Presented July 27, 2011

1. CUSD Budget Revision
Devin Vodicka, Ed.D.
Assistant Superintendent
Business Services
July 27, 2011

2. A Tale of Two Budgets
Pros
It was on time
It provides flat funding for education, at least temporarily
About $80 billion of the $86 billion spending plan is real money
Cons
It underfunds Proposition 98 without suspension
It dictates detailed budget terms to the local school boards
“Trigger” could result in midyear cuts
It strips county offices of education (COEs) of fiscal oversight
It gives the unions a stronger position in negotiations
It creates more debt to schools – both cash and budget authority

3. A Tale of Two Budgets
On the nonfinancial side, this Budget is a train wreck
The level of intrusion into local fiscal decisions is heretofore unheard of
Dictates revenue, staffing, and program levels
Prohibits budgeting for a known potential loss
Setting aside any measure of COE oversight at this point in the economic
cycle invites future, deeper problems
Throws the multiyear projections aside
Dictates certification levels
Dictates factors to be excluded from COE review
Flexibility in staffing is constrained
Program and staffing levels specified are not clear
The “second lay-off window” is closed
None of these things save any money at the state level – but districts will pay
a price

4. Risks to the State Budget
The state and national economies could experience an unforeseeable event,
which could disrupt markets and slow or halt economic growth
A natural disaster, political conflict, an oil supply reduction, or a foreign
debt default would likely slow growth
Lawsuits could unravel the expenditure reductions and funding shifts adopted
by the Legislature
Savings in state programs may not materialize as budgeted, resulting in
current-year operating deficiencies
Federal budget reductions could increase the state’s fiscal burden to maintain
the major safety net programs, such as Medi-Cal, CalWORKs*, and SSI/SSP**
* California Work Opportunity and Responsibility to Kids
** Supplement Security Income/State Supplementary Payment

5. Structural Budget Deficit
© 2011 School Services of California, Inc.
(In Billions)
$0.0
-$5.0
-$10.0
2011-12 Governor's Budget
-$15.0 2011-12 May Revision
2011-12 Budget Act
-$20.0
-$25.0
-$30.0
2011-12 2012-13 2013-14 2014-15
Source: 2011-12 May Revision, p. 2; 2011-12 State Budget Summary, p. 5

6. Major Changes from May Revision to the
Final State Budget
May Revision: Proposes $2.5 billion to “pay down” Proposition 98 deferrals
Final Budget: Defers approximately $2.1 billion of payments to schools
May Revision: Counts on $9.6 billion in temporary taxes
Final Budget: Assumes $4 billion more in General Fund revenues above
May forecast
May Revision: Funds Proposition 98 at the minimum, without suspension
Final Budget: Takes away $2.1 billion from K-12 education through a sales
tax shift and reallocates those funds to other areas of the Budget without
suspension

7. Major Changes from May Revision to the
Final State Budget
May Revision: Did not include “trigger cuts” to education, just the threat of
additional cuts
State Budget: Puts K-12 education at risk of losing $1.9 billion by triggering
a cut if revenues fall short of projections
May Revision: Contains no language that restricts local budgeting practices
and fiscal oversight safeguards
State Budget: Places several requirements on the funding level school
agencies must budget and staffing levels that must be met in 2011-12, and
suspends various AB 1200 provisions
May Revision: Contains no additional flexibility provisions
Final Budget: Allows automatic reductions in the school year if triggered
cuts are made – however, would still be subject to collective bargaining

8. Trigger Reduction Exposure
The 2011-12 Budget Act provides for an automatic reduction to state
appropriations, including funding for schools, if state revenues fall short of
projections
The K-12 reductions are directed at revenue limits ($1.5 billion) and
Home-to-School Transportation ($248 million)
School districts, however, are prohibited from budgeting for these
reductions
The level of the reduction is linked to the amount of the shortfall in the
State Budget revenues and could range from zero to 4% of the undeficited
revenue limit
If the full revenue limit reduction is implemented, the average maximum cut
would be about
$260 per ADA for unified school districts
Approximately $2.7 million for CUSD

9. Base Revenue Limit after Deficit Factor
$7,000
$6,535 $6,535
Apply the
2011-12 deficit of $6,000 $1,291
19.754% to the
undeficited base $5,000 Funded
Base
revenue limit Revenue
$4,000
Limit
Example for Average $3,000
Unified District $5,244
Funded revenue limit $2,000
= $6,535 x (1 - 0.19754)
= $6,535 x 0.80246 $1,000
= $5,244
$0
2011-12 Base Revenue Limit 2011-12 Base Revenue Limit
Before Deficit After Deficit

