BOARD OF EDUCATION Attachment: Information 1 PALO ALTO UNIFIED SCHOOL DISTRICT Date:

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1 BOARD OF EDUCATION Attachment: Information 1 PALO ALTO UNIFIED SCHOOL DISTRICT Date: To: From: Subject: Board of Education Mary Frances Callan, Superintendent Good News This is a periodic update about the good things that are happening in our schools. The Superintendent now has six beautiful holiday cards and four note cards to send in the name of the Palo Alto Unified School District. The images for these cards were selected this spring from many, many examples of wonderful artwork done by our elementary students. One theme that turned up in artwork across the district that worked especially well in black and white was polar bears! There were three outstanding selections: Eboni Cobby s delightful printed paper collage of two polar bears meeting on an ice floe and Jack Shapiro s collage of a big white bear in the snow. Both are students at Escondido. Eboni is a fourth grader and Jack is now in the second grade. Sean Mortenson must have been thinking about a black and white card when he made his whimsical ink drawing of two bears watching the snow fall. He is now a sixth grader at Jordan. The three other holiday cards include: Allison Shorin s graphic representation of the word hope, done with cut paper. Allison did this work as a fifth grader at Walter Hays. Also, Kimberly Starnes lovely chalk and collage image of a snowy day, done as a third grader at Palo Verde, and Kristin Montgomery s water color of poinsettias, done as a fifth grader at Briones. The note cards display a wide variety of images and represent a span of grade levels. Amy Sedgwick, then a Walter Hays first grader, drew a bright gumball machine based on the art of Wayne Thiebaud. Mieko Temple, at the time a third grader at Palo Verde, created a charming underwater collage scene with paper she decorated by making rubbings and going over them with water color. Kaitlyn Tracy, as a fifth grade at Walter Hays, drew her personal quilt squares in ink and crayon. As a Fairmeadow fifth grader Leo Rogers composed an amazing collected architecture city in pen and water color wash. All of these works of art are examples of lessons from the District s Spectra Elementary Art program taught by outstanding artist teachers and coordinated by the Art Education Office. Congratulations to all these young artists and we thank them for their artful contributions.

2 BOARD OF EDUCATION Attachment Consent 2 PALO ALTO UNIFIED SCHOOL DISTRICT Date: /03-04 Special Meeting of August 12, /03-04 Closed Session 013/03-04 Reconvene in Regular Session 014/02-03 Approval of Consent Calendar 015/02-03 Terman Middle School MINUTES FOR SPECIAL MEETING OF AUGUST 12, 2003 The Board of Education of the Palo Alto Unified School District held a Special Meeting on August 12, 2003, in Conference Room A at 25 Churchill Avenue, Palo Alto, California. President Mandy Lowell called the meeting to order at 5.05 p.m. Members present: Ms. Mandy Lowell, President Ms. Gail Price, Vice President Mr. John H. Barton Mrs. Cathy Kroymann Mr. John Tuomy Others present: Dr. Mary Frances Callan, Superintendent Dr. Robert Golton, Deputy Superintendent Dr. Cynthia Pino, Associate Superintendent Educational Services Dr. Marilyn Cook, Assistant Superintendent Human Resources Mr. Bob Mills, attorney The Board recessed immediately to Closed Session to confer with Real Property negotiator, Dr. Robert Golton, pursuant to Government Code regarding Terman Middle School; to confer with legal counsel regarding anticipated litigation re significant exposure to litigation pursuant to subdivision (b) of Government Code section : one case; to discuss public employee employment pursuant to Government code 54957; and to confer with labor negotiator, Dr. Marilyn Cook, regarding PAEA and CSEA pursuant to Government Code The following action was taken: MOTION: Mrs. Kroymann moved that the Board appoint Sharon Ofek as Assistant Principal at Jordan Middle School. Ms. Price seconded the motion, which carried unanimously No other action was taken. The Board reconvened in Regular Session at 6:30 p.m. in Conference Room A Members present: Ms. Mandy Lowell, President Ms. Gail Price, Vice President Mr. John H. Barton Mrs. Cathy Kroymann (left at 7:30 p.m.) Mr. John Tuomy Others present: Dr. Mary Frances Callan, Superintendent Dr. Robert Golton, Deputy Superintendent Dr. Cynthia Pino, Associate Superintendent Educational Services Dr. Marilyn Cook, Assistant Superintendent Human Resources Mr. Bob Mills, attorney MOTION: Mr. Barton moved that the Board approve the Consent Calendar, including certificated and classified personnel actions, which are attached as part of the permanent record Exhibit #1, as presented. Ms. Price seconded the motion, which carried unanimously. Dr. Callan explained that there were a number of issues that involved the joint use of Terman Park, including signage, access to path, temporary courts, and permanent basketball courts. After discussion by the Board members and administration, staff was instructed to go ahead and do whatever was necessary regarding the signage to ensure that it was in place by the opening of school. (9/23/03) - 1 -

