First Interim Report 2017-2018 Board Meeting: Tuesday, December 12, 2017 39139-49 N. 10 th Street East Palmdale, CA 93550 661-947-7191
Interim Report Certification Palmdale School District 2017-2018 First Interim Report Information and Assumptions Education Code requires that the governing board of each district certify, at least twice a year, the district s ability to meet financial obligations for the current and two subsequent fiscal years. This certification shall be classified as Positive, Qualified, or Negative. Based on the budget assumptions used and the resulting multi-year projections attached to this report, it is recommended that the Board approve a Positive Certification for the District. State Budget Act The State Budget Act, signed into law on June 27, 2017, contained substantial changes to impact the District s budget as of this reporting period, ending October 31, 2017. Some of the major changes impacting K-12 education are listed next: Removed revenue deferral in one time funds for repayment for prior year mandate cost claims for 2017-2018. This increased other state revenue in the amount of $2.7 million. Additional funding was granted for Proposition 39 California Clean Energy Act in the amount of $1.1 million for 2017-2018. This amount will reimburse fund 21 (Restricted) for previous years California Clean Energy project paid by fund 21. Lottery funding rates were increased from $144 to $146 per ADA for non-prop 20 unrestricted and from $45 to $48 per ADA for prop 20 restricted funds for fiscal years 2018-19 and 2019-20. Grade Span Adjustment The Local Control Funding Formula provides a 10.4 percent augmentation, referred to as a Grade Span Adjustment, to the base grant amount for students in transitional kindergarten through third grade if a district maintains a school site average maximum 24:1 student to teacher ratio, or an alternate locally bargained ratio. As per the District s Agreement with Palmdale Elementary Teachers Association (PETA) dated May 3, 2016 and subsequently approved by the Board of Trustees, current K-3 student: teacher staffing remains at or below 29:1 by school site. Necessary staffing adjustments based on actual enrollment to meet this requirement have been included in the First Interim Report. Enrollment and Average Daily Attendance (ADA) Based on actual enrollment as of 11/03/17, the 2017-2018 First Interim report was developed projecting an increase of 180 students from the adopted budget projection of 18,564, resulting in an increased enrollment of 18,744 at First Interim report. 1
Palmdale School District 2017-2018 First Interim Report Information and Assumptions Based on the new enrollment projections, the First Interim report ADA increase from 17,629 to 17,872. Any increased or decreased adjustments based on CALPADS and attendance report data will be reflected in future reports when it becomes available. School Year CBEDs Enrollment Increase / (Decline) P2 ADA Factor 2010-11 20,362 (269) 19,354 95.0% 2011-12 20,020 (342) 19,121 95.5% 2012-13 19,590 (430) 18,681 95.4% 2013-14 19,281 (309) 18,450 95.7% 2014-15 19,247 (34) 18,288 95.0% 2015-16 19,072 (169) 18,220 95.5% 2016-17 19,129 57 18,167 94.97% 1 st Interim Projection: Revenues Budget Updates 2017-18 18,744 (385) 17,872.40 95.35% 2018-19 18,328 (416) 17,475.51 95.35% 2019-20 18,106 (222) 17,263.65 95.35% Local Control Funding Formula (LCFF) The First Interim report reflects LCFF Revenue in the amount of $176,814,095 versus $177,090,691 at Adopted Budget Report which represents a decrease by 0.2%. The decrease in revenue reflects updates to ADA from 18,167 to 17872. Local Control Accountability Plan (LCAP): The First Interim Report reflects no change in the contribution from Unrestricted General Fund to LCAP restricted resource code (9000) with approximately $41.6 million directly allocated from LCFF funds. This amount will be adjusted at the Estimated Actuals Report depending on the revenue outcome. Federal Revenue The First Interim Report reflects Federal Revenue in the amount of $21,310,048 versus $15,719,611 at the Adopted Budget Report which represents an increase by 35.6%. Increase in revenue reflects updates to budgeting of federal carry-overs and change in enrollment and ADA. This includes the increase in federal revenue for Middle School Assistant Program (MSAP) grant of $3,195,184. Total MSAP grant amount to be received in five years in the amount of $14,989,264 million. 2
Palmdale School District 2017-2018 First Interim Report Information and Assumptions Other State Revenue The First Interim Report reflects Other State Revenue in the amount of $13,086,692 versus $7,730,006 at the Adopted Budget Report which represents an increase by 69.3%. Increase in revenue reflects one time increases in one time funds for outstanding mandate claims of $2.7 million, Prop 39 funds in the amount of $1.1 million, and SELPA fund 01.4 of $1.5 million. Other Local Revenue The First Interim Report reflects Other Local Revenue in the amount of $17,165,997 versus $16,501,955 at the Adopted Budget Report which represents an increase by 4%. Increase in revenue reflects increases to interest revenue, charter school administrative fee, and additional miscellaneous revenue for the remainder of the 2017-2018 school year. Expenditure Budget Increases The unrestricted General Fund Projected Expenditure Budget reflects an increase of approximately $6.2 million over the original budget. Expenditures Amount Certificated Salaries $1,265,298 Classified Salaries $ 455,124 Benefits $ 342,695 Books and Supplies $2,133,551 Services and Other $1,129,195 Operating Expenditures Capital Outlay $1,103,484 Other Outgo ($231,569) Total $6,197,778 The restricted General Fund Projected Expenditure Budget reflects an increase of $12.7 million over the original budget. Expenditures Amount Certificated Salaries $970,286 Classified Salaries $1,470,145 Benefits ($563,321) Books and Supplies $7,149,577 Services and Other Operating Expenditures $3,872,174 Capital Outlay ($149,078) Other Outgo ($45,646) Total $12,704,137 3