10. 2011-12 Budget Act Funding vs.
2-11
2010-11 Funding for Average Unified District
© 2011 School Services of California, Inc.
The 2011-12 Budget Act $7,000
$6,535
$6,392
does not fund the 2.24% 19.754%
$6,000 17.963%
statutory COLA ($143 for $1,148 Deficit
$1,291 Deficit
unified districts) for $5,000
2011-12 $5,244 $5,244
Funded Funded
The funded base revenue $4,000 Base Base
Revenue Revenue
limit is flat between Limit Limit
$3,000
2010-11 and 2011-12
$2,000
$1,000
$0
2010-11 Actual 2011-12 Budget Act

11. Funding Per ADA – Actual vs. Statutory Level 2-12
© 2011 School Services of California, Inc.
Average Unified District
$6,700
$6,535
$6,411 $6,392
$6,150
Loss of COLA
$5,821
Dollars Per ADA
$5,700 $5,821
Loss of
$5,668
baseline dollars
Projected Statutory COLA $5,244 $5,244
Flat Funding
Actual Funding
$4,981
$4,700
2007-08 2008-09 2009-10 2010-11 2011-12

12. Budgeting for Cuts from Trigger Language Prohibited
Districts are prohibited from assuming that midyear cuts will occur
Both in:
Revenue assumptions and
Expenditure projections
At this time, there are no guidelines about reporting, enforcement, or penalties
if a district does not comply with these requirements
Our advice:
Make the revenue and expenditure changes, if necessary
Continue to project and plan for the out-years using the SSC Dartboard and
factors unique to your district
Above all, follow the law

13. When Will We Know If There is to be a Cut?
AB 121 (Chapter 41/2011) defines the timeline that would trigger midyear
reductions
Not later than December 15, the Director of Finance shall forecast the
General Fund revenues for 2011-12
The Director of Finance’s revenue forecast will be compared to the LAO’s
November 2011 General Fund forecast
Based on these two forecasts, the Director of Finance will use
whichever forecast is higher
The higher revenue forecast will determine if a midyear reduction to
education will be made
Based on this timeline, realistically, the first time LEAs will be able to
incorporate midyear cuts into their budget, if necessary, will be as of the
Second Interim reporting period

14. How Can a District Protect Itself?
In this political climate, it is very difficult to figure out what’s going to happen
next
Districts’ hands are tied for the current year; however, prudent planning and
continuing best practices for fiscal solvency should continue
Maintain a strong cash position
Be ready to borrow
Know the best options for borrowing
Continue the use of MYPs for the two subsequent fiscal years
Update assumptions based on local factors
Communicating with stakeholders about the current-year budget and MYPs
will be key in managing fiscal solvency

15. Health Benefit Update
Insurance Committee Meeting July 18, 2011
Kaiser +17%
Blue Shield +32.4%
Projected annual plan cost increase from $10,551,209 to $13,589,081
Additional $3,037,873 in expenses annually (plans run January to
December)
Employees cover 25% of cost increases; CUSD covers 75%
Potential impact to CUSD of approximately $1.1 million in FY 2011-12
Negotiations with providers is ongoing
Benefit plan modifications still an option
Benefits will require careful attention due to limited funds to absorb cost
increases
Absent additional revenues, midyear budget cuts may be required simply
to cover additional expenses
Combined impact of potential midyear revenue cuts and midyear benefit cost
increases create uncertainty

16. District Budget Overview – Based on 2011-12
Adopted Budget
2011-12 2011-12 Net
Adopted Adjusted Change
Budget Budget
Beginning Fund Balance (Est.) $13,515,702 $13,515,702 $0
Revenues:
Revenue Limit $61,003,372 $60,972,708 ($30,664)
Federal $2,668,700 $2,668,700 $0
State $356,152 $3,889,692 $3,533,540
Other Local $3,584,480 $3,614,480 $30,000
Expenditures $77,967,012 $81,374,780 $3,407,768
Other Financing Sources $0 $0 $0
+ / - Revenues to Expenses ($10,354,308) ($10,229,200) $125,108
Ending Fund Balance $3,161,394 $3,286,502 $125,108

17. Next Steps
Now that the state budget is adopted the District needs to make budget
adjustments within 45 days
By Monday, August 15, 2011
Continue Labor Negotiations, including focus on benefit plans
Prepare contingency language for midyear cuts
Prepare contingency language for FY 2012-13
Monitor state cash flow
Implement cost control measures such as reviewing vacancies

18. Questions