3 016/02-03 Resolutions Approving Two Addenda to the Previously Certified Environmental Impact Report (EIR) for the Terman Middle School Reopening MINUTES FOR SPECIAL MEETING OF AUGUST 12, 2003 Regarding the access to path, no action was required by the Board of Education. The Board said it accepted the public access to the paths as deemed by the City of Palo Alto City Council. Bob Mills, an attorney, said that during school hours, school rules would be in effect, and that outside school hours, it was up to the City. He also emphasized that the school had priority on the use of the playing fields and courts from 7:00 a.m. until 3:30 p.m. Nina Bell, a resident, spoke regarding the two plans for the basketball courts and pointed out that neither plan was acceptable based on the City of Palo Alto standards regarding trees. She noted that two live oaks fall under City protection ordinance and that 18 redwood trees would need to be removed. She said the neighbors were not in favor of doing this. David Clark, a resident, had concerns regarding the location of the proposed basketball courts, pointing out that a sound wall and trees would need to be removed, which would really impact neighbors. He said if this were done, excessive noise would become an issue in the neighborhood. He also spoke about problems with grading the land, as well as concerns regarding safety regarding access to their properties. He emphasized that the neighbors wanted to cooperate but they also wanted to maintain the quality of the neighborhood. Alice Smith, a resident, said she was concerned about the traffic on Arastradero and Charleston, which had not been declared a school zone. She urged the District to do this immediately. She also spoke of a gate at Glenbrook, which was a cul de sac. She said the neighbors did not want cars coming in there to drop off students. She also suggested the School Board reduce the cost of bus rides in order to get people out of their cars and onto school buses. Richard Neely, a resident and a member of the Greenacres Improvement Association, said he realized the District was strapped for funding and proposed that their Association could make some funds available to buy the necessary land up to the where the sound wall exists. He also proposed that in exchange of a one-foot strip of land the District could move back some of their proposed changes. Terry Blackburn, Terman PTA President, said that on behalf of the students they wanted to work with the School Board, as well as with volunteers. They also wanted to be good neighbors to those who lived nearby. She said that she would help out with the neighbors in any way she could Ms. Lowell thanked everyone, but noted that selling or buying land was not the issue. She said that the District needed to provide adequate play areas on campus. She urged the community residents to communicate their concerns with the Palo Alto City Council. She stressed that it was important to have the basketball courts completed quickly. She also noted that there was a long-term group working on traffic issues together with Gayle Likens of the City. Dr. Callan said that the necessary signage for speed and school zone designation would be done right away. Mr. Tuomy gave some background information on why the District chose to reopen a third middle school on the Terman site. He said it might take a while to smooth out the student drop-off process. He added that the City Council had not been very cooperative. He also said that moving the amphitheater was not a good idea. Mr. Barton said his concern was the 600 students who wanted to play basketball. He said that no plan was perfect but that if a few trees needed to be removed, so be it. He suggested that staff write a letter to the City Council, noting that if the courts were not completed by November 1, then the District would need to take a new look at the over-arching agreement with the City. Ms. Price said that the middle school sites needed to be comparable, including the basketball courts and tennis courts. She noted that the District needed the political and staff support from the City to make this happen. If not, they were being obstructionists. She added that the City needed to take these issues seriously and take a proactive stand. MOTION: Mr. Tuomy moved that the Board waive its two-meeting rule in order to take action on this item tonight. Mr. Barton seconded the motion, which passed 4-0, with Ms. Kroymann having left the meeting by this time. (9/23/03) - 2 -

4 MINUTES FOR SPECIAL MEETING OF AUGUST 12, /03-04 Adjournment MOTION: Mr. Tuomy moved that the Board of Education approve Resolutions # and # , both of which were Resolutions of the Palo Alto Unified School District Approving an Addendum to the Previously Certified Environmental Impact Report for the Terman Middle School Reopening. Mr. Barton seconded the motion, which passed 4-0, with Ms. Kroymann absent Dr. Callan said she wanted to also include the 2A and 3R plans in the proposal to the City Council. MOTION: Mr. Barton moved that the Board include the 2A and 3R plans in the proposal to the City Council. Ms. Price seconded the motion, which passed 4-0, with Ms. Kroymann absent. The Board adjourned at 7:45 p.m. to the next Regular Board Meeting on Tuesday, August 26, 2003, in the Board Room at 25 Churchill Avenue, Palo Alto, California. Approved by the Board of Education. Secretary to the Board (9/23/03) - 3 -

5 BOARD OF EDUCATION Attachment Consent 3 PALO ALTO UNIFIED SCHOOL DISTRICT Date: Complete audio tape recordings of Board Meetings are available at 25 Churchill Avenue. This meeting was not video or audio taped. MINUTES FOR SPECIAL MEETING OF August 21, /03-04 Special Meeting of August 21, /03-04 Closed Session 020/03-04 Reconvene in Regular Session 021/03-04 Adjournment The Board of Education of the Palo Alto Unified School District held a Special Meeting on August 21, 2003, in Conference Room A at 25 Churchill Avenue, Palo Alto, California. President Mandy Lowell called the meeting to order at 4:30 p.m. Members present: Mrs. Mandy Lowell, President Ms. Gail Price, Vice President Mr. John H. Barton Mrs. Cathy Kroymann Mr. John Tuomy Others present: Dr. Mary Frances Callan, Superintendent The Board recessed immediately to Closed Session pursuant to Government Code for Public Employee Evaluation - Superintendent. The Board reconvened in Open Session. Ms. Lowell announced no action was taken in Closed Session. The Board adjourned at 6:45 p.m. Mary Frances Callan, Superintendent Secretary to the Board Approved: Special Meeting August 21, 2003 Page 1

