The Budget Timeline
The budget process of a school district requires the district to produce and adopt a budget by June 30 for the upcoming year. The Board is required to certify twice each year that the district is able to meet its financial obligations during the year. The two intermediary reports afford the district the opportunity to adjust the budget’s revenues and expenditures based on the current climate and events. The First Interim Report reflects activities for July 1 – October 31 and is adopted by December 15. The Second Interim Report covers July 1 – January 31 and is adopted by March 15. By September 15, the district publishes the Unaudited Actual based on July 1 – June 30 of the previous year.
How We Got from Second Interim in March to Estimated Actual in May 2017-2018
At Second Interim in March 2018, the District was using a set of assumptions based on the best knowledge at the time to adjust the 2017-2018 year and plan the two out years – 2018-2019 and 2019-2020. The two assumptions with the most impact on the 2018-2019 school year was 1) the 2018-2019 budget was created using 5% growth in assessed valuation for property tax revenue; and 2) there were budgeted expenditures planned to take place in the 2017-2018 school year that did not come to fruition. This created a larger estimated ending balance in 2017-2018, which is used as the beginning balance in 2018-2019.
Revenues
The Board adopted the first set of budget assumptions for the 2018-2019 Budget Adoption and Multi-Year Projection (MYP) at the April 5, 2018 board meeting. The assumptions included an increase of the assessed valuation growth from 5% to 7% in 2018-2019, and carried the assumption of 5% and 3% growth to years two and three of the MYP (2019-2020 and 2020-2021 respectively). The increase in the assessed valuation equate to approximately $480,000 per percentage point increase. The Governor’s May Revise Budget was positive for education. The increase in the 2018-2019 Cost of Living Adjustment (COLA), as well as changes in the COLA for the two out years, and the increase in one-time discretionary accounts increased revenue for the multi-year projection (MYP).
Expenditures
In the spring of 2018, internal miscalculations and the projected lower assessed valuation growth resulted in the District taking a more in-depth review of the current 2017-2018 year ending in preparation for the 2018-2019 budget year. The District took a detailed look at each program’s ending balance in April and May, reviewing the budgeted expenditures planned as of the Second Interim and adjusting the budgeted expense accordingly to actual expenses and most likely actual expenditures to be realized by June 30. At Second Interim in March, 2018, the estimated ending balance for 2017-2018 was $24,255,346 unrestricted and restricted combined. After the program by program review and adjustments, the estimated ending balance for 2017-2018 is $25,928,923. The estimated ending balance of 2017-2018 is the beginning balance for the 2018-2019 budget adoption.
The Board-approved set of assumptions at the April 5, 2018 board meeting on which to build the 2018-2019 budget adoption were updated based on the Governor’s May Revise proposed budget at the May 17, 2018 board meeting. The difference of the two was a reduction in planned expenditures greater than $1 million over the 2018-2021 MYP, such as After School Extended Learning, Elementary Science Coach, and Expanded Language Program for summer. There were positions added to 2018-2019: the one-year At-Risk Supervisors, and the expansion of a full time School Community Engagement Facilitator at all school sites on going.
At Second Interim in March 2018, the Year 2 of the Multi-Year Projection (2018-2019) reserve level was estimated at 27%. The change in both revenues and expenditures of both the 2017-2018 current year and the proposed 2018-2019 Adoption Budget combined resulted with a reserve level of 34%.
2018 – 2019 Budget Highlights
The projected General Fund Unrestricted ending balance for 2018-2019 is $25,600,399, which is a 34.37% reserve, with total revenues at $74,863,972 and total expenditures at $74,495,201. The surplus for the 2018-2019 year is $368,771.
A few of the more material changes to the ongoing budget include: addition of an elementary Math Coach, changing the middle school schedule to eight-period days for more flexibility for electives and the addition of co-teaching, continuation of Sheltered Instruction Observation Protocol (SIOP), creation of Parent Engagement Program to fund Parent University and other parent education programs, and the increase to one full-time School Community Engagement Facilitator (SCEF) at each site. The proposed budget also includes the additional four At-Risk Supervisors to support the elementary schools (2018-2019 school year only).
Multi-Year Projection (MYP) and Reserves
The District relies heavily on the local property tax growth for projected revenues, as a community-funded district. The past three years saw double-digit growth in the assessed valuation of Mountain View. As of budget adoption, the growth over prior year as of May 1, 2018 for the upcoming school year is 4.3%. The District has used 7% as the assumption for growth for the 2018-2019 budget.
The reserve calculation continues to be a point of significance. The recommendation from various education organizations, such as School Services of California, the California Association of School Business Officials, and the Association of California School Administrators, is for districts to carry higher than minimum reserves due to the volatility of State revenues; cash management; and dependency on parcel taxes, to name a few. School Services of California and the Government Finance Officers Association both recommend a minimum of 17% reserves. The Board of Trustees approved Resolution number 1664.1/18 on January 4, 2018 to establish unrestricted reserve levels be between 17%-20% in year three of any budget adoption or interim budget report.
The 2018-2019 May Revision from Governor Brown and Department of Finance warn of the pending economic downturn, as a positive 2018-2019 will tie the longest recovery period in California. In the next two years, many events could significantly affect MVWSD.