2017-18 PROPOSED BUDGET June 13, 2017 1 Anna Pimentel Director, Fiscal Services
B-12 INFLATION FORECAST Inflation Forecast (Percent Change) 3.5% 3.1% 3.0% 2.9% 2.8% 2.7% 2.7% 3.0% 2.3% 2.3% 2.3% 2.5% 2.0% Benchmark 2.0% 1.5% LAO, November 2016 UCLA, December 2016 1.0% 2017-18 Governor’s State 0.5% Budget 0.0% 2016 2 2017 2018
NEW PROPOSITION 98 TOPICS More Proposition 98 2017-18 funding up $1.1 billion from January proposal LCFF* Increases May Revision ups the LCFF funding increase to $1.4 billion Deferral Is Gone 2016-17 proposed deferral replaced by settle-up payment One-Time Funding Up May Revision adds almost $750 million to January’s one-time funds, but with a twist 3 *Local Control Funding Formula (LCFF)
PROPOSITION 98 FUNDING Proposition 98 Funding 2007-08 to 2017-18 $74.6 $80.0 $73.5 $71.4 $71.4 $69.1 $75.0 $68.7 $67.1 $70.0 $58.9 $65.0 (in billions) $58.0 $56.6 $60.0 $51.7 $49.6 $49.2 $55.0 $47.3 $50.0 $45.0 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 Proposition 98 Funding as of Governor's January Budget Source: 2017-18 Governor’s Budget Summary, pg. 18 and 2017-18 May Revision, pg. 4 4
STATUTORY COLA AT 1.56% The Governor’s January Budget estimated the 2017-18 statutory COLA for K-12 education programs at 1.48% Based on actual Implicit Price Deflator factors available for the May Revision, the COLA increases to 1.56% What’s the impact? COLA is applied to the LCFF base grant target rate, but that doesn’t directly affect LCFF growth, which is based on the funds appropriated each year for the transition to full implementation Local educational agencies (LEAs) already at their LCFF target (i.e., fully implemented) will see a slight increase from January due to the modest COLA revision 5
2017-18 LCFF TARGET FUNDING FACTORS The K-12 COLA is 1.56% for 2017-18 and is applied to the LCFF base grants for each grade span Grade 2016-17 Base 1.56% 2017-18 Base Span Grant Per ADA COLA Grant Per ADA K-3 $7,083 $110 $7,193 4-6 $7,189 $112 $7,301 7-8 $7,403 $115 $7,518 9-12 $8,578 $134 $8,712 6
PROGRESS TOWARD LCFF IMPLEMENTATION 2017-18 May Revision: 93% Full LCFF Implementation 100% cumulative gap closure; 97% of full implementation 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 7 Actual Projected
ONE-TIME DISCRETIONARY FUNDS As a result of modest revenue increases since the release of the January Budget, the May Revision proposes an increase in discretionary one-time funding of just under $750 million January Budget May Revision Per-ADA $48 $170 Total $287 million $1.01 billion But, the Governor proposes to hold all of the funds until May 2019! Funds can be used for any one-time expenditure as determined by a local governing board One-time apportionments will offset LEAs’ outstanding mandate reimbursement claims on a dollar- for-dollar basis We continue to believe that these funds should not count toward mandate reimbursement 8
MINIMUM WAGE Senate Bill 3 (Chapter 4/2016) which was signed by the Governor in April 2016 gradually increases California’s minimum wage and provides clarity on exempt employees Governor can pause progress annually Effective Date: Effective Date: MinimumWage > 25 Employees ≤ 25 Employees $10.50/hour January 1, 2017 January 1, 2018 $11.00/hour January 1, 2018 January 1, 2019 $12.00/hour January 1, 2019 January 1, 2020 $13.00/hour January 1, 2020 January 1, 2021 $14.00/hour January 1, 2021 January 1, 2022 $15.00/hour January 1, 2022 January 1, 2023 9
CALPERS EMPLOYER CONTRIBUTION RATE INCREASES Previously The California Public Employees’ Retirement Released System (CalPERS) Board adopted an employer Employer Employer contribution rate of 15.531% for 2017-18, almost Contribution Contribution 2% higher than the current-year rate of 13.888% Year Rates Rate* While the new projected rates are slightly lower than those previously released by CalPERS, they 2017-18 15.8% 15.531% are still significant annual increases that will add 2018-19 18.7% 18.1% to the squeeze on base revenues 2019-20 21.6% 20.8% CalPERS Board also adopted the contribution rate for employees subject to the Public Employees’ 2020-21 24.9% 23.8% Pension Reform Act (PEPRA) 2021-22 26.4% 25.2% Currently, PEPRA members are contributing 2022-23 27.4% 26.1% 6%, which will increase to 6.5% for 2017-18 2023-24 28.2% 26.8% “Classic” members continue to pay 7.0% 2024-25 N/A 27.3% *Actual for 2017-18 10
