SONOMA COUNTY OFFICE OF EDUCATION
SCOE BIZ
Business Services
__________________________________________________________________________________________
Bulletin No. 15-12
Second
Interim
Guidance
February 17, 2015
To:
District Superintendents & Chief Business Officials
Charter School Officials
From:
Judy Thomson, Director Fiscal Services
Subject:
2014-15 Second Interim guidance and the Governor’s 2015-16 Budget Proposal - updated
The purpose of this letter is to provide 2014-15 Second Interim guidance along with the release of the Common
Message. The Governor’s 2015-16 Proposed State Budget continues to provide increased funding for schools, including:
approximately $4 billion for continued LCFF implementation, which is expected to close 32.19% of the remaining gap
between LEAs 2014-15 funding levels and full LCFF Implementation rates; $1 billion in one-time discretionary funding
to further Common Core investment; as well as the retirement of all outstanding K-12 deferrals. This surge in funding
serves to again illuminate the volatility of state revenues. Per the Legislative Analyst’s Office (LAO), “Under the
Governor’s Budget Proposal for 2015-16, LCFF would be 85 percent funded.”
LEAs must continue to adopt a three-year LCAP with an annual update and demonstrate in their LCAP that they have
increased or improved services for unduplicated count pupils in proportion to the increase in the funds apportioned to
supplemental and concentration grant funding. Each LEA faces its own particular set of educational and financial
challenges, and thus there is no “one size fits all” plan. Statute requires districts to involve teachers, parents, and
community members in developing their LCAPs, as the state remains focused on local control. Transparency is
essential for maintaining an LEA’s credibility under LCFF and LCAP, so clearly communicating and explaining budget
assumptions to stakeholders is crucial.
2014-15 Second Interim Current Year Budget and Multi-Year Projections (MYP)
The following should be considered when preparing the Second Interim Report which is due to SCOE no later than
March 16, 2015:
Common Message
Please read the County Office Common Message – Second Interim 2014-15 (attached).
Dartboard
Use the ‘SSC School District and Charter School Financial Projection Dartboard 2015-16 Governor’s Proposed
State Budget’ (attached) for economic planning factors.
Reserves
The LAO released the Analysis of School District Reserves report in January 2015 which can be located at:
http://www.lao.ca.gov/Publications/Detail/3163. The report indicated Districts use their reserves to manage
cash flow, mitigate volatility in funding, address unexpected costs, save for large purchases, and obtain higher
credit ratings. The conclusion stated,” That district reserves vary notably across the state reflects the wide
variety of circumstances that weigh upon these local decisions. While decisions to maintain or increase
reserves sometimes are seen as conflicting with efforts to expand district services, our report finds that healthy
reserves in many cases can help districts avoid risks and costs that otherwise would hinder districts’ ability to
deliver these services.”
LCFF Calculator and Gap Funding Percentages
LEAs should use FCMAT’s LCFF Calculator to determine LCFF funding, which includes the Department of
Finance (DOF) annual gap funding percentages. LEAs with minimal reserves, significant gap funding amounts
or LCFF funding calculations based on uncertain variables, have a lower risk tolerance. LEAs should be
cognizant that Proposition 30 revenues are temporary. The additional ¼ cent sales tax (estimated to generate
approximately 20% of Proposition 30’s temporary taxes) will expire in 2016 and the increase in personal income
tax on high wage earners (estimated to generate approximately 80% of Proposition 30’s temporary taxes) will
expire in 2018. For LEAs with a low risk tolerance, a portion of gap funding should be reserved in the LEA’s
unrestricted fund balance for years 2016-17 and beyond.
The gap funding percentage included in the LCFF calculators/simulators are as follows:
2014-15
2015-16
2016-17
2017-18
2018-19
29.15%
32.19%
23.71%
26.43%
11.31%
29.15%
32.19%
11.00%
12.82%
not
provided
GAP funding percentage
FCMAT’s LCFF Calculator ~ default %s are based on
DOF estimates **
LCFF Simulator by School Services of California
** Please note that the gap funding % of the LCFF Calculator is easily modified on the Assumptions tab.
Offset to Mandate Costs Debt
The Governor’s Budget Proposal includes approximately $1 billion in one-time funds to offset state obligations
for outstanding mandate debt. The funds will go to all LEAs and will not depend on whether the LEA
participated in the mandate program in the past. The allocation represents approximately $170 per ADA. The
Governor suggests these one-time funds be used for costs associated with Common Core.
Mandate Block Grant
For 2014-15 through 2016-17, the mandate block grant rates are estimated to be:
~ School districts will receive approximately $56 per ADA for grades 9-12 and $28 per ADA for grades K-8.
~ Charter schools will receive approximately $42 per ADA for grades 9-12 and $14 per ADA for grades K-8.
Special Education
The Budget Proposal provides for 1.58% COLA for special education in 2015-16, which represents an increase of
approximately $8.33 per ADA.
Transportation:
Maintenance of Effort (MOE) ~ Of the funds received for home-to-school transportation, a school district is
required to expend no less than the amount of funds it expended for home-to-school transportation in the
2012-13 fiscal year or the amount of revenue received in 2013-14, whichever is less. The MOE requirement only
applies to spending up to the amount of the transportation entitlement received in 2012-13; contributions to
transportation programs above the amount of the entitlement are not subject to MOE. This requirement is ongoing, unlike ROC/P and Adult Education MOE provisions that sunset at the end of this year. MOE compliance
will be audited for the 2014-15 fiscal year.
