Budget Update

1
Budget Update

• Budget Workshop I
• January 26. 2009

2
Agenda

• California Economy
• Mid-Year Recommendations
• 09-10 Initial Budget Proposal from Governor
• Impact on Sweetwater
• Budget Advisory Committee

3
California Economy

• State, National and International Economic Crisis
• Worst since the Great Depression
• Main Cause - Housing Market Crisis
• Fall of the Financial Market
• High Unemployment reduces spending
• Projected 42 billion deficit by the end of
  2009-10 (20 - two years)

4
California Economy

• Adoption of 08-09 budget, 2 months later crisis
  erupted
• All forecasters - DOF, LAO, and UCLA missed the
  downturn in the economy
• Expected recovery estimated at two to three years
• Term Limits lack of experience in the
  Legislature

5
Mid-Year Reductions

• Legislature had 45 days to submit bill to
  Governor to address deficit for 08-09
• Democrats and Republicans could not come to
  agreement
• Must be a combination of revenue increases and
  expenditure reductions
• Last minute Democrats submitted package of 15
  bills Governor vetoed didnt include bill to
  stimulate economy

6
Governors Budget Proposal

• Unprecedented Governor releases 18 month budget
  package on December 31st
• Addresses both mid-year cuts and 09-10 budget
• Districts must use his proposal for both the
  Second Interim Financials and Proposed Budget for
  09-10
• Includes both revenue enhancements and
  significant reductions across most state programs

7
Basics of Govs Proposal Mid-Year

• Eliminates .68 COLA for 08-09 original COLA
  5.66
• Reduce Revenue Limit by an additional 4.57
• Reduce Routine Maintenance set-aside from 3 to
  1
• Eliminate Deferred Maintenance Match
• Significant Categorical Flexibility
• Reduce required reserve by 50

8
Basics of Govs Proposal Budget Year

• No COLA (projected at 5.02)
• Additional reduction in Revenue Limit of 2.52
• Cumulative Loss in Revenue Limit 16.16!
• Same flexibility in Categoricals, Deferred Maint.
  Match and Routine Maintenance
• Lifting statutory requirements for most
  categoricals would require board approval
• Ability to reduce school year by 5 days

9
Common Themes

• Both include
• .68 COLA Elimination
• Eliminating Deferred Maintenance Match
• Reducing Routine Maintenance from 3 to 1
• Categorical Flexibility Legislature includes
  more categorical reductions
• Some program elimination, such as High Priority
  Schools Grant

10
Categoricals

• Appropriations already made incorporated within
  district budgets
• Some funds have been spent already
• Flexibility allows movement to fund expenditures
  already made
• Options available to districts
• Sweep categorical balances from 07-08
• Transfer current and budget year allocations to
  other programs or general fund

11
Best Case Scenario

• These proposals may be the best case scenario!
• If revenue enhancements do not occur,
  expenditures would require more cuts
• Many of the revenue proposals may not generate
  expected funds
• Some require voter approval
• Timely of approval of proposals
• Reduced spending by consumers

12
Governors Proposal for Revenue Enhancements

• Sales Tax Increase Temporary 1.5 increase in
  Sales and Use Tax
• Expand Base to Include some services
• Beverage Excise Tax nickel per drink
• 9.9 Oil Severence Tax
• Reduce dependent exemption credit
• VLF Increase Vehicle License Fee by 12 per
  vehicle
• RAWs Revenue Anticipation Warrants would
  have to be repaid
• Lottery Securitization -

• 08-09
• 2.35
• .27
• .24
• .39
• .09

09-10 7.11 1.15 .59 .86 1.44
.36 4.70 6.10
Total 34.85 billion
13
Plus Cash Deferrals.

• A lot of transfers and deferrals to reduce the
  Proposition 98 base for 08-09.
• This will permanently reduce the base into the
  future.
• Does not require a lifting of Proposition 98
  currently we are funded 6.6 billion over base.

14
Cash Deferrals

• Current Deferral of June Apportionment moved to
  July
• New Deferral of February Apportionment moved to
  September
• Districts have ability to do temporary transfer
  between funds
• Sweetwater has significant dollars in other funds

15
Impact on Sweetwater

• Revenue Limit Deficit almost 42 million!
• Reduction to budget year over 18 million
• What Do We Do Right Now!
• Initial reduction of 7.5 in discretionary
• Sweep categorical carryover
• Eliminate Deferred Maintenance Match
• Accelerate cut-off for ordering

16
Additional Issues

• Most contracts still open for negotiations for
  2008-09 and beyond
• No expected growth no funding for step and
  class movement
• Proposal for Early Retirement Incentive
• Superintendent working on District Office
  reorganization for net savings

17
District Budget

• General Fund expenditure
• base 375,348,971
• Unrestricted (includes all
• categoricals that offset GF) 313,783,416
• Almost 6 reduction across all programs!

18
Sources of Funds 2008-2009 Budget
19
Uses of Funds 2008-2009 Budget
20
Budget Advisory Committee

• 1st Meeting held January 15th
• Meetings scheduled every two weeks
• Turnout 70 members
• Employees, community , students
• Purpose This advisory committee will help
  develop list of possible reductions.
• Ideas coming from staff, website, and input

21
Budget Advisory Committee

• Steps in the Process
• Committee will provide suggestions
• Staff evaluates all suggestions
• Committee ranks based on priority
• Recommendation to Superintendent
• Revisions by Supt. and final recommendation to
  Board
• Opportunity for Board to review, ask questions,
  make revisions
• Final approval by Board of Trustees prior to
  budget adoption

22

• Questions