2016-17 PROPOSED BUDGET PUBLIC HEARING Board of Education June 9, 2016 Meeting

Presenters Dr. Linda Wagner Superintendent

David A. Rivera

Assistant Superintendent, Administrative Services

Christeen Betz

Director, Fiscal Services

Priscilla Martinez

Director, Business Services

2

Acknowledgements

3

Legal Requirements for Adoption of Budget for 2016-17 June 9, 2016 Board Meeting 1. Public Hearing of Local Control and Accountability Plan 2. Public Hearing of Proposed District Budget June 22, 2016 Board Meeting • Board Authorizing Local Accountability Plan • Board Authorizing District Budget

Next Steps • Submit reports to the Orange County Department of Education for review and approval

4

Cover Letter Table of Contents Sections  Business Terminology

 Financial Analysis

 Summary of Budget Assumptions

 District Reserves

 Revenue Considerations  Expenditure Considerations

 Multi-year Projections

 State Forms

5

Budget Timelines Completed Projects

Projects in Progress

 Governor’s Budget Proposal (Jan 2016)

 Local Control Accountability Plan (Ongoing)

 Student Enrollment and Housing Projections (Jan 2016)

 May Revision Report

 Personnel Staffing (Ongoing)

 Public Hearings

 LCAP Report  District Budget

 45 Day Budget Revise

 After Adoption of State Budget

6

Board of Education Goals 2016-17 Key Focus Area IV – Fiscal Resources “Vision: Quality teaching and learning are dependent upon adequate and stable financial resources. The Anaheim City School District, therefore, allocates its dollars based upon the prioritized needs of the District—as reflected in its mission, goal, and vision statements and key performance targets—in ways that best serve its students, its schools, and its personnel. Fiscal resources are managed in a cost effective, accurate, and efficient manner, serve immediate needs, and take into consideration long-range goals. Open communication, user-friendly formats, and high involvement from community, parents, and classified and certificated staff ensure broad understanding of the District's budget and budgeting process.”

7

Business Terminology •

ADA – Average-Daily-Attendance –

•

Schools are funded on average daily student attendance

Cover Letter –

Budget narrative accompanying state forms

•

LAO - Legislative Analyst’s Office –

•

LEA – Local Education Agency –

•

Independent state advisory agency Schools districts and community colleges

LCFF - Local Control Funding Formula

•

Deferred Revenue – Unearned Federal Revenue

•

DOF – Department of Finance (California)

•

M – Million

•

DSA - Department of State Architect

•

OCDE - Orange County Dept. of Education

–

•

–

Governing agency responsible for authorizing construction plans for school districts

FCMAT - Financial Crisis Mgmt. Advisory Team –

–

Independent state agency that supports school districts

•

FTE – Full-time Employees

•

K – Thousand

•

Serves as the “bank” for school districts

OPSC - Office of Public School Construction –

•

State’s governing oversight agency for schools

OCT – Orange County Treasury –

•

State adopted in 2013-14 to replace Base Funding Formula for K-12 education

Governing agency who oversees state funded facility programs

SSC - School Services of California –

Education finance consultant

8

Update on May-Revise Report

9

May Revise Updates • The May Revision provides an additional $200 million for a total of $1.4 billion in one-time education funding in 2016-17 – For AESD, this computes to an additional $23 per ADA or $414K – Projected one-time District Funding is now $4.27 million

• State revenues are lower than projected • The state is still making rapid progress toward full implementation of the LCFF

• Governor is proposing to shift TK Program into a Early Education Block Grant 10

U.S. Unemployment Rate California and US Unemployment Rates

11

California- Nonfarm Jobs

12

California – Personal Income Forecast Personal Income (Percent Change)

5.2%

5.3%

6.2%

6.2% 5.5%

5.5%

5.5%

5.8%

5.3%

4.5%

4.4%

4.5%

4.0%

5.0%

5.0%

5.8%

6.0%

6.2%

6.4%

7.0%

3.0% 2.0% 1.0% 0.0% 2014

2015

2016

UCLA, December 2014

UCLA, March 2015

2015-16 Governor's State Budget

2015-16 May Revision

2017

13

US Economy - Stock Markets

14

State Economy • Economic Growth is slowing down – State and Federal GDP is at a low 2.5%

