001Okay. All right, so we're going to get started. So this is the February 26 uh parent workshop on an overview of school district funding. Okay, so tonight we're going to go through about California students publicly available school district financial data where where parents can go out into the internet and get information about schools uh funding sources for schools, how the accounting structure is for school districts, the local control funding formula, we'll talk a little bit about the Capistrano Unified School District budget. What drives our funding, which is enrollment and attendance, some of the challenges we face uh with um the way we're funded. We'll talk a little bit about pre- and post-COVID um funding and talk about how school districts are held accountable for their funding and how it's spent. And then um some of
002the budget challenges and how we prioritize our resources for student learning. So to start with there's 49.6 million students in the United States. And California has the largest number of those students at 5.8 million and number two is Texas with about 5.5 million. Texas is catching up with us there. They're on their tail. So they've [clears throat] grown a little bit, California's has shrunk, declined. So Capistrano Unified School District covers not quite 200 square miles. There's 30 elementary schools 5 K-8s, eight middle schools uh six comprehensive high schools and seven alternative schools and programs. And we are most of all of South Orange County in seven cities and unincorporated areas of um and Rancho Mission Viejo, Coto de Caza uh Ladera Ranch and Sendero. So the information that's available to the public to be able
003to do some comparisons with school districts is Education Data Partnership where each year that gathers information from the state of California and then uh puts it all into one single database so it's easy for parents to go look at it, look at the Capistrano Unified, compare Capistrano Unified to other districts. Um look at and so the following slide shows you what kind of information is available. You have uh student demographic data tab. You can look at staffing uh ratios for the school districts. Uh the school bonds that have been uh attempted and passed or failed by school districts uh financial uh all the financial data. And then you can do it by schools and then here's the comparison. You can go and um do comparison side by side with different schools and districts. Also on
004the Capistrano Unified School District website we have uh at this address here highlighted homepage at district our district budget and LCAP. You can go and look at all the historical budget documents of Capistrano Unified. And this is in addition to the board meeting uh material that you can are available and go and look at PowerPoint presentations that have been given to um at board meetings. Also we have a school locator so uh parents and guardians can go in and put their address in and it'll tell tell them which schools they're boundaried for, elementary, middle and high school in addition to showing the boundaries and also the trustee areas within the Capistrano Unified School District. So funding sources for schools so 95% of funding for schools in California comes from California either through local property taxes
005or from the state through sales tax um lottery money is only about 2% of the total budget for schools uh income tax, sales tax and other types of fees and then the other 5% of funding comes from the federal government. So majority is state-based. School districts began as local entities providing education and they've pretty much stayed that way with support from the state and federal government. So one of the uh issues with California in school funding is the volatility and the reason for the volatility is we've always kind of talking about the ups and downs of school funding in California and the reason for it is the uh the source of the income that funds schools. And the three big income sources is income taxes, sales tax and property tax. So for Capistrano Unified a
006majority of it's property taxes and then the state backfills up to the funding formula which we'll talk about later with income tax and sales tax and other uh funding. And the reason why it's so volatile is because property property tax is a smaller portion of funding for schools than it is in other states. Any other state the majority of it's property tax. And uh because of that the more volatile types of income are funding schools so you'll see when the economy dips there's a big drop in funding for schools. When the economy is doing well there's a big increase. As when the economy takes a downturn people will lose it, income is lost. People don't purchase as many things so sales tax goes down. But what all what people always pay are property taxes. So
007that's why states that are funding schools primarily on property taxes or school school districts who have a majority of their income from property tax there's a little less volatility because property tax is very stable. Because if uh property tax isn't paid on property someone will pay the property tax on that property. It always gets paid. So there's less of a um voluntary type of approach to like sales tax and things and things like that. So now the accounting structure so this would be for the accountants in the audience. This would be very exciting so but I'm not going to I'm not going to dwell on it too much. But this is the reason why uh in Education Data Partnership you can go get this information and do really side by side apples to apples comparisons
008because all school districts have to put their their track their spending in the same way. So we all are have these codes that we use they're called standardized account code structure that the California Department of Education provides and uh school districts are required to use that structure uh to record all their funding and we also use um fund fund accounting to track all the different types of dollars we receive and the spending within those categories. And then the [clears throat] chart of account is available here. I'm not going to go into it and look at it but there's a chart of accounts and it's the key here takeaway is that it's the same for every school district. And then this is the same for every school district as well, how we have to code things.
