Board of Directors’ Meeting

Finance and Business Services

BUDGET STATUS AND FISCAL OUTLOOK

1

November 18, 2014

Overview Objectives

• Review how actual district operations align with 2014-15 budget

• Review 2014-15 operational adjustments to improve fund balance

• Review the fiscal outlook for 2015-16

Strategic Target • 4.1.a – Student learning measures are used intentionally and

systematically to drive long-term financial, staffing, and facilities planning.

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Overview Budget Development Cycle

Enrollment • Methodology • Headcount • FTE

Budget Adjustments • 2013-14 Actual • 2014-15 Adjustments

Fiscal Outlook • McCleary • Joint Task Force • SHB 2776 • Legislative timeline

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BUDGET DEVELOPMENT CYCLE

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Budget development cycle

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Spring/Summer Adoption & Implementation

~ Budget adoption hearing and the final adoption sets expenditure capacity by fund

~ Summer implementation for school year

Fall Operational Adjustments

~ Actual student enrollment ~ Actual staffing alignment ~ State and federal updates ~ Local commitments

Winter Projections

~ Local revenue changes ~ Local expenditure changes ~ State & federal program changes ~ Governor's budget guides FAC target

Winter/Spring Budget Development

~ Fiscal Advisory Council process ~ Budget parameters defined ~ Reduced Educational Program (Formal process if necessary)

Spring Budget Preparation

~ Incorporate defined reductions/additions ~ State F-195 formatting adjustments

F-195 preparation follows legislative session

2014-15 Preliminary budget presentation July 1, 2014

2014-15 F-195 adoption August 26, 2014

Fiscal year begins

ENROLLMENT Methodology Headcount FTE

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Enrollment – methodology Headcount and FTE – what’s the difference?

• Headcount is the common basis of projecting enrollment

• Aligns with projections from other agencies

• Helps make long-range facility plans

• Headcount is converted to FTE for funding

• Headcount and FTE are different because of:

• Half-day kindergarten students

• High school skill center and Running Start students

• Part-time students (Predominantly Port Gardner and Online High School)

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Enrollment – headcount • Oct. 1, 2014 total enrollment is above projection

• Overall enrollment is 290 students over budget

• Overall there are 404 more students than in 2013-14

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Student headcount

Oct. 1, 2013 actual

Oct. 1, 2014 projection

Oct. 1, 2014 actual

Above/ (below)

projection

Elementary 9,096 9,157 9,426 269

Middle 4,205 4,220 4,222 2 High 5,516 5,554 5,573 19

District totals 18,817 18,931 19,221 290

Enrollment – FTE • State funding is based upon annual average FTE

• October 1 FTE is the high point of the year

• Annual average FTE is projected to be 242.8 over budget

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Running Start and Youth Re-engagement Program enrollments are not included

Student FTE

Oct. 1, 2013

actual

Oct. 1, 2014

actual

2014-15 budgeted

annual average

2014-15 projected

annual average

Above / (below)

projection

Elementary 8,554.0 8,895.1 8,621.4 8,876.9 255.5

Middle 4,195.4 4,218.5 4,197.8 4,208.9 11.1 High 5,331.4 5,383.7 5,314.4 5,290.6 (23.8)

District totals 18,080.8 18,497.3 18,133.6 18,376.4 242.8

Enrollment – FTE Increased enrollment revenue is offset by expenditures

• 7.3 additional teachers

• Additional para educator hours

• Materials, supplies, and operating costs (MSOC)

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16,500

17,000

17,500

18,000

18,500

19,000

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May Ju

n

Ann

ual

Ave

rage

Student Enrollment (FTE)

2011-122012-132013-142014-15

BUDGET ADJUSTMENTS 2013-14 actual 2013-14 factors 2014-15 target 2014-15 plan

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Budget adjustments – 2013-14 actual General fund is $483,419 below 2013-14 budget

• Ending balance is 4.81 percent of total expenditures, slightly under the five percent target

• Unassigned is 2.78 percent of total expenditures exceeding 2.5 percent target

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General fund 2013-14 Budget

2013-14 Actual

Beginning fund balance 9,520,406 9,625,792

Revenues + 201,885,616 + 198,373,386

Expenditures - 202,629,739 - 200,506,314

Inter-fund transfer from capital projects fund + 1,350,000 + 1,350,000

Instructional materials transfer from capital projects fund + 0 + 800,000

Ending fund balance = $ 10,126,283 = $ 9,642,864

Restricted/committed portion of balance 1,432,000 4,070,910

Unassigned portion of balance 8,694,283 5,571,954

Budget adjustments – 2013-14 factors Some factors contributing to lower 2013-14 balance

• Higher substitute costs (increase in sick and other types of leave)

• Higher leave cash-outs (increase in retirements)

• Lower taxes received in summer compared to prior years

• McKinney-Vento transportation

• Utility assumptions

• Election costs

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Budget adjustments – 2014-15 target • Lower 2013-14 ending balance impacts 2014-15 starting point

• Revised beginning fund balance is $1,086,845 lower than budget

• Drops budgeted target from 5.5% down to 5.0%

• Prompts 2014-15 fund balance enhancement planning process

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* Includes capital transfer

2014-15 Budget

Beginning Balance Revenues Expenditures

Ending balance

Projected ending target

Adopted $10,729,709 $217,141,923* $215,983,540 $11,888,092 5.50% Revised $9,642,864 $217,141,923* $215,983,540 $10,801,247 5.00%

