RIM OF THE WORLD UNFIED SCHOOL DISTRICT

BUDGET ASSUMPTIONS 2017/18 – SECOND INTERIM

MARCH 8, 2018

General Information

Rim of the WorldUnifiedSchoolDistrictincludeselementaryandsecondarylevelsofeducation underasingleBoardofTrustees. TheDistrict'sgoverningboardconsistsoffiveelectedmembers. Membersareelectedat-largetoservefour-yearterms. MembersoftheBoardelectapresidenteachyear.Theday-to-dayaffairsof theDistrictaretheresponsibilityoftheSuperintendent.

Rim of the World Unified School District is located in the San Bernardino Mountains, located in the eastern Inland Empire region of San Bernardino County. Rim of the World USD spans 110 square miles and serves 11 communities. The elevation between the boundaries ranges from 4,700 to 7,200 feet.

Rim of the World Unified School District was established June 21, 1954 and currently includes three Elementary Schools (TK-5), one Intermediate School (grades 6-8), one High School, and one Continuation High School. The District’s enrollment is approximately 3,300 students.

Localeducationagencies(LEAs)arerequiredtofiletworeportsduringthefiscalyear(interimreports)onthestatusoftheLEA'sfinancialhealth. Thefirstinterimreportisrequiredtobesubmittedto theCountySuperintendentofSchoolsnolaterthanDecember15fortheperiodendingOctober31.ThesecondinterimreportistobesubmittednolaterthanMarch15fortheperiodendingJanuary31. Inaddition,eachyeartheDistrictisrequiredtosubmitapreliminarybudgettobeapprovedbytheDistrict'sgoverningboardnolaterthanJune30.

Certification – There are three types of certifications; Positive – A district WILL meet their financial obligations for the current and two fiscal years; Qualified – A district MAY NOT meet their financial obligations for the current and two fiscal years; Negative – A district WILL BE UNABLE TO meet their financial obligations for the current or next fiscal year.

The District is Self-Certifying “Positive” in its submission of the 2nd Interim Financial Report. A positive certification is dependent on certain Assumptions.

EnrollmentProjections

TheCaliforniaBasicEducationalDataSystem(CBEDS)isanannualdatacollectionadministeredinOctober.ThepurposeofCBEDSistocollectinformationonstudentandstaffdemographicsincludingstudentenrollment,graduates,dropouts,courseenrollment, enrollmentinalternativeeducation,giftedandtalentededucation,andmore. Enrollmentprojections areusedto estimatethe facilitiesandstaffingneeds,as well as statefundingbased on the attendance rate of our student enrollment. Averagedailyattendance ADA is the cumulative attendance of our enrolled students.

AverageDailyAttendance(ADA)

Themostsignificantcharacteristic fordeterminingdistrictincomeisthecalculationofthe averagenumberofstudentsthatareinschoolandinattendanceonadailybasis. TheaveragedailyattendanceorADAismultipliedbytheDistrict'sLocalControlFundingFormula(LCFF)GrantEntitlementperADAtodeterminethetotalLCFFincomefortheDistrict. Rim of the World USDhasprojectedthattheADAfor2017/18willbe3,145.16 or94.0%ofcertified CBEDS enrollment. Our district has been declining in it’s enrollment for several years going back to the late 1990’s. When a district is in declining enrollment, the ADA used to determine revenue is based on the prior year. This is referred to as the “Prior Year Guarantee.” Therefore, our 2017/18 LCFF Revenue budget was based on 2016/17 ADA. ADA earned in the current fiscal year will determine our second subsequent fiscal year (2018/19). ADAprojectionsareforallTK-12regulareducationandspecialeducationprograms.SinceADA is such an important part of the District’s income base, the attendance records are monitored monthly and ADA is updated throughout the year to ensure that the projected revenue matched the District’s projections.

GeneralFundRevenueSources

84%oftheDistrict'sGeneralFundrevenueisgeneratedfromtheLocalControlFundingFormulawhich yields funds based on a state-determineddollar amount multiplied by theaveragenumberofstudentswhoareinattendancethroughouttheschoolyear.

Federalincomeis asmallportionoftheentireDistrictincome.Mostofthefederal income isrestricted and it must be expended for purposes that are determined by the grantor,notthelocalBoardofEducation.

OtherStateincomeprimarily representsUnrestrictedandRestrictedlottery.OtherStateincomepreviously includedotherstatecategoricalmonies,howeverthosemonieswererolledintotheLCFF. One-time funds based on ADA are included in Other State income.