009So if you're looking for a particular expenditure there's a way to find it when you look at our budget that was just shown the links to our budget and you go in and you'll see fund resource object site the goal function the year and then a miscellaneous code that school district can use on their own to distin- distinguish between different expenses. Uh to make them to more granular uh track expenses. But for the most part the top uh six of these are all of the same for every school district. So fund accounting. So school districts then have to track all of their revenue and expenditures within funds. So the general fund is the largest fund for Capistrano Unified and school districts in general. And uh the general fund is made up of the unrestricted budget
010and restricted budget. So the unrestricted would be your regular property tax goes into it um other types of um funding that the school receives. And on the restricted side would be all federal funding. Uh some of the lottery money is restricted just for instructional materials. So the restricted side of the budget then tracks those things like special education things like that. And if the restricted side of the budget has a particular mandate to meet for the needs of students and it costs more than the funding that's provided then the general unrestricted fund has to transfer the difference over. But you can see here the general fund is all the more the basics of providing education. All right, then there's some other funds that we track and that is cafeteria so food services is all separate
011fund. Uh it's completely self-sustaining in Capistrano Unified School District so there's no uh we've not had a need to transfer any funding to the cafeteria fund. It's funded by federal and state funds and operates entirely on its own and um has never been in the red. It just operates as a separate fund. Then we have child development similar concept receives state funding and fees for parents for um preschool. And so it operates all separately on its own. So that would be more in the preschool side. And then we have deferred maintenance. In the past, this used to be a fund that school districts would contribute to from their general fund and the state would match it. But uh with the new funding formula back in 2012-13, now it's um entirely funded from the school district.
012So it's the amount that the school district would set aside for doing deferred maintenance and it's entirely um optional for the school district. So our contribution to this fund it runs between three to five million dollars over time and we adjust it based on our budget needs. Sometimes if our budget's a little tight, we might reduce the amount we put in deferred maintenance. When things are better, we put more money into it. And then facility funding. So the the funding that we talked about previously is all general fund and it's for operating the school districts year over year. And none of it's for building for building brand new schools or anything like that. That would be part of what's uh in the uh facilities funds. So you'd have capital facilities funds which are developer fees
013for uh mitigating um new students. So if you have new students that move into new developments, the development has to pay developer fees and then use those fees to build schools. So that would be like with Esencia, Rienda, the developer pays half and the state of California pays the other half. A lot of people are surprised by that because California pays for the half the property price to buy the property and half to build the school. And then the um the developer, usually through Mello-Roos, it ends up being actually the homeowners are paying for the school. And then there's bond funds. So if a school district passes a bond measure, then those are deposited into a uh separate fund to be tracked for spending for building and modernizing schools. And then there's also special reserve
014for capital outlay which is the proceeds from sale of schools. So that's if you sell property, you would then put that funding into a separate fund to be used for other capital facilities projects. So the idea behind that is if you sell a taxpayer's asset, a school, then it goes back into a a capital asset. So you can use that funding to modernize other schools and things like that. You can't use it for your operating budget. We can We can have some questions, yes. That means sell property. No, it goes back into So it's the source of the the funding is from a capital facility, it goes back into a capital facility. So now the there's a formula that's used to calculate the um how school districts receive their money. And it's actually very simple.