Members of a JPA ~ Under current law, transportation JPAs will no longer receive transportation funding from
the State after 2014-15 and member districts of JPAs will not be allocated funding. We are aware this issue is
being addressed in a trailer bill. However, due to uncertainty of funding, we are suggesting districts budget
conservatively and plan for the possibility that additional transportation funding does NOT come to fruition.
We are requesting the narrative discuss the district's transportation revenues/costs. The use of multiple MYPs
can be effective in presenting different transportation funding scenarios. Districts that do not belong to JPAs
include transportation funding as a permanent add-on to their Target LCFF entitlement.
Basic Aid/ Excess Tax School Districts
Under LCFF, basic aid districts will receive minimum state aid (hold harmless funding) of no less than the
amount received in 2012-13, which represents their categorical allocation net of 8.92% fair share reduction.
There is disagreement as to whether this funding will continue beyond full implementation of LCFF. To date, there
is no resolution.
All districts are guaranteed a minimum of $200 per ADA of Education Protection Account (EPA) funding
through 2018-19.
It is highly recommended that Basic Aid/Excess Tax school districts not budget RDA Residual (8047 – RDAX) or
RDA asset liquidation (8047-LQID) tax revenues in excess of what has been received to date in the current year.
Due to their volatile and uncertain nature, it should not be assumed that a district will receive the same amount
in future years.
District of Choice funding currently sunsets at the end of 2015-16 (inoperative on July 1, 2016). Do not budget
district of choice revenue in 2016-17.
Basic aid districts are subject to the Local Control and Accountability Plan (LCAP) and Supplemental and
Concentration Grant regulations under LCFF.
Basic Aid Supplemental Funding (BAS)
In 2014-15, the District may budget up to the P-1 apportionment in accordance with District practices and
policies reflecting a conservative posture. For example, one such strategy follows:
1/3rd reserved in fund balance due to the uncertainty of the funding
1/3rd used for one-time expenditures
1/3rd on-going expenditures
In the out-years, the District may budget BAS revenue with 50% reserved in fund balance and 50% in one-time
expenditures.
It is recommended that districts consider using this revenue to fund OPEB liabilities and pay the actuarially
determined annual required contribution (ARC) amount rather than the pay-as-you go amount. ARC payments
reduce the cost of OPEB liabilities in the out-years when financial circumstances are unknown.
Although the change in the education funding model from revenue limit to LCFF did not eliminate BAS funding,
it remains a controversial form of funding. Facts and circumstances are different for each district. Please feel
free to call your SCOE accountant or myself to discuss.
Adult Education
The Governor’s Budget proposal includes a new $500 million block grant for Adult Education in 2015-16.
STRS and PERS contribution rates:
2014-15
2015-16
2016-17
2017-18
2018-19
8.88%
11.771%
10.73%
12.60%
12.58%
15.00%
14.43%
16.60%
16.28%
18.20%
Employer Contribution Rates
STRS – Per Ed Code Sections 22901.7 & 22950.5
PERS – Actual and projected rates
K-3 Grade Span Adjustment (GSA)
In 2014-15, as a condition of receiving the K-3 GSA (10.4% of K-3 base grant), school districts must maintain or
make progress towards an average K-3 class size of 24 by school site in both 2013-14 and 2014-15 unless a
collectively bargained alternative to the statutory requirements have been agreed upon. If an annual audit of a
school district finds the district out of compliance, the CDE will retroactively reduce the district’s funding.
There is no waiver process.
Temporary Flexibility that expires June 30, 2015:
o Routine Restricted Maintenance (RRM) – Set aside of 1% of total General Fund expenditures returns to
a 3% set aside.
o Instructional days/minutes ~ Reduction of school year by up to five days and/or equivalent in
instructional minutes expires at the end of this fiscal year. District must return to 180 days of instruction
in 2015-16.
o The suspension of instructional materials adoption requirements expires at the end of 2014-15. For
greater detail, please go to: http://www.cde.ca.gov/ci/cr/cf/
Charter Schools
A charter school’s concentration grant percentage will be limited to the percentage associated with the school
district where the charter school resides. If the charter school is physically located in more than one school
district, then the charter’s percentage cannot exceed that of the school district with the highest percentage.
Charter schools do not have declining enrollment protection. All charter schools are required to prepare a
LCAP.
LCAP Public Hearing reminder
The LCAP public hearing must be on the same day as the budget public hearing and requires the agenda to be
posted at least 72 hours prior to public hearing. The public meeting for the LCAP adoption and budget
adoption may be no sooner than the subsequent day. LCAPs must be adopted by June 30 prior to the fiscal year
for which it is created. LEAs may want to consider scheduling additional board meetings in June to
accommodate this approval process.
Greater detail regarding LCFF funding can be found in the state-wide County Office Common Message – Second
Interim 2014-15 which is attached, as well as located at dp.scoe.org website under the Workshops tab.
Summary Statement
It is recommended that LEAs proactively involve stakeholders in a transparent and inclusive LCAP and budgeting
process to obtain the consensus needed in creating programs which meet educational goals and maintain fiscal
solvency. Please call if you have questions, need assistance or advice. We are here to assist districts
however possible.