6 BOARD OF EDUCATION Attachment: Consent 4 PALO ALTO UNIFIED SCHOOL DISTRICT Date: TO: FROM: SUBJECT: Mary Frances Callan, Superintendent Robert Golton, Deputy Superintendent Amendment #2 to Contract with O Connor Construction Management, Inc. BACKGROUND On June 11, 2002, the Board of Education approved an agreement with O Connor Construction Management, Inc. for support services in the management of the Building for Excellence Program. On August 27, 2002, the Board approved Amendment #1 to the agreement to extend those services through June The combined total for the original agreement and Amendment #1 was $376,599. Since last August, O Connor Construction Management s services have included oversight of the master plan for the high schools and construction management of the Palo Alto High School project. PROPOSAL Based on current staffing of ongoing projects, it is anticipated that O Connor Construction Management s services will be needed through June It is proposed that the District execute Amendment #2 with O Connor Construction Management, Inc. for the period July 2003 through June 2004 at a not-to-exceed amount of $408,384, plus $1,000 for reimbursable expenses, for a total of $409,384. This will bring the combined total amount of the contract to $785,983. FISCAL IMPACT The cost for these services under Amendment #2 is $409,384. Funding for this amendment is included in the Building for Excellence budget. This item was presented to the Board for discussion on September 9, RECOMMENDATION It is recommended that the Board of Education authorize staff to execute Amendment #2 to the agreement with O Connor Construction Management, Inc. in the amount of $409,384.

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12 BOARD OF EDUCATION Attachment: Consent 7 PALO ALTO UNIFIED SCHOOL DISTRICT DATE: 09/23/03 TO: FROM: SUBJECT: Mary Frances Callan, Superintendent Carmen M. Giedt Director of Educational Support Services INTERDISTRICT TRANSFERS Paperwork authorizing interdistrict transfers is processed throughout the academic year by the sending and receiving districts. Consequently, the Board is asked to consider administrative recommendations for interdistrict transfers throughout the school year. It is recommended that the Board of Education deny the admission of seven students into the District. Attachments

13 BOARD OF EDUCATION Attachment: Information 8 PALO ALTO UNIFIED SCHOOL DISTRICT DATE: TO: FROM: SUBJECT: Board of Education Mary Frances Callan, Superintendent All School Funds (ASF) Presentation The District works collaboratively with non-profit organizations whose interest aligns with its students. All School Funds (ASF) is on such organization. Representatives will be presenting an overview of their work to date and plans for future fundraising.

14 BOARD OF EDUCATION Attachment: Public Hearing Discussion 9 PALO ALTO UNIFIED SCHOOL DISTRICT Date: TO: FROM: SUBJECT: Mary Frances Callan, Superintendent Marilyn Cook, Assistant Superintendent - Human Resources Proposed Ratification of Tentative Agreement with the California School Employees Association (CSEA) Representatives of the Board of Education and the California School Employees Association (CSEA) have concluded negotiations on compensation and benefits for the fiscal year. We are in the second year of a three-year agreement, which opens annually on compensation and benefits along with an additional article of each party s choice. Both parties have signed a tentative agreement. The following information highlights changes that will be made in Article VI of the current agreement as a result of these negotiations. A financial disclosure statement is also included. Copies of the tentative agreement have been given to Board members and are available upon request from the Human Resource Center. All provisions other than those listed here will be in effect for the duration of the contract. Health Benefits Changes: The District will increase its contribution to employee benefits in the coming year in order to maintain coverage for families in either Kaiser or the Blue Cross HMO. There will continue to be no cost to the employee for single, two-party, or family coverage. Employees will continue to pay a portion of the Blue Cross PPO premium. For single coverage, the employee cost will be $125 per month; for two-party coverage, the employee cost will be $225 per month; for family coverage the employee cost will be $325 per month. Following the recommendation of the Joint Benefits Committee (including representatives of CSEA, Palo Alto Educators Association, and the District), benefits will be restructured from composite rates to tier rates. Double coverage for employees with spouses also covered by the District will be eliminated. One employee spouse will be able to cover the other employee spouse by selecting two-party or family coverage. Beginning with employees hired on or after January 1, 2004, the District will pay a pro-ration of the District s contribution for the tier rate of the plan and coverage selected by the employee when the employee works at least 50 percent but less than 100 percent; e.g., for an employee working 75 percent of full time, the District will pay 75 percent of the selected premium; the employee must pay the additional 25 percent in order to have health coverage with the District. This is a standard practice in other school districts.

15 All current employees will be unaffected by the system going into affect for new part-time employees on January 1, Employees who are laid off due to lack of funds or lack of work but who were hired before January 1, 2004, shall continue to be treated as employees hired before January 1, 2004, for purposes of eligibility and pro-ration of health insurance benefits. The District will increase the on-going dollars made available for employee health benefits and will increase that commitment from $6,232 per employee to $6,665 per employee per year. The California School Employees Association membership will be holding a ratification vote on the tentative agreement on September 22, Pending ratification by the CSEA membership, it will be recommended that the Board approve this tentative agreement.

