizens
Must be approved by at least two-thirds of those voting on the measure
Typically assessed for five, seven, or ten years
May include inflation adjustments
Voters must approve extension when tax expires
No restrictions on use
Board may target specific needs in ballot language
The Goal for Tough-Time Budgets
18
When managing budgets in tough times, the overarching goals should be
to:
Minimize impact on programs and students
Maximize progress toward district goals
Keep all stakeholders informed of the budgetary impact of current
challenges and district decisions
Have as broad a based buy in to budget reductions as is realistic
Keep the district financially healthy and prepared for the future . . . this
too shall pass and we will see better days!
Thank you
Public Education’s Point of
Reference for Making
Educated Decisions
Since 1975