OtherLocalIncomerepresentslocalrestricted donations andentitlementssuchasfunds received on behalf of ROP.

LocalControlFundingFormula(LCFF)

Publiceducation-unlikeanyotherpublicagency-receivesmostofitsrevenuebasedonthepopulationitserves. Approximately84%oftheGeneralFund'srevenuesaregeneratedbystudentattendanceandaccountedforasLCFFfunds.Studentattendanceistheaveragedailyattendanceof pupilsforattendancemonthsone througheight.ThisnumberismultipliedbytheDistrict'sLCFFGrantFundingcalculationfordeterminingtheanticipatedrevenuetobeapportioned.

LCFFisfundedbypropertytaxreceipts,withthebalanceprovidedtotheDistrictasastateapportionmentnettedagainstProp98StatefundingforTK-14education. Rim of the World USDreceivesapproximately40%ofitsstatefundingfrompropertytaxreceipts.

LCFFFactors

LCFFisaneightyearplantobringCalifornia'spublicschools(TK-12)backtothefunding levelof2007/2008.With2012-2013astheBaseyeartheformulacreatesa''fullyfunded"totalduetoeachdistrictin the2020-2021year(theGAP). EachyearaportionoftheGAPistobefundedtoreachtheeight-yeargoal. Included in the 2018/19 Governor’s Proposal, the State is planning to shorten the phase in timeline and “fully fund” LCFF in fiscal year 2018/19. By no means does this adequately fund school districts such as Rim.

Factors-TheBaseGrantisfundedonADAbyGradeSpanwithadditionaldollarsprovidedforK-3,9-12,Supplemental,andConcentrationgrants. TheSupplementalandConcentration

GrantsareafunctionofhowmanyunduplicatedEnglishLanguageLearners,FreeandReducedLunchandFosterYouthasapercentageoftheDistrict'senrollment. Thismeansthateverydistrictinthestateisfundeddifferentlyanddistrictswithahigherproportionalshare ofthe 'targeted'studentswillreceivegreaterperpupilfunding.

COLA-(CostofLivingAdjustment) -TheannualinflationpercentageforK-12revenuelimitswasestablishedbystatutorylaw. For2017/18,thisisimpliedtobeaportionoftheGAP. So,anyrealizationoftheCOLAwillonlybemetatthepointintimethattheGAPisfullyfunded.

2017-18 / Per Funded ADA (3,274.48)
Base Grant / 24,774,343.89 / 7,566
Grade Span Adjustment / 910,810.13 / 278
Supplemental Grant / 2,796,735.98 / 854
Concentration Grant / - / -
Add-ons (Transportation/TIG) / 1,490,634.00 / 455
29,972,524.00 / 9,153

LotteryRevenue

Lotteryprovidesapproximately2%oftheGeneralFundtotalrevenues. Lotteryfundingisprojectedtobe$194perADAin2017/2018 (Unrestricted and Restricted combined). Unrestricted Lottery funds discretionary site budgets based on enrollment and teacher salaries. Restricted Lottery is solely used for instructional supplies used by students in the course of instruction.

ExpenditureBudgetSummary

ThesevereimpactofbudgetreductionsstilllimitstheDistrict'sabilitytoaddressevenbasicsupport:suchastextbooksandmaintenance. Retiree costs such as contributions to STRS and PERS along with the increasing costs of health care and over all operational costs continue to add to the structural deficit of our budget.

ExpenditureClassifications

CertificatedPersonnelSalaries

Certificated salaries are salaries that require a credential or permitissued by theCommissiononTeacherCredentialing.Examplesofcertificatedpersonnel:

ClassifiedPersonnel Salaries

Classified salariesaresalariesthatdonotrequireacredentialorpermit.

EmployeeBenefits

Thisclassificationisusedtoaccountforcontributionstoemployeeretirementplans,healthandwelfarebenefits,stateunemploymentinsurance,socialsecurity,Medicareandworkers'compensationassociatedwithcertificatedandclassifiedpersonnelsalaries,andotherpost­employmentbenefits.

BooksSupplies

Expendituresforthe purchaseofinstructionalmaterials,books,encyclopedias,paper,pencils,audiovisualmaterials,andmagazinesubscriptionsarerecordedinthiscategory.

ServicesOtherOperatingExpenditures

Thisclassification isusedtorecordexpendituresforservices,rents,leases,maintenancecontracts,dues,travel,insurance,utilities,andlegalexpenses.

