RE: Local Control Accountability Plan and Adopted Budget Fiscal Year

Transcription

1 Frank Barbaro President, Governing Board 555 Richmond Drive Millbrae, CA RE: Local Control Accountability Plan and Adopted Budget Fiscal Year Dear Mr. Barbaro: The San Mateo County Office of Education (SMCOE) has completed its review of the District s Local Control Accountability Plan (LCAP) and Adopted Budget for the fiscal year pursuant to Education Codes and A. LOCAL CONTROL ACCOUNTABILITY PLAN The County Superintendent is required to approve the District s LCAP if she determines that the following criteria have been met: The LCAP adheres to the template adopted by the State Board of Education (EC 52064). The budget includes expenditures sufficient to implement the specific actions and strategies included in the LCAP. The LCAP adheres to the expenditure requirements for funds apportioned on the basis of the number and concentration of unduplicated pupils (EC and ) The San Mateo County Superintendent of Schools has approved your Local Control Accountability Plan (LCAP) for the school year, pursuant to Education Code (EC) Section (d). California Education Code requires the County Superintendent to review and approve the LCAP prior to the approval of the LEA s adopted budget per EC Section 1622(b)(1)(C). Your board-approved LCAP has been posted on our SMCOE website. B. ADOPTED BUDGET In accordance with Education Code Section 42127, the County Superintendent of Schools has examined the Adopted Budget of (the District) for fiscal year to determine if it complies with the Criteria and Standards adopted by the State

2 Page 2 Board of Education, allows the District to meet its financial obligations during the fiscal year, and is consistent with a financial plan that will allow the District to meet its multi-year financial commitments. The County Superintendent of Schools is also required to determine whether the Adopted Budget includes the expenditures necessary to implement the LCAP or annual update to the LCAP. On the basis of our review and analysis, the District s Adopted Budget meets the specified criteria and includes sufficient funds to support and implement the actions and services included in the Local Control Accountability Plan (LCAP) for the budget year. The San Mateo County Office of Education approves s Adopted Budget with the following comments: FINDINGS/COMMENTS: General Fund Budget Summary The Adopted Budget shows a net decrease in General Fund revenues of approximately $432,000 compared to the Estimated Actuals. Although LCFF entitlements are projected to increase by $465,000 compared to the prior year, the increase was offset by the anticipated reduction in State mandated cost reimbursements of approximately $506,000 and estimated reduction in funding for federal programs of $45,000. Local revenues are also reduced by approximately $339,000 as the District does not include local grants or donations until actual grant awards or funding commitments are received. The net decrease in General Fund expenditures of approximately $800,000 is largely due to the reduction in the budgets for Books and Supplies and Services and Other Operating Expenditures of approximately $1.9 million compared to the prior year. These expenditures were funded in from one-time State discretionary funding and one-time local revenue sources. These funding sources are not included in the revenues for the current year. The $1.9 million reduction in Books and Supplies and Services and Other Operating Expenditures are offset by increases in Certificated and Classified Salaries and Benefits of approximately $1.0 million; these include increases in employer pension contributions rates for CalPERS and CalSTRS. Below is a comparison of revenue and expenditure budgets in the General Fund for fiscal years and :

3 Page 3 General Fund Unrestricted/Restricted Estimated Actuals Adopted Budget A. Anticipated Revenues $23,797,916 $23,365,488 B. Proposed Expenditures 24,802,130 24,001,644 C. Excess (Deficiency) of Expenditures over Revenues (1,004,214) (636,156) D. Other Sources/Uses and Transfers 97,466 31,068 E. Total Increase (Decrease) in General Fund (906,748) (605,088) F. Ending Balance Unrestricted/Restricted $3,309,018 $2,703,930 G. Ending Balance Unrestricted only $3,170,007 $2,703,930 Total available reserve in the General Fund for fiscal year is $980,000 or 4.07% of the total General Fund expenditures. The State-recommended minimum reserve level for the size of the District is 3%. The District has assigned approximately $1.7 million ending balance in the General Fund to cover anticipated revenue shortfall in and ; the assigned portion of the General Fund balance are not included in the available reserve calculations. Reserves in Excess of Minimum Education Code 42127(a)(2)(B) requires the governing board of a school district provide, for public review and discussion at a public hearing, any amount in excess of the Staterecommended minimum reserve for economic uncertainties. This includes the combined assigned and unassigned ending fund balances in General Fund (Fund 01) and Special Reserve Fund (Fund 17). The District is required to provide a statement of reasons to substantiate the need for the reserve in excess of the State-recommended level. The District held a public hearing on June 15, 2017 and has provided the public an opportunity to review and discuss the components and reasons for the reserves. The total assigned and unassigned balance in the General Fund and Special Reserve Fund is approximately $2.7 million. The amount in excess of the 3% minimum reserve is approximately $1.9 million for the fiscal year. Cash Flow The District submitted cash flow projections for and showing positive balances each month for both fiscal years. The District is commended for maintaining adequate funds in the General Fund to meet its financial obligations without outside borrowing. The estimated cash balances at the close of the and fiscal years are $3.6 million and $3.1 million, respectively.

