2016-17 Second Interim Budget Revision Narrative

Mark Twain Union Elementary School District Julia Tidball, Superintendent

California Education Code requires all public school districts to file at least two interim financial reports annually with their local county superintendent of schools and California Department of Education. Interim reports serve as “snapshots” of the district’s financial condition at a particular point in time. The Governing Board of each district must certify whether their budget is able to meet their financial obligations for the remainder of the current fiscal year and two subsequent years. Certifications are positive, qualified, or negative. A positive certification means the district will be able to meet its financial obligations for the current year and two subsequent years. Qualified certification means the district may not meet its financial obligations, while negative certification indicates the district will not meet its fiscal obligations.

Interim reports are prepared by using the Standardized Account Code Structure (SACS) state software. SACS forms have four columns of information: A: Original July 1st Budget, B: Board Approved Operating Budget, C: Actuals to date from July 1 to October 31 of the current fiscal year, and D: Projected Year Totals.

The First Interim Budget Report covers the financial and budgetary status of each school district for the four month period July 1, to October 31 of the current fiscal year.

The Second Interim Budget Report covers the financial and budgetary status of each school district for the seven month period July 1, to January 31 of the current fiscal year. On December 8, 2016 the Board approved the 1st Interim Budget Report with positive certification and the Calaveras County Office of Education concurred with the District’s positive certification. The following summary has been prepared to assist the Board in the decision to approve the positive certification of the 2nd Interim Budget Report.

Key planning factors incorporated into the attached Second interim report and multiyear projections are listed below and are based upon the latest information available as of February 2017.

FISCAL YEAR PLANNING FACTORS 2016-17 2017-18 2018-19 K-8 Student Enrollment 833 835 844 Average Daily Attendance (ADA) 793.49 793.38 804.90 COLA (Department of Finance) 0.00% 1.11% 2.42% LCFF Gap Funding Percentage (DOF) 55.28% 23.67% 53.85% STRS Employer Rates 12.58% 14.43% 16.28% PERS Employer Rates 13.888% 15.80% 18.70% Lottery – Unrestricted per ADA $144 $144 $144 Lottery – Prop 20 restricted per ADA $45 $45 $45 Mandated Block Grant – K8 per ADA $28.42 $28.42 $28.42 Mandated Discretionary Funds per ADA $214 $48 NA The projections presented have been developed based on information provided by the MTUESD Business Department, the Business and Administration Steering Committee (BASC), and by the Fiscal Crisis and Management Assistance Team (FCMAT). Enrollment and ADA is based on grade-level cohort projections. The following projections are based upon the most recent information and are subject to change. Any significant changes will be adjusted and reflected in the 2017-18 Adopted Budget Report which will cover the financial and budgetary status of the district for the twelve month period July 1 to June, 30.

The following schedule presents a summary of the General fund changes between the 1st interim report and the 2nd interim report as reflected in the SACS documents attached to this narrative.

1st Interim 2nd Interim 2016-2017 Change 2016-2017 Revenue & Other Financing Sources LCFFSources 8010-8099 $ 6,622,138 29,258 $ 6,651,396 Federal Revenues 8100-8299 327,572 (16,386) 311,186 Other State Revenues 8300-8599 558,870 (69) 558,801 Other Local Revenues 8600-8799 107,872 4,035 111,907 Transfers In 8910-8929 - - Other Sources 8930-8979 - - - Total Revenue & Other Financing Sources 7,616,452 16,838 7,633,290

Expenditures & Other Financing Uses Certificated Salaries 1000-1999 3,092,927 (4,751) 3,088,176 Classified Salaries 2000-2999 1,177,623 - 1,177,623 Employee Benefits 3000-3999 1,744,192 (1,278) 1,742,914 Books & Supplies 4000-4999 384,814 (7,123) 377,691 Services & Other Exp 5000-5999 1,101,146 (38,935) 1,062,211 Capital Outlay 6000-6999 12,000 - 12,000 Other Outgo 7100-7299 73,400 - 73,400 Direct Support/Indirects 7300-7399 - - - Other Debt Service 7400-7499 24,689 - 24,689 Transfers Out 7610-7629 129,947 - 129,947 Uses 7630-7699 - - - Total Expenditures & Other Financing Uses 7,740,738 (52,087) 7,688,651

Increase (Decrease) Fund Balance (124,286) 68,925 (55,361) Beginning Fund Balance 1,764,583 1,764,583 Projected Ending Fund Balance $ 1,640,297 $ 1,709,222

Total revenues increased by $16,838. LCFF funding increased from 1st interim projections by $29,258. This increase was from higher projected ADA for 2nd interim and a slight increase in the funding gap. Federal revenues decreased by $16,386 because of a corresponding decrease of qualified children determined by the federal census data.

