November 13, 2014

• November 4, 2014 Election–Passage of Proposition 2–Prop 98 Rainy Day Reserve–Public School System Stabilization

Account (PSSSA)– Effective 2015-16 Budget Adoption

• Full Repayment of Prop 98 Maintenance factor• Prop 98 must be calculated using Test 1• Prop 98 must not be suspended• Capital gains taxes must be greater than 8% of State

General Fund revenues–All of the above conditions must be met.

• If met, the Cap on Reserves would be no greater than twice the minimum

• MVSD 3% or 6% maximum reserve levels• Exemption from County Superintendents– Statement substantiating extraordinary circumstances requiring

higher reserve– Provide amounts associated with extraordinary circumstances– Provide documentation that no other resources are available– *Exemption limited to two of three consecutive years

Financial flexibility to absorb unanticipated expenditures without significant disruption to educational programs.

Protection against exposure to significant one-time outlays such as disasters, lawsuits, or material audit findings.

Protection against the volatility of state revenues. Protection against the volatility of property tax revenues for basic aid districts.

Why have reserves greater Why have reserves greater than the minimum? than the minimum? Cont… Cont…

Cash management / avoiding the cost of borrowing cash. Protection against declining enrollment. Protection against the expiration of parcel taxes. Protection to cover increases in fixed and statutory costs. Financial flexibility to shift resources as priorities set through the LCAP process change. Planning for major projects such as information technology upgrades or deferred maintenance.

• CalSTRS Rate Projections per Education Code– Employer Contribution

• 2014-15 at 8.88%• 2015-16 at 10.73%• 2016-17 at 12.58%• 2017-18 at 14.43%• 2018-19 at 16.28%• 2019-20 at 18.13%• 2020-2021 at 19.1%

• Revised LCAP template to be approved November 14

• Negotiations

• Federal Sequestration Reductions

• SMAA (Formerly Medi-Cal Administrative Activities– More information January 2015