Tamalpais Union High School District 2018-19 1st Interim Budget December 11, 2018
So... why do a 1st Interim budget report? ➢ The 1st Interim reports: ○ Actual financial activity from July 1st through October 31st ○ Projects financial activity through June 30th ➢ Comparison: Adopted Budget (June 2018) vs. 1st Interim Budget (December 2018) ➢ Provides an opportunity to: ○ Revise the budget based on any significant changes since the budget adoption in June ○ Recalculate Multi Year Projections ○ Discuss any needed changes or actions ➢ Board must approve certification of financial condition ○ Positive – “will be able” ○ Qualified – “may not be able” ○ Negative – “unable” 2
Agenda ➢ Budget Reporting Cycle ➢ Context: Where were we in June and the Fall? ➢ Key Assumptions ➢ Budget: Revenue & Expenditures - What has changed since June? ➢ STRS and PERS increases ➢ Multi-Year Projection - Where are we going? ➢ Other Funds ➢ Prudence and Next Steps ➢ Questions 3
Budget Reporting Cycle 4
Where were we in the Fall? In the last 10 years, TUHSD has added 1,227 students resulting in additional 70.5 fte certificated staff ● Given TUHSD is ‘basic aid’, we do not get extra revenue for each student ● As a result, TUHSD is projecting operating deficits of ● $7.9M for 2018-19 (current year) ○ $8.7M for 2019-20 ○ $9.7M for 2020-21 ○ The Reserve has and will decrease by these operating deficits ● Reserve was $24.8M in 2016-17 & is currently $17.7M to begin this year ○ Reserve is projected to be depleted by 2020-21 ○ Solution = Reduce costs + Increase revenue (supplemental parcel tax) ● $8M = $3M + $5M if parcel tax passes $8M = $8M + 0 if parcel tax fails Need staff and community input on how to reduce costs with and without Parcel Tax ● 5
Basic Aid vs. State-Funded (LCFF) District is entitled to a calculated ● Formerly referred to as ‘Revenue Limit’ ● revenue entitlement District is entitled to a calculated ● Comprised of both local property taxes ● revenue entitlement revenue and state aid Comprised of both local property taxes ● If property taxes exceed the calculated ● and state aid revenue entitlement, then the district When property taxes do not meet the ● keeps the overflow revenue and calculated revenue entitlement, then the receives only basic (minimal) state aid State makes up the shortfall with Does not receive significant additional ● additional funding up to the calculated revenue for each new student in revenue entitlement enrollment growth TUHSD is about $17M over the LCFF ● entitlement 6
Key Budget Assumptions Enrollment & Average Daily Attendance ○ Official enrollment reported to the state is estimated to be 5,167 students ○ Estimate Actual Average Daily Attendance (ADA) of 4,850 ■ An increase of 214 ADA from 2017-18 ■ Estimated ADA to enrollment ratio of approximately 96% (excluding NPS & County students) ■ Unduplicated pupil percentage of 10% for supplemental & concentration funding ● Given the District receives the majority of its general purpose revenues in the form of property taxes (i.e. basic aid funded), the increase in ADA from 2017-18 does not significantly impact operating revenues. It does, however, increase operating expenditures. 7
Key Budget Assumptions (continued) 8
Property Tax Revenues While still increasing, property tax revenue growth has slowed. 9
Combined Parcel Tax Revenue 10
Sources of 2017-18 General Revenue (combined) General Purpose $ 63,666,385 ➢ Property taxes, Education Protection Account, ○ minimum State Aid State Funding $ 4,691,972 ➢ Not part of LCFF (Lottery, Special Education, etc.) ○ Federal Funding $ 1,169,181 ➢ Title I, Title II, etc. ○ Local Revenue $ 17,288,728 ➢ Parcel tax, Foundations, facilities fees, interest ○ TOTAL: $ 86,816,266 11
General Fund Revenue Sources (Unrestricted) 12
Enrollment Growth ○ Additional 1,344 students over 10 years ■ 3,823 students in 2008-09 to 5,167 students in 2018-19 ○ 35% increase over ten year time period 13
Enrollment & Growth While the rate of increase of property taxes slows, enrollment continues to grow. The combination puts a squeeze on funding per student. 14
Revenue per Student Revenue continues to increase, but at a slower rate than student growth, so funding per student drops. 15
General Fund Expenditures Salaries and benefits comprise approximately 88% of the District’s unrestricted expenditures, and approximately 77% of the combined General Fund expenditures. 16