Total expenditures decreased by $52,087. Federal expenditures were decreased to correspond to decreased revenues. Special education transportation expenditures were revised by the transporting agency and make up the majority of other expenditure changes. Summary of Multi-year Projections at 2nd Interim

The following schedule discloses the District’s projected financial activity for the three years 2016-17, 2017-18, and 2018-19 respectively. These projections are used to evaluate the District’s ability to continue as a going concern for a reasonable period of time. These projections show that the district has budgeted to deficit spend in each of the three years. The district anticipates ending the 2016-17 year with a fund balance of $1,709,222 and an unassigned fund balance of $1,258,867 (16.37%). Projections reflect that by the end of 2018-19 the fund balance will be $1,381,045 and an unassigned fund balance of $1,000,700 (12.60%). The district will meet the 4% reserve requirement for each of the three years.

2nd Interim Projected Projected 2016-2017 Change 2017-2018 Change 2018-2019 Revenue & Other Financing Sources LCFFSources 8010-8099 $ 6,651,396 106,371 $ 6,757,767 406,214 $ 7,163,981 Federal Revenues 8100-8299 311,186 (127,186) 184,000 500 184,500 Other State Revenues 8300-8599 558,801 (143,676) 415,125 (38,100) 377,025 Other Local Revenues 8600-8799 111,907 9,265 121,172 12,025 133,197 Transfers In 8910-8929 - - - - - Other Sources 8930-8979 - - - - - Total Revenue & Other Financing Sources 7,633,290 (155,226) 7,478,064 380,639 7,858,703

Expenditures & Other Financing Uses Certificated Salaries 1000-1999 3,088,176 (50,068) 3,038,108 84,840 3,122,948 Classified Salaries 2000-2999 1,177,623 24,169 1,201,792 30,424 1,232,216 Employee Benefits 3000-3999 1,742,914 78,063 1,820,977 100,095 1,921,072 Books & Supplies 4000-4999 377,691 (36,443) 341,248 (11,487) 329,761 Services & Other Exp 5000-5999 1,062,211 (4,341) 1,057,870 20,580 1,078,450 Capital Outlay 6000-6999 12,000 20,162 32,162 - 32,162 Other Outgo 7100-7299 73,400 - 73,400 - 73,400 Direct Support/Indirects 7300-7399 - - - - - Other Debt Service 7400-7499 24,689 - 24,689 - 24,689 Transfers Out 7610-7629 129,947 53 130,000 - 130,000 Uses 7630-7699 - - - - - Total Expenditures & Other Financing Uses 7,688,651 31,595 7,720,246 224,452 7,944,698

Increase (Decrease) Fund Balance (55,361) (186,821) (242,182) 156,187 (85,995) Beginning Fund Balance 1,764,583 1,709,222 1,467,040 Projected Ending Fund Balance $ 1,709,222 $ 1,467,040 $ 1,381,045

Components of the projected General fund ending fund balance for 2016-17 and the two subsequent years are:

Unexpendable $ 1,500 $ 1,500 $ 1,500 Restricted 52,890 25,600 14,769 Assigned 88,419 67,849 46,288 Economic Uncertainties @ 4% 307,546 308,810 317,788 Unassigned 1,258,867 1,063,281 1,000,700 Projected Ending Fund Balance $ 1,709,222 $ 1,467,040 $ 1,381,045

Unassigned % of expenditures & transfers 16.37% 13.77% 12.60% Unassigned & REU 20.37% 17.77% 16.60% Total revenues are projected to decrease by $155,256 in 2017-18 and increase by $380,639 in 2018-19. Total expenditures are projected to increase by $31,595 in 2017-18 and increase by $224,452 in 2018-19. These projections reflect a fund balance decrease of $242,182 in 2017-18 and decrease of $85,995 in 2018-19. The district will need to decrease expenditures in years after 2018-19 if revenues are not increased to offset rising costs.

The following schedules present a brief summary of the General fund Federal, other state, and local revenues for 2016-17, and two subsequent years as reflected in the SACS documents attached to this narrative.