• State Revenue projections are not materializing as forecast • Employment has recovered – New jobs created are in transitional positions which are lower paying job

• Change in minimum wage rate is not expected to provide additional state tax revenues

15

State’s General Fund Budget Summary 2016-17 (Reported in Millions)

16

Income and Sales Tax Revenues (Percentage Changes)

7.0%

6.0%

5.5%

5.0%

4.2% 3.6%

4.0%

3.3%

3.0% 2.0%

Expiration of Prop 30

1.0%

0.7%

0.0% 2015-16

2016-17

2017-18

2018-19

2019-20

17

State’s Main Revenue Source (Corporate, Sales and Income Taxes) Dollars in Billions

18

Proposition 98 Funding 2007-08 to 2016-17 $75.0

$69.2 $66.3

$70.0

Dollars in Billions

$71.6

$65.0 $60.0

$57.9

$58.9

$56.6

$55.0 $51.7 $50.0

$49.2

$49.6

$47.3

$45.0 Proposition 98 Funding as of Governor's Budget

Proposition 98 Funding under May Revision

19

District Data and Trends

20

Anaheim Elementary School District Student Enrollment History and Projections 23,000 22,500 22,000 21,500 21,000 20,500 20,000

19,125

19,308

19,164

10-11

11-12

12-13

13-14

14-15

15-16 Proj

16-17 Proj

17-18 Proj

17,918

19,310

09-10

18,251

19,095

08-09

18,483

19,312

07-08

16,500

18,711

19,278

17,000

19,332

19,958

02-03

17,500

20,690

01-02

18,000

21,383

00-01

21,963

22,375

18,500

22,426

19,000

22,275

19,500

16,000 15,500 15,000 03-04

04-05

05-06

06-07

18-19 Proj

21

Anaheim Elementary School District Funded Average-Daily-Attendance (includes students served by OCDE)

22,000

Impact of Enrollment Decline: 3,786 ADA

21,500 21,000 20,500 20,000

19,500 19,000 18,500 18,000 17,500 17,000 16,500

21,710

21,770

21,454

20,643

19,982

19,861

18,895

18,576

18,657

18,512

18,260

18,489

18,838

18,575

18,509

17,984

17,856

17,633

15,500

21,404

16,000

00-01

01-02

02-03

03-04

04-05

05-06

06-07

07-08

08-09

09-10

10-11

11-12

12-13

13-14

14-15

15-16 Proj

16-17 Proj

17-18 Proj

18-19 Proj

15,000

Projections do not include calculations from Board Approved Budget Stabilization Plan for Saturday School (44 ADA for 2015-16 and 89 ADA every year there after)

22

Anaheim Elementary School District Projected Funding Distributions 120%

98%

100%

80% 69% 65% 59%

60% 53% 47%

41% 40%

35% 31%

20%

2% 0% 2013-14

2014-15

2015-16

SC

2016-17

2017-18

Base

23

Anaheim Elementary School District Revenue Projections and Targeted Funding (LCFF Model)

24

Anaheim Elementary School District Annual Costs of Operations Fiscal Year: 2016-17 $2,750,000 $2,500,000 $2,250,000

Annual Costs are rising between $7m to $8m annually

$2,400,000

$2,400,000 $2,200,000

$2,000,000 $1,750,000 $1,500,000

$1,250,000

$1,100,000

$1,000,000 $750,000 $500,000 $250,000

$Step/Scale/Longevity

Pension Reform

Health and Welfare

Special Education Program Contributions

25

Year-end Updates for 2015-16

26

Budget Assumptions Summary Starts on Page 5 of the Cover Letter

27

Major Budget Variances (Unrestricted) Second Interim vs. Estimated Actuals Revenues

Expenditures -

• •

LCFF Other Local Revenue

•

In accordance with GAAP, the District needed to reclassify $700k budget allocation for Deferred Maintenance Transfer –