Difference ($ 1,086,845) $0 $0 ($ 1,086,845) (0.50%)

Budget adjustments – 2014-15 plan Fund balance enhancement plan major elements

• Evaluate and adjust prior year expenditure assumptions • Increase expected leave cash-outs associated with retirements • Increase expected substitute costs • Increase utility allowance • Decrease classroom over goal costs

• Evaluate and adjust prior year revenue assumptions • Increase due to reassessment of 2014 property rebates and exemptions • Increase for enrollment revenue in excess of staffing and MSOC costs

• Reduce planned expenditures for 2014-15 • Review $3 million of program increases built into 2014-15 budget • Identify reduction in program expenditures • Identify expenditures for deferral to 2015-16 budget

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Budget adjustments – 2014-15 plan Reductions in planned expenditures

• Staffing positions • $275,000 Hold on vacant support positions

• Program expenditure reductions or deferrals • $200,000 Building improvements • $ 140,000 Unemployment pool contribution • $ 100,000 Professional development - 12.5 percent • $ 100,000 School improvement - 10.4 percent • $ 92,000 Election costs • $ 45,000 Two transportation vehicles

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Budget adjustments – 2014-15 plan • Enhancement plan establishes target above 5.2 percent

• Additional set asides have been established for unforeseen circumstances • Just a quarter of a percent swing in projections is $500,000

• 2015-16 budget must re-integrate most expenditure cuts • Building improvements, professional development, school improvement

• Multi-year goal necessary to reestablish 6 percent fund balance

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* Includes capital transfer

2014-15 Budget

Beginning Balance Revenues Expenditures

Ending balance

Projected ending target

Adopted $10,729,709 $217,141,923* $215,983,540 $11,888,092 5.50%

Revised $9,642,864 $217,141,923* $215,983,540 $10,801,247 5.00%

Adjusted $9,642,864 $217,141,923* $215,500,000 $11,284,787 5.24%

Difference $0 $0 ($483,540) $483,540 0.24%

Budget adjustments – outlook Multi year goal to reestablish six percent fund balance

• Five percent goal will increase at a greater rate with new McCleary funding • First five percent of new funding must be set aside to maintain five percent target • Additional investment in reserves is necessary to reach the six percent level

• Steady increase will maintain strong bond ratings

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$0

$5

$10

$15

$20

200

0-0

1

200

1-0

2

200

2-…

200

3-…

200

4-…

200

5-…

200

6-0

7

200

7-0

8

200

8-…

200

9-1

0

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

Dol

lars

in

mil

lion

s

Fund Balance HistoryActualbalance

5 %target

Projectedbalance

FISCAL OUTLOOK McCleary Joint Task Force SHB 2776 Legislative timeline

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Fiscal outlook – McCleary • Paramount duty of state is to fully fund K-12 per McCleary

• Legislature’s 2013-15 down payment for K-12 fell short of Joint Task Force timeline and SHB 2276

• 2015 legislative priorities focus on the importance of concurrently implementing the elements of McCleary

• Compensation must be addressed prior to any reduction of local levy

• 2015 legislative session may result in a myriad of possible outcomes and may not conclude until summer

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Fiscal outlook – Joint Task Force McCleary calls for full funding by 2018

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Fiscal outlook – SHB 2776 SHB 2776 resources phase-in

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School Year 2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

2017-18

1

Full-Day Kindergarten Must be fully funded statewide by 2017-18

Phase-in based on FRPL

219 Schools

More funding

can begin

More funding must begin

Continues to ramp up

Continues to ramp up

Continues to ramp up

Continues to ramp up

Fully Funded

2

K-3 Class Size Reduction

Must be fully funded statewide by 2017-18

Phase-in based on FRPL

$0 More

funding can begin

More funding must begin

Continues to ramp up

Continues to ramp up

Continues to ramp up

Continues to ramp up

Fully Funded

3

Materials, Supplies, Operation Costs (MSOC)

Must be fully funded by 2015-16

$ per student basis

More funding

can begin

More funding must begin

Continues to ramp up

Continues to ramp up

Funded at new level

Funded at new level

Funded at new level

4

Basic Transportation Must be fully funded by

2014-15 % of formula funded basis

More funding

can begin

More funding must begin

Continues to ramp up

Fully Funded

Fully Funded

Fully Funded

Fully Funded

Source: OSPI, 5/10

Fiscal outlook – levy and compensation Local compensation for salaries and benefits must be addressed prior to local levy cut

• Current law will lower levy from 28 to 24 percent in 2018

• OSPI and legislators considering a cap between 15 and 20 percent

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$0

$10

$20

$30

$40

$50

$60

2014 2015 2016 2017 2018

Mil

lion

s

Levy and Compensation

28% Levy & LEA24% Levy & LEAI-732, I-728, and K-3Local Salaries

Fiscal outlook – legislative timeline 2014-15 legislative timeline

• November 19 State revenue forecast

• December 15-19 Governor’s budget

• January 12 105-day regular legislative session begins

• March 1-2 WSSDA legislative conference

• March 16-31 House and Senate budgets

• April 19 105-day session ends

• April 20 - ? 30-day special session(s)

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THANK YOU Questions?

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