Local Control Funding (LCFF) is comprised of state aid, local property taxes, and the education protection account (EPA). LCFF is generated by ADA and has been adjusted to reflect increases or decreases in estimated ADA. State revenues from Local Control Funding and components used in the calculation incorporated into the attached Second interim report and multiyear projections are listed below:

MULTIYEAR PROJECTIONS 2016-17 2017-18 2018-19 Local Control Funding Formula Target $ 6,946,650 $ 7,103,385 $ 7,438,719 Funding Floor 6,286,421 6,650,591 6,843,404 Current year GAP funded 660,229 452,794 595,315 Funding Rate 55.28% 23.67% 53.85% Funding Amount (Gap times rate) 364,975 107,176 320,577 Funding Floor plus GAP portion $ 6,651,396 $ 6,757,767 $ 7,163,981 Percent of Target funded 95.75% 95.13% 96.31%

Funded by state aid $ 2,661,506 $ 2,768,430 $ 3,116,718 Funded by Education Protection (EPA) 539,059 538,506 596,432 Funded by local taxes 3,450,831 3,450,831 3,450,831 Current Year LCFF Funding $ 6,651,396 $ 6,757,767 $ 7,163,981

The district is experiencing a rise in enrollment in 2016-17 and if current enrollment remains an increase in ADA is projected through 2018-19. ADA has increased from 788 at the adopted budget to 793 at the second interim. ADA has been projected to increase to 805 in 2018-19. The ADA to project the LCFF funding above is presented as follows:

Funded Average Daily Attendance (ADA) 793 793 805 LCFF Funding per ADA $ 8,388 $ 8,522 $ 8,899

2016-17 revenues from federal sources are budgeted anticipating a substantial use of the Title 1 prior year carryover. The carryover resulted from the districts lack of success in obtaining a Title 1 teacher in 2015-16. Title 1 revenues have been decreased $60,000 in subsequent years because of a decrease in the federal estimates of low income households in our district as reflected in the 2015 federal census. Other federal funds are also affected by this data. MULTIYEAR PROJECTIONS 2016-17 2017-18 2018-19 Title 1 $ 268,325 $ 150,000 $ 150,000 Title 2 29,452 30,000 30,000 Title 3 5,483 4,000 4,500 Forest Reserve 7,926 Federal Revenues $ 311,186 $ 184,000 $ 184,500

Lottery, mandated block grant, and other state revenues projected at the 2015-16 funding level for 2016-17, 2017-18, and 2018-19. Mandated Discretionary funds are One-Time funds to be received in 2016-17 with an additional $48 per ADA estimated for 2017-18. Educator Effectiveness funds were One-Time sources received in 2015-16 only.

MULTIYEAR PROJECTIONS 2016-17 2017-18 2018-19 Lottery - Unrestricted $ 108,500 $ 108,500 $ 108,500 Lottery – Prop 20 restricted 31,775 31,775 31,775 Mandated Block Grant – K8 21,976 22,000 22,000 One-Time Mandated Discretionary Funds 182,800 38,100 NA One-Time Educator Effectiveness Funding NA NA NA Miscellaneous state revenues 5,000 6,000 6,000 STRS On-behalf 208,750 208,750 208,750 Other State Revenues $ 558,801 $ 415,125 $ 377,025

Lease revenue decreased by $9,000 in 2016-17 as the Copperopolis site needed space to meet enrollment demand. 2016-17 and 2017-18 revenues from local sources are budgeted at the 2015-16 funding level. Other local revenues will increase as the district recognizes funding from Erate sources. Local grants are not budgeted until awarded. Special education SELPA costs are expected to increase and eliminate the county transfer. One-time Microsoft funds were granted for 2016-17 only.

Leases and rentals $ 5,600 $ 5,600 $ 5,600 Interest 10,000 10,000 10,000 Fees, donations, & other local revenues 79,272 89,372 100,372 Other local revenues 15,260 16,200 17,225 Microsoft 1,775 NA NA Local grant NA NA NA Other Local Revenues $ 111,907 $ 121,172 $ 133,197 The following schedule presents a brief summary of the General fund expenditures for 2015-16, 2016-17, and two subsequent years as reflected in the SACS documents attached to this narrative.