$700k $356k

Entry is now shown as an expenditure rather than a reduction of revenue

Salary/Benefits - Negotiated Agreements (4%)

$4.7m

–

General Operation

$4.2m

–

One-time Program Contributions (Categorical Programs)

$487k

•

Savings Saturday School (Budget Stabilization Phase II)

($677k)

•

Text Books ($1.3m) (Committed for 2016-17 Adoption LCAP)

•

Materials and Supplies (Committed for LCAP)

($900k)

Total Savings Budget Stabilization Plan Phase I & II $3.28M Refer to Slide 54 for details

28

Major Budget Variances (Restricted) Second Interim vs. Estimated Actuals

Revenues Special Ed Prior Year Revenue Title I (Deferred Revenue /Uncommitted Funds)

Expenditures $994k ($818k)

Books and Supplies Capital Outlay

($789k) ($1m)

(Restricted Maintenance Acct)

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Budget Variances (Combined) Second Interim vs. Estimated Actuals Beginning Fund Balance Audit Adjustments Revised Fund Balance

Second Interim Estimated Actuals 18,264,377 18,264,377 None None 18,264,377 18,264,377

Variances None -

Total Revenues

$215,426,463

$216,512,982

1,086,519

Total Expenditures

$202,808,633

$203,614,340

805,707

$12,617,830

$12,898,642

280,812

$30,882,207

$31,163,019

280,812

1,180,000

2,480,000

1,300,000

75,000 175,000 30,000 900,000 4,141,425

75,000 175,000 30,000 2,200,000 3,997,522

1,300,000 (143,903)

6,084,259 6,084,259 13,392,264 6.60%

6,108,430 6,108,430 12,468,637 6.12%

24,171 24,171 (923,627)

Changes in Fund Balance Projected Ending Fund Balance Components of Ending Fund Balance I. Unavailable Reserves: 1.) Nonspendable Revolving Cash Warehouse Inventory Revolving Cash Prop & Liability Supplemental & Concentration 2.) Restricted Program Balances II. Total Unrestricted Fund Balance 1.) Reserve for Economic Uncertainty (State - 3% Min) 2.) Reserve for Economic Uncertainty (AESD 3%) 3.) Available Reserves Unrestricted Available Reserves Unrestricted

30

Budget Assumptions for Budget Year and Subsequent Two Fiscal Years 2016-17, 2017-18, and 2018-19

31

Fiscal Year: 2016-17 Budget Assumptions (Material Changes)

Revenues •

Budgeted Per-Student Funding Amount – – –

Grades TK-3 $7,083 plus $740 for CSR Adjustment Grades 4–6 $7,189 Gap Funding @ 54.84% (May Revise)

•

Student Enrollment Decline of 522/ADA

•

No Cost-of-Living Adjustment

•

Updated Lottery Funding for Enrollment Decline

•

One-Time Mandated Cost Funds -

Expenditures •

Program Needs –

Digital Coaches and TOSA’s (12.8 FTE) $1.3m

–

Transportation (Drivers & Trainer)

$495k

•

Cost Increases for Operations

•

Increase in General Fund Contributions

•

Budget Stabilization Plan Phase I & II ($15.7m)

– – –

–

Step, Column and Longevity Pension Reform Health & Welfare

Special Education

$1.1m $2.4m $2.2m

$2.4m

Proposed funding $3.85 million After the Budget Act is signed, additional funding above $3.85 million will be captured

Total Savings Budget Stabilization Plan Phase I & II $15.7M Refer to Slide 54 for details

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Fiscal Year: 2017-18 Budget Assumptions (Material Changes)

Revenues •

•

Budgeted Per-Student Funding Amount – Grades TK-3 $7,268 plus $756 for CSR adjustment – Grades 4–6 $7,377 – Gap Funding @ 45.34% • Recommendation from Department of Finance Student Enrollment Decline of 128/ADA