4 Page 4 The County Superintendent urges the District to continue to implement best practices and monitor regularly its cash position to ensure payroll and other monthly obligations are met on a timely basis. Multi-Year Projections (MYP) The multi-year projection is one of the most important tools in determining the financial position of the district. In order to make multi-year projections, school districts rely on a variety of assumptions and sources of information available at the time of report preparation. The MYP incorporate the following key assumptions: Revenues: LCFF revenues for the current year are based on gap funding rates recommended by the Department of Finance at the time of budget adoption. The average daily attendance (ADA) used in projecting LCFF revenues is increased by 4.25 ADA in ; an overall reduction of ADA is shown over the next two fiscal years based on the District s estimate of ADA ratio to straight line enrollment projections. Federal, State, and Local Revenues are projected to be at approximately the same level as the current year. One-time funding sources including one-time State mandate discretionary funding are not included in the multi-year projections. Expenditures: Salaries and benefits budget includes step and column adjustments estimated at 2% for certificated and classified employees. CALSTRS and CalPERS employer contributions are projected to increase as follows: Employer Contributions CalSTRS % 16.28% 18.13% CalPERS % 18.10% 20.80% The budget for Books and Supplies decrease by $1.1 million for the current year and are projected to remain at the current year level for the two subsequent fiscal years. No significant increases in other operating expenditures are projected for the and fiscal years. The chart below shows the reserve levels and projected ending balance in the Unrestricted General Fund for the budget year and subsequent two fiscal years:

5 Page 5 Unrestricted General Fund Estimated Beginning Balance $3,170,007 $2,703,931 $2,170,793 Revenues & Other Financing Sources 16,754,445 17,251,456 17,015,316 Expenditures & Other Financing Uses 17,220,521 17,784,594 18,001,629 Net increase (Decrease) (466,076) (533,138) (986,313) Projected General Fund Ending Balance $2,703,931 $2,170,793 $1,184,480 Available Reserves Percentage Per MYP* 4.07% 4.31% 4.13% *This includes the 3% State-recommended minimum reserve for economic uncertainties. The multi-year projections show an increasing operating deficit in the General Fund. Although the District has set aside funds for future revenue shortfall, it is important to address spending deficits early to maintain fiscal solvency. The County Superintendent recommends the District identify additional measures to address operating deficits in the General Fund to ensure educational programs are not adversely affected. The District is also urged to review carefully the assumptions used in the Adopted Budget and multi-year projections and make budget revisions as necessary. The final State Enacted Budget shows lower funding rates for school districts, as shown below: LCFF Gap Funding Rates At District Budget Adoption 43.97% 71.53% 73.51% State Enacted Budget 43.19% 66.12% 64.92% Local Control Accountability Plans The District is reminded to monitor the LCAP and budget closely to ensure that sufficient funds are maintained to support all actions and services included in the District s LCAP for through fiscal years. Salary Negotiations The District has not settled negotiations with its certificated and classified bargaining units for the fiscal year.

6 Page 6 In accordance with Government Code and Assembly Bill 2756, the District must provide the County Office of Education with an analysis of cost and impact on operating budget of any proposed salary settlement. The District is also required to submit the following documents reflecting the financial impact: 1) Disclosure of Collective Bargaining Agreement ten (10) days before the Governing Board takes action on any tentative collective bargaining agreement (requires the signatures of the Superintendent and the Chief Business Official). 2) Multi-year spreadsheet (reflecting current and two subsequent fiscal years). 3) Budget revisions (if necessary, must be posted to the financial system prior to processing a salary settlement on the payroll system). The County Superintendent encourages school districts to be cautious in their negotiations and to conduct thorough pre-settlement analysis of any proposed collective bargaining agreement to protect from cost increases beyond the scope of bargaining. Increases in CalSTRS and CalPERS contributions must also be considered to ensure affordability of proposed settlements. Other Funds The District maintains positive balance for all funds. Below is a summary of revenues, expenditures, and fund balances for other District funds shown in the Adopted Budget reports: District Funds Estimated Beginning Balance Revenues Expenditures Other Sources (Uses) Projected Ending Balance 13 Cafeteria 88, , ,564 50,000 40, Spec Reserve Other 74, , Foundation Special Reserve 50, , Special Reserve for Postemployment Benefits 1,962,225 15, ,977, Capital Facilities 583, ,000 3, , Special Reserve Capital Projects 12,909, , ,400 (81,068) 12,948,362 Funds transfers for included $50,000 contribution from General Fund (Fund 01) to the Cafeteria program and an approximately $81,000 from Special Reserve Fund for Capital Outlay Projects (Fund 40) to General Fund (Fund 01) to be utilized for facilities maintenance projects.