FUNDING CALSTRS Pre- Post- Employer rates are increasing to 14.43% in PEPRA* PEPRA** 2017-18, up from 12.58% in 2016-17 Year Employer Employees Employees No specific funds are provided for this cost increase 2016-17 12.58% 10.25% 9.205% Under Education Code Section 22950.5, once the statutory rates are achieved, the California 2017-18 14.43% 10.25% 9.205% State Teacher’s Retirement System (CalSTRS) 2018-19 16.28% 10.25% 9.205% will have the authority to marginally increase or decrease the employer and state 2019-20 18.13% 10.25% 9.205% contribution rate CalSTRS cannot increase rates by more 2020-21 19.10% 10.25% 9.205% than 1% in a year and cannot exceed 12% overall, until the remaining unfunded * First hired on or before December 31, 2012 actuarial obligation is eliminated ** First hired on or after January 1, 2013 11
ROUTINE RESTRICTED MAINTENANCE ACCOUNT 2016-17 2017-18 to 2019-20 2020-21 and beyond Greater of: At least: Lesser of: 3% of total General Fund Lesser of 3% of total General expenditures Fund expenditures or the 3% of total General Fund amount deposited in 2014-15 expenditures Legislative intent: Comply with minimum 3% deposit at full LCFF The amount deposited in 2014- 2% of total General Fund implementation 15 expenditures Note: Flexibility goes away and the requirement becomes 3% in the year after a local agency receives its first apportionment from Proposition 51. District current funding is 2.5% or $1,434,048. 12
2017-2018 GENERAL FUND REVENUES 13
2017-2018 GENERAL FUND EXPENDITURES 14
GENERAL FUND – FEDERAL SOURCES DODEA, PROJECT CONNECT 430,278 TITLE III, LIMITED ENGLISH PROFICIENCY 20,541 TITLE III, IMMIGRANT EDUCATION 8,077 TITLE II, TEACHER QUALITY 80,188 SPECIAL EDUCATION, PRESCHOOL BASIC 48,692 SPECIAL EDUCATION, PRESCHOOL LOCAL 26,237 SPECIAL EDUCATION, K-12 BASIC LOCAL 760,660 TITLE I, BASIC LOCAL ENTITLEMENT 244,022 61,336 JROTC MAINTENANCE & OPERATIONS (IMPACT AID) 3,068,474 - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 15
GENERAL FUND – STATE SOURCES STRS ON BEHALF OF 1,687,297 SPECIAL EDUCATION, WORKABILITY 43,630 SPECIAL EDUCATION, MENTAL HEALTH SVCS 275,586 STATE STUDENT IDENTIFIER 1,500 STATE TESTING FEES 24,000 286,543 CAREER TECHNICAL EDUCATION INCENTIVE GRANT PROP 39 CLEAN ENERGY JOBS ACT 440,911 LOTTERY - RESTRICTED 252,770 LOTTERY - UNRESTRICTED 808,864 199,348 MANDATED COSTS REIMBURSEMENTS - 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 16
GENERAL FUND – LOCAL SOURCES SAFETY CREDIT PROGRAM 40,504 FIRST FIVE JUMPSTART KINDERGARTEN GRANT 50,000 SPECIAL EDUCATION SELPA PLAN ALLOCATION 465,997 SPECIAL EDUCATION SCOE AB602 EXCESS 25,000 AP TEST FEES 40,500 HOME-TO-SCHOOL TRANSPORTATION FEES OUTSIDE 15,000 AGENCIES HOME-TO-SCHOOL TRANSPORTATION FEES 275,000 INSTRUCTIONAL SERVICES SUPPORT CARRYOVER 65,000 DISTRICT CONTINGENCY FUND 1,000 SALARY REIMBURSEMENTS 206,090 ALL OTHER FEES & LOCAL REVENUES 65,025 INTEREST 55,000 LEASES & RENTALS 60,000 - 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000 17
2017-18 STEP & RETIREMENT INCREASES Cost of Step movement – All groups $484,144 Cost of STRS Increase – Certificated $448,342 Cost of PERS Increase – Classified $168,587 Other Statutory on Step movement $ 26,909 Total Increase $1,127,982 LCFF Increase $1,265,234 $ 137,252 18
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UNRESTRICTED FUND BALANCE – STATEWIDE AVERAGES 2015-16 Average Unrestricted General Fund, Plus Change Fund 17; From Prior Net Ending Balances as a Percentage of Total General Year* Fund Expenditures, Transfers, and Other Uses Elementary School 21.54% 2.58% Districts High School Districts 17.19% 2.33% Unified School Districts 16.45% 3.36% Source: Statewide certified data *Increase relative to the reserve levels of 2014-15 21
2017-2018 PROPOSED BUDGET MANDATORY RESERVE ANALYSIS District Reserves/Unassigned Ending Fund Balance above Standard 3% Reserve Level = 8.2% 22
2017-2018 ALL FUNDS SUMMARY 23
FINAL THOUGHTS Assumptions are based on current available information District budget to be adopted June 20, 2017 State budget must be adopted before June 30, 2017 Staff will attend School Finance and Management Conference in July District required to prepare 45-day budget revision to reflect state adopted budget Questions? 24
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