12 Month by Month Projected Income

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					BERRYESSA UNION SCHOOL
DISTRICT




2009-2010 May Revise
in June
Overview of the State Budget
                                                                   1

 This just in – this is a terrible Budget year!
     State revenues have fallen dramatically (27%)
     Expenditures continue to rise on the natural
     Borrowing has been more difficult and more expensive than ever before
     California continues to lose jobs
     More people demand social services – that won't be available – during a
     downturn
 There is no way to "trim around the edges" and not deal with the realities of
 the imbalance between state revenues and the cost of public services
 That said, we do not want and should not have more cuts to education
     Nevertheless, there are more cuts to education and all other major areas
     of the Budget
Overview of the State Budget
                                                                2

 Proposition 98 has been on a rollercoaster ride
     Cuts to the revenue limit
     Cuts to categoricals
     Flexibility within remaining categorical funding
     Withdrawal of Public Transportation Funds with no backfill
     Addition of one-time federal funds
     Changes to federal Maintenance-of-Effort (MOE) requirements
     And much more to be detailed later in the program
 What does it all mean?
     Less of everything for California's children
     Coupled with cuts to health and welfare programs, the most vulnerable
     Californians – mostly children – are in for a very tough year
May Revision Features
                                                                  3

 The already reduced 17-month Budget adopted in February is reduced by
 another $24.3 billion
 Major cuts to K-12 education, welfare, prisons, and higher education
 No suspension of Proposition 98 – not needed as funding floor has dropped
 No cost-of-living adjustment (COLA) and a huge deficit factor
 Lottery and other special election proposals appear to be dead
 More cuts to K-12 – $3.9 billion – between the February Budget and the May
 Revision
 Some additional flexibility anticipated, but not yet approved
 Even more funding deferred – placing an even greater burden on cash flow
 Dramatically lower funding for every aspect of government services
Major May Revision Proposals
                                                                     4

 The projected deficit is now $24.3 billion with the failure of the May 19 special
 election ballot measures and falling revenue projections

 Major Budget-balancing proposals:

     $16 billion in cuts and savings, with $7.2 billion from Proposition 98

     $2.8 billion from revenue accelerations and fees

     $2 billion from local government borrowing

     $3.5 billion from program consolidations, fund shifts, and other changes
Proposition 98
                                                               5

 Proposition 98 establishes the minimum funding guarantee for K-12 and
 community colleges, based on formulas set in the State Constitution
     The guarantee has dropped for both 2008-09 and 2009-10 because of the
     continued fall in state revenues
     The Governor proposes to fund K-14 education at the newly calculated
     minimum level:
         2008-09 – $49.091 billion
         2009-10 – $50.407 billion
Maintenance Factor Controversy
                                                                 6

 Three months ago, when the 2009 Budget was enacted, Proposition 98
 funding was determined by "Test 1" (41% of General Fund revenues) for both
 2008-09 and 2009-10
     The Administration asserted that Maintenance Factor obligations were
     eliminated under "Test 1"
          This interpretation led education supporters to include
          Proposition 1B on the special election ballot, with $9.3 billion
          at stake – the measure failed
 The May Revision shows that 2009-10 funding will be determined by "Test 2"
 (per capita personal income and average daily attendance [ADA])
     $1.17 billion in Maintenance Factor is paid, with $209 million remaining
 This calculation appears to ignore more than $8 billion in prior Maintenance
 Factor obligations
     Expect the issue to go to court
Revenue Limits for 2009-10
                                                                  7

 The May Revision recognizes the statutory COLA at 4.25%, down from an
 estimated 5.02% in the January Governor's Budget, but does not propose to
 fund it
 The May Revision proposes to cut revenue limits an additional $1.894 billion
 from the 2009 Budget Act level
 The new proposal will result in a base-revenue-limit-per-ADA reduction of
 3.45% for the average district in 2009-10

                               May Revision Factors
                                       2008-09        2009-10
                Statutory COLA         5.66%          4.25%
                K-12 Deficit          11.428%         17.967%
                COE Deficit            7.839%         12.717%
2008-09 K-12 Revenue Limits – BUSD
                                                                                    8


                                      Base Revenue                              Funded Base
              2008-09                 Limit per ADA       Deficit Factor        Revenue Limit
                                            (A)                (B)              (C) = (A) x (B)

 1. 2007-08 Base Revenue Limit        $       5,518.67       1.00000            $       5,518.67

 2. 2008-09 Base Revenue Limit        $       5,833.67       0.88572*           $       5,167.00

 3. Dollar Change (Line 2, Column C, minus Line 1, Column C)                    $        351.67

 4. Percentage Change (Line 3 divided by Line 1, Column C,
    converted to a percentage)                                                           -6.37%