7 Page 7 There are no significant changes in the other funds of the District compared to the Estimated Actuals. GENERAL COMMENTS: Public Disclosure of Voter and Non-voter-Approved Debt Districts are reminded to review the requirements for public disclosure of voter and nonvoter-approved debt. Voter-approved debts include General Obligation Bonds and Capital Appreciation Bonds. Non-voter-approved debts include Certificates of Participation (COPs), Tax Revenue Anticipation Notes (TRANs), Bond Anticipation Notes (BANs), revenue bonds or any other debt instruments not requiring voter approval. In accordance with AB2197, Education Code Sections 17150, and , thirty (30) days prior to the District Governing Board s approval, all districts, regardless of certification status, are required to submit to the County Superintendent of Schools and the County Auditor the following information (as applicable): 1) Repayment schedule for debt obligation. 2) Evidence of the district s ability to repay the obligation. 3) Disclosure of General Obligation Bonds (GOBs) and Capital Appreciation Bond (CABs) Refinancing. The County Superintendent of Schools and the County Auditor may comment publicly within 15 days of receipt of the information. The 30 day advance notice will require careful planning by the school district in order to comply with the disclosure requirements. The use of debt proceeds is detailed under Education Code , which prohibits school districts from using the proceeds from specific debt instruments for general operating purposes. Fiscal Distress Notification In compliance with Assembly Bill 2756, districts are required to submit to the County Superintendent of Schools any study, report, evaluation or audit that was commissioned by the district, the Superintendent of Public Instruction or State control agencies that shows evidence of fiscal distress under the Standards and Criteria adopted in Section 33127, or any report on the school district by the County Office, Fiscal Crisis and Management Assistance Team or any regional team created pursuant to subdivision (1) of Section The County Superintendent is required, in turn, to consider the findings of such report(s) in the analysis of the district s financial status (Reference: Education Code Section ).

8 Page 8 BUDGET RECOMMENDATIONS: The Enacted State Budget increased K-12 education funding over the 2016 Budget Act level. However, a significant portion of the increase is dedicated to one-time funding. The Governor cautioned that the trend of increasing revenues would not continue indefinitely and urged districts to maintain fiscal prudence. He noted that a modest recession would result in large decreases in state revenues and that proposed changes to the Affordable Care Act could have a significant negative impact on California. It is critical to plan ahead and use district resources wisely and effectively. Enclosed is a summary of the District s financial profile. Also enclosed is a historical spreadsheet that shows actual and estimated General Fund revenues, expenditures, and fund balances from fiscal year through The District may find this document useful in analyzing fiscal trends; the most critical information is reflected on Lines C, E and F2 of the spreadsheet. We want to express our appreciation to the Board and district staff for the work that went into the development of this year s LCAP and Budget. The County Superintendent and staff will continue to provide technical and coaching assistance in the monitoring and development of the District s budget and LCAP. Please be sure to contact us if you have any questions about our review of your district s LCAP or budget. Sincerely, Denise Porterfield Deputy Superintendent, Business Services dporterfield@smcoe.org Gary Waddell, Ed.D. Deputy Superintendent, Instructional Services gwaddell@smcoe.org Enclosures c: Mr. Vahn Phayprasert, Superintendent, Richard Champion, Chief Business Official, Anne Campbell, Superintendent of Schools, SMCOE Denise Porterfield, Deputy Superintendent, Business Services, SMCOE Gary Waddell, Deputy Superintendent, Instructional Services, SMCOE Priscilla Aquino-Dichoso, Administrator, District Business Services, SMCOE Liz Wolfe, Administrator, Learning Analytics & Continuous Improvement Services, SMCOE