Purpose of the Interim Report: School districts are required to certify their financial position twice

during each fiscal year. The certification addresses a district’s ability to meet its financial obligations for the current and two subsequent fiscal years.

Certifications include the following options: Positive Certification – will be able to meet financial obligations Qualified Certification – uncertainty around ability to meet

obligations Negative Certification – will NOT be able to meet financial

obligations

The LOCAL CONTROL FUNDING FORMULA (LCFF):New funding formula for California schools (most significant change in 40 years)

Provides for a Base Grant for all students Provides a Supplemental Grant based on English Language Learners (ELL),

Free and Reduced Priced Meal (FRPM) eligible students, and foster youth unduplicated count

Provides a Concentration Grant based on ELL, FRPM, and foster youth unduplicated count students above 55% of the District wide enrollment

Districts must develop a Local Control Accountability Plan (LCAP) that will align the academic plan with the District expenditure plan each year

LCAP is a work in progressDistricts will no longer get a Revenue Limit guarantee but will have revenues fluctuating based on student demographics and changes in ADALCFF funding in FY 2013/14 will not be finalized until July, 2014, therefore making current year actual revenues uncertain until that timeLCFF targeted funding is phased in over 8 years through fiscal year 2020/21

1st INTERIM MULTI-YEAR PROJECTION

Unrestricted/Restricted General Fund Combined

Fiscal Year 2013/14

1st Interim Budget Budget

FY13/14 FY14/15 FY15/16

Revenues $ 188,308,372 $ 192,723,451 $ 205,663,190

Expenditures $ 205,023,323 $ 187,859,547 $ 190,136,777

Excess/(Deficiency) $ (16,714,951) $ 4,863,904 $ 15,526,413

Transfers In $ 11,597,915 $ 5,944,862 $ 5,943,362

Transfers Out $ 44,466,971 $ 1,029,345 $ 1,029,345

Net Increase/(Decrease) $ (49,584,007) $ 9,779,421 $ 20,440,430

Beginning Fund Balance $ 71,197,162 $ 21,613,155 $ 31,392,576

Ending Fund Balance $ 21,613,155 $ 31,392,576 $ 51,833,006

Components of Ending Fund Balance:

Revolving Cash $ 100,000 $ 100,000 $ 100,000

Stores $ 170,000 $ 170,000 $ 170,000

Reserve for MAA $ 527,395

Legally Restricted $ 4,263,472 $ 7,053,978 $ 9,720,566

3% Reserve for Economic

Uncertainty (STATUTORY MINIMUM) $ 7,484,709 $ 5,666,667 $ 5,734,984

Unassigned Reserve $ 9,067,578 $ 6,116,182 $ 10,881,969

Year 2 LCFF Base $ 9,535,964 $ 9,535,964

LCFF Supplemental/Concentration $ 2,749,785 $ 2,749,785

Year 3 LCFF Base $ 10,042,266

LCFF Supplemental/Concentration $ 2,897,472

Ending Fund Balance $ 21,613,154 $ 31,392,576 $ 51,833,006

Unassigned Reserve & New LCFF Funds:

1st Interim Budget BudgetFY13/14 FY14/15 FY15/16

Unassigned Reserve $ 9,067,578 $ 6,116,182 $ 10,881,969 Year 2 LCFF Base $ 9,535,964 $ 9,535,964 LCFF Supplemental $ 2,749,785 $ 2,749,785 Year 3 LCFF Base $ 10,042,266

LCFF Supplemental $ 2,897,472 TOTAL RESERVES TO ADDRESS $9,067,578 $18,401,931 $36,107,456

SEE NEXT SLIDE FOR CAUTIONS AND CONSIDERATIONS

CAUTIONS & CONSIDERATIONS FOR UNASSIGNED & LCFF:Cautions:

LCFF funding in current year 13/14 still uncertain Future LCFF funding not guaranteed Cost of LCAP not known at this time Implementation over 8 year period creates uncertainty of funding Design of LCFF will create competing interests seeking share of pie Class Size Reduction tied to the funding – 8 year implementation Categoricals rolled into LCFF must still be addressed