MULTIYEAR PROJECTIONS 2016-17 2017-18 2018-19 Certificated salaries $ 3,088,177 $ 3,038,108 $ 3,122,948 Classified salaries 1,177,623 1,201,792 1,232,216 Fringe benefits 1,742,914 1,820,977 1,921,072 Total Salaries and benefits 6,008,714 6,060,877 6,276,236 Books and supplies 377,691 341,248 329,761 Service and Other operating expenditures 1,062,211 1,057,870 1,078,450 Capital Outlay 12,000 32,162 32,162 Other outgo and indirect 98,089 98,089 98,089 Transfers out 129,947 130,000 130,000 Total General fund expenditures & transfers $ 7,688,652 $ 7,720,246 $ 7,944,698

Employee salaries o Certificated salaries and benefits reflect a 4% salary increase for 2015-16 paid in 2016-17. Classified salaries and benefits reflect a 0.25% salary increase for 2015-16 paid in 2016-17. 2016-17, 2017-18 and 2018-19 include step and column increases of 3% for all qualifying employees as reflected in the current salary schedule adjusted to reflect the 4% increase. o All Certificated employee’s qualify o Projected that 2/3 of classified employees will move advance a step on the salary schedule. o A part time counselor has been added in 2016-17. Employee benefits o STRS employer contributions increase from 10.73% in 2015-16 to 12.58% in 2016-17, 14.43% in 2017-18 and 16.28% in 2018-19. o PERS employer contributions increase from 11.847% in 2015-16 to 13.888% in 2016-17, 15.50% in 2017-18, and 17.10% in 2017-18 o OASDI, SUI, and Workers Compensation for 2016-17 and 2017-18 include an increase to correlate to increasing salaries. No increase in rates is budgeted. o An increase in Health and Welfare or disability rates has not been budgeted in 2016-17, 2018- 18, or 2018-19. Health and Welfare employer contributions are capped at $9,260 per full time employee. Negotiations are not yet settled for 2016-17 for any of the bargaining groups. Materials and Services expenses o 2016-17 One-time expenditures eliminated in out years o 1% increase for supplies from remaining prior year expenditure levels o 2% increase for operating expenditures from remaining prior year expenditure levels o Increase in capital outlay to reflect the expected replacement of obsolete technology on a 3 year rotational basis. o The district has elected to transfer $100,000 per year to the deferred maintenance fund and transfer $190,000 annually to Routine Restricted Maintenance.

Summary of Proposed 2nd Interim Budgets for ALL funds

This schedule reflects the 1st Interim budget for all funds. All funds show a positive ending fund balance

Special Summary of Board Adopted Budget Deferred Building Capital Bond General Fund Cafeteria Reserve - Maintenance Fund Facilities Redemption ALL Funds Facilities

Income: Local Funding Control Funds $ 6,651,396 Federal 311,186 $ 296,200 State 558,801 24,100 $ 112,119 Local 111,907 43,300 $ 2,250 $ 6,000 $ 84,000 2,500 $ 600,000 Transfer In & Other Sources 25,430 100,000 4,517 Total Income, Tansfers In, & Sources 7,633,290 389,030 102,250 6,000 84,000 119,136 600,000

Expenditures: Certificated 3,088,176 Classified 1,177,623 145,202 Benefits 1,742,914 77,128 Books/Supplies 377,691 158,000 4,000 Services/Operating Exp. 1,062,211 8,700 33,574 1,250 Capital Outlay 12,000 33,926 149,496 Other Outgo 73,400 Direct Support/Indirect - Debt Service 24,689 600,000 Transfer Out & Other Uses 129,947 Total Expenditures, Transfers Out, & Uses 7,688,651 389,030 71,500 1,250 - 149,496 600,000 Increase (Decrease) in Fund Balance (55,361) - 30,750 4,750 84,000 (30,360) - Beginning Fund Balance 1,764,583 53,775 322,491 1,398,231 1,121,925 131,002 155,891 Ending Fund Balance $ 1,709,222 $ 53,775 $ 353,241 $ 1,402,981 $ 1,205,925 $ 100,642 $ 155,891

Differences between the Adopted Budget and Proposed 2nd Interim Budget

Cafeteria Fund - Revenues Rental income from was decreased because the district utilized the rented space for an increase in enrollment at the Copperopolis site. The loss in rental revenue and an increase in salaries and benefits resulting from the pay raise increased the General fund contribution to the Cafeteria.

Cafeteria Fund - Expenditures Classified salary and fringe benefit increases of $6,258 and $2,030 were the result of the 0.25% pay raise. Food costs were decreased by $6,000 to minimize the amount needed by the general fund to cover losses. This savings will result because of changes in menu planning by district staff.

The district has budgeted approximately $30,000 in 2016-17 and the two subsequent years to supplement the food service program from the effects of salary and benefit increases and revenue losses sustained from meals prepared for the Copperopolis Head-start program.

Special Reserve – Capital Outlay Fund – Revenues and Expenditures Expenditures increased by $146, 564. This increase is because the energy upgrade scheduled for June 2016 was not completed until July of the current year. Revenue is recognized in the same year as expenditures. The district also received $4,517 in Safety Credit funding for new fencing of a planned parking lot.