2019-20 first interim budget report...2019-20 first interim budget report june 19, 2019 page | 1...

Manhattan Beach Unified School District

2019-20 First Interim Budget Report (Actuals through October 31, 2019)

Presented to the Board of Trustees and Superintendent

Bill Fournell, President Jennifer Cochran, Vice President

Karen Komatinsky, Clerk Jennifer Fenton, Member

Sally Peel, Member

Michael Matthews, EdD, Superintendent

Prepared and Presented by

Dawnalyn Murakawa-Leopard, EdD Deputy Superintendent

December 11, 2019

2019-20 First Interim Budget Report

Table of Contents Overview .................................................................................................................................... 1Economic Indicators ................................................................................................................... 1California’s Budget .................................................................................................................... 4The District ................................................................................................................................ 6Revenue ..................................................................................................................................... 6

Enrollment .............................................................................................................................. 6LCFF Funding – Base Grant ................................................................................................... 7LCFF Funding – Supplemental and Concentration Grants ....................................................... 8Local Revenue – Measure MB .............................................................................................. 10Local Revenue – Manhattan Beach Education Foundation .................................................... 10Other Revenue Sources ......................................................................................................... 11

Expenditures ............................................................................................................................. 12Cash Flow ................................................................................................................................ 14Multi-Year Projection ............................................................................................................... 15Ending Fund Balance ................................................................................................................ 23Ongoing Concerns and Priorities .............................................................................................. 25Bond Funds: Measures C and EE .............................................................................................. 26Other Funds .............................................................................................................................. 28Purpose of the Report ............................................................................................................... 30Budget Certification ................................................................................................................. 31Detailed Budget Forms ............................................................................................................. 31

Budget Forms ....................................................................................................................... 31Criteria and Standards ........................................................................................................... 31SACS Budget Report ............................................................................................................ 32


June 19, 2019 Page | 1

Manhattan Beach Unified School District 2019-20 First Interim Budget Report

“For those who say that we can’t have a recession in a presidential election year, I would note that recessions occurred in 1960, 1980, and 2008; all presidential election years.”

- David Shulman, Senior Economist, UCLA Anderson Forecast1

Overview With the US currently in the longest expansion in history, economists have been warning of an impending recession. However, with each new economic report, it appears that the economy continues to grow, though at a slower rate than in recent years, so, while impending, the recession does not appear imminent. Similarly, while the current year marks the first year of “COLA-only” growth under the Local Control Funding Formula, meaning that although California’s K-12 schools did not receive the large infusions of revenue that they had seen in the years since 2013 when the state was still providing “gap” funding, they did receive some new revenue. While the education community is starting to talk about potential reductions, these, too, appear to be impending but not imminent. In Manhattan Beach, the same is true. While ongoing increases to health care, pension, and special education costs have consumed increases in revenue, and while there are signs of substantial challenges ahead, significant reductions have been avoided in the current year. However, for Manhattan Beach, the future is here. Reserves have been reduced to the point where additional deficit spending is unsustainable. And, due to the legal requirements surrounding any staffing reductions, planning for 2020-21 must begin now, with decisions required within the next few months. The Manhattan Beach Unified School District will be required to identify significant increases to revenue or decreases to expenses – or both – beginning in 2020-21, and this report is the first step in developing those plans.

Economic Indicators On both state and national levels, economic indicators continue to point to a slowing economy. While the Conference Board reported in October that global consumer confidence remains high,2 it also notes that “the US LEI [Leading Economic Index] declined for a third consecutive month, and its six-month growth rate turned negative for the first time since May 2016,”3 pointing to a softening labor market and weak manufacturing orders. The yield curve, which inverted through 1 David Shulman. “UCLA Anderson Forecast: The Two-Track Economy.” UCLA Anderson Forecast. December 2019. Accessed December 5, 2019. https://www.anderson.ucla.edu/documents/areas/ctr/forecast/reports/UCLAForecast_Dec2019_Shulman.pdf 2 The Conference Board. “Global Consumer Confidence.” October 9, 2019. Accessed November 24, 2019. https://www.conference-board.org/data/bcicountry.cfm?cid=15. 3 The Conference Board. “The US Leading Economic Index® (LEI) for the U.S. Declined Slightly..” November 21, 2019. Accessed November 24, 2019. https://www.conference-board.org/pdf_free/press/US%20LEI%20PRESS%20RELEASE%20-%20NOVEMBER%202019.pdf


December 11, 2019 Page | 2

in August, has un-inverted, with earnings on long term Treasury rates once again returning to the “normal” position of outpacing short term rates. However, Forbes notes that this pattern does not mean that a recession is not looming, commenting that, “the un-inversion does indeed signal an economic recovery—but it doesn’t mean we won’t have to get through a recession first” and noting that, based on past patterns, the un-inversion would indicate that a recession may be coming within a year.4 Indeed, data collected by the Federal Reserve Bank of St. Louis indicates that, since at least 1976, every time that the curve has inverted, a recession has followed within 24 months,5 and Michael D. Bauer and Thomas M. Mertens of the Federal Reserve observe, “Every US recession in the past 60 years was preceded by a negative term spread, that is, an inverted yield curve.”6

4 Brad McMillan. “The Yield Curve Has Un-Inverted: Now What?” Forbes. November 13, 2019. Accessed November 24, 2019. https://www.forbes.com/sites/bradmcmillan/2019/11/13/the-yield-curve-has-un-inverted-now-what/#267132793866 5 Federal Reserve Bank of St. Louis. “10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity [T10Y2Y].” November 24, 2019. Accessed November 24, 2019. https://fred.stlouisfed.org/series/T10Y2Y 6 Arjun Reddy. “A closely followed recession indicator is flashing its most worrying sign in 12 years.” Markets Insider. May 9, 2019. Accessed June 9, 2019. https://markets.businessinsider.com/news/stocks/yield-curve-inversion-3-month-10-year-yield-curve-inverts-2019-5-1028187644

Figure 1: Conference Board Consumer Confidence Index

Figure 2: 2-year to 10-year US Treasury Yield Curves



Last spring, the UCLA Anderson Forecast placed the probability of a recession in 2021 at between 24% and 83%.7 In September, they revised that forecast and stopped short of predicting a recession.8 This month, the UCLA Anderson Forecast issued its December report, which they characterized as “more optimistic,” with senior economist David Shulman explaining, “We modestly upgraded our forecast. . . . As a result, instead of forecasting 1% real growth for 2020, we expect growth to be on the order of 2% on a fourth quarter to fourth quarter basis. . . . But make no mistake, although we have lowered the risk of a recession, the second half of 2020 remains problematic for the economy.”9 In September, Bankrate conducted a survey of over 20 economists from organizations including Bank of the West, Grant Thornton LLP, Raymond James Financial, Stifel Nicolaus & Co, among others, and aggregated results point to a 41% chance of a recession before the next election.10 Bloomberg Economics’ recession indicator puts the chance of recession within the next 12 months at 26%; they note that this reading “is higher than it was a year ago but significantly lower than before the last recession. There are reasons to keep a close eye on the economy, but it’s not time to panic yet.”11

7 UCLA Anderson School of Management. “UCLA Anderson Forecast says economy may be weaker than it looks.” UCLA Newsroom. June 5, 2019. Accessed June 9, 2019. http://newsroom.ucla.edu/releases/ucla-anderson-forecast-june-2019-us-california 8 UCLA Anderson School of Management. “UCLA Anderson Forecast: Slow Growth but No Recession Predicted for U.S. Economy.” UCLA Anderson Forecast. September 25, 2019. Accessed November 24, 2019. http://newsroom.ucla.edu/releases/ucla-anderson-forecast-june-2019-us-california 9 UCLA Anderson School of Management. “UCLA Anderson Forecast: The Two-Track Economy.” UCLA Anderson Forecast. December 2019. Accessed December 5, 2019. https://www.anderson.ucla.edu/documents/areas/ctr/forecast/reports/UCLAForecast_Dec2019_Shulman.pdf 10 Sarah Foster. “Survey: Expect the Fed to cut rates ate least two more times over the next year.” Bankrate. September 4, 2019. Accessed November 24, 2019. https://www.bankrate.com/surveys/economic-indicator-survey-september-2019/ 11 Reade Pickert, Yue Qiu and Alexander McIntyre. “U.S. Recession Chances Inch Down to 26% Within Next 12 Months.” Bloomberg. Published October 14, 2019; Updated November 6, 2019. Accessed November 24, 2019. https://www.bloomberg.com/graphics/us-economic-recession-tracker/

Figure 3: Bloomberg Recession Indicator



In California, growth continues to outpace the rest of the nation. This is because of “productivity gains through the employment of labor augmenting technology,” according to UCLA Anderson Forecast Director Jerry Nickelsburg, who explains that while job growth has been steadily increasing, the productivity (or output) in the largest growth sectors has grown at steeper rates than the job growth rates, indicating that although more people are being employed their work is being enhanced by robots and other technologies. However, the housing market, including both sales and new construction, are not as strong as might be hoped, leading to projections of slowing growth for California, as with the rest of the nation. The September edition of the UCLA Anderson Forecast’s California report notes that, despite Governor Newsom’s commitment to addressing the housing crisis in the state, “weakness in home building, even with the new eased regulations and zoning, means that the prospect for the private sector building out of the housing affordability problem over the next three years is nil.”12

