GENERAL FUND BUDGET NARRATIVE

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1 GENERAL FUND BUDGET NARRATIVE The Final Budget is the result of a great deal of work and effort by many people involved with the Dublin Unified School District. The Board of Trustees had provided overall direction in the development of the budget. The Board developed its vision that: We believe All Dublin Students Will Become Lifelong Learners Core Values Our most important goal is to maximize learning for every student. Every student deserves the best possible educational experience. Wellness and character development are critical components of student learning. Professional learning communities are essential for continuous improvement of student learning. Our most valuable resource is the skills, knowledge, and experience of our teachers, support staff, and our administrators, and parent community. Mission Our mission is to ensure that every student becomes a lifelong learner by providing a rigorous and relevant 21 st century education that prepares him/her for college and career or service to our country and for success in the global economy. Every Student will Goals for all Students Demonstrate college and career readiness. Meet the District s rigorous and relevant 21 st century standards for graduation. Be proficient in Algebra I. Read at grade level by the end of 3 rd grade. Improve his/her academic performance each year. Strategic Initiatives: Student Learning: We will maximize student learning and achievement. Learning Environment: We will provide an environment that enhances student learning. Resource Alignment: We will align resources in order to support student learning. Partnerships: We will establish and maintain productive partnerships that support student learning. Vision 2020 was created with guidance and approval of the Board of Trustees. The Vision 2020 Strategic Plan was the direct result of the efforts of numerous committees with much participation including community members, teachers, students, district staff, city leaders and district leadership. The National and State of California economic crisis has reduced state school funding dramatically during the to period, and cumulatively over 13 Million in revenues had not been received during that term in Dublin Unified. The Budget year is the second year of increased funding but it is just the beginning of our climb back to revenue that we received in The increased revenues are welcome but we must be conservative and only increase spending with respect to how much revenue is received. This district is no longer a high revenue limit funded district. This is a brief review of the major changes that occurred in school district finances and the new distribution network that occurred in previous year. Governor Jerry Brown made a major overhaul of school district finance when Proposition 30 funding passed in November Local Control Funding Formula (LCFF) is the new law and has eliminated revenue limits and over 20 Dublin Unified

2 categorical funds including all rules and regulations including the following funding sources: 1. Deferred Maintenance 2. School Safety and Violence Prevention 3. Arts and Music Block Grant 4. Middle and High School Counseling 5. Peer Assistance and Review 6. School and Library Improvement Block Grant 7. Pupil Retention Block Grant 8. Professional Development Block Grant 9. Gifted and Talented Education 10. Instructional Materials 11. K-3 Class Size Reduction 12. Class Size Reduction Grade Physical Education Teacher Incentive 14. Community Based English Tutoring 15. California High School Exit Exam 16. Economic Impact Aid 17. Oral Health 18. Math and Reading Professional Development 19. Math and reading Professional Development English Learners 20. Advanced Placement Exam Fees Two programs are extended for separate funding streams for one more year. Regional Occupation Program (ROP) and Adult Education. The future of these programs is uncertain at this time. The district has funding available in Fund 170 Special Reserve and is experiencing student enrollment growth of over 8% in budget year. The future fiscal years funding is uncertain at best as the new formula begins implementation across all school districts in the state. The district will need to keep building reserves beyond the state recommended 3% and build reserves to 5% as we are able due to continued economic uncertainty in future years. The revenue limit funding has been in a steady decline since The cumulative loss per student in each year has grown. The revenue limit base has been decreased annually $550, to $1,591, to $1,302, to $1,460 to what is currently a loss of $1, per student in , Chart 5 is what is nicknamed the alligator chart, Base Revenue Limit History. The State of California continues severe underfunding of education although they have functionally eliminated the deficit. The true question now is will California ever adequately fund education? The education reductions have been unprecedented in magnitude and future years look at best uncertain, with promises from Governor Brown and the LCFF implementation to begin returning funding to California schools to the funding level. It is certainly a questionable goal when we are pleased to return to a level that was barely adequate in The LCFF that combines revenue limit and funding from 20 state categorical programs, including K-3 Class Size Reduction, is replacing the current funding system. The new system is being phased in over an eight-year period beginning in Funds are distributed according to a base funding amount per ADA for four different grade spans. Base funding is supplemented by a weighting factor of 30% of base funding for each English Learner and Free/Reduced-Price Meals Program eligible student. This district will not receive concentration funding from the LCFF model. A new committee was formed this year for the Local Control Accountability Plan (LCAP) required as the budget for the year was developed. Representatives from the ESL community, African American Community, any interested parents and socio-economically challenged community were asked to participate along with administrators, principals, collective bargaining representatives and board members. There were numerous meetings this year with vibrant discussions taking place. In this initial year while the state template was developed much of the discussion was centered on educating all members on new requirements and the State priorities. The committee was formed in the early part of the year and many meetings centered on the current Vision 2020 plan and how it incorporated many of the new state required elements. Several other committees such as DLAC were already operating (members crossed-over between the committees) along with our Financial Advisory Committee (now classified in the Resource Strategic Initiative) met regularly the past year. The purpose of Financial Advisory was to both receive