              *0.88572 deficit factor = 88.572% funding, or a 11.428% deficit
2009-10 K-12 Revenue Limits – BUSD
                                                                                    9


                                     Base Revenue                           Funded Base
              2009-10                Limit per ADA       Deficit Factor     Revenue Limit
                                           (A)                (B)           (C) = (A) x (B)

 1. 2008-09 Base Revenue Limit $             5,833.67        0.88572
                                                                            $           5,167.00

 2. 2009-10 Base Revenue Limit $             6,083.67       0.82033*            $       4,990.62


 3. Dollar Change (Line 2, Column C, minus Line 1, Column C)                    $        -176.38

 4. Percentage Change (Line 3 divided by Line 1, Column C,
                                                                                         -3.41%
    converted to a percentage)
              *0.82033 deficit factor = 82.033% funding, or a 17.967% deficit
19




                                                              10.000%
                                                                        12.000%
                                                                                  14.000%
                                                                                             16.000%
                                                                                                       18.000%




              0.000%
                       2.000%
                                  4.000%
                                           6.000%
                                                     8.000%
  93
       -9
          4
19
  94                                       8.140%
       -9
          5
19
  95                                                  11.010%
       -9
          6
19
  96                                                10.120%
       -9
          7
19
  97
       -9
                                              8.801%
          8
19
  98                                          8.801%
       -9
          9
19
  99
       -0
                                              8.801%
          0
20
                                      6.996%
                                                                                                                  Revenue Limit Deficit Factor




  00
       -0
          1
20
  01
       -0
                   0.000%
          2
20
  02
       -0          0.000%
          3
20
  03               0.000%
       -0
          4
20
  04              3.002%
       -0
          5
20
  05
       -0
                                2.143%
          6
20
  06
       -0              0.892%
          7
20
  07
       -0          0.000%
          8
20
  08
       -0          0.000%
          9
                                                                                                                 10




20
  09                                                      11.428%
       -1
          0
                                                                                            17.967%
Categorical Funding Overview
                                                                    11

 With more than a billion dollars already cut from categoricals in 2008-09 and
 2009-10, the Governor has stayed away from making proposals for further
 across-the-board cuts
 However, there are a few programs that are proposed for significant
 reduction or elimination:
     Home-to-School Transportation – reduced by 65%
     High Priority Schools Grant Program – eliminated for 2009-10
     Child Care – funding drops with CalWORKs cut
 In reality, given the magnitude of the cuts proposed to revenue limits in the
 May Revision, it's time to take another look at categoricals and decide how
 far to go with available flexibility
May Revision Flexibility Proposals                                   12


 Flexibility is like adding sugar to medicine – it may make it easier to handle,
 but side effects are unchanged
     Given the magnitude of the additional cuts, additional flexibility is
     helpful, but not sufficient to soften the blow of the cuts
         Flexibility cannot restore funding cuts
 The May Revision contains a few new proposals:
     Reduction in the school year
May Revision Flexibility – Reduction in the School
Year                                                              13

 The Governor's January Budget proposal, calling for a shorter school year,
 was shot down by the Legislature
     However, given the further cuts that are being proposed, the proposal is
     revived and expanded
         Permits, does not require, schools to drop from a minimum of
         180 days of instruction to 173 days (seven fewer days) for a period
         of no more than three years
 The Governor's proposal reduces revenues and makes it possible to legally
 reduce expenditures
     But, ultimately, LEAs would need to renegotiate contracts to realize
     expenditure savings
ARRA – California's Budget Crisis
                                                                 14

 Given California’s worsening budget situation – any plans that LEAs
 previously made for American Recovery and Reinvestment Act (ARRA) funds
 may require reconsideration
     It may now be necessary to use the funds to:
         Save an existing job rather than restoring one that has already been
         cut
         Avoid further cuts – but keep the ones that have been made so far
         Pay for something ongoing rather than one time – at least for now
 ARRA has created opportunities for some – mainly auditors
     Four simultaneous audit teams working at the state level are reviewing
     ARRA
     Expect this to trickle down and affect local reporting and auditing
     requirements in the very near future
The ARRA Program Details
                                                                    15

 Much more is known now than in February, but there are many outstanding
 issues that are yet to be resolved
 Just as the state has treated this funding as part of its Budget-balancing
 solution, so should LEAs
     State Fiscal Stabilization Fund (SFSF) dollars will be necessary to offset
     cuts
     Title I funds for many LEAs will be needed to offset reductions in base
     grants
     Individuals with Disabilities Education Act (IDEA) funding will be needed
     to help control local contributions
Effectively Using New Federal Funds
                                                                              16