California’s Budget In late November, the Legislative Analyst’s Office (LAO) released a report on the 2020-21 Budget,13 providing its fiscal outlook for the state. Noting that updated analysis reveals that the state may have an additional surplus of $7 billion beyond what was previously predicted, the LAO finds that the budget “continues to be in a good position.” Of the $7 billion surplus, the LAO estimates that anywhere between $1 billion and $3 billion could be ongoing, meaning that this funding could be used to support ongoing program enhancements. The LAO also finds that the state’s reserves are sufficient to allow it to “weather a recession typical of the post-World War II era,” but notes that recent recessions have been more significant than “typical” and that a moderate recession characterized by “more significant stock market drops would have much larger impacts on the state budget” due to California’s tax revenue structure. The report goes on to comment that in a recession scenario, funding formulas would allow the legislature to fund schools at a lower rate, and the LAO makes an assumption of K-14 spending reductions by “a few billions of dollars year over year,” offsetting revenue losses by $20 billion over the course of the hypothesized 3-year recession. This results in a scenario where, although the state’s reserves would be sufficient to offset operating deficits, this is only possible because “General Fund spending on K-14 education declines even as the state maintains other programmatic spending using reserves.” Specific to K-12 education, the LAO provides a separate report on Proposition 98.14 In this report, the LAO projects continued declining enrollment on a statewide basis and projects a lower COLA for 2020-21, at 1.79% as compared with previous projections of 3.00%. (It should be noted that the MBUSD budget presented in this report uses the 3.00% COLA per current direction from the Los Angeles County Office of Education and that a reduction to 1.79% would 12 Jerry Nickelsburg. “The California Growth Spurt Continues to Roll On, But for How Long?” UCLA Anderson Forecast. September 2019. Accessed November 25, 2019. https://www.anderson.ucla.edu/documents/areas/ctr/forecast/reports/UCLAForecast_Sept2019_Nickelsburg.pdf. 13 Legislative Analyst’s Office. “The 2020-21 Budget: California’s Fiscal Outlook.” November 20, 2019. Accessed November 25, 2019. https://lao.ca.gov/Publications/Report/4111 14 Legislative Analyst’s Office. “The 2020-21 Budget: The Fiscal Outlook for Schools and Community Colleges.” November 20, 2019. Accessed November 25, 2019. https://lao.ca.gov/Publications/Report/4113



present significant difficulties and would create further budget challenges beyond those shown in the District’s current Multi Year Projection.) The LAO notes that this COLA “is relatively low compared to the cost pressures most districts are facing. If the Legislature were to provide no other ongoing increase in general purpose funding, most districts likely would need to dedicate nearly all of the increase to covering their higher pension costs.” While the LAO identifies additional funding for K-12 education, in the form of just over $500 million in one-time adjustments in revenue for 2018-19 and 2019-20 as well as just over $2 billion in 2020-21, it suggests that “because certain indicators suggest the chances of an economic slowdown are higher than normal,” at least half of the available funding be used for one-time purposes (such as paying down pension liabilities), as this “creates a buffer that helps protect ongoing programs in case the guarantee drops.” While School Services of California encourages the legislature to “consider using other tools [besides program reductions and deferrals] to mitigate the impacts of an economic downturn on our students, including using a portion of the state’s reserve to avoid such draconian reductions to education spending,”15 there is no guarantee that this will happen, and all indications are that now is the time for districts to prepare for the possibility of significant negative budgetary impacts should a downturn occur in 2021 or beyond. While the Governor’s willingness to utilize non-Proposition 98 funds on a one-time basis to support education in the 2019-20 budget was an important acknowledgement that Proposition 98 alone does not provide sufficient resources to support education in California, it does not represent an ongoing commitment, and California schools remain significantly underfunded. As noted in the District’s adopted budget, the California School Boards Association and the Association of California School Administrators have compiled data that reflects that California:

• has the largest economy in the nation, and the 5th largest economy in the world but • ranks 41st in the nation in per-pupil funding when adjusted for cost and

o 45th in the percentage of taxable income spent on education o 45th in students per teacher o 48th in students per staff member

They further point out that, prior to the shift in funding created by Serrano v. Priest and the passage of Proposition 13, California public schools were funded in the top ten in the nation and now remain in the bottom ten.16 Additionally, as noted in a Rutgers University analysis, while California has moved up in its per pupil ranking over the past several years, it continues to provide approximately 2/3 of the funding provided by the 10th ranked state, showing that while California may be making progress compared with states below the national average, the top funded states are increasing their education investment at a higher pace than California, creating a greater gap between the top funded states and states at or near California in the rankings.17

15 Patti Herrera. “Legislative Analyst Issues Positive But Cautious Outlook.” November 21, 2019. Accessed November 26, 2019. https://www.sscal.com/publications/fiscal-reports/legislative-analyst-issues-positive-cautious-outlook. 16 Capitol Advisors Group. “Budget Perspectives Workshop: 2019-20 May Revision.” May 2019. 17 Bruce Baker, et. al. “Is School Funding Fair? A National Report Card.” February 2018. Accessed June 9, 2019. https://edlawcenter.org/assets/files/pdfs/publications/Is_School_Funding_Fair_7th_Editi.pdf



The District The Manhattan Beach Unified School District serves 6,550 students from kindergarten to twelfth grade, plus approximately 350 additional preschool students. Students attend school at eight campuses – one preschool, five elementary schools, one middle school, and one high school. MBUSD consistently ranks as one of the highest performing unified school districts in California, and its schools and programs receive numerous honors. District awards include recognition as a National Green Ribbon district, and school recognitions as California Distinguished Schools, National Blue Ribbon Schools, California Gold Ribbon Schools, and California and US Green Ribbon Schools. The Mira Costa High School drama program has received statewide recognition, and the school is home to a Grammy award winning music program. Mira Costa’s Model United Nations program is nationally and internationally recognized and in 2017-18 won its fourth national championship in the last six years. Its student newspaper, La Vista, was a Crown recipient for the 2017 Columbia Scholastic Press Association awards. 48% of Mira Costa High School students participate on at least one athletics team, and the school was named Cal-Hi 2016 Sports D2 School of the Year. 87% of Mira Costa High School graduates attend college after high school, including Stanford, Harvard, Yale, Princeton, UCLA, and USC. 67.9% of graduating students succeed on at least one AP test during high school. The District is a leader in the implementation of classroom technology, makerspace, and STEM programs, and it has, over the past few years, placed significant focus on the social and emotional learning of its students, helping them to strive to find the right balance between school achievement and mental health needs, including stress reduction, adequate sleep, and healthy levels of play time, down time, and family time. MBUSD has brought this issue to the forefront in the larger community and is a resource to many districts in this area. In seven of the last nine years, one of MBUSD’s teachers was named a Los Angeles County Teacher of the Year, and in 2012, 2013, and 2019 respectively, MBUSD teachers Michael Hayden, Maggie Mabery, and Kim Holz were named California Teachers of the Year. In addition to outstanding students and excellent teachers, MBUSD is extremely fortunate to have a high level of parental involvement in its schools and very strong partnerships with community groups such as the Manhattan Beach Education Foundation, PTAs and the PTSA, MBX, the City of Manhattan Beach, Chevron, Beach Cities Health District, the Manhattan Beach Chamber of Commerce, and other local organizations and businesses. These local partnerships have been and continue to be critical in providing the resources to allow MBUSD to continue to offer the outstanding educational programs that it maintained through the recession and continues to build upon as it moves forward.

Revenue

Enrollment While demographic patterns throughout California have generally indicated declining enrollment, MBUSD was fortunate to see relatively stable enrollment through 2014-15. This changed in 2015-16, when enrollment declined by over 100 students, representing a 1.4% decline. In 2016-17, enrollment matched 2015-16, but in 2017-18 and 2018-19, enrollment numbers reflected additional declines, by over 125 students in 2017-18 and by just over 100 students in 2018-19. In both 2015-16 and 2017-18, the decline was largely due to smaller



kindergarten classes, combined with a smaller than anticipated ninth grade class in 2015-16 and smaller than anticipated middle school classes in 2017-18. For 2018-19, while the district enrolled a larger incoming kindergarten class, this was offset by the graduation of a large senior class and by decreases in enrollment from kindergarten to first grade and from fifth to sixth grade. Table 1: Census Day Enrollment 2014-15 to Present

TK/K 1 2 3 4 5 6 7 8 9 10 11 12 Total

2014-15 419 455 470 494 496 484 506 567 455 634 657 622 631 6890 2015-16 395 411 464 488 500 502 485 511 559 586 627 646 600 6774 2016-17 442 402 427 480 489 514 491 476 506 707 584 622 634 6776 2017-18 394 430 414 429 474 495 502 469 467 651 698 591 633 6647 2018-19 448 363 426 413 438 474 473 495 472 631 648 692 610 6583 2019-20* 455 398 366 429 417 449 475 466 492 595 630 648 693 6513

*preliminary figures Declining enrollment leads to a decrease in revenue provided through the LCFF. In order to provide relief from sharp revenue reductions resulting from enrollment fluctuations, when a district’s revenue declines, the state allows the district to base its current year revenues on the higher of the current or the prior year’s enrollment numbers, thereby delaying some of the effects of a decrease until the following year and providing the district with time to plan and prepare and to determine whether a single year’s decline in enrollment is anomalous or ongoing. However, with MBUSD’s enrollment declining for the third time in a row, revenue continues to be impacted. In building projections for future years, the District relies upon a variety of analyses, including a demographic survey conducted during the District’s master planning process, a regression analysis, a cohort survival model, and a weighted model incorporating both the regression analysis and the weighted model. In comparing these projections with actual enrollment numbers over the past four years, none provides a precisely accurate projection, but the weighted average has provided the figures closest to actual enrollment in three of the last four years, and that is the methodology that the District is currently using in establishing its enrollment projections. Using these numbers, the District projects ongoing declining enrollment over the next two years, with stabilization possible in the third year. Table 2: Enrollment Projections – Weighted Average (Regression Analysis + Cohort Survival)