•

Cost-of-Living Adjustment of 1.11%

•

Updated Lottery Funding for Enrollment Decline

Expenditures •

Cost Increases for Operations – Step, Column and Longevity $1.1m – Pension reform $1.6m – Health & Welfare (+8.9%) $2.1m

•

Increase in General Fund Contributions – Special Education $2.4m

•

Budget Stabilization Plan Phase I & II ($14.6m)

Total Savings Budget Stabilization Plan Phase I & II $14.6M Refer to Slide 54 for details

33

Fiscal Year: 2018-19 Budget Assumptions (Material Changes)

Revenues •

Budgeted Per-Student Funding Amount – Grades TK-3 $7,461 plus $776 for CSR adjustment – Grades 4–6 $7,572 – Gap Funding @ 6.15 % • Recommendation from Department of Finance

•

Student Enrollment Decline of 224/ADA

•

Cost-of-Living Adjustment of 2.42%

•

Updated Lottery Funding for Enrollment Decline

Expenditures •

Cost Increases for Operations – Step, Column and Longevity $1.1m – Pension reform $2.0m – Health & Welfare (+8.9%) $2.1m

•

Increase in General Fund Contributions – Special Education $2.4m

•

Budget Stabilization Plan Phase I & II ($12.6 m)

Total Savings Budget Stabilization Plan Phase I & II $12.6M Refer to Slide 54 for details

34

Multi-Year Budget Projections Beginning Fund Balance Audit Adjustment/Restatement Revised Fund Balance Annual Revenues (includes other financing sources) Annual Expenditures (includes other financing Changes in Fund Balance

Projection

Projection

Projection

2016-17 $31,163,018 None $31,163,018

2017-18 $34,544,932 None $34,544,932

2018-19 $37,291,605 None $37,291,605

$217,785,872 $214,403,958 3,381,914

$222,317,317 $219,570,644 2,746,673

$221,614,872 $224,327,137 (2,712,265) ($8,503,102)

Required Budget Reduction Projected Ending Fund Balance I. Unavailable Reserves: 1.) Nonspendable: Revolving Cash Warehouse Inventory Revolving Cash (Property Liability Fund) 2.) Restricted Program Balances 3.) Supplemental and Concentration 4.) Enrollment Decline Contingency II. Total Unrestricted Fund Balance: 1.) Reserve for Economic Uncertainty (State - 3% min.) 2.) Reserve for Economic Uncertainty (ACSD - 3%) 3.) Available Reserves (Unrestricted) III. Available Reserves (Unrestricted):

$34,544,932

$37,291,605

$43,082,442

$6,785,917

$17,001,847

$29,622,814

$75,000 $200,000 $30,000 $3,932,856 $1,548,061 $1,000,000

$75,000 $200,000 $30,000 $4,191,917 $6,495,763 $6,009,167

$75,000 $200,000 $30,000 $5,092,208 $11,779,755 $12,445,851

$27,759,015 $6,432,119 $6,432,119 $14,894,778 6.95%

$20,289,758 $6,587,119 $6,587,119 $7,115,519 3.24%

$13,459,628 $6,729,814 $6,729,814 ($0) 0.00%

35

Other Funds of the District

36

Child Development Fund 12 • The Child Development Fund is used to account separately for federal, state and local revenues to operate child development programs.

2016-2017 Budget • • • •

Beg Fund Balance Revenues Expenditures Ending Fund Balance

$ 50,197 $ 5,225,224 $ 5,225,224 $ 50,197

37

Deferred Maintenance Fund 14 • Deferred maintenance funds may be used for the major repair or replacement of plumbing, heating, air conditioning, electrical, roofing, flooring systems, and the exterior and interior painting of school buildings. As part of the Budget Stabilization Plan, the Districts Contribution of $700,000 per year has been suspended until 2018-19.