General Fund Expenditures 17
STRS & PERS Rates grow exponentially ● In 2013, both STRS and PERS rates were re-calculated based on the Public Employee Pension Reform Act that restructured retirement age and benefits. ● The result is less District funding available for any other uses. ● Compared to 2013-14, increased rates cost district additional $3.99M as of 2018-19 ● By 2022-23, budget will reflect $2.7M more in annual district retirement contributions than 2018-19 ● From 2013-14 to 2022-23, the cumulative impact is $6.7M annually 18
STRS & PERS Costs double in next few years 19
Reconciliation of Adopted vs. 1st Interim Budgets Description Amount 2018-19 Adopted Budget Projected Deficit $ (7,847,650) Add: Variance Components $ 4,129,039 ( See Next Slide ) $ (3,718,611) 2018-19 First Interim Projected Deficit Operating Deficit occurs when the current year expenditures exceed current year revenues, which results in depleting reserves. 20
Reconciliation Variance Components Description of Variance Components Amount Increase in Supplemental Parcel Tax revenue $2.9 Million Increase in One-Time Mandated Cost reimbursement revenue $901k ($810k) Increase in expenditures given 1.5% salary increase for all groups for 2017-2018 $151k Decrease in expenditures given combined duties for Sr Director of Curriculum & Instruction with Tamiscal Principal position $300k Decrease in expenditures given 10% reduction in Department budgets $300k Decrease in expenditures given 25% reduction in school site budgets $256k Decrease in expenditures given elimination of Assistant Superintendent of Educational Services $5,600 Decrease in expenditures given reduction of work calendar for new Director of Nutritional Services 21
Reconciliation Variance Components (continued) Description of Variance Components Amount ($370k) Increase in expenditures given net increase of 2.7 fte in certificated staffing across the District ($136k) Increase in expenditures given additional Special Education transportation costs for 17.5 students ($262k) Increase in expenditures given additional staffing for Drake CEC Special Education classroom starting in January Increase in expenditures given recognized Special Education Excess Costs for 2016-17 and 2017-18 (one-time) ($341k) Increase in recognized Community Education revenue from Summer 2018 $255k Reversed 2017-18 transfer out to Adult Education $192k Eliminated 2018-19 budgeted transfer out to Adult Education $132k Increase in Fund Balance given return of former Superintendent’s housing loan (one-time) $502k Other net adjustments (IT, Facilities, other) $153k 22 Total Variance $4,129,039
Reconciliation of Adopted vs. 1st Interim Budgets Description Operating Deficit Ending Fund Balance (Reserve) 2018-19 Adopted Budget Projection $(7,847,650) $8,630,435 (6.5%) $5,400,600 (change due to reduction in operating deficit & Add Variance/Change $4,129,039 $1.3M adjustment to beginning fund balance at Unaudited Actuals in September) $(3,718,611) $14,031,035 (11.5%) 2018-19 First Interim Projection Average reserve levels for CA basic aid districts is about 17%, so TUHSD is below this average. The components of the District’s fund balance are as follows: ● Revolving cash - $12,000 ● Assignments - $3.3M ● Reserve for Economic Uncertainty (REU) - $2.79M 23 ● Amount above REU - $7.94M
Multi-Year Projection Assumptions Revenue Assumptions: ● Enrollment to continue to increase over the next three years by an estimated cumulative total of 242 ADA compared to 2018-19 ● Local property tax revenue growth is projected to decrease from 4.64% in current year to 4.1% in 2020-21 ● Federal revenue is expected to remain relatively constant ● State revenue is expected to remain constant ● Local revenue is expected to increase by the new supplemental parcel tax measure revenue ○ Prorated percentage of the annual parcel tax revenue in 2018-19 ($2.9M) ○ Full annual revenue in 2019-20 continuing for the term ($5.1M) ○ Additional increase with the 3% annual inflation adjustment in both parcel taxes Expenditure Assumptions: ● Step & Column increases are 1.83% for Certificated and 2.2% for Classified ● Additional 4.8 certificated fte positions to accommodate enrollment growth in 2019-20 24
25
MYP Notes 26
Summary of All Funds In addition to the general fund, other funds collect and track specific funds for restricted purposes. 27
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