TK/K 1 2 3 4 5 6 7 8 9 10 11 12 Total

2020-21 421 374 385 370 420 423 450 462 465 624 601 631 646 6272 2021-22 423 354 367 360 385 408 460 464 451 625 633 654 667 6250 2022-23 431 358 358 348 366 678 438 457 469 627 634 682 707 6252

LCFF Funding – Base Grant Now in its seventh year of implementation, the Local Control Funding Formula (LCFF) provides a per pupil “base” grant, a figure which is augmented by additional funding to provide 24:1 class sizes at grades K-3 and to support college and career support at grades 9-12. Districts receive



additional funding through “supplemental” and “concentration” grants whose size is determined by the unduplicated count of high need youth enrolled in the District. The total of these three amounts creates a “target” funding level, which the State not only fully funded in 2018-19 (two years ahead of projections) but also enhanced through a supplemental COLA which provided additional ongoing LCFF funding. For 2019-20, the state funded the LCFF at the statutory COLA of 3.26% without any enhancement, making this the first year of a true “COLA-only” increase to LCFF and illustrating for the first time the true discrepancy between COLA-only LCFF increases and statutory and “on the natural” cost increases for salary, pensions, health and welfare and other benefits. The current budget is based upon LCFF Base Grant rates for 2019-20 as follows: Table 3: 2019-20 Base Grant Projections

Grade Span PY Base Grant (Amount per ADA)

COLA (3.26%)

Augmentation Grant

Base Grant

TK-3 $7,459 $243 $801 $8,503 4-6 $7,571 $247 $-0- $7,818 7-8 $7,796 $254 $-0- $8,050 9-12 $9,034 $295 $243 $9,572

LCFF Funding – Supplemental and Concentration Grants In addition to base grant funding, districts also receive Supplemental and Concentration Grants, which provide additional per-ADA funding to support the learning needs of the district’s English Learner, low income, homeless, and foster youth (often referred to as the “unduplicated count,” or the UPP – the Unduplicated Pupil Percentage). Supplemental Grants enhance the per-ADA amount by 20% for each student who is included in the UPP; Concentration Grants (only provided when a district’s unduplicated count is greater than 55%) provide an additional 50% in per-ADA funding for qualifying districts. The unduplicated count in MBUSD has been close to 5% since the LCFF’s inception: Table 4: MBUSD Unduplicated Pupil Percentages by Year18

Year UPP 2013-14 4.00% 2014-15 3.50% 2015-16 4.10% 2016-17 4.89% 2017-18 5.32% 2018-19 5.55%

Preliminary 2019-20 data shows a 6.2% unduplicated pupil percentage, but it should be noted that this is based on current year figures, whereas the UPP listed in the chart above, which is the 18 California Department of Education. “Local Control Funding Formula – Funding Snapshot.” Accessed November 26, 2019. http://ias.cde.ca.gov/lcffsnapshot/lcff.aspx



figure used for funding purposes, is based on a three-year average, so the district’s official 2019-20 is likely to be lower in its final form. This compares with a statewide count of 63.71% and a Los Angeles County count of 71.6%. It is the second lowest unduplicated count in both the County of Los Angeles and for a unified district in all of California (behind Hermosa Beach City Elementary and Piedmont City Unified, which were at 4.89% and 2.59%, respectively, in 2017-18). Table 5: 2017-18 Lowest Statewide Unduplicated Counts by District

Rank County District Type Basic Aid

Parcel Tax UPP

10 Santa Clara Loma Prieta Joint Union Elementary Elementary Y Y 5.85% 9 Los Angeles Manhattan Beach Unified Unified N Y 5.32% 8 Contra Costa Lafayette Elementary Elementary N Y 4.92% 7 Los Angeles Hermosa Beach City Elementary Elementary N N 4.89% 6 Contra Costa Moraga Elementary Elementary N Y 4.51% 5 Santa Clara Los Gatos-Saratoga Joint Union High High School Y Y 3.96% 4 Alameda Piedmont City Unified Unified N Y 2.59% 3 Contra Costa Orinda Union Elementary Elementary N Y 2.45% 2 San Mateo Hillsborough City Elementary Elementary Y Y 2.14% 1 Marin Ross Elementary Elementary Y Y 1.04% Table 6: 2017-18 Selected LA County Unduplicated Counts by District (20% or less &/or in the South Bay Region)

County Rank District Type Basic Aid Parcel Tax UPP 80 Lennox Elementary N Y* 96.28% 69 Hawthorne Elementary N Y* 89.40% 60 Centinela Valley Union High High School N Y* 85.63% 56 Inglewood Unified Unified N N 84.92% 55 Lawndale Elementary Elementary N Y* 84.80% 26 Wiseburn Unified Unified N Y* 46.01% 21 Torrance Unified Unified N N 38.18% 18 Culver City Unified Unified N Y (2019-20) 37.23% 14 Santa Monica-Malibu Unified Unified N N 28.60% 10 South Pasadena Unified Unified N Y 19.74% 9 Redondo Beach Unified Unified N N 19.10% 8 El Segundo Unified Unified N N 16.00% 7 Beverly Hills Unified Unified Y N 15.60% 6 San Marino Unified Unified N Y 15.26% 5 Las Virgenes Unified Unified N Y 14.79% 4 Palos Verdes Peninsula Unified Unified N Y 11.95% 3 La Canada Unified Unified N Y 8.00% 2 Manhattan Beach Unified Unified N Y (2018-19) 5.32% 1 Hermosa Beach City Elementary Elementary N N 4.89%

*these districts together passed a shared “regional” parcel tax with no sunset date in 2012.



The District’s exceptionally low unduplicated count will provide a very limited supplemental funding amount of approximately $670,432 for the 2019-20 school year.

Local Revenue – Measure MB In June 2018, Manhattan Beach voters passed Measure MB, a local funding measure that will provide funding to the District in the amount of $225 per parcel of land in the City of Manhattan Beach. There are approximately 13,090 eligible taxable parcels of land in the City. Although demographic information from the Manhattan Beach Chamber of Commerce reflects that 13.9% of residents of Manhattan Beach are senior citizens age 65 or older who might be eligible for exemptions,19 the actual exemption rate for 2018-19, the first year during which revenues from this source were collected, was 14.45%, representing 1,892 exemptions (1,888 senior exemptions and 4 SSI/SSDI exemptions). Based on this exemption rate, the District anticipated receiving approximately $2.5 million annually in additional revenue for the district for six years, from 2018-19 through 2023-24. In 2018-19, it was anticipated that the parcels not subject to exemption would result in $2,471,625 in revenue, assuming a 100% rate of payment. Actual revenue of $2,448,736 was collected (representing a 99% rate of payment). Based on this experience, current year revenues are estimated at $2,436,330, representing a 99% rate of payment based on current year tax rolls. The District is utilizing Measure MB funds to support teaching positions that will allow the District to maintain manageable class sizes, provide programs in math, science, reading, language arts, social studies, art, music and STEM (science, technology, engineering and math), and prepare students for college and careers. Funding in 2018-19 supported 27 positions, allowing the District to delay significant expenditure reductions originally planned for that year. However, based on salary cost increases, 2019-20 Measure MB funds will support 23.5 positions, and ongoing increases to costs will erode the District’s deficit at an accelerated pace and will mean that the District will need to implement increasing and ongoing reductions beginning in the current year, albeit at a slower pace than would have been the case without Manhattan Beach voters’ passage of Measure MB.

Local Revenue – Manhattan Beach Education Foundation In addition to Measure MB, the District is fortunate to have the Manhattan Beach Education Foundation (MBEF) as a partner. MBEF is an independent fundraising organization that has provided significant funding to the District each year since its inception in 1983 to help to provide “small class sizes, rigorous academics and a breadth of educational experiences from kindergarten through high school.”20 For the past six years this figure has been over $5 million and growing, and in 2019-20 grants to the schools will amount to $6.4 million. Grants to the District fund numerous positions and programs, providing additional staffing to lower class sizes as well as music teachers, elementary physical education teachers, librarians, counselors, science specialists, reading specialists, and a variety of professional development programs for teachers. MBEF also supports the District’s ongoing work in the areas of social inclusion and social

19 Manhattan Beach Chamber of Commerce. “Demographics.” 2016. Accessed June 13, 2018. http://www.manhattanbeachchamber.com/shop/demographics/. 20 Manhattan Beach Education Foundation. “History and Mission.” 2018. Accessed June 13, 2018. https://mbef.org/about/history/.



emotional learning and is a partner to the District in identifying and addressing emerging priorities and needs. MBEF has established an endowment fund and has embarked on a campaign to grow this fund, which held $18.5 million as of August 2018, to hold $20 million by 2020. This will enable MBEF to provide ongoing funding not dependent solely on annual donations. It is anticipated that if MBEF is able to achieve its goal, the endowment fund will provide revenue of $1 million per year to support District programs.

