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Butte County Office of Education Don McNelis, Superintendent

Butte County Office of Education Don McNelis, Superintendent. Management Group Meeting Chico, California September 10, 2009. Joel Montero, FCMAT. Talking Points. The Economic Maelstrom The State’s Budgets and Local Impacts Proceeding With Caution—Getting to There Cash Proposition 98

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Butte County Office of Education Don McNelis, Superintendent

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  1. Butte County Office of EducationDon McNelis, Superintendent Management Group Meeting Chico, California September 10, 2009 Joel Montero, FCMAT

  2. Talking Points • The Economic Maelstrom • The State’s Budgets and Local Impacts • Proceeding With Caution—Getting to There • Cash • Proposition 98 • What’s Likely

  3. Beginning with Basic EconomicsHow Did We Get Here? • The National Economy and Budget • Lack of Consumer Confidence • A Correction in the Housing Market • Construction and Unemployment • Education and Proposition 98

  4. The Latest from Sacramento: What School Leaders Need to Know

  5. State General Fund Revenue and Expenditure Trends $ in billions Includes $10 billion of temporary tax revenue Source: Department of Finance

  6. State Budget Deficit Explodes ($1.0) July 2007 Jan. 2008 Sept. 2008 Feb. 2009 July 2009 ($5.0) ($6.1) $ in billions ($10.0) ($14.5) ($24.3) ($30.0) ($41.6) ($50.0) ($60.0) ($67.0) ($70.0) Source: Department of Finance and Legislative Analyst’s Office

  7. $60 Billion in Solutions February ($35.8 billion) • $14.9 billion in Reductions • $ 8.4 billion (56%) from K-14 Education • $12.5 billion in Temporary Taxes • $8 billion in Federal Stimulus Funds • $400 million in borrowing

  8. $60 Billion in Solutions July ($24.2 billion) • $16.1 billion in Reductions • $6.6 billion (40%) from K-14 Education • $1.0 billion in Fund Shifts • $3.5 billion in revenue accelerations • $2.2 billion in borrowing • $1.4 billion in state employee payment shifts

  9. February/July Budget Corrections$ 9.15 Billion in K-12 Spending Cuts 2008-09 Budget Year $2.15 billion mid-year ongoing cut to categoricals and core revenue (February 2009) • $375 per ADA $1.6 billion one-time per ADA cut to core revenues (July 2009) • $ 260 per ADA

  10. February/July Budget Corrections$ 9.15 Billion in K-12 Spending Cuts 2009-10 Budget Year • $702 million ongoing cut to categoricals and core revenue (February 2009) • $130 per ADA • $2.1 billion ongoing cut to core revenues (July, 2009) • $ 370 per ADA • $450 million one-time cut to core revenue of QEIA districts (July, 2009) • $430 per ADA

  11. Budget Corrections Include K-12 “Flexibility” • Categorical Program Flexibility • Ending Fund Balance Sweeps • Rule Suspension on 42 “Tier III” Categorical Programs • Option to Reduce Instructional Year (5 days) • CAHSEE Exemption for Special Ed Students • Suspension of Routine Restricted Maintenance • Budget Reserves

  12. What Should Districts Do Now in Order to Get From Here to There • Establish the core program for All students—Mission Critical • Staff to contract to support the core program. RIF • Review classified staffing in the same manner as above • Maintain as strong a cash position as is organizationally possible • Determine if you have any funding latitude remaining • Continue to update cash flow projections for current + 1 subsequent years

  13. What Should Districts Do Now in Order to Get From Here to There • Plan for the use of ARRA dollars strategically and try not to spend them on things that eat. • If you do spend ARRA dollars on things that eat, try to spread the use of the money out over multiple years. • Be prepared to take on the costs for ARRA expenditures when the money runs out or prepare to make additional cuts • Leverage any other dollars you have to free up money in the general fund (RDA, Developer Fees, etc)

  14. What Should Districts Do Now in Order to Get From Here to There • Negotiate with care and don’t settle without first determining the affordability of CB agreements in the context of your list of core programs • Do not kick problems into next year. Bad news will not improve with age. • Create a solid and accurate multi-year projection and update it every time your assumptions change • This is a multi-year problem. Create a solvency plan that will get you to 2011-12.

  15. What Can Districts Do Now in Anticipation of an Uncertain Cash Environment • Have a system in place to analyze and monitor cash flow—all funds • Report cash flow status and projection to the board on a regular basis • Conserve cash when possible—all funds • Build Reserves/Fund Balance—all funds • Consider creating spending plans to manage available cash • Consider options for dry period financing (borrowing) • Should county offices loan districts money? • Don’t run out!