3 financial education and generate ideas for revenue enhancements and expenditure savings. The committees will continue to operate in the future with some refinements and possible adjustments as the process becomes clearer with more experience. District staff worked with school site and program level managers to develop the budget. In addition this year the LCAP developed must be considered in the forming of priorities for funding in the general fund. The budget itself is a financial representation of the District s educational plan. The figures in the budget reflect what is known at this point in time. Virtually nothing in the development of the budgets has been normal, as has been the norm recently. The January Governor s Budget was released in January The budget implements LCFF. Governor released his budget which implemented the second year of LCFF with many items changed from original proposal including grade span allocations and cost of living implemented in particular parts of the formula. Growth continues to be funded in The District continues to work with the California School Finance Reform Coalition with the goal of working together to ensure every public school in California receives the funding necessary to provide a high quality education for all students. The coalition was a group of districts across the state that had potential negative impacts from the new funding formula. Dublin Unified was one of the biggest losers in the state in the original formula. The coalition members were a group of districts with growth and were set to never be restored to funding base. The formula was originally planned to be a redistribution of current inadequate school funding, taking from wealthier districts to poorer districts with large numbers of English language students and socio-economically challenged students. Dublin Unified s stated position is that funding needier students and districts with greater populations is certainly acceptable and appropriate. But this re-distribution should not put other districts with smaller populations of ESL and socioeconomically challenged students at a disadvantage because funding would be inadequate for all students. Dublin Unified hired Johan Klaus, a former legislator, to make our case known in Sacramento. In June 10, 2013 the legislative conference committee approved an educational spending plan for Key in the compromise deal were base grants were increased for all districts and an economic recovery target (ERT) was established to restore all districts to base funding rates. The May Revision contained funding for growth in base, although not in categorical at this time. These changes brought enough funding to Dublin Unified to balance our budget and maintain 3% reserve in prior year. Preparation of the budget normally begins in January with the release of the Governor s proposed budget for the State of California for the upcoming year. The Governors proposed budget indicates his best estimate of school revenues. The District normally receives 80% of our funding from the state, the State Budget is critical in our operations. The budget gets modified and adjusted many times from July 2014 forward; this is no more evident than the current year. The District s final budget, according to state law, is adopted prior to July 1. The budget is modified and adjusted many times thereafter, primarily finalizing enrollment, staffing and categorical revenue adjustments. Adoption of Dublin s Budget, Adoption of the State Budget and the closing of the district books, all occur in the summer months, provide additional information, which causes the budget to be adjusted. The District s Budget is comprised of several funds. The General Fund, by far the largest and most significant fund, is approximately $79 Million in size. The General Fund is used to account for the day-today operations of the District. The General Fund budget for is based on the LCFF funding proposed in the Governor s May Revision. The District s General Fund is divided into two sections: Unrestricted funds and Restricted funds. Restricted funds are monies received by the District, which are categorical in nature, i.e., they can only be used for the purposes prescribed by the funding agency.

