Azusa Unified School District

Budget Study Session

February 23, 2010

U.S. Economic Outlook

The broader national economy may be turning the corner

The rate of job loss has slowed considerably

Job growth, although likely weak, may begin soon

Since the recession began, the U.S. has lost 7.6 million jobs

Home sales are rising

Consumer spending is up 2.8% in the third quarter of 2009

The stock market is up 60% from its March 2009 low

Third quarter U.S. gross domestic product (GDP) increased 2.2% (revised), the best showing since the recession began

1

U.S. Economic Outlook

Because of excess capacity in the labor and products market, UCLA forecasts low inflation in the near term of about 2% annually through 2011

Once the recovery is fully under way, inflationary pressures will mount as the federal government finances the debt

Interest costs could reach $800 billion annually, 40% of current receipts, according to UCLA

-$2,000

-$1,500

-$1,000

-$500

$0

$500

2000 2003 2006 2009 2012 2015 2018

Federal DeficitFY 2000-19 (In Billions)

Source: UCLA Anderson Forecast, September 2009

2

California’s Economy

While there are signs of recovery, California’s economy will continue to suffer from high unemployment

As of November 2009, the state’s unemployment rate is 12.3%, compared to 10.0% for the U.S. as a whole

The Department of Finance forecasts the unemployment rate to remain above 10% through 2011

Other factors that will impair the recovery include:

Very weak construction and manufacturing sectors

Continuing drought

Political gridlock in Sacramento

3

Governor’s Budget 2010-11

For the current year, 2009-10, the Governor’s January Budget proposes no change in revenue limit funding, with the deficit factor remaining at 18.355%

In 2010-11, the statutory cost of living adjustment (COLA) is negative 0.38% and is fully “funded”

The deficit factor of 18.355% remains unchanged in the 2010-11 budget

In addition to the negative COLA and the continuation of the 18.355% deficit factor, the Governor’s Budget proposes an ongoing targeted cut of $1.5 billion in 2010-11 which approximates $201 per ADA

4

Risks to the Budget Proposal

The Governor’s Budget assumes $6.9 billion in additional federal support to fund state/federal programs

The federal government is running a $1.5 trillion deficit

The Governor proposes funding shifts for various programs

A major change is the Administration’s proposal to eliminate the state tax on gasoline and substitute an increase in the excise tax on gasoline

This shift provides more flexibility in how the funds can be spent

However, it also reduces General Fund revenues by $1.6 billion which drives the calculation of the Proposition 98 minimum guarantee

5

Risks to the Budget Proposal

Other shifts include:

$550 million from the California Children and Families Act of 1998 (Proposition 10) to children’s programs administered by the Departments of Developmental Services and Social Services

$452 million from the Mental Health Services Act (Proposition 63) to fund other mental health services

Both require voter approval, but last May, voters rejected all of the Governor’s special election Budget initiatives

The economic and revenue forecasts are vulnerable to downward revision, especially when the economic signals are mixed

6

California Revenue Limit Deficit Factors

8.14

0%

11.0

10%

10.1

20%

8.80

1%

8.80

1%

8.80

1%

6.99

6%

0.00

0%

0.00

0%

0.00

0%

3.00

2%

2.14

3%

0.89

2%

0.00

0%

0.00

0%

7.84

4%

18.3

55%

18.3

55%

0.000%

2.000%

4.000%

6.000%

8.000%

10.000%

12.000%

14.000%

16.000%

18.000%

20.000%

1993

-94

1994

-95

1995

-96

1996

-97

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

7

SSC Financial Dartboard

Factor 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15Statutory COLA (use for K-12 and COE Revenue Limit)

4.25% (0.38%) 1.80% 2.40% 2.80% 3.10%

K-12 Revenue Limit Deficit 18.355% 18.355% 18.355% 18.355% 18.355% 18.355%Net Revenue Limit Change (7.64%) (0.38%) 1.80% 2.40% 2.80% 3.10%