Other Revenue Sources In addition to revenue described above, the District anticipates receiving ongoing local revenue from its Shared Use Agreement with the City of Manhattan Beach. This agreement has been in place for several years, with a one-year amendment including an increase of $200,000 in revenue put in place in 2017-18 and a six-year amendment including an adjustment to the maximum CPI increase on the annual revenue from $15,000 to $25,000. For 2019-20, the District anticipates receiving approximately $775,000 through this agreement. In addition, MBUSD will continue to participate in the Mandate Block Grant program, which provides a per-ADA allocation to offset the costs of state-mandated requirements imposed on districts and is anticipated to generate just under $280,000 for the District. Importantly, for the first time in several years, the state is not providing additional one-time funding to districts. Last year, this funding source provided approximately $1.2 million to the District, and while the District did not anticipate this as an ongoing revenue source, the loss of this revenue will enhance concerns related to deficit spending. The District anticipates total revenue in the amount of $85,578,231 The District’s largest source of revenue continues to be from the state through the LCFF, with the second largest source being local revenue, including funding from Measure MB, MBEF, and the District’s Fund 06 organizations. As noted previously, because Fund 06 donations are generally targeted (restricted) one-time donations, the associated revenue (and expense) is not included in the District’s adopted budget, but rather grows over the course of the year.

LCFFRevenue$56,553,075

66%

FederalRevenue$2,140,522

2%

OtherStateRevenue$9,952,11112%

LocalRevenue$16,932,523

20%

Figure 4: 2018-19 Revenue Sources



This revenue figure includes changes made previously through the 45-day budget revision and unaudited actuals budget report, which reflected updates resulting from the state’s budget enactment process, as well as updates made since then. The major revisions made at the time of the 45-day revision and unaudited actuals included:

• The inclusion of CalPERS On-Behalf state revenue (offset by corresponding expense) in the amount of $782,744

• The addition of one-time state revenue for preschool special education services in the amount of $646,200

As of the First Interim Budget Report, additional changes include:

• An increase by $1,951,392 in Fund 06 revenue • An increase by $145,898 in funding from MBEF, due to the addition of revenue related

to MBEF’s Paddle Raise and adjustments to other grants • An increase by $136,350 in Low Performing Student Block Grant funding • An increase by $39,753 in federal special education funding • An increase by $34,817 in receipts from the Property Tax JPA in which the District

participates • An increase by $12,111 to offset expenses related to the SELPA DHH Regional Program

operated by the District • An increase by $10,248 in other federal funding • A decrease by $106,602 in one-time state revenue for preschool special education

services (at unaudited actuals, the District anticipated receiving funding for 72 students – based on anticipated December 2019 counts – at a rate of $8,975 per student; the state has recently informed the SELPA that the District will receive funding for 60 students – based on December 2018 counts – at a rate of $9,010 per student)

• A decrease by $63,343 in state special education funding • Additional minor decreases in state and local revenue amounting to $12,821

These changes amount to an increase over anticipated revenue at the time of budget adoption by $3,560,554 and since unaudited actuals by $2,124,093, all of which is from restricted and/or one-time sources.

Expenditures The District anticipates total expenditures in the amount of $89,695,480. The largest category of expense is for personnel costs, with certificated and classified salary and benefits comprising 83% of projected expenses. Over the course of the year, this percentage will decrease slightly, as Fund 06 non-personnel expenses increase, but personnel costs will remain the large majority of the District’s expenses.



As with revenues, these expenditure figures include changes made previously through the 45-day budget revision and unaudited actuals budget report as well as updates made since then. The major revisions made at the time of the 45-day revision and unaudited actuals included:

• The inclusion of CalPERS On-Behalf expenditures in the amount of $782,744

• A reduction in expenditures for special education and utility services in the amount of in the amount of $820,124

As of the First Interim Budget Report, additional changes include:

• An increase by $1,951,392 in Fund 06 expenditures

• An increase by $662,243 in increased costs for special education services provided by NPA’s, NPS’s and consultants (this increase has been adjusted downwards based on a 2% budget reduction for NPA’s and a 5% budget reduction for NPS’s anticipating less than 100% utilization of these services).

• An increase by $460,097 in salary and benefits costs, related to new hires, 6th period assignments, and a reconciliation of costs based on actual payroll

• An increase by $412,549 in grant-supported travel and conference costs • An increase by $319,119 in legal services costs, of which $179,269, or 56%, is

attributable to special education and the remainder to unrestricted general fund expenditures.

• An increase by $82,422 in supply costs, as a result of a corresponding decrease in capital expenditure costs

• An increase by $63,030 in supply costs due to shifts from planned expenditures in services and capital outlay to supplies in the District’s technology budget

• A reduction in indirect costs in the amount of $15,800 • Other minor adjustments to expenditures resulting in an overall increase by $9,869

These changes amount to an increase over anticipated expenditures at the time of budget adoption by $3,905,944 and since unaudited actuals by $3,949,521. It is important to note that at budget adoption, the District anticipated an operating deficit of $3,771,859. This was decreased to $2,291,821 at unaudited actuals and has now grown to $4,117,249. The $1,825,428 increase to the deficit since the time of unaudited actuals is largely

CertificatedSalary

$36,740,46941%

ClassifiedSalary

$15,031,65417%

Benefits$22,641,552

25%

Supplies$2,777,237

3%

Services$12,025,782

13%

CapitalOutlay$20,0000%

OtherOutgo/Indirect$399,0861%

Figure 5: Budgeted Expenditures by Category



due to changes in special education revenue and expense. A decrease to special education revenue of $117,081 combined with an increase to special education expense of $904,909 results in a total increase to the deficit of $1,021,990. Another $263,548 is a result of salary and benefits reconciliation based on actual payroll costs. The remaining $539,890 increase to the deficit is due to increases in unrestricted costs including an increase in health and welfare costs by $194,968, an increase in legal costs of $139,850, a utility cost increase of $48,760, and an increase in insurance costs by $38,430. To begin to address the deficit, the District implemented expenditure reductions in the current year. While these reductions do not mitigate the structural challenges of the District’s budget – primarily caused by ongoing increases to costs (salary, benefits, and special education) that are not offset by increases to revenue – they do have some impact:

• The district’s professional development budget was reduced by nearly $260,000 • The district’s instructional materials budget was reduced by $400,000 • The district’s technology budget was reduced by just over $400,000 (reducing the

technology replacement budget by over $315,000 and ongoing services by nearly $100,000)

• The district’s legal services budget was reduced by almost $135,000 • The district’s overtime budget was reduced by nearly $120,000 • The district’s budgets for other departments was reduced by approximately $75,000

In addition, beginning immediately, the District will implement further cost-reduction measures by requiring Cabinet-level review of all optional or unplanned general fund expenditures. However, these measures are not sufficient to provide budgetary relief in the long run, and significant reductions will be required in subsequent years in order for the District to be able to maintain a positive budget.

Cash Flow Districts receive their LCFF funding through a combination of state funding and local property tax dollars. State funding is apportioned on what is called a 5-5-9 schedule, so that districts receive 5% of their funding in July, 5% in August, and 9% in each month thereafter. For MBUSD, state funding under the LCFF amounts to $12,174,505, apportioned to the district on the 5-5-9 schedule ($608,725 in the first two months and $1,095,705 in each month thereafter). In addition, the District receives $1,282,254 in funds from the temporary income tax increase authorized by voters through Proposition 55 via the Education Protection Account; these funds will be used to pay for classroom teachers’ salaries and benefits as authorized by Board resolution 2019-18, approved on June 19, 2019, and are distributed quarterly rather than according to the 5-5-9 schedule. The remainder of LCFF revenue ($43,097,431 for MBUSD) comes to the District in the form of property tax revenue. This revenue is disbursed to districts at different times of the year based on statutory timelines and formulas; as one might expect, the largest disbursements generally occur in December and April, and disbursements are small in the other months.



As a result of the state funding and tax disbursement schedules, it is not uncommon for revenue to be insufficient to cover costs during the months leading up to December and April. Districts that do not have sufficient reserves often engage in short-term borrowing, either by borrowing from other funds held by the District or, if such funding sources are insufficient, by participating in a County borrowing pool. Such borrowing requires that funds be repaid (with interest) within the fiscal year during which they were borrowed. While MBUSD was historically able to meet cash flow needs by borrowing from within other funds during previous years, it became necessary to begin participating in the County borrowing pool in 2017-18. This need continues in 2019-20. On June 19, 2019, the Board authorized both inter-fund borrowing via Board Resolution 2019-19 and the issuance of Tax Revenue Anticipation Notes (TRANs) in the amount of $13 million via Board Resolution 2019-17 (up from $6 million in 2018-19 and $7.5 million in 2017-18). As the District’s reserve level continues to decline, it is anticipated that such borrowing will continue to be needed for the foreseeable future.