2016-2017 Budget • • • •

Beg Fund Balance Revenues Expenditures Ending Fund Balance

$ 1,320,721 $ 9,232 $ 344,524 $ 985,429

38

Building Fund 21 • The Building Fund exists primarily to account separately for proceeds from the sale of bonds. Expenditures of the proceeds will be primarily for modernization and growth projects. 2016-2017 Budget • • • •

Beg Fund Balance Revenues Expenditures Ending Fund Balance

$ 2,086,936 $ 11,536 $ 830,351 $ 1,268,121

39

Capital Facilities Fund 25 • The Capital Facilities Fund exits primarily to account separately for moneys received from fees levied on developers or other agencies as a condition of approving development. Interest earned in the Capital Facilities Fund is restricted to that fund. (Government Code Section 66066) 2016-2017 Budget • • • •

Beg Fund Balance Revenues Expenditures Ending Fund Balance

$ 14,542,731 $ 99,938 $ 346,753 $ 14,295,916

40

County School Facilities Fund 35 • The County Facilities Fund was established pursuant to Education Code Section 17070 to receive apportionments from the State School Facilities Fund authorized by the State Allocation Board for new school facility construction, modernization projects, and facility hardship grants. The District will use the fund to account for income and expenses related to the modernization program.

2016-2017 Budget

• • • •

Beg Fund Balance Revenues Expenditures Ending Fund Balance

$ $ $ $

3,924 27 3 3,948

41

Special Reserve for Capital Outlay Fund 40 • The Special Reserve Fund for Capital Outlay projects exist primarily to provide for the accumulation of General Fund moneys for capital outlay projects (Ed Code Section 42840). Other authorized revenues which may be transferred to the Special Reserve are (1) proceeds from the sale or lease-with-option-to-purchase of real property (Ed Code Section 39363); (2) rentals and leases of real property specifically authorized for deposit to the by the governing board (Ed Code Sections 41003).

2016-2017 Budget

• Beg Fund Balance • Revenues • Expenditures Ending Fund Balance

$ $ $ $

2,857,054 726,221 1,001781 2,581,494 42

Bond Interest and Redemption Fund 51 • The Bond Interest and Redemption Fund is used for the repayment of bonds issued for a LEA (Ed Code Sections 15125-15262, Bond Interest and Sinking Fund). The bonds are issued by the board of supervisors of the county. The proceeds from the sale of the bonds are deposited in the county treasury to the Building Fund of the LEA. Any premiums or accrued interest for the sale of the bonds must be deposited in the Bond Interest and Redemption Fund for the LEA. The county auditor maintains control over the LEA’s Bond Interest and Redemption Fund.

2016-2017 Budget

• • • •

Beg Fund Balance Revenues Expenditures Ending Fund Balance

$ 7,251,116 $ 8,808,475 $ 8,558,071 $ 7,501,520 43

Self Insurance Fund 67 • Self-Insurance Funds are used to separate moneys received for self-insurance activities from other operating funds of the District. Expenses from the Self-Insurance Funds shall be made for the payment of claims, administrative costs, services, deductible insurance amounts, cost of excess insurance and other related costs. 2016-2017 Budget • • • •

Beg Fund Balance Revenues Expenditures Ending Fund Balance

$ (14,105,740) $ 24,268,189 $ 26,451,712 $ (16,292,263) 44

Staff Recommendations 1. At the June 22nd Meeting, the Governing Board adopt the Proposed District Budget as presented 2. After the State Budget Act has been enacted, a 45 Day Revise Report be provided to the Board of Education 3. Any updates or changes not captured in the Proposed District Budget be incorporated in the 45 Day Revise Report

45

Other Considerations

46

47

48

Early Education Block Grant

49

Funding Analysis of Implementation of Early Childhood Education Block Grant Current TK Model •

TK Program Funding is accounted for under District Average Daily Attendance Model

•

2015-16 ADA is 509

•

Program Revenues $4,954,606 or $9,734 per ADA

•

Program Expenditures $2,285,270

•

Program Surplus (Deficit) $2,669,336

Proposed Model Beginning 2017-18 •

Per-Student Fund $6,200

•

Program Revenues $3,200,000

•

Program Expenditures $2,285 270

•

Program Surplus (Deficit) $914,730

Net Change in Funding to the Anaheim Elementary School District Funding is ($1,754,606)