  16. K-14 Education Spending and the Budget Shortfall Comparison of State General Fund Revenue and Expenditure Increases to Increases in K-14 (Prop. 98) Guarantee2004-05 Through 2009-10 1Legislative Analyst’s Office. State spending Plan: 2004-05, September 2004 2Governor’s Budget Summary, July 2009 (includes all proposed budget solutions) 3 Adjusted for $6.626 billion in Local Property Tax Transfers per VLF Transfer, Triple Flip and RDA shift (LAO, July 2009 est.) 4 Includes Local Property Taxes and General Fund Spending

  17. K-14 Education Spending and the Budget Shortfall Comparison of State General Fund Revenue and Expenditure Increases to Increases in K-14 (Prop. 98) Guarantee1998-99 Through 2009-10 1Legislative Analyst’s Office. State spending Plan: 1998-99. October 1998, Page 4, Revenues & Expenditures; p. 26 Proposition 98 2Departemnt of Finance. Governor’s Budget Summary, July 2009 (includes all proposed budget solutions) 3 Adjusted for $6.626 billion in Local Property Tax Transfers per VLF Transfer, Triple Flip and RDA shift (LAO, July 2009 est.) 4 Includes Local Property Taxes and General Fund Spending

  18. Comparison of Major General Fund Expenditure Areas1998-99 through 2009-10 1Legislative Analyst’s Office. State spending Plan: 1998-99. October 1998, Page 4, Revenues & Expenditures; p. 26 Proposition 98 2Departemnt of Finance. Governor’s Budget Summary, July 2009 (includes all proposed budget solutions) 3Includes Local Property Taxes and General Fund Spending

  19. Actions Taken to “Lower” Proposition 98 Base by $20.858 Billion 2002-2010 • 2001-02$2.2 Billion Total • $583 Million (Mid-Year Reductions) February 2002 (High Priority School Grants, Teaching as A Priority Block Grants, Certificated Staff Performance Awards, Energy Grants, 9th Grade CSR, Cal-Safe) • $503 Million (Prior-Year Reversions) June 2002 Backfill of Adult Education Reductions • $1.124 Billion (Categorical Deferrals) June 2002 • 2002-03$2.61 Billion Total • $1.3 Billion (June Apportionment Deferral) March 2003 • $460 Million (K-12 Funding Reductions) May 2003 • $734 Million (K-12 Prior-Year Reversions to Backfill Cuts) June 2003 • 2003-04$1.468 Billion • $1.048 Billion (Prior-Year Reversions to fund Deferral) June 2004 • $341 Million (Prior-Year Reversions to Fund TIG Grants June 2004 and Child Care) • $127 Million (New Federal IDEA Funds to backfill June 2004 reduced State Special Education contribution) Source: State Spending Plans (2002-03, 2003,04, 2004-05, 2007-08 and 2008-09), Legislative Analyst’s Office

  20. Actions Taken to “Lower” Proposition 98 Base by $20.858 Billion 2002-2010 2007-08$507 Million • $211 Million in Current-Year Reversions February 2008 • $295.4 Million in Prior-Year Reversions February 2008 2008-09$ 9.513 Billion • $2.3 Billion (RL/Categorical Reduction and COLA rescission) February 2009 • $3.244 Billion (February RL/CSR/CC and February 2009 June Apportionment Deferrals) • $1.1 Billion (Use of Prior-Year Prop. 98 “Settle-Up”) February 2009 • $619 million (Home-to-School Funding Swap) February 2009 • $150 million (prior-year reversions and child care cuts) February 2009 • $2.1 billion (Revenue Limits: unallocated categoricals and QEIA) 2009-10$4.56 Billion • $2.1 billion (K-12 Revenue Limits) July 2009 • $.580 million (Community Colleges) July 2009 • $80 million (Basic Aid District “Fair Share” Cut to Categoricals) July 2009 • $1.8 billion (April and May RL/CC Apportionment Deferrals) July 2009 • Source: State Spending Plans (2002-03, 2003,04, 2004-05, 2007-08 and 2008-09), Legislative Analyst’s Office

  21. 2009-10 Governor’s BudgetFinal Considerations • Budget Risks Remain to the Downside • $7-8 billion shortfall persists • 2009-10 revenue estimates “very soft” • Mid-year budget cuts almost certain • Fiscal Crisis and Increased “Flexibility” Underscore Importance of School Leaders • Resource scarcity requires difficult choices • Building consensus • Student, School and District Accountability Remains a High Priority at State and National Levels • Importance of Protecting and Restoring Essential Programs for Students

  22. What’s Likely? • Additional reductions/corrections in 2009-10? • Problems with QEIA • Additional cash deferrals? • Receipt of stimulus (ARRA) dollars? • Additional categorical program impacts? • Proposition 98 Suspension?

  23. Summary • The fiscal situation for the state has deteriorated since Feb. 2009 and could continue to deteriorate this year • The state’s deficit will continue to grow • Education growth for a 10 year period is less than other parts of the budget • We have an 17 month budget but revenue projections are volatile • ARRA dollars will play some role in district finances • LEA planning is more critical than ever • Charter schools are also affected • Cash is King • Collective bargaining will be challenging • It is a multi-year issue-2010-11 could get ugly

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