Palmdale School District 2017-2018 First Interim Report Information and Assumptions Salaries and Benefits Cost increases in salaries and benefits reflect actual staff s placement on the new salary schedule, substitute teacher cost increase, and open positions being filled e.g., special education instructional assistant, new positions, and others. Special Education Program The First Interim Report reflects an increase in the contribution from the unrestricted general fund of approximately $394,498 from $17.9 million at the adopted budget to $18.3 million at First Interim report, which includes the instructional assistant positions being filled and new contracts for services established. Negotiations As of the First Interim Report, the District has not reached agreements with either certificated or classified bargaining units for 2016-2017 and 2017-2018. Contributions to Restricted Funds The report shows contributions to restricted programs projected increase of $828,264 in 2017-18 between the following programs: Program Original Budget First Interim Increase/(Decrease) Special Ed Programs (Resr. 33100.0-65120.0) $17,912,272 $18,306,770 $394,498 RRMA (Resr 81500.0) $4,545,000 $4,978,766 $433,766 LCAP (S&C Grant) $41,646,913 $41,646,913 $0 Total $64,104,185 $64,932,449 $828,264 Deficit Spending The report shows a deficit spending for Fiscal Year 2017-18 in the amount of $15.2 million. Ending Fund Balance Prior Year 2016-2017 Ending Fund Balances The Adopted budget report reflected an estimated unassigned Unrestricted Ending Fund Balance (EFB) for 2016-2017 of $44,974,422 vs. $46,561,818 at the Unaudited Actuals (UA) report. The Restricted EFB reported at the Adopted budget was $16,659,305 vs. $18,006,911 at UA report. These UA EFB amounts are reflected as the 2017-2018 Beginning Fund Balances. 4
Palmdale School District 2017-2018 First Interim Report Information and Assumptions 2017-2018 Unassigned Ending Fund Balances The First Interim Report reflected an estimated unassigned Unrestricted EFB of $3,834,680 vs. $32,277,593 at the Adopted Budget report. The First Interim Report reflected an estimated Restricted Ending Fund Balance of $7,722,792 vs. $11,910,142 at the Adopted budget report. Technology Reserve The district will conclude the expenditure of the designated one-time mandate funds in technology upgrade in the amount of $10.7 million in 2017-18. Transportation Reserve: 10-year Bus Lease Agreement and Fuel Cost The total cost of bus lease and fuel for 10 years is $11 million. The First Interim Report shows $1.1 million in expenditure budget. This lease will be terminated at the end of 2017-2018 fiscal year. Following a review and analysis of the District s needs for buses and an analysis of whether the buses being supplied pursuant to the Lease adequately satisfy such needs, it has been determined that it is in the best interests of the District to not budget, appropriate or otherwise make available any funds to pay the basic rental payments and/or any other amounts due under the Lease starting with the 2018/2019 fiscal year, and to purchase new buses to accommodate the District s transportation needs. Statement on Absence of Bus Lease from Budget In connection with the budget for the 2018/2019 fiscal year, the Board hereby excludes and otherwise does not appropriate or otherwise make available any funds to pay the basic rental payments and/or any other amounts due under the Lease for the 2018/2019 fiscal year. The Board understands that such action will constitute an Event of Non- Appropriation, as that term is used in the Lease, and will result in the Lease being deemed terminated at the end of the District s 2017/2018 fiscal year. The Board hereby directs counsel for the District to notify Wells Fargo Equipment Finance, Inc. of this action. The district has assigned $6.4 million in the capital outlay for purchase of new buses in fiscal year 2017-2018. Textbook Reserve: 8-year Language Arts Adoption The First Interim Report shows $5.4 million in expenditure budget and actuals posted for 2016-17 rollover of textbook purchase. $2,144,841 were included in the unrestricted and $3,246,910 in restricted lottery account. 5
Palmdale School District 2017-2018 First Interim Report Information and Assumptions Board Reserve Board Policy 3100 requires that one percent (1%) of the General Fund Budget be designated as a Board Reserve and, as such, $2,527,502 has been assigned within the 2017-18 ending fund balance. Reserve for Economic Uncertainties The budget reflected in the First Interim Report includes a state required amount equal to three percent (3%) of the general fund expenditures as a Reserve for Economic Uncertainties to accommodate fluctuations in school revenue and expenditures which are greatly affected by variables beyond the District s control. The Reserve for Economic Uncertainties for 2017-2018 is $7,582,505. Budget Revisions Budget Revisions for the changes from Adopted to 1 st Interim budgets will be brought to the board in January for approval. Charter Schools The charter school financial information presented in this 1 st Interim budget report was provided to the district by the charter schools. Although these schools operate independently, as the authorizing agent, the district is required to monitor the fiscal solvency of these charter schools. These statements will be evaluated as part of that responsibility. Projections A budget is intended to be a living document; therefore, revisions will be presented as new information is known. As the variables change through legislative action, or economic turnover at the state or local level, the projections will be analyzed and adjusted as appropriate. 6