Proposed budget 2010 2011 june 14 2010
1 / 56

Slide 1 - PowerPoint PPT Presentation

  • Updated On :

Proposed Budget 2010-2011 June 14, 2010. Prepared by the Business Office. National Economy. The U.S. economy is no longer in decline, but is growing slowly The recession began in December 2007, 29 months ago U.S. Gross Domestic Product (GDP) grew 3.2% in the first quarter of 2010

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
Download Presentation

PowerPoint Slideshow about 'Slide 1' - aadi

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Proposed budget 2010 2011 june 14 2010 l.jpg

Proposed Budget


June 14, 2010

Prepared by the Business Office

National economy l.jpg
National Economy

  • The U.S. economy is no longer in decline, but is growing slowly

    • The recession began in December 2007, 29 months ago

    • U.S. Gross Domestic Product (GDP) grew 3.2% in the first quarter of 2010

    • 162,000 jobs were added in March (unrevised survey)

  • But the unemployment rate has remained high

    • The April 2010 rate was 9.9%, up from 8.9% one year ago

U s economic outlook l.jpg





U.S. Economic Outlook

Source: U.S. Bureau of Economic Analysis, April 2010

California economy l.jpg


California Economy

  • The state’s economy is recovering along with the nation’s

    • State personal income grew at 4.1% and taxable sales grew at 1.9% in the 4th quarter of 2009, according to the University of California Los Angeles (UCLA) Forecast

  • However, job growth remains a major drag on the economy

    • California added only 2,800 jobs in February and 4,200 jobs in March

    • If California had shared in the 162,000 U.S. jobs added in March, our proportionate gain would have been more than 16,000 jobs

    • The state’s unemployment rate, at 12.6%, is the third highest in the nation

California employment l.jpg


California Employment

Sources: Employment Development Department; Historical Civilian Labor Force, May 2010

California s unemployment rate vs other hard hit states l.jpg

National Average



California’s Unemployment Rate vs. Other Hard-hit States

Source: U.S. Bureau of Labor Statistics, April 2010

Overview of the state budget l.jpg


Overview of the State Budget

  • Education fares better than the rest of the Budget

  • The rest of the Budget is absorbing even heavier cuts in order to protect education from deeper cuts

    • But there is no “free ride” – the nearly $2.5 billion taken from education in January remains unrestored

    • Child care takes a huge cut

    • Social and health programs that serve K-12 students and their families are hit even harder

    • California Work Opportunities and Responsibility to Kids (CalWORKs), which is California’s main avenue to welfare payments, is on the chopping block

  • The Budget reflects two major unresolved problems:

    • California’s finance system serves the state poorly in both good and bad times

    • The current economic woes remain unresolved

May revision features l.jpg


May Revision Features

  • For the most part, the May Revision contains no further cuts to K-12 education

    • Cuts proposed in January remain

    • Targeted proposed administrative cut is eliminated

    • Cuts to child care eliminate subsidized slots for 142,000 children

    • No new federal dollars

  • No new taxes are proposed

  • Major additional cuts to the noneducation portions of the Budget are proposed

  • We expect the Legislature to have great difficulty voting for the choices before them

  • Despite the Governor’s call for an on-time Budget, chances are slim

Comparing the forecasts income l.jpg
Comparing the Forecasts – Income


Sources: 2010-11 Governor’s Budget, January 2010; 2010-11 May Revision, May 2010

Comparing the forecasts jobs l.jpg
Comparing the Forecasts – Jobs

Sources: 2010-11 Governor’s Budget, January 2010; 2010-11 May Revision, May 2010

General fund revenues l.jpg


General Fund Revenues

  • The state economy drives General Fund revenues through three major taxes: personal income tax, sales tax, and corporation tax

  • The collapse of the state and national economies has driven state tax revenues down, but signs of recovery are emerging

    • Revenues outperformed admittedly low projections from December 2009 through March 2010

      • April 2010 collections fell short, but this was based largely on 2009 liabilities; revised revenues for 2009-10 are down $1.2 billion