4 The state and federal governments provide such funding for many such special programs or projects. An example, special education funds are restricted. Special education funds can only be spent on students with identified special needs and in the manner outlined in state and federal law. Restricted funds are provided directly to the schools and in other cases are controlled centrally by the District. In either case, how the District spends these monies is determined by restrictions imposed by the granting agency. The State categorical flexibility and elimination of many grants due to LCFF implementation has substantially reduced direct allocations to school sites and blurred the distinction between restricted and unrestricted funding. The LCFF model and base has included over 20 categorical funds including, CSR and School and Library funding, Chart 6, $4,773,271. Unrestricted funds are monies which are available for general use and are not restricted in their use. The District can spend unrestricted monies on whatever programs it chooses. Examples of unrestricted funds include the District s LCFF appropriation, lottery revenues, and local revenues including rental and lease income. The accountability to the supplemental part of LCFF has been determined. The District must process cautiously with about $2 Million in supplemental funding in the LCFF model. In addition to the General Fund, the district has other special purpose funds. These funds are used to account for monies, which can only be spent on their designated purpose. The funds are designated as follows: A. Special Revenue Funds; Adult Education, Child Nutrition, Special Reserve, Deferred Maintenance B. Capital Project Funds; Building (Bond) Fund, Capital Facilities (Developer Fees) Fund, and County School Services (Modernization); C. Debt Service Funds Bond Interest and Redemption KEY ASSUMPTIONS REVENUES Chart 1 The amount of local property taxes collected is less than the total LCFF revenue amount. The state makes up the difference with an allocation of state monies. In some districts, though, the amount of local property tax collected is actually larger than the total revenue limit amount. These districts are called Basic Aid Districts. Basic Aid Districts get to keep the entire property tax collection plus a nominal basic aid amount of state funding of $120 per pupil. This year with the passage of Proposition 30 and the implementation of LCFF some major issues are yet to be settled on how conversion from revenue limit formula to LCFF occurs. The revenue limit formula was complex and had impact on salary and other funds revenues. One of the major changes made with passage of Proposition 30 on November 6, 2012 was the creation of the Education Protection Account to receive and disburse the revenues derived from the incremental increases in taxes imposed by Article VIII, Section 36 (f), in Dublin this amount is $9,580,496 out of $63,503,053 in LCFF revenue. Dublin Unified School District s property tax collections make up 46.5% of the total revenue limit. The district receives some property tax collections, which formerly were kept by counties. These monies are known as Education Revenue Augmentation Funds (ERAF). Due to a change in state law, counties are now required to give these monies to schools thereby reducing the state aid contribution to the revenue limit. ERAF tax collections do not count as property taxes in determining if a district is Basic Aid. Without ERAF monies, property taxes make up 42% of the district s revenue limit. Federal Revenue The district receives approximately $1,283,202 Million in federal funding for special purpose programs. The largest funded program in the district is a funding allocation for special education, IDEA, Local Assistance. This allocation brings the district approximately $843,351. The District also receives other federal

5 funded programs including No Child Left Behind (NCLB), Title I; Basic Grant (Low Income); funds for drug, alcohol, and tobacco education; NCLB Title II, Teacher Quality; and NCLB Title III, Limited English Proficient Students); and child nutrition (food services funding). Funding for these programs is entirely categorical, that is the monies received can only be spent for the purpose specified by the granting agency. Overall federal funding was in prior times fairly consistent, these amounts are still reduced with federal sequestration cuts enacted last year. Other State Revenues Special programs funded by the state are accounted for in the revenue category called Other State Revenues. Lottery revenues at $1,216,575, Mandated costs, $281,950 which are not restricted funds, are also included in this category. The amount of Other State Revenues estimated for is $1,941,103. This amount is reduced dramatically from prior year s due to LCFF. Lottery Proceeds from lottery ticket sales augment school districts budgets. Lottery funds are distributed throughout the state on a per pupil basis. Actual apportionments of lottery funds typically occur from four to six months after ticket sales due to the complexities of accounting and distribution of prize winnings. Funding for is budgeted at $ unrestricted and is $30 restricted per pupil, for an annual amount of $1,216,575. Lottery funding was modified by Proposition 20. The funding was divided into a restricted portion for purchases of instructional text books and continued an unrestricted portion. The unrestricted portion of lottery is $982,618 and restricted is $233,957. The Proposition lottery revenues make up less than 2% of the district s total income in Other Local Revenue The district anticipates receiving $6,435,753 in Other Local Revenue. The largest source of local revenues are from the Special Education Local Plan Area (SELPA) at $4,432,593. The next largest source is $175,000 estimated Special Education bill backs. The other local revenue sources are lease and rental income, interest earnings on district monies, and local donation income. Revenues from tenant leases and facility users are projected to be $234,105. Interest rates are expected to remain in the low range and are budgeted at zero amount. EXPENDITURES Chart 2, Chart 3 Classroom Teachers A total of full time equivalent (FTE) teachers are budgeted for Of this total, FTE are regular classroom teachers, 47.4 FTE are special education teachers, and are specialists (prep, music, ESL, ROP, Math literacy and Science Coaches). Class size in grades K-3 averages students. Classroom teachers represent 85% of the total cost for certificated employees. The average salary for classroom teachers in the district is $95,548. The district pays employer statutory costs and dental benefits for teachers at an average of $11,466 per teacher. Salary negotiations with teachers for have been concluded. Step and column movement has been budgeted. A 4.5% on schedule with.5% added for raising collaboration days from 16 to 21 is included in this budget. Other Staff The balance of the salary accounts are instructional aides, certificated and classified leadership, and support staff including behaviorists, occupational therapists, maintenance and operations personnel, library aides, health clerks and all clerical personnel. A 5% schedule raise is planned in all other salary accounts. Employee Benefits The district is required by law to provide certain benefits to its employees. These statutory benefits include retirement funding (State Teachers Retirement System, STRS, for certificated employees and Public Employees Retirement System, PERS, for classified employees), social security contributions (OASDI), Medicare contributions, unemployment insurance (UI), and workers compensation benefits. The sum total budgeted for statutory benefits for all employees for next year is $10,188,201. The Governor decided in his May 2014 Revision to begin repaying the STRS liability. This year the STRS rate will increase from 8.25% up.61% to 8.86%.