Other Revenue Limit Adjustments($252.83) per ADA

($191) ESD($231) HSD($201) USD

($191) ESD

($231) HSD

($201) USD

($191) ESD($231) HSD($201) USD

($191) ESD($231) HSD($201) USD

($191) ESD($231) HSD($201) USD

Special Education COLA (on state and local share only)

0.00% (0.38%) 1.80% 2.405 2.80% 3.10%

State Categorical COLA (including adult education and ROC/P; Tier IIn addition to prior year Tier IIreduction of 15.38%) Tier III

0.00%(4.46%)(4.46%)

N/A(0.38%)(0.38%)

1.80%1.80%1.80%

2.40%2.40%2.40%

2.80%2.80%2.80%

3.10%3.10%3.10%

California CPI 0.80% 2.00% 2.60% 2.90% 3.20% 3.40%

California LotteryBase $110.00 $110.00 $110.00 $110.00 $110.00 $110.00

Prop 20 $13.00 $13.00 $13.00 $13.00 $13.00 $13.00Interest Rate for Ten-Year Treasuries 3.50% 3.90% 4.30% 4.70% 5.00% 5.20%

8

Azusa USD 2008-09 K-12 Revenue Limit

Average Unified District for 2008-09

Base Revenue Limit per ADA

(A)

Proration Factor(B)

Funded Base Revenue Limit (C) = (A) x (B)

1. 2007-08 Base Revenue Limit $5,789.44 1.00000 $5,789.44

2. 2008-09 COLA per ADA 329.00 – –

3. 2008-09 Base Revenue Limit 6,118.44 0.92156* 5,638.51

4. 2008-09 One-Time Reduction – – 0.00

5. Net 2008-09 Funding (C3 minus C4) $5,638.51

6. Dollar Change (Line 5, Column C minus Line 1, Column C) <$150.93>

7. Percentage Change (Line 6, Column C divided by Line 1, Column C) <2.61%>

*0.92156 = 1.0 – 7.844% (deficit factor)

9

Azusa USD 2009-10 K-12 Revenue Limits

Average Unified District for 2009-10

Base Revenue Limit per ADA

(A)

Proration Factor(B)

Funded Base Revenue Limit (C) = (A) x (B)

1. 2008-09 Base Revenue Limit $6,118.44 0.92156 $5,638.51

2. 2009-10 COLA per ADA 261.00 – –

3. 2009-10 Base Revenue Limit 6,379.44 0.81645* 5,208.49

4. 2009-10 One-Time Reduction – – <252.83>

5. Net 2009-10 Funding (C3 minus C4) $4,955.66

6. Dollar Change (Line 5, Column C minus Line 1, Column C) <$682.85>

7. Percentage Change (Line 6, Column C divided by Line 1, Column C) <12.11%>

*0.81645 = 1.0 – 18.355% (deficit factor)

10

Azusa USD 2010-11 K-12 Revenue Limits

Average Unified District for 2010-11

Base Revenue Limit per ADA

(A)

Proration Factor(B)

Funded Base Revenue Limit (C) = (A) x (B)

1. 2009-10 Base Revenue Limit $6,379.44 0.81645 $5,208.49

2. 2010-11 COLA per ADA (0.38%) <24.00> – –

3. 2010-11 Base Revenue Limit 6,355.44 0.81645* 5,188.90

4.2010-11 Proposed Ongoing per Student Reduction

<201.00> – <201.00>

5. Net 2010-11 Funding (C3 minus C4) $4,987.90

6. Net 2009-10 Funded Revenue Limit (Slide TK Line 5, Column C) 4,955.66

7. Dollar Change (Line 5, Column C Minus Line 6, Column C) $32.24

8. Percentage Change (Line 7, Column C Divided by Line 1, Column C) 0.65%

*0.81645 = 1.0 – 18.355% (deficit factor)

11

Azusa USD Declining Average Daily Attendance (P2)