    • Sales and corporate earnings are improving, bringing in more tax revenues than expected

  • The May Revision anticipates continuing improvement in revenues in 2010-11

    • The forecast adds $2.1 billion for 2010-11 from the January projection

General fund revenues13 l.jpg


General Fund Revenues

Source: 2010-11 May Revision, page 56

Risks to the revised budget proposal l.jpg


Risks to the Revised Budget Proposal

  • In January, we noted several major risks to the Governor’s Budget proposals:

    • Federal funds – no guarantee that $6.9 billion could be secured

    • Voter approval – required for fund shifts

    • Economy and revenues – the economy and revenues could underperform forecasts

  • Some of these risks have in fact materialized:

    • Only $3.4 billion in federal funds are expected to be received

    • Fund shifts requiring voter approval will not be placed on the ballot

    • Current-year revenues have fallen short by $1.6 billion

Risks to the revised budget proposal15 l.jpg
Risks to the Revised Budget Proposal

  • The May Revision, if enacted as proposed, contains other – but equally significant – risks

    • Court challenges – rebenching Proposition 98, elimination of CalWORKs, state worker pay cuts, health care reductions, and other cuts could face court challenges

    • Late Budget – a late Budget would delay implementation of program reductions, resulting in the loss of budgeted savings

    • Economic and revenue risks – the state and national economies face the possibility of a “double dip” recession, especially in light of the turmoil in overseas economies

  • These risks in turn could threaten California’s access to the capital markets, pushing borrowing costs even higher

General fund budget summary l.jpg
General Fund Budget Summary

  • One year ago, the proposed reserve for 2009-10 was +$4.5 billion, a swing of more than$11 billion

  • The reserve equals 1.3%of projected revenues in 2010-11

  • Revenues increase 5.7%in 2010-11, while expenditures drop 3.5%

  • The current-year fund balance deteriorated $1.4 billion since January

Source: State Budget 2010-11

California per student spending falls far below average l.jpg


California Per-Student Spending Falls Far Below Average

  • According to the National Education Association’s (NEA) Rankings of the States 2009, as of 2008-09, California was 44th in per-student spending, falling from 34th in 2007-08

Source: Rankings of the States 2009 and Estimates of School Statistics 2010, National Education Association

2010 11 deficit applied and cut l.jpg
2010-11 Deficit Applied and Cut

  • Apply the 2010-11 deficit of 18.355% to your undeficited revenue limit per ADA

  • Apply the 3.85% cut to the undeficited revenue limit per ADA



Deficit Factor Reduction



$246 (3.85%)reduction

2010-11 Revenue Limit Funding

Example for Average Unified District

Funded revenue limit

= $6,386 – ($6,386 x 0.18355 + $6,386 x 0.0385)

= $6,386 – ($1,172 + $246)

= $6,386 – $1,418

= $4,968


2010-11 Revenue Limit Before Deficit

2010-11 Revenue Limit After Deficit and Cut

Special education issues l.jpg


Special Education Issues

  • The mental health budget includes a proposal to suspend AB 3632 (Chapter 1747/1984), which mandates county mental health agencies to provide services to children with disabilities

    • The concern is that the fiscal burden will shift to school districts since they will continueto provide mental health services required by students’ Individualized Educational Programs

Pension reform legislation l.jpg


Pension Reform Legislation

  • SB 919 (Hollingsworth) would reform pensions for newly hired employees covered by the Public Employees’ Retirement System (PERS)

    • School members first employed on or after the date the bill takes effect would be subject to a 2%-at-65 retirement formula, rather than the current 2%-at-55 formula

  • The bill would also permit districts that contract with PERS for health benefits to collectively bargain a different employer contribution for employee and annuitant health benefits coverage for those hired on or after the effective date of a memorandum of understanding

  • SB 919 was heard in its first policy committee on May 10, but no vote was taken

Strs contribution rates l.jpg


STRS Contribution Rates

  • State Teachers’ Retirement System (STRS) had an unfunded actuarial obligation of $22.5 billion as of June 30, 2008