6 In addition to statutorily required benefits, the district provides dental benefits for teachers and leadership and a capped fringe benefit amount of $5,915 for each classified full time equivalent. Board members are also offered a capped fringe benefit package amount of $1,500 to participate in the district provided and approved health and welfare benefits. The past five years health and welfare costs have had double digit increases impacting all units take home pay. The district took action in to reduce costs by changing to the PersCare medical plan. This provider has large purchasing power and can assist the district in managing the upward spiraling costs of health care. The Obama Health Care Plan will be implemented in January The District will provide additional information and cost impacts as it becomes available. Books & Supplies A small portion, 4.4%, of the district budget is utilized for the purchase of books and supplies. A large portion of that amount in past years came from state categorical funds. The sites have lost considerable book and supplies funding with the loss of the School and Library funding allocation. Funds are distributed to program managers, usually on a per student basis, and individual schools and programs have discretion over how they are spent. School allocations are $22 per student at the elementary level and $47 per student at the middle school and high school. Schools site budgets have been increased in and adjusted for student enrollment increases and decreases in Services, Other Operating Expenses - The district spends $7,653,826 in this expenditure category, or 10% of the total budget. The major components include utilities, insurance, contracts for repair services, and non-public school services for severely handicapped children. The district has little or limited control over the costs of most of the services in this category. Where appropriate, inflationary costs for maintenance agreements, utilities, and insurance have been included. The District has contracted with Energy Educators and employed an Energy Manager to assist the District in energy management the last seven years. In addition, in we are striving to close our schools down during summer, winter and spring breaks. The Energy program has been effective at managing our utility costs through a number of ways: Behaviors and best practices Energy audits Training Communications Bond Impact on Building Systems: HVAC control Lighting management Utilizing building automation to maximum effect EMS, twist timers Lighting control systems Other Outgo The district operates the Regional Occupation Program (ROP) as a joint powers agreement (JPA) with Pleasanton and Livermore. Direct Support/Indirect Cost - The District also collects indirects, a charge for district overhead or fixed costs to other funds. Indirects are charged to the adult and child nutrition funds. The amount collected from both these funds is $95,236. The district also collects direct charges for the administration of collecting developer and mitigation fees. The district can collect up to 3% of revenues received. FUND BALANCE Financing Sources and Uses The District has transferred all revenue increases or expenditure savings during the year to the special reserve fund. The Fiscal Advisory Committee in 2010 advised the district to maintain $1.5 Million in special reserve at all times. At end of the district will increase special reserve $2 Million and immediately utilize in This is a financing source in of $5,922,728. The special reserve will have no balance remaining. These funds are one time in nature and cannot be planned on for more than one cycle. Beginning Balance The actual beginning balance for will not be known until September, after the district books are closed. At this time it is

7 projected to be $2,958,466. This amount represents a decrease in fund balance of $919,840. The district has $3.5 Million in special reserve pus $2 Million in general fund to utilize in Ending Balance For the year the district is projected to be deficit spending at $6 Million. This deficit spending is exacerbated by the receipts of federal funding from prior years and slow receipt of state funding. The revenue will come from fund balance in carry over at closing of books. The general fund is expending more in expenditures than it earns in revenues. The following years the district growth and the implementation of LCFF should help aid the district in reducing deficit spending, but the state deficit will continue to challenge our deficit spending. The district must make deliberate efforts to control spending and not increase spending beyond the ability to generate revenues. The ending balance for the last several years is shown in graph. Restrictions on Ending Balance In the ending balance of $2,465,468 are certain designations that are legally required to be maintained. The district has a $25,000 revolving cash fund. The district warehouse has approximately $45,000 of inventory (stores). Reserves The state recommends districts the size of Dublin Unified to maintain a 3% reserve. The district meets the requirement. Based on the projected expenditures that reserve requirement is $2,393,047. Districts are allowed to use their reserve funds during the year (they are for emergencies and to help buffer loss of state and other revenues), but they must replenish those reserves at the year s end. Currently the strategic plan in Resources calls for the district to build reserves to 5%, something that will assist the district with the growing student demographics.