CapitalOutlay

Expendituresforthepurchaseofsites,buildings,andcapitalizedequipmentarerecordedinthisclassification.

Other Outgo

This classification isused to account forthe indirect cost that can be charged tocategoricalprogramsorotherfundsforthesupportprovidedbytheGeneralFund. Theindirectcostratefor2017/2018 isbe7.48%.

Interfund Transfers

Thisclassification isused toaccount forcontributions inoroutoftheGeneral Fund(restrictedorunrestricted)toanotherfundmaintainedby theDistrict. The only fund the district transfers funds from the General Fund (01) is the Child Nutritional Services Fund (13).

Theimplementation oftheLCFFandtheLCAPhasremovedmostStaterequiredspendingprogramsandplacedthecontrolofhowtomosteffectivelyserviceatriskstudentsinthehandsofthelocaleducationalagency.TheDistrictBudget for2017/2018reflectstheexpendituresdelineatedintheLCAPdocument.

StateBudgetUpdate:

■COLA –

■18/19 increased from 2.15% to 2.51%

■19/20 increased from 2.35% to 2.41%

■20/21 increased from 2.57% to 2.8%

■NO COLA for Transportation Add-on

■GAP Funding –

17/18 – increased from 43.19% to 44.97%

18/19 – increased from 66.12% to 100%

■One-time Funding – From zero in 18/19 to $295 per ADA

Cautions for ROWUSD –

Increase SPED and Transportation costs without increase in funding

■Low UPP

Flat revenues, including COLA do not equal the increases in expenditures including but not limited to STRS, PERS, Step/Column & Heath Benefits for active and retired employees

Declining enrollment – Savings from reduction in staff do not equal the loss in revenue

■Aging buildings & Equipment

■Continued deficit spending

October 5, 2017 Board approved resolution for layoff’s, program and other reductions totaling over 1.2 million

Multi-year Projectionsinclude the following:

■LCFF GAP % at 100%

■COLA in fiscal years 18/19 and 19/20 at 2.51% and 2.41% respectively

■Savings from reduction in staff due to declining enrollment

■Savings from employees who may retiree

■Increased Health and Welfare rates

■Increase in STRS and PERS rates

■Increase in Utility costs

■Savings from Board Approved Reductions and Bargaining Unit agreements

■Savings from reduction to discretionary spending

■Savings from other staff reductions

■One-time funds continued to 2018-19

■Decrease in Revenue from declining enrollment

■Increase in costs associated with Step and Column

Notes from our County Office:

Despiteincreasedrevenues,escalatingfixedexpendituresare increasinglydifficulttomanageand,accordingly,mayultimatelythreatenfiscalsolvencyformanydistricts:

•ItisunlikelythattheannualCOLAontheLCFFwillbesufficienttofundtheannualcostincreasesassociatedwithstepandcolumnandthe escalatingretirementsystemratesatmostdistricts.Forthesedistricts,anyadditionalongoingincreasestothesalaryscheduleare highly problematic in maintaining a balanced budget.

•ManydistrictsadoptedapracticeofmultiyearagreementsduringtheimplementationphaseoftheLCFF.However,continuingthispracticenowthatrevenuegrowthwillslowtoCOLAalonecouldleadtoarapiddeteriorationoffiscalsolvencyandisstronglydiscouraged.

Numerousotherriskfactorsonthehorizonaffectthenegotiatingenvironmentandthe affordabilityofcollectivebargainingagreements:

•TheimpacttohealthcarecostsresultingfromtheeliminationoftheindividualmandateundertheAffordableCareAct

•Ongoing increasesinthestateminimumwage

•Theincreasingriskofaneconomicdownturnastheexpansioncycleexceedsallpreviouscycles

•ImpactsassociatedwiththerecentlyenactedAB119regardingunionaccesstoemployees

•ScheduledSupremeCourtargumentsintheJanuscaseattheendofFebruary2018

Regardlessoftheeconomicenvironment,districtsalwaysmustbepreparedtorespondtoemployeerequestsforstaffcompensationandbenefitincreases.Nonetheless,fiscalsolvencyisparamountinnegotiationsand,ifitistobesustained,demandsreasonableandaccuraterevenueandexpenditureprojections.Maintainingfiscalsolvencywhilemaximizingservicestostudentswithavailablefinancialresourceswillbeacontinuingchallenge.Itisinevitablethatcostreductionswillberequiredformanydistrictsinthebudgetyearand/ortheoutyearsofthe multiyearfinancialprojectionperiod.