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19 BOARD OF EDUCATION Attachment: Discussion 10 PALO ALTO UNIFIED SCHOOL DISTRICT Date: TO: FROM: SUBJECT: Mary Frances Callan, Superintendent Marilyn Cook, Assistant Superintendent - Human Resources Health Benefits Changes for Non-Represented Employee Groups Negotiations with the California School Employees Association have been completed for the school year and our collective bargaining agreement is in the process of ratification and approval. Negotiations are continuing with the Palo Alto Educators Association. Given the difficult budget year faced by the District and the increasing cost of health insurance, negotiations have focused on the maintenance of health benefits for employees. The District has been involved since January of this year in working with the Joint Benefits Committee comprised of representatives of the California School Employees Association, the Palo Alto Educators Association, and the District to examine the way our health benefits are structured and to make recommendations to the negotiating teams. Health benefits are provided to all employees and our rates are quoted by the carriers to include all employees of the District including non-represented employees. Consequently, the District has met with representatives of the Management Group and representatives of the Confidential / Supervisory Group and agreement has been reached. That agreement encompasses health benefit changes as follows: The District will increase its contribution to employee benefits in the coming year in order to maintain coverage for families in either Kaiser or the Blue Cross HMO. There will continue to be no cost to the employee for single, two-party, or family coverage. Employees will continue to pay a portion of the Blue Cross PPO premium. For single coverage, the employee cost will be $125 per month; for two-party coverage, the employee cost will be $225 per month; for family coverage the employee cost will be $325 per month. Following the recommendation of the Joint Benefits Committee (including representatives of CSEA, PAEA, and the District), benefits will be restructured from composite rates to tier rates. Double coverage for employees with spouses also covered by the District will be eliminated. One employee spouse will be able to cover the other employee spouse by selecting two-party or family coverage. Beginning with employees hired on or after January 1, 2004, the District will pay a pro-ration of the District s contribution for the tier rate of the plan and coverage selected by

20 the employee when the employee works at least 50 percent but less than 100 percent; e.g., for an employee working 75 percent of full time, the District will pay 75 percent of the selected premium; the employee must pay the additional 25 percent in order to have health coverage with the District. This is a standard practice in other school districts. All current employees will be unaffected by the system going into effect for new part-time employees on January 1, Employees who are laid off due to lack of funds or lack of work but who were hired before January 1, 2004, shall continue to be treated as employees hired before January 1, 2004, for purposes of eligibility and pro-ration of health insurance benefits. The District will increase the ongoing dollars made available for employee health benefits and will increase that commitment from $6,232 per employee to $6,665 per employee per year. It is recommended that this benefits package be approved for the District s non-represented employees the Management Group and the Confidential/Supervisory Group.

21 BOARD OF EDUCATION Attachment: Discussion 11 PALO ALTO UNIFIED SCHOOL DISTRICT Date: TO: FROM: SUBJECT: Mary Frances Callan, Ph.D., Superintendent Marilyn Cook, Ed.D., Assistant Superintendent Human Resources Renewal of Student Teaching/Intern Agreements Proposal Each year the District contracts with colleges and universities to provide opportunities for teacher training participants to fulfill their student teaching or internship requirements in our classrooms. While we primarily place student teachers from College of Notre Dame, Stanford University, and San Jose State University, we are asking for authorization to enter into agreements with the following ten institutions: California State University National University San Francisco State University San Jose State University Stanford University University of California Berkeley University of California Santa Barbara University of Notre Dame de Namur University of San Francisco University of Santa Clara Some of these institutions have contracts on file, and others will develop contracts when and if a student teacher is assigned to one of our schools. Board authorization to enter into agreements with these ten institutions will allow us to work with candidates from each of them, should the opportunity arise. Background Student teachers work in the classroom of a Palo Alto Unified School District teacher. A student teacher is not the teacher of record and receives no money from the District. Interns are hired as full or part time teachers. They are placed on Step 1, Column 1 of the salary schedule and are the teachers of record for their class(es). They are supervised jointly by a university supervisor and a PAUSD teacher or administrator. Supervising teachers for interns or student teachers receive a small stipend from the universities for their services. Recommendation At the next meeting, it will be recommended that the Board of Education authorize the District to enter into student teaching/internship agreements with these ten institutions as needed.

22 BOARD OF EDUCATION Attachment: Action 12 PALO ALTO UNIFIED SCHOOL DISTRICT Date: To: From: Board of Education Robert F. Golton, Deputy Superintendent SUBJECT: Financial Report and Budget Update for BACKGROUND The Palo Alto Unified School District (PAUSD) budget for was approved June 24, The budget was based on the latest information available at that time. However, as has been the case in the past, the state budget process was not completed, the County Controller-Treasurer s estimate of property tax revenue was almost two months away, and the District s books had yet to be closed and ending balance calculated. These three vitally important pieces of information (state budget, property tax revenue estimates, and final prior year financials) are now available. Therefore, as in past years, this first revision of the budget has been compiled and was presented at this first meeting on September 9, Last year, the September financial report discussed the change in the state and local financial climate. It alerted the reader that the financial situation in California school districts in general, and PAUSD in particular, had reached a turning point. A year later, the full force of the State s declining economy and continued deferral of budget actions to resolve deficits have had tremendous impact, and no warnings are needed. In particular, PAUSD lost the $120 per student in state Basic Aid funding, lost $782,000 in state categorical funding, and has had disappointing property tax growth. PAUSD made important budget reductions last spring in order to balance the budget. Further adjustments are needed this year in order to conserve money and to balance the budget for LOCAL PROPERTY TAX REVENUE The District received disappointing property tax news at the quarterly County Basic Aid meeting on August 20, This August meeting provided the first County Controller-Treasurer projection on PAUSD property tax revenue. The overall growth is now projected at only 1.22 percent rather than the 3.66 percent projected in the June budget. This budget update reflects the resulting $1,730,882 reduction in estimated property tax revenue for