10,9

66

10,9

58 11,2

36 11,3

82

11,4

94

11,2

81

11,3

24

11,4

40 11,7

39

11,8

26

11,6

17

11,4

23

11,1

77

10,9

06

10,7

76

10,7

60

10,3

99

10,1

10

9,000

9,500

10,000

10,500

11,000

11,500

12,000

1993

-94

1994

-95

1995

-96

1996

-97

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

12

Azusa USD Revenue Limit Funding Reductions

State Funding Reductions

Declining Enrollment

Cumulative Effect

1. 2008-09 Year $5,171,543 $737,855 $5,909,398

2. 2009-10 Year $15,319,102 $79,340 $15,398,442

3. 2010-11 Year $14,220,832 $1,800,226 $16,021,058

4. Total $34,711,477 $2,617,421 $37,328,898

13

ARRA Funding Cliff

ARRA funds have provided LEAs with a welcomed level of relief – and, depending on how the funding was used, either alleviated or created budget challenges

Districts need to be prepared for the loss of ARRA funding

Tough choices will need to be made – positions, services, and supplies funded with ARRA dollars will need to be eliminated, reduced, or shifted to another source of funding

Don’t include competitive ARRA funding in your 2010-11 budget

These funds are not a sure thing

MYPs need to acknowledge the loss of ARRA funding

14

AUSD ARRA Funding- Estimated Allocations15

2008-09 Azusa USD General Fund Revenues

Property Taxes7.78%

Local Revenue1.61%

State Categorical Programs24.89%

Federal Categorical Programs10.45%

State Revenue Limit55.27%

Category AmountState Revenue Limit $53,606,675State Categorical Programs 24,143,932 Federal Categorical Programs 10,140,572 Property Taxes 7,542,773 Local Revenue 1,558,932 Total Revenues $96,992,884

16

2008-09 Azusa USD General Fund Expenditures

Certificated Salaries 46.23%

Classified Salaries 14.69%

Certificated Management & Supervisors 4.78%

Employee Benefits 15.35%

Supplies & Operations 17.63%

Classified Management & Supervisors 1.32%

Category AmountCertificated Salaries 43,154,117$ Certificated Management & Supervisors 4,457,616 Classified Salaries 13,715,125 Classified Management & Supervisors 1,234,755 Employee Benefits 14,323,256 Supplies & Operations 16,452,130 Total Expenditures 93,336,999$

17

2008-09 Azusa USD Salaries and Benefits by Classification - All Funds

Classified 21.75%

Non-represented 3.18%

Adult Education 2.41%

Management 11.10%

Certificated 61.55%

18

Classification AmountCertificated 50,287,373$ Adult Education 1,969,443 Management 9,070,326 Classified 17,771,462 Non-represented 2,599,925 Total Salaries and Benefits 81,698,529$

Azusa USD General Fund Revenues(in thousands) as of January 31, 2010

57,49159,538

62,848 63,41961,149

53,70952,235

19,185 20,494

26,009 26,12124,144

21,202 21,202

8,518 7,878 7,095 6,83010,141

14,172

8,658

1,058 1,319 1,804 1,559 1,660 1,660

86,25188,955

98,174 96,993

90,743

83,755

1,045

97,270

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10est.

2010-11est.

Th

ou

san

ds

Fiscal Year

Am

ou

nt

Rev Limit State Federal Local Total

19

Over a quarter of districts, representing approximately 38% of the state’s ADA, responded to an SSC survey regarding class size and contract/school year length

Not surprising . . .

Class sizes are increasing across all grade levels

School years are getting shorter

And many districts have made or are contemplating work-year reductions

Flexibility Changes to Staffing Practices20

2009-10 Estimated Second Interim Report

21

2009-10 Estimated Second Interim Report, cont.