Multi-Year Projection The District’s Multi-Year projection is largely built based on assumptions provided by the Los Angeles County Office of Education:

Utilizing these assumptions and the information included above, the district has developed an updated multi-year projection for the current and subsequent two fiscal years. This projection indicates that while MBUSD will end the year with a healthy reserve, ongoing deficit spending, escalating mandatory costs, and limited revenue increases will result in diminishing ending fund balances. The District will need to enact significant budgetary reductions in future years, and even with such reductions will need to reduce its Reserve for Economic Uncertainties (REU) to



3% in the current year. While these projections could change based on actual receipt of revenues and actual expenditures, the projected decreases to the ending fund balance are part of an ongoing trend, and while the depletion of reserves may be prolonged over more years than current projections indicate, significant expenditure reductions will be needed on an ongoing basis, as, even if the current deficit were resolved, future increases to expenditures are anticipated to outpace increases to revenues. The declining size of the District’s ending fund balance, its REU, and its undesignated amount can be seen in the following table: Table 7: Surplus/Deficits and Reserve amounts as a Percentage of Expenditures

Year Excess (Deficiency) Ending Balance as a % of Expenditures

REU Undesignated Amount

2011-12 ($1,078,135) 27.42% 5% 22.00% 2012-13 ($2,956,203) 22.62% 5% 15.47% 2013-14 $1,127,733 24.98% 5% 17.40% 2014-15 ($1,402,406) 19.75% 5% 11.69% 2015-16 $79,097 18.13% 5% 10.44% 2016-17 ($75,426) 18.16% 5% 9.63% 2017-18 ($2,300,560) 14.48% 5% 5.92% 2018-19 ($2,851,599)* 9.40%* 5%* 1.44%* 2019-20 ($4,117,249)* 4.69%* 3%* 1.21%* 2020-21 ($1,521,272)* 3.06%* 3%* 0.02%* 2021-22 ($56,020)* 3.06%* 3%* 0.03%*

*projected at first interim Importantly, while the District realized a budget surplus in each of the years from 2004-05 through 2010-11, the District has been in a deficit spending scenario in all but two years since that time. A review of the District’s budgetary history reflects significant changes in the amount of deficiency between budget adoption and unaudited actuals, but this positive change has still resulted in overall budget deficits. Further, while the change was consistently positive prior to 2018-19, averaging approximately $2.2 million over the five years leading up to that point, in 2018-19 the change was negative by $2.7 million, bringing the new five-year average down to $826,512 and the five-year average of the percent of budget represented by the change down from 3.38% to 1.33%. Table 8: Changes to Budget Excess/(Deficiency) from Adoption to Unaudited Actuals

Adopted Budget Unaudited Actuals Total Change Change as % of Budget 2011-12 ($2,176,236) ($1,078,135) $1,098,101 2.08% 2012-13 ($5,682,446) ($2,956,204) $2,726,242 4.70% 2013-14 ($2,977,006) $1,127,733.00 $4,104,739 7.16% 2014-15 ($3,211,807) ($1,402,406) $1,809,401 2.88% 2015-16 ($683,646) $79,099.47 $762,745 1.11% 2016-17 ($3,339,507) ($75,426) $3,264,081 4.44% 2017-18 ($3,303,012) ($2,300,560) $1,002,452 1.30% 2018-19 ($145,480) ($2,851,599) ($2,706,119) (3.06%)

The changes in projections have stemmed from a variety of sources. They are not predictable and therefore cannot be incorporated into the District’s multi-year projections. However,



ongoing positive swings would lengthen the period during which reserve funding would allow the District to slow planned reductions. Barring significant increases to revenue, increases to expenditures will continue to exceed increases to revenue, and as existing reserves are depleted it will be necessary not only to eliminate all deficit spending shown in the current Multi-Year Projection but to reduce expenditures even further in order to maintain a balanced budget and a positive three-year outlook in years beyond the current projection. As in the past, MBUSD continues to rely upon LACOE’s guidance in developing budget projections. Currently projected revenue increases are quite modest, especially when compared with projected mandatory cost increases. Significantly, as noted previously, while current revenue projections are based on the 3.00% COLA outlined in LACOE’s guidance, recent LAO projections suggest that this may be overly optimistic and use a 1.79% COLA instead. Modest revenue projections are coupled with ongoing cost increases, including step and column salary cost adjustments, health and welfare cost increases, inflation on goods and services, pension rate adjustments, and special education cost increases. Over the next several years, one of the largest factors influencing changes expenditures will be increases to employer contribution rates for CalSTRS and CalPERS. As these retirement systems work to address their liabilities and ensure that they will remain fiscally solvent and fully funded, costs to employers will continue to increase at relatively steep rates. Furthermore, recent investment earnings have prompted both CalSTRS and CalPERS to examine their actuarial assumptions, with CalPERS taking definite action to increase its projected employer contribution rates, and CalSTRS likely to do so to the extent currently permitted by law. The table below describes both CalPERS and CalSTRS projected rate increases, though it is important to note that projected rates for future years can fluctuate and have changed by as much as a full percentage point over the last few years. These rate increases come after more than 30 years of lower contributions. The last time that CalPERS rates were above 11% was in 1986-87; the highest rate since 1979-80 was in 1980-81 when rates peaked at 13.119%.21 There has been no separate funding source to assist districts in supporting these increasing rates, and therefore all rate increases for STRS and PERS have been paid out of ongoing revenue sources. In the 2019-20 budget the Legislature provided a revenue investment proposed by Governor Newsom that offset employer contribution rates to STRS and PERS by just over 1% for 2019-20, by 0.7% and 0.9% respectively for 2020-21, and by 0.3% for both funds thereafter. This provided welcome relief and a landmark action by the legislature, which had previously taken no action to allocate funds beyond those provided through the LCFF and other Proposition 98 funding sources. However, as can be seen in the chart above, increases will continue over the coming years, and whether the legislature continues to provide additional relief remains to be seen.

21 Employer Contribution Rate History. (30 June 2014.) CalPERS Schools Pool Actuarial Valuation – June 30, 2014. Retrieved from https://www.calpers.ca.gov/docs/rate-history-schools-2014.pdf.



Table 9: Retirement System Employer Contribution Rates

CalPERS Actuals/ Current Projection22

CalSTRS Actuals/ Legislative Limit23

2010-11 10.707% 8.250% 2011-12 10.923% 8.250% 2012-13 11.417% 8.250% 2013-14 11.442% 8.250% 2014-15 11.771% 8.880% 2015-16 11.847% 10.730% 2016-17 13.888% 12.580% 2017-18 15.532% 14.430% 2018-19 18.062% 16.280% 2019-20 19.721% 17.100% 2020-21 22.800% 18.400% 2021-22 24.900% 18.100% 2022-23 25.900% 18.100% 2023-24 26.600% can increase by up to 1% per year to a

maximum employer contribution rate of 20.25%; unfunded actuarial

obligation to be eliminated by 2046

2024-25 27.000% 2025-26 26.800% 2026-27 26.700%

In addition to the impact of pension cost increases, the District has been impacted by ongoing increases to costs related to its Special Education program. This is due to a number of factors including increases to salary costs, increases to the number of positions funded, particularly in the area of classified staff, and legal services. The LAO recently published a report on Special Education in California.24 In it, the LAO observes that,

After remaining at 10.8 percent throughout the early 2000s, the share of students receiving special education has increased steadily every year since 2010-11. In 2017-18, 12.5 percent of California public school students received special education. Though rates have been increasing in California, all but seven states still have higher rates. In 2017-18, the median state provided special education services to 14.3 percent of its students.

In MBUSD, the identification rate was 11.9% in 2016-17 grew to 13.0% in 2017-18 and 13.8% in 2018-19. Within this number, the District has disproportionately high numbers of students identified as having a speech or language impairment, emotional disturbance, or other health

22 Charlene Quilao & Sheila Vickers. “Ask SSC . . . What Are the CalSTRS, CalPERS, Social Security, Medicare, and SUI Historical Rates?” School Services of California. October 18, 2019. Accessed November 30, 2019. https://www.sscal.com/publications/fiscal-reports/ask-ssc-what-are-calstrs-calpers-social-security-medicare-and-sui. 23 CalSTRS. “Employer Directive 2014-05” June 26, 2014. Accessed November 30, 2019. https://www.calstrs.com/sites/main/files/file-attachments/ed2014-05_calstrs_long-term_funding_legislative_changes_0.pdf?1403907585. 24 Legislative Analyst’s Office. “Overview of Special Education in California.” November 6, 2019. Accessed November 30, 2019. https://lao.ca.gov/Publications/Report/4110.



impairment, coupled with disproportionately low numbers of students identified as having intellectual disabilities and specific learning disabilities. According to the LAO, “the average annual cost of educating a student with disabilities ($26,000) is almost triple that of a

student without disabilities ($9,000).” The LAO goes on to state that Between 2007-08 and 2017-18, inflation-adjusted special education expenditures increased from $10.8 billion to $13 billion (28 percent). Both state and federal funding decreased in inflation-adjusted terms over this period, primarily as a result of declining overall student attendance. Consequently, local unrestricted funding has been covering an increasing share of special education expenditures (49 percent in 2007-08 compared to 61 percent in 2017-18). We estimate that about one-third of recent increases in special education expenditures are due to general increases in staff salaries and pension costs affecting most school districts. We estimate that the remaining two-thirds of recent cost increases are due to a rise in an incidence of students with relatively severe disabilities (particularly autism) which require more expensive and intensive supports.

In 1977, federal law under the Individuals with Disabilities Education Act (IDEA) established a maximum amount for federal funding of “40 percent of the average per-pupil expenditure in public elementary schools and secondary schools in the United States” per student with disabilities who receives special education and related services. The LAO notes that actual federal funding has never come close to this target. Similarly, state grants, one of

Figure 7: Federal Funding for Special Education

Figure 6: California Special Education Funding Sources



the few remaining sources of categorical funding remaining under California’s new school finance system, funds only a portion of the cost of educating students identified as needing special education services under a relatively complex system of 11 funding programs, granting funds sometimes based on total district enrollment, sometimes based on numbers of identified students, and sometimes based on other demographic and competitive factors, and allowing funds to be used in part to support any special education expense and in part to be targeted towards specific services for specific groups of students. In Manhattan Beach, the District’s contribution has outpaced the statewide average, rising from 60% in 2013-14 to 65.4% in 2014-15, 67.4% in 2015-16, 73.5% in 2016-17. However, this percentage has decreased over the past two years, with the District contributing 73% in 2017-18 and 65% in 2018-19. The percentage in 2018-19 is anomalous and due to the addition of the SELPA’s Regional Program for students who are Deaf and Hard of Hearing; this program’s costs are 100% funded by contributions from the Districts of Residence of the students who are served. Removing the costs and revenues associated with this program results in a contribution percentage of 73.07%, in line with the prior year. Similarly, on a statewide basis, legal cases have been on the rise, with the state receiving 2,626 due process filings in 2007-08 and 4,854 in 2017-18; in Manhattan Beach 8 cases were filed in 2016-17, 15 in 2017-18, and 12 in 2018-19. The District recently contracted with Strategic Consultation for Schools to study this data and make recommendations to help ensure that the District delivers a strong program while implementing cost controls. Recommendations include the development of a variety of systems, structures, and procedures to ensure strong general education support structures, a clearly articulated continuum of services, and structures to monitor and ensure appropriate and effective staffing. The report suggests that staffing may need to be reduced in some areas and increased in others; changes implemented as a result of this study may have both short and long term budgetary impact for the District and may change some of the trends upon which current assumptions are based, but it is not likely that changes will result in short term cost reductions. It remains to be seen whether changes will have an impact in arresting ongoing cost increases in this area, which have grown at an average rate of 7.74% over the past five years As described previously, the District faces additional cost increases “on the natural:”

• The District projects annual “step and column” salary advancement for employees at approximately 1.3%, along with associated increases to statutory benefits costs.