    • But this does not reflect the 25% investment loss in fiscal year 2008-09 or the partial recovery this year

  • Investment earnings alone, projected at today’s lower rates, cannot close the shortfall

  • Instead, an approximate 14% increase in contributions will be required to amortize the shortfall over 30 years

    • The contribution increase could come from employers, employees, and/or the state

    • If employers alone were tapped, the employer contribution rate would exceed 22% (additional $47 million in expense)

  • Increasing the employer contribution rate would require legislation and none has been introduced

Pers contribution rates l.jpg


PERS Contribution Rates

  • Employer contribution rates are set by the PERS Board each May

    • The Board is expected to approve a rate of 10.707% on May 19

  • Based on PERS’ previously provided multiyear contribution rate estimates and the Board’s subsequent approval of new actuarial assumptions expected to further increase the school employer contribution rate by about 0.5% of payroll, we estimate:

Flexibility opportunities continue l.jpg


Flexibility Opportunities Continue

  • The flexibility options introduced in 2008-09 continue without changes

    • 42 Tier III flexible categorical programs

      • Including suspension of deferred maintenance match requirements and instructional materials adoption timelines

    • Relaxation of K-3 Class-Size Reduction (CSR) funding penalties

    • Lowering of reserve for economic uncertainty requirements

    • Shorter school year

  • The May Revision proposes no changes to existing flexibility – nor does it offer answers to questions about the future of flexibility

    • Tier III flexibility continues through 2012-13

    • K-3 CSR funding penalties remain relaxed through 2011-12

The legislative analyst office s report on flexibility l.jpg


The Legislative Analyst Office’s Report on Flexibility

  • The Legislative Analyst’s Office (LAO) offers some recommendations to continue and expand flexibility

    • These proposals are not reflected in the May Revision, but may become part of legislative budget hearings

  • The LAO conducted a survey of all school districts

    • 231 school districts responded

  • Based on this survey, LAO concluded:

    • Flexibility helped districts develop and balance their budgets and focus scarce resources more strategically

    • Most decisions to shift funds were done to redirect funding from non-instructional to instructional areas

    • The majority reported that they would like to have additional programs added to the list of flexible programs

The legislative analyst office s report on flexibility26 l.jpg


The Legislative Analyst Office’s Report on Flexibility

  • LAO’s recommendations:

    • Add K-3 CSR, Home-to-School Transportation, and After School Education and Safety to Tier III

    • Consolidate Economic Impact Aid (EIA) with English Language Acquisition Program

    • Consolidate Career Technical Education programs

    • Ease or remove state restrictions for:

      • Contracting out for noninstructional services

      • Hiring/pay rate for laid-off teachers serving as substitutes

      • Quality Education Investment Act (QEIA) requirements

The report can be found at

Other federal issues l.jpg


Other Federal Issues

  • Congress has proposed and the President is now supporting provisions that were in the “Keep Our Educators Working Act”

    • $23 billion to help states retain and hire teachers and other school staff members

    • Economic experts (including Nobel Laureate, Paul Krugman) have called for more investment in education

  • The reauthorization of the Elementary and Secondary Education Act (ESEA) continues to be overdue

    • In spite of expectations that RTTT and other ARRA-related measures signaled the future direction for ESEA, no legislation has been released

State s cash problem became our problem l.jpg
State’s Cash Problem Became Our Problem

  • On Wednesday, June 2, 2010 State Controller John Chiang sent a letter and chart to the Governor and Legislative leaders, advising them of his latest cash projections based on actual numbers through April and the Governor’s May Revision budget proposal.

  • “The State’s ability to meet its payment obligations during the next three months is entirely owed to two factors:

    • Legislation enacted earlier this spring that allowed the deferral ofapproximately $4.7 billion of payments to K-12 education, higher education, and local governments; and

    • The continued reliance on borrowing as much as $20 billion from special funds.”