23 The PAUSD budget is always a discussion agenda item at the first Board of Education meeting in June and then an action item adopted at the second Board of Education meeting in June. In August, the County Controller-Treasurer s Office completes its compilation of data leading to its initial projection of property tax growth for the fiscal year. Since County Controller-Treasurer data are not available in late May when the budget preparation is completed, the Distinct uses the only data that are available: the latest County Assessor s report on growth of the secured roll. The District then does its own estimate for the much smaller unsecured and homeowners exemption rolls. As information, the secured roll accounts for approximately 89 percent of property tax revenue; the unsecured roll, 10 percent; and the homeowners exemptions, 1 percent. The County Assessor s secured roll growth information was given to Basic Aid districts at the County meeting for Basic Aid districts held this year on May 12, It showed 5.57 percent growth for the secured roll through May 4, The District budget used 5.57 percent in the adopted budget for secured roll growth and estimated a 10 percent drop in the unsecured roll and 0 percent growth in the homeowners exemption roll. This resulted in overall growth of 3.66 percent. There had been reason for optimism that property tax growth might be higher than the May estimates because home sales in the community had been strong. Also, typically the County Assessor s roll, on which the County Controller-Treasurer s estimates are related, shows some growth between early May and July 1 when the roll is finalized. There was, therefore, great surprise at the County Controller-Treasurer s meeting of August 20, 2003, when the County Controller-Treasurer s estimates were sharply below the May estimates for a number of districts. A relatively small part of the PAUSD shortfall, about $320,000, was due to the fact that the County Controller-Treasurer increased the allowance for property tax appeal refunds, from $15 million in to $25 million in However, County staff at the meeting could give no explanation for the remainder of the drop, which in Palo Alto s case was $1.4 million. More data was promised within 48 hours, and in fact another set of spreadsheets was faxed two days later. The County Controller-Treasurer had done more precise estimates but the overall growth for PAUSD was still sharply down at 1.22 percent. On Monday, August 26, 2003, a meeting was held with Larry Stone, the County Assessor, and six of his most senior staff. There was a lot of discussion, but then an important fact came to light that potentially explains this decrease. In one of the more general discussions about the state of the economy, one of the staff members mentioned that the County Assessor had made a significant number of Prop 8 reductions to the roll in May and June. Proposition 8 was passed by the voters in It provides that property owners are entitled to the lower of the fair market value of their property or the assessed value at the time of purchase. For many properties in the County purchased in the last few years, the fair market value has declined below purchase price. In particular, in the commercial markets where some rents have halved and vacancy rates are high, value has markedly declined. The County Assessor s office made $2.5 billion in residential Prop 8 reductions and $5.5 billion in commercial reductions, for a total of $8 billion. The total Santa Clara County assessment roll is now only $217 billion, so this would represent almost a 4 percent reduction. 2

24 This Prop 8 reduction information was not provided at the May county meeting. If high magnitude Prop 8 reductions took place in May and June, it provides a potential explanation for the drop in projected tax revenue. A further complicating factor is that Prop 8 reductions are not spread uniformly, and can and do affect some school districts more than others. At this point, the County Assessor s office staff is doing further research, as are we, and we are awaiting further information. We do, however, have the County Controller-Treasurer s projection, and this projection is always used in the September budget revision. In fact, their projections are used throughout the year as the basis for the PAUSD budget since it is the County Controller-Treasurer who makes the payments to Basic Aid school districts. The resulting downward revision is $1,730,882. This information is shown on the budget update. Percentage of Unrestricted Revenue by Source Lease Revenue 8% State Income 5% Other Income 4% Parcel Tax 6% Property Taxes 77% PAUSD s property tax growth assumptions for future years have been left as is for now. As with the June budget, growth is projected at 2.5 percent for the secured roll and 0 percent for the other two rolls through Property tax growth roughly reflects the condition of the general economy, but the changes in property tax growth are delayed. STATE BUDGET Governor Gray Davis, concluding another chapter in the State s continuing saga of fiscal dilemmas, signed the $99.1 billion State Budget 33 days late on Saturday, August 2, The Governor s final signature was made with an admission that this budget does not address the structural differences between state revenues and expenditures. Consequently, the Budget will also 3

