Irvine Unified School District

First Interim Report

Presented by John Fogarty

December 8, 2015

Financial Reporting Cycle

State Budget Adoption . . . . . . . . . . . . . . . . . . . . . July

2014-15 Unaudited Actuals . . . . . . . . . . . . . . . . . September

First Interim Report . . . . . . . . . . . . . . . . . . . . . . . . December

Governor’s 2016-17 Budget Proposal . . . . . . . . . January

Second Interim Report . . . . . . . . . . . . . . . . . . . . . March

IUSD 2016-17 Budget Adoption. . . . . . . . . . . . . . June

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First Interim Report

Interim Report Purpose:

The First Interim Report represents the District’s first official revision to the

Final Adopted Budget

The First Interim Report includes actual financial data through October 31,

2015 with revised projections for the remainder of the fiscal year

Each school district is required to certify its financial condition twice during

the fiscal year. This certification addresses the District’s ability to meet its

financial obligations for the current year and two subsequent years

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Legislative Analysts Office

November 2015 Fiscal Outlook

LAO nonpartisan fiscal advisor to the Legislature

Annual Fiscal Five Year Outlook provides preview of Governor’s likely January Budget proposal

Main outlook very positive – “The state budget is better prepared for an economic downturn than it has been at any point in decades”

Recognizing the length of the current economic recovery and the volatility of California’s economy which is heavily dependent on income taxes, the LAO’s report once again outlines three scenarios:

Main Scenario (focus)

• Continued moderate economic growth through 2019-20

• Modest stock market gains projected through 2019-20

• Budget surpluses and growing budget reserves

• Assumptions based on current policies…….4

Legislative Analysts Office

November 2015 Fiscal Outlook

Main Scenario (focus) – Education Funding

Under LAO’s Main Scenario, state revenues will continue to grow

through 2019-20 resulting in steady increases in Proposition 98

funding

Current year and prior year state revenues projected to exceed

budget resulting in an increase of approximately $2 billion in 2015-16

Proposition 98 guarantee

Likely priorities –

LAO’s recommendation – “minimize risk by designating some

funding for one-time”

Provide additional funding for unpaid mandates

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Big Three Revenues Under Main Scenario (In Billions)

All Big State Revenue Sources

Grow Throughout Forecast Period

6Source: LAO November 2015 Fiscal Outlook

Current Economic Expansion

Already Among Longest in U.S. History

Caution: Main Scenario would represent longest expansion in U.S. History

7Source: LAO November 2015 Fiscal Outlook

Legislative Analysts Office

November 2015 Fiscal Outlook

Alternate Scenarios

Slowdown Scenario

• Continued economic growth through 2019-20 however growth

slows significantly beginning in 2017

• State revenues reduced $30 billion from 2016-17 – 2019-20

• Budget surpluses remain however reduced substantially

• Illustrates that state is financially sound even with significant

downturn

Recession Scenario

• Mirrors dot.com bust of early 2000s

• State revenues reduced by $60 billion from 2016-17 – 2019-20

• Budget deficits offset by state reserves through 2018-198

Comparing Proposition 98 Minimum

Guarantee Under Three Scenarios(In Billions)

9Source: LAO November 2015 Fiscal Outlook

Note: LCFF implemented in 2013-14. Targeted to be fully funded in 2020-21.

$7,829

$6,000

$6,200

$6,400

$6,600

$6,800

$7,000

$7,200

$7,400

$7,600

$7,800

$8,000

2015-16

Do

llars

Per

AD

A

Progression towards 2007-08 Funding

Revenue Limit&

Categorical FundingPer ADA

Local ControlFunding Formula

Per ADA

Irvine Unified School District

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$7,556

<$273> Difference

LCFF Long-Term Potential Impact to IUSD

• Because LCFF is heavily weighted to favor districts with high populations of disadvantaged students, the LCFF as proposed, negatively impacts IUSD