Cash deferrals of 2009 2010 state apportionment impact to lbusd l.jpg
Cash Deferrals of 2009-2010 State Apportionment Impact to LBUSD

Amount deferred within FY 2009-2010 = $ 48,626,592

* Amount deferred to FY 2010-2011 = $101,450,731

Cash deferrals of 2010 2011 state apportionment impact to lbusd l.jpg
Cash Deferrals of 2010-2011 State Apportionment Impact to LBUSD

Amount deferred within FY 2010-11 = $ 54,184,566

* Amount deferred to FY 2011-12 = $131,591,086

Principal apportionment deferrals 2009 10 to 2010 11 l.jpg


Principal Apportionment Deferrals2009-10 to 2010-11

Revenue assumptions l.jpg
Revenue Assumptions

  • Enrollment - Projections include declining enrollment at 1.4% for Fiscal Years 2010-11, 2011-12, and 2012-13

  • Revenue Limit - Includes: COLA at -0.39%, additional adjustment at -3.85% (estimated at -$250 per ADA), and a deficit of 18.355%

  • State Categoricals - COLA at -0.38%Lottery — $111 per ADA for unrestricted and $14.50 per ADA for restricted for a total of $125.50 per ADA

Revenue assumptions cont d l.jpg
Revenue Assumptions (Cont’d)

Programs that will be utilizing carry-over funds and have no new 2010-11 funding include:

* No funding and no carryover in 2010-11

2010 11 adopted budget revenues l.jpg
2010-11 Adopted Budget—Revenues

$ 0






Revenue Limit Sources and State Revenues make up 88% of total revenues.

Expenditure assumptions l.jpg
Expenditure Assumptions

  • Salaries - No COLA projected. A 5-day furlough in FY 2010-11 projected for TALB and non-representative employees.

  • Step and Column Increases - Certificated @ 2.47% and Classified @ 1%

  • Health & Welfare Benefits - 10% increase for FY 2010-11 and 15% for FY 2011-12 and 2012-13

  • Workers Compensation Rate - reduced from 3% to 2.75%

  • Unemployment Insurance Rate - increased from 0.3% to 0.72%

Expenditure assumptions cont d l.jpg
Expenditure Assumptions, cont’d

  • Supply allocations to school sites — remains the same in FY 2010-11 as prior year

  • Textbooks — Purchase of $10 million of Language Arts textbooks is expected to take place in FY 2012-13 in preparation for FY 2013-14 adoption

  • Anticipated expenditure reductions include: $57 million for FY 2011-12 and $98 million for FY 2012-13 if reductions were one-time. If reductions were made to on-going expenditures, a total reduction of $98 million must be made in the two fiscal years.

2010 11 adopted budget expenditures l.jpg
2010-11 Adopted Budget—Expenditures








Salaries and employee benefits make up 87% of total expenditures.

Major one time funding flexibility l.jpg
Major One-Time Funding & Flexibility

* Revenues are projected for 3 years, and appropriation for 2 years.

Ending balance l.jpg
Ending Balance

The blue bars show the estimated ending balances with expenditure reductions for FY 2011-12 and 2012-13. The purple bars show what the estimated ending balances would have been without expenditure reductions. For Fiscal Years 2006-07 through 2010-11, both bars are the same.

Slide49 l.jpg


Thanks to:

Erica Cisneros

Betty Ng

Susan Ginder

Tess Mendoza, Renee Arkus, Shawn Bartschi,

Exhibits l.jpg

The following slides are detail listings of

Board-approved budget reductions.

Budget reductions phase ii january 27 and february 9 2010 l.jpg
Budget Reductions—Phase IIJanuary 27 and February 9, 2010

Budget reductions phase ii january 27 and february 9 2010 continued l.jpg
Budget Reductions—Phase IIJanuary 27 and February 9, 2010 (Continued)

Budget reductions phase ii january 27 and february 9 2010 continued54 l.jpg
Budget Reductions—Phase IIJanuary 27 and February 9, 2010 (Continued)

Item no. 31 Details for Central Office

Budget reductions phase iii march 2 2010 l.jpg
Budget Reductions—Phase IIIMarch 2, 2010

* Total estimated savings include the original board actions and March 2 changes.