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Presentation To Board Of School Trustees 2.10.11 V2


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Presentation To Board Of School Trustees 2.10.11 V2

  1. 1. Preliminary<br />2012<br />FY<br />Budget<br />Forecast<br />February 10, 2011<br />1<br />
  2. 2. What are we talking about?<br />Shortfall in state/local funding<br />$250 to $275 million <br />or at least $870 per student<br />Loss of Federal Funds<br />939 positions<br />ARRA (Title I, IDEA), EduJobs<br />2<br />
  3. 3. Why is this happening?<br />Shortfall<br />It’s called a Structural Deficit<br />3<br />
  4. 4. What has already been cut?<br />Since 2007<br /><ul><li>20% of central office staff
  5. 5. Block schedule & AVID funding
  6. 6. School staffing – 3%
  7. 7. Class size increase: Grades 1-3 (by 2)
  8. 8. Administrative staffing
  9. 9. Textbook/supply budgets</li></ul>A total of $375 million has been cutand 1,734 positions eliminated<br />4<br />
  10. 10. What about the Capital Funds?<br />State is proposing to take a total of $300 million from CCSD’sDebt Service Reserve<br />Bond Proceeds<br />Debt ServiceReserve<br />Used to pay for<br />constructionand other capitalimprovements<br />State mandated reserve needed to payprincipal & intereston bonds<br />Significant Federal tax issues with using for operations, among other issues<br />Would require increase in property tax rate and/or non-economic bond refinancing<br />5<br />
  11. 11. What would happen?<br />If $300 million is taken from Debt Svc. Reserve<br />Current projections are that revenues will not be sufficient over the next 7 years to cover debt servicecosts.Thus, allof theexistingreserveis neededjust tomeetexistingcosts.<br />1<br />6<br />
  12. 12. What would happen?<br />If $300 million is taken from Debt Svc. Reserve<br />With $300 million taken from the reserve, CCSD would no longer be able to pay all required principalandinterestpaymentsstartingin 2013.<br />2<br />Assumes only existing bonds (no new bonds)<br />7<br />
  13. 13. What would happen?<br />If $300 million is taken from Debt Svc. Reserve<br />To ensure that adequate funds are available to cover debt service costs, the debt service tax rate (currently $0.5534 per $100 of assessed value) would need to increase to whatever rate necessary to generate revenue sufficient to meet debt service obligations.<br />3<br />This is provided for, specifically, in law. And, CCSD’s debt service property tax rate has priority over other non-voter-approved local tax rates under the county-wide cap of $3.64 per $100 of value.<br />8<br />
  14. 14. What would happen?<br />If $300 million is taken from Debt Svc. Reserve<br />As an alternative to increasing the property tax rate, the district could do a non-economic restructuring of its bonds, to push principal payments out an additional 10 years, when adequate property tax revenues would be sufficient.<br />4<br />There are significant problems with doing this:<br /><ul><li>Interest rates would be higher than existing bonds
  15. 15. The market for these restructured bonds may be very limited
  16. 16. Would need to pay interest for more years
  17. 17. Would reduce future construction capacity
  18. 18. Would likely adversely impact the district’s bond rating
  19. 19. Would be out of compliance with Board’s Debt Management Policy (which requires all refinancing of bonds achieve a minimum 3 percent net present value savings)</li></ul>9<br />
  20. 20. What are other issues?<br />If $300 million is taken from Debt Svc. Reserve<br /><ul><li>State law would need to be changed to allow this
  21. 21. $150 million per year of the state’s ‘guaranteed’ funding is coming from CCSD’s capital funds
  22. 22. This is a one-time, stop-gap measure that will leave a big financial ‘hole” to fill in the next biennium
  23. 23. This goes against promises made to voters in 1998</li></ul>10<br />
  24. 24. What about the revenue estimates?<br />…used to calculate the debt service impact<br />Conservative revenue assumptions were used to develop these estimates<br />…as is consistent with district practices when issuing bonds and validated when seeking approval thruthe County Debt Management Commission,the Oversight Panel for School Facilities,and the Board of School Trustees <br />The biggest revenue source (at least 76%) is property tax, which is projected todecline by 10.5% next year<br />…and without legislative changes, will be abated (limited) in its growth when property values begin growing again<br />11<br />
  25. 25. Why are we short $250-$275 million?<br />State Funds - $196 million<br />Debt Service Funds + $150 million<br />Loss of room tax - $35 million<br />Property tax decrease - $48 million<br />Fund balance used up - $62 million<br />Employee Contractual provisions - $68 million(step, increments, PERS)<br />NOTE: This assumes no new revenue sources are identified<br />12<br />
  26. 26. How bad is it?<br />$ 250-275 million =<br /> 14 more students per class<br />or 33 less days in the year<br />or 16% cut in pay/benefits<br />or 95% of central office<br />A reduction of as many as 3,800 positions<br />Note: These are notrecommendations, rather they are meant to quantify the magnitude of the projected shortfall<br />13<br />
  27. 27. When will we know?<br />Tentative budget must be adopted in April & the final budget in May<br />Reduction-in-force processmust beginin April<br />State funding will likely not be known until June<br />Negotiated agreements roll forward until bargained<br />14<br />
  28. 28. Our Strategy ?<br />Plan for theWorst<br />Work for theBest<br />Participate as a Team<br />15<br />