• For years beyond the current year, the District anticipates annual increases to Health and Welfare benefit costs at a rate of 7.8%; this increase is based on the average rate increase experienced by the District over the past five years.

• The District can anticipate increases to the costs of other goods and services with CPI growth projected at between 3.02% and 3.14% over the next three years.

While these increases are offset to some degree due to decreasing staffing needs as enrollment declines and as the District adjusts staffing levels accordingly, natural attrition will not keep pace with the increasing costs that are being imposed on the District.



Another factor to consider is negotiated salary increases. While such increases are not legislatively mandated, they are subject to collective bargaining, and it is important to recognize that with the high cost of living in California, and in the South Bay in particular, retaining employees requires an investment to ensure that salaries are competitive and allow employees to live in circumstances that are conducive to working in Manhattan Beach. The District has worked to do this and has provided competitive salary increases: Table 10: Negotiated Salary Increases

Statutory COLA Salary Increase 2017-18 1.56% 1.0% 2018-19 2.71%* 1.5% 2019-20 3.26% 2.5%

*For 2018-19, the state legislature augmented this COLA and applied a 3.7% COLA to LCFF funding.

For the current and two previous years, these increases have represented just under $3.4 million in increased salary costs. While these increases have served to keep MBUSD’s compensation above average compared with districts in the region, total compensation for District employees is competitive, but not the highest in the area. It is a demonstration of the fiscal constraints faced by all districts in the state that even with only modest salary increases the District faces challenges that may require it to reduce program in order to sustain these cost of living adjustments. In examining these cost pressures, it becomes clear that even accounting only for increased pension, salary and statutory benefits, and health and welfare costs, these increased costs alone will outpace any projected LCFF revenue increases in the coming years. Adding in negotiated salary increases and the variable of special education cost increases widens the gap. Using the assumptions described above (and acknowledging the variability of special education contribution growth and years for which salary has not yet been negotiated), the difference between currently projected increases to LCFF revenue and increased expenses (keeping all current staffing and spending levels constant) is as follows:

Figure 8: LCFF Growth v. Cost Increases per ADA



While these projections are theoretical in nature, as they do not incorporate changes to planned expenditures, they provide a general sense of future District budgets. As stated earlier, the 2018-19 budget not only filled the remaining gap between existing and target funding levels but also provided an augmented COLA, meaning that new revenue was, in that year and for the last time, significantly enhanced by the state’s investment in filling the LCFF “gap.” As the state moves into a COLA-only scenario for revenue increases, the discrepancy between increased revenue and increased costs dramatically increases. Thus, even if the District did not have a current deficit, the structure of the LCFF and the legislated cost increases on the horizon would create and enlarge a deficit over the next several years. It is also important to remember that projections do not currently anticipate the very real possibility of an economic downturn, nor do they incorporate the LAO’s downsizing of the 2020-21 COLA from 3.0% to 1.79%. Notwithstanding the District’s historical positive trends between budget adoption and year-end closing, this structural issue will need to be addressed in order to allow the District to remain fiscally solvent in future years. Furthermore, the above scenarios do not take into account other needs, such as the need to address looming facilities maintenance needs. While, like many former categorical programs, the Deferred Maintenance program has been incorporated into the LCFF, LACOE has previously provided the following guidance:

DeferredMaintenancenolongerexistsasaseparateprogramandisnowapermanentpartoftheLCFFbasegrant.However,districtsarestillrequiredtoappropriatelymaintaintheirfacilities.TheresponsibilityformaintainingdistrictfacilitiesisoneoftheeightStateprioritiesandshouldbeincludedinthedistrict’sLCAP.Inaddition,theWilliamsActfacilityrequirementswillcontinue.Werecommendthatdistrictssetasidefundsinaseparateresourcefordeferredmaintenancethatisnotavailableforothergeneralfundpurposes.

WithregardstoRoutineRestrictedMaintenance,LACOEhasinformedprovidedthisguidance:

School districts are required to deposit 3 percent of total General Fund expenditures beginning in the FY 2019-20, which is triggered by E.C. 17070.75(b)(2)(F) due to the full implementation of the LCFF.

This will result in a District budget of $2,897,214 for maintenance, of which $2,690,864 (3% of expenditures) is designated as Routine Restricted Maintenance. However, the District’s experiences with indoor air quality issues last year highlighted that this allocation is not necessarily sufficient to meet the District’s ongoing facilities maintenance needs. Last year’s challenges led to an unanticipated, though one time, impact to the budget of approximately $1.3 million. While these costs will hopefully not recur, they did result in a significant negative impact to the District’s available reserve. Additionally, in response to the clear needs demonstrated by last year’s air quality concerns, the District has added two maintenance and one management positions. This will begin to address the challenges created by significant reductions to the maintenance program over the last 10 years but will also create ongoing increased costs. And, even with this investment, the District has not come close to restoring the 12 (now 10) positions that would bring it to recommended staffing levels, or restore previously available funds for preventative, routine, and deferred maintenance. The District’s 2015



Facilities Master Plan identified close to $50M in maintenance needs, including between $20M and $25M in immediate or short-term needs. Since that time, the District has passed two bond measures, and much of the revenue from the bond sales will be utilized to address the identified facilities needs. However, the design process is still ongoing and construction is planned over the next few years, and in the interim the District will continue to address immediate and urgent maintenance issues as they arise through any available resources. One factors that will provide some favorable relief is that 2020-21 will be the last year in which the District will be obligated to pay retiree annuity investment costs related to a retirement incentive provided in the spring of 2016, reducing expenditures by just over $250,000 per year. The district has developed a multi-year projection for the current and subsequent two fiscal years. This projection indicates that while the district will end the year with a significant reserve, ongoing deficit spending will result in diminishing ending fund balances and the district will go from approximately 8.5% in in its reserve and unassigned balances in the current year to 3% in 2021-22, even with significant reductions in the coming years.

Ending Fund Balance The ending fund balance and multi-year projections reflected in the First Interim Budget Report reflect ongoing deficits of $3.7 million in 2018-19, $4.1 million in 2019-20, $1.5 million in 2020-21, and just over $40,000 in 2021-22, even with significant expenditure reductions. This will lead to a need to reduce the District’s Reserve for Economic Uncertainties (REU) from the Board-directed 5% to the statutory minimum of 3% of expenditures in the current year. The District can anticipate ending 2021-22 with less than $50,000 in undesignated funds. Figure 9: Components of the Ending Balance

$-

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,000

$9,000,000

2018-19 2019-20 2020-21 2021-22

3-YearEscrow

Restricted

REU(5%)

REU(3%)

UndesignatedAmount



It should be noted that in the current year the District is eliminating the “3-Year Escrow” which has been held in the District’s reserves since the inception of the current Shared Use Agreement

Table 11: Multi-Year Projection

2018-19 Unaudited

Actuals

2019-20 Adopted Budget

2019-20 45-Day

Revision/ Unaudited

Budget

First Interim 2019-20 Budget

Projected 2020-21 Budget

Projected 2021-22 Budget

Revenues Revenue (LCFF) $54,712,051 $56,554,190 $56,554,190 $56,553,075 $57,852,074 $57,330,081 Federal Revenue $2,117,463 $2,090,521 $2,090,521 $2,140,522 $2,140,522 $2,140,522

Other State $11,268,668 $8,556,321 $9,985,265 $9,952,111 $9,420,353 $9,428,365 Local $17,609,162 $14,816,645 $14,824,162 $16,932,523 $16,932,523 $16,932,523

TOTAL REVENUES $85,707,344 $82,017,677 $83,454,138 $85,578,231 $86,345,472 $85,831,491

Expenditures Certificated Salaries $35,513,032 $36,220,474 $36,220,474 $36,740,469 $34,316,896 $31,804,058

Classified Salaries $14,181,603 $15,108,414 $15,108,414 $15,031,654 $15,227,065 $15,425,017 Employee Benefits $21,689,553 $21,643,604 $22,427,451 $22,641,552 $22,763,724 $22,752,426 Books & Supplies $2,490,285 $1,654,482 $1,654,482 $2,777,237 $2,832,782 $2,897,525

Services/Other Operating Expenses $13,685,758 $10,686,172 $9,866.048 $12,085,482 $12,327,191 $12,609,399

Capital Outlay $384,612 $82,442 $82,442 $20,000 $0 $0 Other Outgo $700,309 $495,948 $488,948 $485,286 $485,286 $485,286

Indirect (86,209) ($102,000) ($102,000) ($86,200) ($86,200) ($86,200)