       Examples of Effective Uses          Uses that Should Be Avoided
      Professional Development           Hiring staff on a permanent basis
      Afterschool/Summer School          Purchasing vehicles*
      Supplemental instruction           Building athletic facilities*
      materials                          Maintenance costs*
      Education technology and           Long-term reserves – the funds
      hardware to support data           must be expended within a few
      analysis                           years*
      Construction, modernization,       Adding nonmandatory special
      renovation, or repair (allowed     education service
      with SFSF)                         Paying for core requirements
      Payoff outstanding                 with Title I funds*
      postemployment retirement          Title I dollars at non-Title I-eligible
      benefit or other debt (may be      schools*
      allowed with SFSF)
                                       * These items are prohibited by federal law
Deferrals
            17
Cash is King
                                                                   18

 Many LEAs are forced to use their reserves to balance their budgets this year
 because of the midyear cuts
     The use of reserves will affect future cash flows
     Fewer reserves mean less working capital – less cash on hand to meet
     expenses
 The unrestricted ending fund balance is a focal point for the determination of
 fiscal status
     Estimate and evaluate it very carefully
           Adjust with each budget update and identify why it changed
     Communicate the changes often and include a reconciliation of the
     changes
     Monitor the balance closely for its impact on cash flow
 Remember that "cash is king"
District Budget Overview – Based on the
Governor’s Proposed May Revise                                                    19


                              2008-09            2008-09
                           Adopted Budget    Adjusted Budget    2009-10 Budget     Net Change
Beginning Fund Balance           6,921,138          6,921,138         5,019,279        <1,901,858>
Revenues:
   Revenue Limit                45,048,173         42,244,573        40,835,151        <1,409,422>
   Federal                       2,792,775          5,256,759         4,218,858        <1,037,901>
   State                         9,978,297          9,258,973         9,135,577         <123,396>
   Other Local                   3,512,524          4,365,075         4,680,231           315,156
Flexibility Transfers                   0           1,096,068           404,217         <691,851>
Expenditures                    63,497,989         64,756,786        61,985,577        <2,771,209>
Other Financing Sources          1,360,988           633,480            291,653         <341,827>
+/- Revenues to Expenses         <805,232>        <1,901,858>       <2,419,890>           518,032
Ending Fund Balance              6,115,906          5,019,279         2,599,389        <2,419,890>
Key Budget Assumptions
                                                                   20

 Following are key budget assumptions for 2009-10 based on the Governor’s
 Proposed May Revise:

   ADA                     8165
   COLA                    4.25%
   Deficit                 -17.967%
   Step and Column         1.5% Certificated and 1.2% Classified
   Health and Welfare      5% Increase
   Staffing Levels         356 Classroom Teachers
   Operating
    - Utilities            1.6 M
    - Contracts/Services   1.75 M
Legislature's Response
                                                                 21

 In response to the May Revision, legislative leaders promised to complete the
 Budget process quickly – before the state runs out of cash in July
     Appointed a ten-member Budget Conference Committee to immediately
     begin hearings
     Invited public comment
         Testimony limited to 90 seconds
     Will begin taking action in early June
 Governor addressed joint session of the Legislature
     Followed by meeting with legislative leaders
So, Are We There Yet?
                                                                   22

 Is this the end? – No
      Is this the beginning of the end? – No
      But, it might be the end of the beginning!
 This Budget is a long way from being done
      There will be more economic news
      The size of the problem will change
      It will take time for the Legislature and the Administration to respond
 But, make no mistake, California cannot legislate or wish this problem away
 Nearly every state is taking action to deal with the worldwide economic crisis
 – but, as usual, the problems are bigger in California
 We foresee revisions throughout the year
      For 2009-10, there will likely be early cuts, midyear cuts, and late-year
      cuts
      Hold on to your reserves!
Budget Timeline
                  23
Next Steps
                                                                 24

 Balanced budget must be adopted by district prior to June 30, 2009

 Developing the budget requires:

     Clarifying assumptions

         How much revenue?

         What flexibility options will be acted upon?

         How will expenditures change?
What's Next?
                                                                         25

 We expect that at least some of the revisions requested by the Governor will
 be enacted in June or July to avoid yet another cash crisis
 When planning the 2009-10 school year, you will need to plan for a full
 180 days unless and until two things happen:
     The state acts on the Governor's request to shorten the school year
     A shorter work year is negotiated with your bargaining units
 Any additional flexibility, if it comes at all, will be difficult to implement
 You will need to adopt your district budget in accordance with the May
 Revision, even though we expect more changes
 You may need to use the August 15 layoff window
 Continue to monitor the revision of the 2009-10 Budget

				
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