50

CalSTRS Rate Increases Employer contributions are changing from 10.73% in 2015-16 to 12.58% in 201617

Employee contributions are changing from 9.20% in 2015-16 to 10.25% in 201617

Under current law, once the statutory rates are achieved, CalSTRS will have the authority to marginally increase or decrease the employer contribution rate

CalSTRS Rates Change

Employee

Employee

Contribution

Contribution

(*Classic)

Change

(*New)

Fiscal Year

Employer

2013-14

8.25%

2014-15

8.88%

7.64%

8.15%

1.88%

8.15%

2015-16

10.73%

20.83%

9.20%

12.88%

8.56%

2016-17

12.58%

17.24%

10.25%

11.41%

9.21%

2017-18

14.43%

14.71%

10.25%

0.00%

9.21%

2018-19

16.28%

12.82%

10.25%

0.00%

9.21%

2019-20

18.13%

11.36%

10.25%

0.00%

9.21%

Overall

119.76%

10.25%

28.13%

9.21%

8.00%

N/A

51

CalPERS Rate Increases • The employer contribution to CalPERS is proposed to increase to 13.888% in 2016-17 from 11.847% in 2015-16 • “Classic” members continue to pay 7.00% – New members pay 6.00%, which may fluctuate from year to year based on the PEPRA requirement to pay half the normal cost rate • Estimates of the resulting future contribution rate increases for school employers are as follows:

CalPERS Rates Actual

Projected

2016-17

2017-18

2018-19

2019-20

13.888%

15.50%

17.10%

18.60%

*CalPERS provided these estimates in 2016

52

Fiscal Impact to Anaheim Elementary School District from Pension Reform STRS Salaries Subject $96,009,181

PERS Salaries Subject $28,986,175

District Contributions by year

District Contributions by year

2016-17 $12.08m 2017-18 $13.85m 2018-19 $15.63m

At this time, no additional funding is provided to cover incremental costs

2019-20 $17.40m By year 2019-20, annual contributions are $5.32m higher

2016-17 $4.03m 2017-18 $4.50m 2018-19 $4.96m

2019-20 $5.40m By year 2019-20, annual contributions are $1.37m higher

Based on 2016-17 Salary Data, annual pension contributions will increase by $2.48m.

53

Budget Stabilization Summary Phase I & II Description Phase I Phase I

Phase I Phase I Phase I Phase II Phase II Phase II Phase II Phase II Phase II

Recommendation 1 Recommendation 2

LCFF Revenue One Time Revenue

Recommendation 3 Recommendation 4 Recommendation 5 Recommendation 6 Recommendation 7 Recommendation 8 Recommendation 9 Recommendation 10 Recommendation 11

Deferred Maint. & Restricted Main. Contribution All Day K Cost Shift All Day K Bussing Saturday School Rev. Saturday School Exp. Energy Cost Savings Trio Plan Savings Early Retirement Plan Optimize Medi-Cal

Total Budget Savings

2015-16

2016-17

2017-18

2018-19

222,260

2,806,545 3,849,622

5,119,056

5,119,056

2,006,741

100,000

2,006,741 3,982,658 392,000 442,944 424,128 200,000 167,610 1,434,263 -

2,006,741 3,982,658 392,000 885,888 424,128 200,000 167,610 1,434,263 -

3,982,658 392,000 885,888 424,128 200,000 167,610 1,434,263 -

3,273,675

15,706,511

14,612,344

12,605,603

677,064 100,000 167,610

Budget Stabilization Plan Phase I & II identified $46.2m in savings, this is $26.25m more than the targeted amount of $19.95m

54

Analysis of Ending Fund Balance Projections

Projections

Projections

2016-17

2017-18

2018-19

Proposed Budget

34,544,932

37,291,605

43,082,442

Less Budget Stabilization Phase I & II

15,706,511

14,612,344

12,605,603

Projected Reserves without Budget Stabilization Plan

18,838,421

22,679,261

30,476,839

The Projected Ending Fund Balances do not reflect earmarked and committed funds which would further decrease the available reserves

55

Board of Education Comments and Questions…

56