TOTAL EXPENSES $88,558,943 $85,789,536 $85,745,959 $89,695,480 $87,866,744 $85,887,511

Net Increase/ (decrease) ($2,851,599) ($3,771,859) ($2,291,821) ($4,117,249) ($1,521,272) ($56,020)

Fund Balance (Reserves) Beginning fund balance $11,149,418 $7,491,030 $7,491,030 $8,324,150 $4,206,901 $2,685,629

Ending Fund Balance $8,324,150 $3,719,171 $5,199,209 $4,206,901 $2,685,629 $2,629,609 Non-Spendable Revolving Cash ($10,000) ($10,000) ($10,000) ($10,000) ($10,000) ($10,000)

Stores ($20,000) ($20,000) ($20,000) ($20,000) ($20,000) ($20,000) Restricted Ending Balance ($677,495) ($439,195) ($396,624)

Assigned/Designated 3-year Escrow $1,912,418

Supplemental Grant REU (5%) $4,427,947 $4,287,298 REU (3%) $2,573,686 $2,690,864 $2,636,002 $2,576,625

UNDESIGNATED ENDING BALANCE $1,276,290 $676,290 $881,911 $1,089,412 $19,626 $22,984



s with the City of Manhattan Beach. These funds have been held in reserve because that agreement specifies that the District must be prepared to reimburse the City for payments made under the agreement in the most recent three years in the event of a court finding requiring it. Eliminating these funds from the reserve means that the District will need to find other means to provide this reimbursement if necessary. These diminishing reserve amounts create vulnerability, particularly should a recession develop, leading to some of the more negative potential in the LAO’s projections noted earlier. LACOE has previously offered guidance on this topic:

The experience of the most recent recession has clearly demonstrated these minimum levels are not sufficient to protect educational programs from severe disruption in an economic downturn. The typical 3.0 percent reserve minimum represents less than two weeks of payroll for many districts. Many LEAs have established reserve policies calling for higher than minimum reserves, recognizing their duty to maintain fiscal solvency. The adequacy of a reserve level should be assessed based on the LEA’s own specific circumstances.25

The current ending fund balance reflected in the District’s multi-year projection does not allow MBUSD to maintain its current goal of a 5% reserve beyond 2018-19, nor does it sustain substantial unassigned funding in the subsequent years. Ongoing cost pressures will mean ongoing deficit spending, which will require the District to plan for reductions, beginning in 2019-20 and continuing in subsequent years; planning for such reductions should be incorporated into current budget planning discussions.

Ongoing Concerns and Priorities As a result of the community’s passage of Measure MB, the District was able to describe a positive budget for 2018-19. However, this funding cannot offset the gap by which increases to revenue outpace statutory and negotiated increases to expenditures. The adopted budget described the current and subsequent two fiscal years describes a positive fiscal outlook, but this is achieved only through substantial expenditure reductions. Currently the budget contemplates these reductions as reductions in personnel positions (the equivalent of 35 positions in 2020-21 and an additional 36.5 positions in 2021-22), but the District will be exploring all areas as it develops and articulates its plans for 2020-21 and beyond. In addition to making these reductions, the District will need to address a number of impending funding and expenditure challenges over the coming years:

• Despite a budget that reflects a very small deficit in 2021-22, a balanced budget will not be achieved in future years without further expenditure reductions, as cost increases are likely to continue to outpace LCFF growth. This discrepancy may be lessened if and as pension costs stabilize, but it will not be eliminated as increases in areas such as special education and health benefits will continue to be significant.

• Diminishing available reserves 25 Candi Clark and Keith Crafton “2017-18 First Interim Financial Reporting” 3 November 2017. Web. 3 December 2017. http://www.lacoe.edu/Portals/0/zBulletins/4700.pdf.



• Diminishing increases to state funding provided to districts through the LCFF • Ongoing increases to the District’s contribution to benefits for STRS and PERS through

2020-21 for STRS and through 2024-25 for PERS • Ongoing increases to other expenditure areas, including health and welfare benefits and

special education programs • Ongoing need to address deferred and increasingly urgent facilities maintenance needs

even after campus modernization projects can be completed • The impact of negotiated settlements with the district’s bargaining units (a contingent

salary increase has been negotiated for 2020-21, and negotiations have not yet begun for 2021-22 and beyond)

• Ongoing need for textbook and instructional materials investment • Ongoing need for further human capital investment in maintenance and operations as

systems are upgraded and as a result of significant personnel reductions and facilities modernization

• Ongoing and increasing needs for the replacement and upgrade of technology infrastructure and hardware

In addition, as noted previously, COLA-only LCFF increases compounded by declining enrollment will result in ongoing challenges and the need for further expenditure reductions. While there is significant uncertainty in projections for future years, and while the years beyond the next two are even more uncertain, it seems clear that there will be a need for ongoing reductions. In order to maintain a positive certification, the District will need to continue to project additional expenditure reductions in 2021-22 and beyond. Without such reductions, the District can anticipate qualified or negative budgets in the future; Multi Year Projection would appear as follows: Table 12: Four Year Multi-Year Projection

2018-19 2019-20 2020-21 2021-22 2022-23 Beginning Balance $11,149,419 $8,324,150 $4,206,901 $2,685,629 $2,629,609 Revenue $85,707,344 $85,578,231 $86,345,472 $85,831,491 $86,149,095 Expense ($88,558,943) ($89,695,480) ($87,866,744) ($85,887,511) ($88,365,780) Ending Balance $8,324,150 $4,206,901 $2,685,629 $2,629,609 $412,924 Undesignated Amt $1,276,290 $1,089,412 $19,626 $22,984 ($2,268,049)

Bond Funds: Measures C and EE On November 8, 2016, voters approved Measure EE, a $39 million bond measure which will provide funding to replace the outdated and undersized gymnasium at Mira Costa High School, and Measure C, a $114 million bond measure which will be used to repair and renovate deteriorating roofs, plumbing, electrical, and ventilation systems in aging facilities, replace or update older classrooms, including temporary portable buildings, make improvements for earthquake safety, improve heating and install air conditioning, improve student safety, security, lighting, fencing, and communication systems, and provide facilities and equipment needed to support high quality instruction in math, reading, science, the arts, and technology.



Since that election, the District has moved forward in implementing projects related to both bond measures. The Board has appointed Bond Oversight Committees for each measure and has identified Gensler as the architect for the Mira Costa Athletics Complex and DLR as the architect for all Measure C projects. Balfour Beatty will serve as the lease leaseback contractor for all projects for both Measures C and EE. In February and March of 2018, the District worked to update its credit ratings and was pleased when Moody’s maintained its Aa1 rating and Standard & Poor maintained its AA rating with a stable outlook for MBUSD bonds. In providing these ratings, Moody’s noted the District’s “large and diverse tax base, strong wealth indicators and healthy financial position supported by strong reserve and cash levels. The rating also incorporates the district's low debt and OPEB burdens as well as its moderate pension burden.” Similarly, Standard & Poor’s commented positively on “the district's very strong and stable local economy, which we believe moderates the risk of major local economic fluctuations. . . . [and] our view of the district's strong financial profile, with a demonstrated commitment by management and the board to maintaining very strong available reserves, while seeking additional and sustainable revenue flexibility.” Both firms indicated that future ratings would be influenced by changes to the District’s reserves. On May 9, 2018, the District’s bond sale closed, and the District received $89,168,337.10 for the Manhattan Beach USD 2016 Election General Obligation Bonds, 2018 Series A (Measure C and EE). These funds are held in the District’s Building Fund (Fund 21), and projections for these funds are as follows: Table 13: Measure C and Measure EE Bond Fund Revenue and Expense

Initial Bond

Issuance Prior Years’

Expenditures Beginning Balance Revenues Expenditures

(Deficit)/ Increase

Ending Fund

Balance

Measure C $41,844,047 $14,686,660 $24,726,681 $570,000 $16,484,420 ($15,914,420) $8,812,261

Measure EE $38,847,473 $9,333,984 $30,720,478 $570,000 $29,473,705 ($28,903,705) $1,816,773

* includes projected interest (actual interest allocation per bond will depend on rate of spend) The budgeted expenditures at the time of budget adoption anticipated all contemplated projects; however the construction timeline indicates that, while some projects will be completed by the end of the current year, others will still be in progress. At this time, the District is in construction of the new gymnasium building. The District’s Architect, Gensler, received approval from Division of the State Architect (DSA) on the plans they submitted. The District’s contractor Balfour Beatty Construction began demolition in December 2018 and construction in February 2019, and the new facility is expected to open for the fall sports season in 2020-21. Some components of the District’s Measure C plans, specifically security fencing at four school sites, were partially funded by the City of Manhattan Beach and completed during the 2018-19 school year. During the summer of 2019 school year, the District largely completed modernization at Pacific Elementary as well as District-wide roofing and HVAC at portions of



Mira Costa High School. Designs for Grand View Elementary, Meadows Elementary, Pennekamp Elementary, and Robinson Elementary have been submitted to DSA, with construction scheduled to begin in the summer of 2020. Designs for Manhattan Beach Pre School have also been submitted to DSA, with a summer 2021 construction start date, and plans for Manhattan Beach Middle School are still in development. With this information, the 2019-20 budget for Measure C and EE has been revised as follows:

Fund 21.0 Beg. Bal. Revenues Expenditures (Deficit)/ Increase Ending Bal. Adopted Budget $57,891,061 $1,000,000 $56,416,639 ($55,416,639) $2,474,422 Changes ($2,443,902) 140,000 ($10,458,514) ($10,318,514) $8,154,612 First Interim Budget $55,447,159 $1,140,000 $45,958,125 ($44,818,125) $10,629,034

While construction will be ongoing at the end of the current fiscal year, it will be necessary for the District to issue bonds for some, if not all, of the remaining portion of the Measure C bonds at the end of the current fiscal year or at the start of the next fiscal year.