22

Previous Reductions - Never Reinstated

Program Description1 Reduced the Home to School transportation program2 Eliminated 50% General Fund support of Resource teacher positions3 Reduced Custodial cleaning program to every other day only4 Reduced Computer Lab Aides by 33 percent

5 Reduced School Counselors by one at each High School and AlternativeEducation Center

6 Reduced School Counselors by 1.5 FTEs at the Elementary School level7 Eliminated Directors of Facilities and Risk Management

23

Current Budget Reduction Measures

24Program Description

1 No COLA increases for all employees for 2007-08; 2008-09 and 2009-102 Reduced 10% District office department budgets across the board3 Reduced PDC Operations and Staffing4 Reduced Summer School Program offerings and administrators5 Reduced Funding for fingerprinting volunteers6 Eliminated Management Seminar facility and consultant costs7 Reduced Summer Cleaning program8 Current open position: Director of MIS9 Current open position: D.O. Secretary

10 Current open position: 100% PDC Clerk11 Current open position: Maintenance (2 FTEs)12 Current open position: Custodial13 Current open position: Nutrition Services14 Eliminated 6th Grade Academy15 Reduced attendance to conferences to essential only16 Reduced New teacher support17 Implemented $5.2 million in Tier III Flexibility Transfers in 08-0918 Implemented $991,338 in Other Categorical Transfers in 08-0919 Implemented $1.3 million in Tier III Flexibility Transfers in 09-1020 Implemented $300,000 in Other Categorical Transfers in 09-1021 Delayed textbook adoption for Language Arts K-1222 9th Grade CSR @25 to 1; "With Flexibility" (AHS, GHS )23 Reduced classified Overtime and Substitution costs

Potential Reductions

25

Description Total Certificated Classified Management Adult EdPotential Personnel Related Reductions:

Unrestricted General Fund:1 Potential School Closure - Longfellow Elementary School 289,280 - 163,430 125,850 - 2 K-12 Staffing reductions due to enrollment decline (12.1 FTEs) 801,964 801,964 - - - 3 K-3 CSR @24.94 to 1 including transfers to QEIA (27.7 FTEs) 1,656,950 1,656,950 - - - 4 9th Grade CSR - Elimination of remaining balance (3.5 FTEs) 231,973 231,973 - - - 5 Potential Reduction - CSR Downsize - One Custodian (Open) 44,966 - 44,966 - - 6 Potential Reduction - Maintenance Worker (2 FTEs) (Open) 114,637 - 114,637 - - 7 Reduction in Salaries transferred to First Five Program 438,717 - 59,107 234,841 144,769 8 Eliminate Hourly Employment for Summer Cleaning Program 30,885 - 30,885 - - 9 Additional Reductions Required 1,076,170 - 457,911 223,957 394,302

Total Unrestricted General Fund 4,685,542 2,690,887 870,936 584,648 539,071

Potential Reductions, Cont.

26Description Total Certificated Classified Management Adult Ed

Potential Personnel Related Reductions:Restricted General Fund:

1 Intervention Teacher Reductions (1.6 FTEs at HS) 97,598 97,598 - - - 2 Potential School Closure - Longfellow Elementary School 26,926 - 26,926 - - 3 Additional Reductions Required - Restricted 509,102 332,565 176,537 - -

Total Restricted General Fund 633,626 430,163 203,463 - -

Previous Reductions - Director of MIS 140,526 - - 140,526 -

Total Potential Personnel Related Reductions 5,459,694 3,121,050 1,074,399 725,174 539,071

% Total Potential Personnel Related Reductions 100.00% 57.17% 19.68% 13.28% 9.87%

Other Non-Personnel Related/Previously Budgeted Reductions:1 K-3 CSR - Revenue Loss due to class size increase (895,775) 2 K-12 Staffing reductions estimated/reflected in budget (10 FTEs) (722,750) 3 Director of MIS (140,526) 4 K-3 CSR FTE transfers to QEIA (10 FTEs) 662,780 5 Implement Tier III transfer from IMFRP 750,000 6 Potential 10% balance from the 2008-09 year ARRA funding 466,005 7 PARS Retirement Incentive 184,368

Effect of Other Non-Personnel Related Reductions: 304,102

Grand Total 5,763,796

The End