25 be a difficult dilemma for the State of California, with an $8 billion deficit projected already and the strong likelihood that it will be much more. The State Budget includes, once again, major deficit financing to balance the State s revenues and expenditures in the current fiscal year. A $10.7 billion loan will be used to pay off prior-year deficits. The loan will be paid off beginning in by a dedication of one-half cent of California s sales tax income. The budget also includes other questionable sources of funds to address the $38 billion budget gap, such as funding from tribal gaming revenues, additional tobacco securitization bonds, borrowing from state pension funds, and a questionable anticipation of dramatic growth in federal funding for California. The Governor indicated in his press releases that the Department of Finance and the Legislative Analyst both agree that there will be a reappearance of the structural deficit unless additional action is taken. As is typical in this type of situation, the press release indicated the Governor has directed the Department of Finance to work with the Legislature and all other parties to identify ways to address the structural deficit, including potential legislative actions before the end of the session. The adopted State Budget for K-12 education included the loss of 1.5 percent of the underlying revenue limit amount for Basic Aid districts. This amount is to be taken from Basic Aid district categorical funds. That loss is projected to be $782,000, slightly less than the $835,000 projected in the June budget. FUND BALANCE The projected unrestricted undesignated fund balance in June was $3,358,447. With the books now closed, the actual unrestricted undesignated fund balance is $3,381,185. The difference is $22,738, or 0.02 percent of the General Fund budget. This amount of $3,381,185 is available in the event of emergencies. PAUSD also has its reserve for economic uncertainty of 3 percent, or $3,250,221, and its Basic Aid reserve of $6,711,000. A solid level of reserves is needed, of course, because of the added financial uncertainty associated with being a Basic Aid school district. However, as we know, there is a serious problem in spending down reserves in difficult financial times because it builds ongoing expenditures with one-time money. Such spending, absent a plan to rebalance the budget, can simply serve to avoid financial decisions and make the problems much more serious in the future. INSURANCE RATE INCREASES Health care insurance premiums increased again for The Kaiser plan increased by 9.1 percent, the Blue Cross HMO increased by 5.0 percent, and the Blue Cross PPO plan increased by 25.0 percent. The overall increase is very onerous, although not at the level of a year ago, thanks to the successful efforts of the Superintendent and consultants to hold down increases. 4

26 The PAUSD Joint Benefits Committee, composed of representatives of the employee units and the District, has been working to develop options to preserve the affordability and quality of the health care plans that the District provides. The budget model at this point does not include provision for increasing the district contribution to health service system costs. PAUSD, like other California employers, is feeling the effect of the Workers Compensation insurance crisis. California has some of the highest insurance rates in the United States while at the same time having relatively modest benefits. The District had a substantial reserve for claims in excess of actual requirements. As a result, it continues to charge funds and programs $0.50 per $100 of salaries, roughly $1.00 per $100 of salaries less than estimated to be required to break even. This year, the District s Workers Compensation insurance costs tripled, and with a higher self-insured retention required. It remains to be seen how long the District will be able to go without raising its Workers Compensation rates. FIVE-YEAR BUDGET MODEL (See page 9) The district is committed to taking a long-term planning approach to the district budget. The State requires that school district budget plans contemplate not only the current year, but also the two following years. Palo Alto Unified School District uses a five-year model for its budget planning. The District is committed to understanding the longer-term impact of its financial decisions. The County Controller-Treasurer has projected overall property tax revenue growth of 1.22 percent for The growth percentages for the years after used in the model in June were 2.5 percent for the secured roll for through Property tax growth roughly reflects the condition of the general economy, but the changes take place later. The effects of the downturn in the economy are now reflected in the current year s property tax growth numbers and in the years to come until the financial climate improves. These growth percentages will be reviewed and, if necessary, revised at the time of the first interim financial report in November. PROPERTY TAX REVENUE PER STUDENT As a basic aid school district, PAUSD receives no per student allocation from the State. (The $120 per student it formerly received was lost in this year s state budget battle.) Increased enrollment has the effect of diluting the available property tax dollars. In contrast, a revenue limit district receives the full per student revenue limit funding for each student. The following three charts show property tax growth, enrollment growth, and property tax dollars per student growth for Palo Alto Unified School District. The enrollment growth for is based on the June projection of enrollment growth of 231 students. A report on this year s eleventh day counts will be provided at the October 14 Board meeting. Note that these charts do not take into account the loss of the $120 per student basic aid or the loss of categorical revenue. 5

27 Property Tax Revenue Growth 14% 12.77% 12% 10.69% 10.20% 10% 9.12% 8.96% 8% 8.30% 6% 5.56% 4% 3.02% 2% 1.31% 2.07% 2.42% 1.22% 0% Projection Source: Controller-Treasurer Projected Enrollment Growth 5% 4.61% 4% 3.67% 3% 2% 2.68% 2.14% 2.99% 2.95% 2.47% 3.16% 2.00% 2.28% 1% 0% 0.05% -0.79% -1% Projected -2% Property Tax Revenue Growth Per Student 16% 14% 13.67% 12% 10% 9.80% 8% 6% 5.47% 5.99% 6.33% 6.82% 4% 3.49% 2% 0% -2.27% -0.07% -0.55% -1.52% -1.04% -2% -4% Projected Projection Source: Controller-Treasurer 6