Other Funds In addition to the General and Bond Funds, the District receives revenues and makes expenditures in a number of other funds. The First Interim Budget Report includes updated information regarding beginning and ending fund balances along with revenues and expenses for these funds below. CAFETERIA FUND (Fund 13) This fund reflects adjustments based on changes to the beginning fund balance created by differences in 2018-19 expense identified between estimated and unaudited actuals, as well as a small adjustment based on year-to-date expenditures.

Fund 13.0 Beg. Bal. Revenues Expenditures (Deficit)/Increase Ending Bal. Adopted Budget $1,068,108 $1,816,700 $2,623,774 ($807,074) $261,034 Changes $843,601 $38,207 ($38,207) $805,394 First Interim Budget $1,911,709 $1,816,700 $2,661,981 ($845,281) $1,066,428

Based on current projections, this fund will maintain a positive ending fund balance. CAPITAL FACILITIES FUND (Fund 25) This fund reflects adjustments based on changes to the beginning fund balance created by differences in 2018-19 expense identified between estimated and unaudited actuals, as well as a small adjustment based on year-to-date revenues and expense.

Fund 25.0 Beg. Bal. Revenues Expenditures (Deficit)/Increase Ending Bal. Adopted Budget $4,400,602 $650,000 $19,500 $630,500 $5,031,102 Changes $490,616 $200,000 $3,338 $196,662 $687,278 First Interim Budget $4,891,218 $850,000 $22,838 $827,162 $5,718,380

Based on current projections, this fund will maintain a positive ending fund balance.



CAPITAL PROJECTS FUND (Fund 40) At the time of budget adoption, it was anticipated that no revenues or expenditures would impact this fund. However, since that time, the District has received donations from Kinecta through a facilities naming agreement, and such funds will be held in this fund pending their expenditure on the Mira Costa High School marquee and the Stadium Way improvement project. In addition, the District anticipates receiving field rental revenue through its field management agreement with MB|X, which will be held in this fund pending the identification of future facilities improvement projects. Current year anticipated expenditures are related to ongoing work related to the close out of prior DSA construction projects; additional expenditures may be added later as improvements related to the Kinecta and MB|X agreements are identified.

Fund 40.0 Beg. Bal. Revenues Expenditures (Deficit)/Increase Ending Bal. Adopted Budget $10,856 -$0- -$0- -$0- $10,856 Changes $9,571 $201,400 $5,000 $196,400 $205,971 First Interim Budget $20,427 $201,400 $5,000 $196,400 $226,827

Based on current projections, this fund will maintain a positive ending fund balance. OTHER ENTERPRISE FUND (Fund 63) This fund reflects adjustments based on changes to the beginning fund balance created by differences in 2018-19 expense identified between estimated and unaudited actuals, as well as adjustments to current year expenses and revenues based on year-to-date expenditures and income.

Fund 63.0 Beg. Bal. Revenues Expenditures (Deficit)/Increase Ending Bal. Adopted Budget $719,965 $4,703,243 $5,024,420 ($321,177) $398,788 Changes $503,367 $179,507 $113,561 $65,946 $569,313 First Interim Budget $1,223,332 $4,882,750 $5,137,981 ($255,231) $968,101

Based on current projections, this fund will maintain a positive ending fund balance. SELF INSURANCE FUND (Fund 67) This fund reflects adjustments based on changes to the beginning fund balance created by differences in 2018-19 expense identified between estimated and unaudited actuals, as well as a small adjustment based on updated interest projections.

Fund 67.0 Beg. Bal. Revenues Expenditures (Deficit)/Increase Ending Bal. Adopted Budget $84,902 $1,300 $13,000 ($11,700) $73,202 Changes $2,476 $500 $500 $2,976 First Interim Budget $87,378 $1,800 $13,000 ($11,200) $76,178




RETIREE BENEFIT FUND (Fund 71) This fund reflects adjustments based on changes to the beginning fund balance created by differences in 2018-19 expense identified between estimated and unaudited actuals, as well as a small adjustment based on updated interest projections.

Fund 71.0 Beg. Bal. Revenues Expenditures (Deficit)/Increase Ending Bal. Adopted Budget $87,367 $2,200 $75,000 ($72,800) $14,567 Changes $2,995 $600 $600 $2,395 First Interim Budget $90,362 $1,600 $75,000 ($73,400) $16,962


Purpose of the Report Pursuant to Education Code § 42127, school districts must hold a public hearing on the budget for the subsequent fiscal year and then, following budget adoption, file the budget with the County Superintendent of Schools by July 1 of each year. Additionally, pursuant to Education Code § 52062, prior to budget adoption, each school district’s Local Control and Accountability Plan (LCAP) must be approved following opportunities for review and comment by the LCAP Advisory Committee, the English Learner Parent Advisory Committee, and members of the public, including at least one public hearing. The adoption process requires two separate Governing Board public meetings, held at least one day apart, for the school district budget hearing and budget adoption. In addition, the LCAP public hearing must occur at the same meeting as the budget public hearing and the LCAP adoption must occur at the same meeting as the budget adoption. The LCAP item must precede the budget item at each meeting. The public hearings require 72 hours public notice. Following budget adoption, Education Code (EC) Sections 35035(g), 42130 and 42131 require the Governing Board of each school district to certify at least twice a year to the district’s ability to meet its financial obligations for the remainder of that fiscal year and for the subsequent two fiscal years. This is the Interim Report Process. Public hearings for the purpose of taking input on the LCAP and the 2019-20 Adopted Budget will be held during the June 19, 2019, meeting of the Board of Trustees. Adoption of the LCAP and 2018-19 budget is scheduled for the June 20, 2019, special meeting of the Board of Trustees. The budget must be developed in accordance with criteria and standards adopted by the California State Board of Education. These criteria and standards require Districts to certify that their budgetary projections are accurate within established ranges and to explain any significant variances, to certify that the budget includes sufficient facilities maintenance funding, and to certify that they are limiting deficit spending and maintaining sufficient reserves.



Budget Certification Based on the best available current information and budgetary assumptions, it is recommended that the Board of Trustees of the Manhattan Beach Unified School District adopt the proposed budget for 2019-20 and two subsequent years, 2020-21 and 2021-22. It is additionally recommended the Board of Trustees continue to maintain a balanced yet conservative approach to budget planning. As noted, it will be important to limit deficit spending and ensure a strong general fund reserve in anticipation of ongoing cash flow considerations and the combination of increasing costs and limited revenue growth in upcoming fiscal years.

Detailed Budget Forms The following pages include the detailed budget documents. The budget format established by the State and LACOE and complies with the Standardized Account Code Structure (SACS) used throughout the state as well as any locally prescribed requirements.

Budget Forms Each fund is reported separately in the SACS format and provides a columnar view of the adopted, current operating budget, expenditures based on the close of the prescribed reporting period, proposed budget, and the difference between proposed and approved operating budget. In addition to the columnar review of fiscal year change the budget is broken down by description of revenue, expenditures, excess (deficiency of revenue over expenditures), other financing sources, net change to fund balance for the year, and the resulting ending balance based on the beginning balance (prior year closing ending balance). Definitions26 are as follows:

Revenue: The primary financial source of a fund. Revenues are recognized when assets are increased without increasing liabilities or incurring an expenditures reimbursement. Expenditures: The costs of goods delivered or services rendered, whether paid or unpaid, included expenses, provisions for debt. The expenses are to benefit the current fiscal period. Other Financing Sources/Uses: Reporting of sources includes long-term debt proceeds, operating transfers in, and material proceeds of fixed asset dispositions. Reporting of uses includes operating transfers out. Fund Balance: The difference between assets and liabilities. The fund equity of governmental and trust funds.

Criteria and Standards The criteria and standards were created to develop, review, and assess school district and county office of education budgets and interim financial reports. They are intended to provide a measurement system for fiscal solvency on a periodic basis. The District’s budget is measured against the standards, and a determination of whether the standards have been “met” or “not met” 26 California School Accounting Manual, Revised October 2011. Glossary Section



is made; this determination is intended to foster dialog, explanations and more detailed analysis on the part of the Board of Education, Staff, and the County Office in their review. The areas included are:

Standard Categories 1. Average Daily Attendance 2. Enrollment 3. Comparison of Enrollment to ADA 4. Local Control Funding Formula Revenue 5. Salaries and Benefits in Proportion to Expenditures 6. Changes in Other Revenues and Expenditures 7. Facilities Maintenance 8. Deficit Spending 9. Fund and Cash Balances 10. Reserves Supplemental information S-1 Contingent Liabilities Disclosure S-2 Using One-Time Revenues to Fund Ongoing Expenses S-3 Temporary Interfund Borrowing S-4 Contingent Revenues S-5 Contributions S-6 Long-Term Commitments S-7 Unfunded Liabilities S-8 Status of Labor Agreements Disclosure S-9 Status of Other Funds Additional Fiscal Indicators A-1 Negative Cash Flow A-2 Independent Position Control A-3 Declining Enrollment A-4 Charter School Impact A-5 Salary increases to COLA A-6 Uncapped health benefits A-7 Independent financial system A-8 Fiscal distress reports A-9 Change of CBO or Superintendent in a year

SACS Budget Report The District’s SACS Budget Report has been prepared and is presented simultaneously with the Budget Narrative; the documents are published and posted alongside each other to the Board and to the public.

2019-20 first interim budget report...2019-20 first interim budget report june 19, 2019 page | 1...

Documents