Considerations: Class Size Reduction Implementation of LCAP Salary Increases Educational Goals/Programs

Q&A:Q: What makes up the $21,751,651 Unrestricted General Fund (03) Contribution to the Restricted General Fund (06)?A: Special Education Encroachment $9,159,276 Transportation Encroachment 1,452,833 Routine Repair & Maintenance 4,487,482 Certain LCFF Contributions (a) 6,650,283 Site Contributions 1,777(a) In this transition year to LCFF, some of the categoricals rolled into LCFF still have their expenses in Restricted Fund (06), while the revenues are included in the LCFF revenue in Unrestricted Fund 03. It is anticipated that the impacted categorical programs (EIA and Transportation) will be transferred into the Unrestricted Fund 03 by the time the 2nd Interim Report is prepared and CDE has issued more detailed guidelines for the LCFF.

Q: What is the relationship of the General Fund to Fund 17:A: Fund 17 is titled Special Reserve for Other Than Capital Projects and the District established this reserve years ago in order to have funds available for such things as the initial expenses of a new school. Sources of the funds included mandated cost reimbursements and lottery receipts. This fund had a balance of $12,603,242 at the beginning of the current fiscal year. Painted Hills Middle School is in the third year of startup administrative costs in the amount of $1.3 million. Rancho Mirage High School (RMHS) is in the first year of startup operational costs, in the amount of $2.5 million. The General Fund is financed this way for a new school’s first three years of operation. Therefore, this reserve fund will end the current year with an estimated balance of $8,850,242. Two more years of RMHS at $2.5 million will reduce the balance in this fund to less than $4,000,000 in 2016. This has been an excellent reserve in lessening the impact of the operating expenses of new schools. Additional funding to this reserve could be a consideration in prioritizing available funds under the new funding formula.

Q&A (Cont):Q: What is the relationship of the General Fund to Fund 40?A: Fund 40 is titled Special Reserve for Capital Projects. The District established this reserve years ago in order to account for funds received primarily through capital outlay rebates and reimbursements for construction/ modernization projects. During the current fiscal year, Redevelopment funds have been transferred into this fund from the General Fund. The purpose of these funds is for capital and maintenance type projects. For many years these funds were housed in the General Fund with a specific reserve designation attached to them. A side advantage of this was that it provided the General Fund with a large cash reserve. A disadvantage was that it made the General Fund appear to some to be maintaining excessive fund balances. Fund 40 funds various capital programs, such as Deferred Maintenance, Routine Repair & Maintenance, and the District’s Educational Technology plan.

Q: What is the relationship of the General Fund to Fund 14?A: Fund 14 is the Deferred Maintenance Fund. For many years this fund has been used for major renovations and repairs to school properties. Prior to the recent recession districts were required to contribute ½ of 1% of their General Fund to this fund and that amount was matched by the State. The recession stopped contributions by the State and most districts “swept” their deferred maintenance funds into the Unrestricted General Fund. PSUSD continues to maintain this fund, even without State assistance. District contributions are made from the redevelopment fees in Fund 40. Currently, this fund has a projected fund balance of approximately $750,000 as of June 30, 2014.

CONCLUSIONSThe District CAN meets it financial obligations for the current fiscal year and the two following fiscal years, and it is recommended the Board approve the 1st Interim Report with a Positive Certification.The District has positioned itself well over a number of years to maintain a healthy operation even under poor state and national financial conditions.The new LCFF financing model will bring about major changes to how California school districts are financed. Uncertainty of funding is a concern districts must take into consideration.The new LCAP requirements will have a dramatic impact in how school districts allocate their resources, but the full impact of those changes will not be known completely for some time.For the first time in over six years the District has the opportunity to address increases in the budget as opposed to budget cuts, but must do so cautiously until all of the intricacies of the new laws are fully known and understood.