28 REVISIONS TO THE BUDGET We now have the County Controller-Treasurer s estimate on property tax revenue and the adopted state budget. The June adopted budget had a surplus of $5,174. The aggregate effect of a reduction of $1,730,882 in estimated property tax revenue, a lower lottery estimate by $10,000, and the downward revision of $53,437 in the categorical funding reduction from the State is a net shortfall of $1,682,271. This shortfall will be resolved in the following ways: 1. The June budget assumed that the full categorical funding reduction of $782,296 would come from the General Fund. In the current budget model, $335,680 will be taken from stand-alone categorical programs that do not impact the General Fund. These include reductions in the categorical programs for GATE, SIP, Peer Assistance and Review, Economic Impact Aid, State Instructional Materials, School Safety, and Tobacco Use Prevention Education. This is ongoing expenditure reduction. 2. The amount of $465,142 in funds was transferred from categorical balances to General Fund designated fund balances as authorized by the State to offset mid-year cuts. This one-time money will be used to balance the shortfall. 3. The remainder of $881,449 will be taken from the General Fund undesignated and unrestricted fund balance. Our plan is to reduce this $881,449 transfer as the year progresses. The District will be extremely careful in filling vacancies and making other expenditures. The personnel costs will be reconciled in October, as is done every year, and any savings will serve to reduce the transfer. The amount saved will reduce the budget realignment target for next year. The details on the budget revision are as follows: 1. Secured Roll Property Taxes (Decrease of $1,482,269). In June, PAUSD budgeted a 5.57 percent increase for this roll, from the estimated actual of $60,800,128 in to $64,186,695 in The County Controller-Treasurer estimate is now $62,704,426, a 3.18 percent increase from estimated actuals and a decrease of $1,482,269 from the adopted budget. 2. Unsecured Property Taxes (Decrease of $231,897). In June, the District budgeted a 10 percent decrease for this roll, at $7,476,377. The County Controller-Treasurer s estimated decrease for the unsecured roll is percent from the base of $8,350,551 to $7,244, Homeowner s Exemption (Decrease of $16,716). In June, the District budgeted a 0 percent increase for this roll, at $653,472. The County Controller-Treasurer s estimated decrease for this roll is 2.56 percent from the base of $653,472 to $636, Basic Aid Funding Reduction (Decrease of $53,437). The state budget contains two significant funding reductions for Basic Aid school districts. The first is the loss of $120 per student Basic Aid funding and the second is reduction in categorical programs equivalent to 7

29 approximately 1.5 percent of the District s calculated revenue limit. Both reductions were included in the adopted budget. A revised calculation shows a saving of $53, Lottery Income (Decrease of $10,000). This decrease is based on the latest estimate from School Services of California, a $1 per student reduction from the adopted budget. 6. Categorical Program Expenditure Reduction (decrease of $335,680). The June budget assumed the full categorical funding reduction of $782,296 would come from the General Fund. In the current budget model, $335,680 will be taken from categorical programs that do not impact the General Fund. UNAUDITED ACTUAL REVENUE AND EXPENDITURES (See pages 10-12) In September, School districts are required to file their final reports for the prior year with the County Superintendents. PAUSD s external auditor, Vavrinek, Trine and Day, then audits these reports at a later date. The final unrestricted balance is $3,381,185. This is $22,738 higher than the $3,358,447 estimated in June. Staff is requesting that the filing of these unaudited actuals be approved by the Board of Education. RECOMMENDATION: It is recommended that the Board of Education approve: 1. The revision to the budget as presented. 2. The filing of the unaudited actual financial report to the County Superintendent of Schools. 8

30 SEPTEMBER BUDGET UPDATE MULTI-YEAR GENERAL FUND PROJECTION Property tax increase 1.22%(all rolls), 2.5%, 2.5%, 2.5%, 2.5%, 2.5% (secured tax only) BEGINNING FUND BALANCE 11,847,182 10,500,591 9,637,560 8,981,255 8,801,963 9,318,222 2 Restricted/Reserved/Designated 8,465,997 7,900,986 7,934,925 7,993,922 8,047,921 8,096,592 3 Undesignated 3,381,185 2,599,605 1,702, , ,042 1,221, Projected Revenue Budget 105,352,603 5 Total Recurring Operating Revenue from Prior year 103,665,158 6 Less one-time revenue from prior year (443,654) 7 Total Recurring Operating Revenue from Prior year 103,221, ,279, ,453, ,730, ,048,185 8 Increase VTP Revenue Limit funding for enrollment growth (30, 30, 30, 30, 0) 102, , , ,626-9 Increase Property Taxes - see above (1,730,882) 1,604,667 1,644,784 1,685,904 1,728,051 1,771, Increase CSR income due to enrollment growth (123, 268, 204, 151, 98) 33,301 55,516 80,340 48,668 49, Increase CSR income due to State COLA (2.10%, 2.30%, 2.70%, 2.90%, 2.90%) 61,950 70,041 85,612 96, , Increase Special Ed State funding due to State COLA (2.10%, 2.30%, 2.70%, 2.90%, 2.90%) 60,328 67,461 81,015 89,366 91, Increase/(Decrease) Lottery Income for enrollment growth ($111.75, $111.50, $111.30, $111.10, $111.10) (10,000) 13,745 29,882 22,705 16,776 10, Increase Lease Income (2.70%, 2.90%, 3.00%, 3.10%, 3.10%) 182, , , , , Basic Aid Funding Reduction 53, Total Projected Revenue 103,665, ,279, ,453, ,730, ,048, ,307, Projected Expenditure Budget 105,347, Total Recurring Operating Expenditures from Prior year 105,011, ,143, ,109, ,909, ,531, Additional Teachers for growth 6, 13, 10, 8, 5 FTE (sal/benefits) 429, , , , , Additional Sp Ed Teachers for enrollment growth 1, 2, 1, 1, 1 FTE (sal/benefits) 71, ,165 73,671 74,776 75, Additional Special Education Aides for enrollment growth 1, 1, 1, 1, 1 FTE (sal/benefits) 26,269 26,663 27,063 27,469 27, Net Increase - Certificated step/column increases & attrition/retirement savings 529, , , , , Net increase - Classified step/column increases & attrition/retirement savings 116,514 94,711 53,039 20,005 20, Salary/benefit savings (182,613) (159,628) (54,000) (30,000) (30,000) 25 PERS rate (10.42% for all 5 years) 13,603 11,563 7,631 4,523 4, Increase in school discretionary budgets (enrollment growth) 13,540 26,495 23,300 16,654 12, Increase in Special Education Non-Public School tuition and transportation costs (5%) 115, , , , , Increase in Utilities expenses (5% for all 5 years) 135, , , , , Increase maintenance expenditure to required 3% 33,938 58,997 53,999 48,671 41, AVID expenses 21, Categorical program expenditure reduction (335,680) 32 Available ongoing funds for compensation/budget additions/(reprioritization) One-time benefit costs increases - (192,480) 34 Total Projected Expenditures 105,011, ,143, ,109, ,909, ,531, ,925, Excess of Revenues over Expenses (Unrestricted) (1,346,591) (863,031) (656,305) (179,292) 516,259 1,381, ENDING FUND BALANCE 10,500,591 9,637,560 8,981,255 8,801,963 9,318,222 10,699, Restricted/Reserved/Designated 7,900,986 7,934,925 7,993,922 8,047,921 8,096,592 8,138, Undesignated 2,599,605 1,702, , ,042 1,221,630 2,561,429 9