State, County, District LCFF Funding Comparison

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$0$1,000$2,000$3,000$4,000$5,000$6,000$7,000$8,000$9,000

$8,208/ADA$7,172/ADA

$6,706/ADA

2014-15 LCFF Funding Comparison

IUSD LCFF

Funding

Orange County

Avg. LCFF Funding

Note: IUSD funded $1,502/ADA below statewide average for Unified School Districts statewide. Impact $46.5 million……

State Avg.LCFF

Funding

IUSD Estimated LCFF Funding

IUSD LCFF 2015-16 Projection 2016-17 Projection 2017-18 Projection

LCFF Target(Actual Target to be Reached in 2020-21)

$265,523,582 $282,052,537 $302,894,120

LCFF Floor(2013-14 Actual Funding Adjusted for ADA Growth

& Any LCFF Funding rec’d)

$211,299,782 $249,614,269 $265,287,250

LCFF Gap =(Difference Between Target & Floor)

$54,223,800 $32,438,268 $37,606,870

Gap Funding Rate =(% of Gap to be Funded, set by Governor)

51.52% 12.52% 18.11%

Gap Funding Amount =(Anticipated Additional Funds)

$27,936,102 $4,061,271 $6,810,604

Total LCFF Funding = $239,235,884 $253,675,540 $272,097,854

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2016-17 & 2017-18 LCFF Gap Funding Rate based on School Services Projections

2015-16 First Interim Assumptions

2015-16

Projected

2016-17

Projected

2017-18 Projected

ADA Growth 931 1,448 1,592

LCFF Funding per student $7,556 $7,683 $7,7862

Fair Share State Reductions $0 $0 $0

Salary Increases (On-going) 4% 0% 0%

Salary Increases (One-time)* 2% 0% 0%

Step & Column Increases 2% 2% 2%

Health Insurance Contributions $10,143 $10,143 $10,143

Utility Increases 5% 5% 5%

District Reserve Level 2% 2% 2%

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2015-16 Budget & Multiyear Projections

Unrestricted General Fund

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Unrestricted2015-16

Projected

2016-17

Projected

2017-18

Projected

Total Revenues $269,162,636 $266,496,816 $285,072,059

Total Expenditures $227,829,524 $231,223,406 $246,705,969

EXCESS (DEFICIENCY) $41,333,112 $35,273,410 $38,366,090

Other Sources/(Uses) ($43,780,460) ($41,710,124) ($44,203,962)

Net Increase/(Decrease) ($2,447,348) ($6,436,714) ($5,837,872)

Beginning Balance, July 1 $37,984,702 $35,537,354 $29,100,640

Ending Balance, June 30 $35,537,354 $29,100,640 $23,262,768

2015-16 Budget & Multiyear Projections

Components of Ending Fund Balance

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Description2015-16

Projected

2016-17

Projected

2017-18

Projected

Ending Fund Balance $35,537,354 $29,100,640 $23,262,768

Revolving Cash $150,000 $150,000 $150,000

Stores $375,000 $375,000 $375,000

State Minimum DEU $6,303,000 $6,250,000 $6,500,000

Contingency Reserve $5,000,000 $5,000,000 $5,000,000

Deferred Allocation $14,348,608 $6,760,704

Board Assigned $9,360,746 $10,564,936 $11,237,768

Certification Definition

Positive = A school district that, based on current projections, will be able to meet its financial obligations for the current fiscal year and subsequent two fiscal years

Qualified = A school district that, based on current projections, may not meet its financial obligations for the current fiscal year or subsequent fiscal year

Negative = A school district that, based on current projections, will be unable to meet its financial obligations for the current fiscal year or for subsequent two fiscal years

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1st Interim Report

Recommendation

Based upon the information included in the

First Interim Report, staff is able to certify

that IUSD can meet its obligations for the

current and two subsequent fiscal years

Staff recommends a Positive Certification of

the First Interim Report

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Questions?

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