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34 BOARD OF EDUCATION Attachment: Discussion 13 PALO ALTO UNIFIED SCHOOL DISTRICT Date: TO: FROM: SUBJECT: Mary Frances Callan, Superintendent Robert Golton, Deputy Superintendent Modification of Building for Excellence Budget and Authorization to Fund Construction Projects BACKGROUND On June 24, 2003, the Board of Education appropriated $4,131,605 of additional state modernization bond funds to the Building for Excellence program contingency. This increased the balance of the program contingency from $5,192,627 to $9,324,232. The District also has available unappropriated additional interest earnings on the bond funds and state modernization funds through June These total $3,495,338. This money is available for the program. The Building for Excellence program has an approved scope of work, last revised by the Board of Education on December 14, This revised scope of work will be completed by August 2004 with the completion of the current Phase 3 projects. PROPOSAL The purpose of this proposal is two-fold: 1) to approve additional construction, and 2) to align the Building for Excellence budget to take into account additional available funds. Regarding additional construction, staff is recommending that the locker and shower facilities at the two high school campuses be renovated. The Board has previously approved design funds and design funds have been expended. What is required at this point is the appropriation of construction funds. Also, staff is recommending the renovation of rest rooms at five elementary school campuses where not all of the bathrooms were completed. The design of these bathrooms is consistent with the bathrooms already renovated. Regarding the Building for Excellence budget, each project dollar allocation has been reviewed. This report revises those allocations in accordance with the latest information. The following is a line-by-line description of the recommended modifications to the budget.

35 Secondary Schools 1. Phase 1 at Palo Alto has been completed, with the exception of placing lockers around the 500 building. However, to meet our matching funds requirement that 60 percent of the project be spent on construction, another $290,555 will be transferred from program contingency to fund the HVAC and roofing of Building 300A, which was originally approved by the State under this phase. 2. Phase 1 at Gunn has been settled with Falk Construction, Vanir, and VBN. The amount of $463,787 is being transferred to the program contingency, leaving $100,000 to complete remedial work. This includes $60,000 for potential roofing repairs and $40,000 for repainting the exterior. 3. Phase 1 at Jordan is complete. The amount of $3,427 is unexpended and is being transferred to the program contingency. 4. Phase 1 at J.L. Stanford is under construction. There has been $162,209 of programmatic additions to the project, with the major requirement being to provide new food service equipment in the central kitchen to comply with County Health Department standards. Also included in the amount above are replacements to existing casework and countertops and new parking lot paving. The amount of $162,209 will be transferred to the project from program contingency to replenish the project contingency budget. 5. Phase 2 at Palo Alto is complete. The amount of $70,760 is unexpended and being transferred to the program contingency. 6. Phase 2 at Gunn is complete. The amount of $154,349 is unexpended and being transferred to the program contingency. 7. Phase 2 at Jordan is complete. The amount of $102,151 is unexpended and being transferred to the program contingency. 8. Phase 3 at Palo Alto is under construction. No modifications are needed at this time. 9. Phase 3 at Gunn is under construction. No modifications are needed at this time. 10. Phase 3 at Jordan is under construction. While adverse field conditions have been encountered in several buildings to date, no modifications are being requested at this time. 11. (New Project) Renovation of Palo Alto s lockers and showers has been designed, with the cost of design being included with the school s Phase 3 project. Authorization to fully fund this project is being requested. $2,600,000 will be transferred from the program contingency to fund the construction of this project.