015Uh the it's just the the mechanism of it out there for each different school uh school districts can be a little bit different, but for the most part it's the same for everybody. And that is uh the local control funding formula and that came online after the Great Recession in 2012-13. It was fully implemented in 2018 and now we've been operating on under this funding formula since then. And the way it works is each grade span receives a separate amount of money and every school district in California gets the same exact amount. So students who are in K-3 get the same amount plus an augmentation fund. So before local control funding formula, that CSR augmentation was for class size reduction in K-3. When they came out with the new funding formula, they just called it
016an augmentation amount and just add it to the K-3 funding. And then students in 4-6 get a different amount per student, 7-8 get a different amount, and then high school students get an uh another amount. And then there was career or technical funding back before the old funding formula and now with the new one, they just put it uh they take that this was categorical funding. So they added it to the regular budget for school districts and it's called career technical augmentation for 9-12 students. And then on top of that, it's supplemental funding and supplemental funding is uh purely for uh students who are qualified for the funding. So those are students who um qualify for free or reduced price meals. So it's an income-based uh uh reason, uh foster children, um and uh English
017language learners. So those are students who would receive 20% of the base grant. So you take the base grant multiplied by 20% for each of those students who are in that category. Oops. And that gets added to the amount for the school district. And then above that is concentration funding and the concentration funding is for school districts that have more than uh they get 65% of the base grant if for every student that's over 55% of the school district if the school district's 55% uh students who qualify as low income or English language learners, then for every student above that 55% gets an additional 65% of the base grant on top of that. And we'll talk about more of this later about how this um factors into our total funding. And he as noted here,
018Capistrano Unified is for about 32% um uh of those students that qualify and they're referred to as unduplicated because you can if you're an English language learner and low income, then you would just be counted once. So they refer to it as being unduplicated. And the unduplicated percentages are what you're seeing here. So uh 55% is the percentage of students who are unduplicated and if you're above that, you qualify for other concentration grant. I'll be more of that. So now this is how it would look. So this is in 2024-25, the way Capistrano Unified calculated its local control funding formula and it's very very simple. So here's the number of students, so the average daily attendance. We'll talk about that later. That are grades TK through three, 4-6, 7-8, 9-12. And then this is the
019base grant that every student in that category receives throughout the state of California. And then these are the the CSR augmentation for for TK through three and then this is the um uh career technical augmentation. So every student who's 9-12 also gets $316 per student and every student who's K-TK through three gets $1,043 per student. And you see at the top is the 1.07%. That was the COLA that year. So the numbers below reflect a 1.07% increase from the prior year. So it's real simple math to come up with these with what what it is. And then this was our unduplicated percent pupil percentage, 34.77%. So right off the bat, you know we don't qualify for concentration funding, but we do get supplemental funding. So then for every student that qualifies of that of the
02034.77% in each of these grade levels receives supplemental funding. So $770 for TK through three all the way up to $866 for 9-12. And that represents 20% of the base grant. And if we for concentration districts here, it's 65% of the base grant but the it's students over the 55%. Mhm. Um base Yes, that means Well, the ADA is the number of students. So it but they refer to Yeah. So they refer to it as ADA as average daily attendance cuz you're not funded on the enrollment. They actually the student you're funded on the days they attend. And we'll talk about that later. So then for the local control funding formula, then you add all that up and then that comes to the $480 million for Capistrano Unified. And uh we'll talk a little bit
021later about this, but a majority of that funding for Capistrano Unified comes from local property taxes. And then whatever falls short of what this formula generates, the state backfills. So after the formula's said and done, each unified school district is is reflected here. Uh the and this is for 25-26. So the amount per student here is the following year after example last year. And Capistrano Unified is at $12,615 per student. You see here's the ADA, 38,807. That's not our enrollment, that's just the percentage of attendance. And it generates this much funding. And you can see the school districts that have a very similar demographic because the funding is based on what we talked about, free free reduced price meals and EL students and students that need extra um extra funding. They're the the ones here
022down in pretty much very similar in funding. And you get to the districts that receive concentration grant funding which is up here with Garden Grove and Santa Ana. You can see their funding per student goes up and that's reflection of the additional supplemental funding and then the concentration grant funding. And as a comparison, uh Santa Ana is very similar in size to Capistrano Unified. Uh their funding level generates about $150 million more per year for their students. But and the point of the local control funding formula was to um uh to uh have districts that need to more intervention with students and the concentration grant was meant to address communities that are high concentration of low needs students to help them address the needs. And then the top two is Laguna Beach and Newport Mesa.
023They have their asterisks next to their numbers and you can see their their local control funding formula the state would calculate that say Newport Mesa would receive $13,022 which is similar to in our range. But because their local property taxes exceed that, they just are considered basic aid so they receive just their property taxes so and that calculates to $24,259 per student. And then Laguna Beach is the same and so they're at 35,000. Any questions? Well, there's I would put school districts into three different tiers. One is not basic aid. Uh districts that are very close to it so you tend to bounce in and out of basic aid. So for example, during the Great Recession, the cuts were so deep Irvine became a basic aid district. They basically so they kind of became basic
024aid the opposite way. The state cut so great that but but the beauty of it is they once they hit their property tax levels, the cut stopped. So they're so they were protected from the full cuts because they were they were cut into basic aid sooner. Um then so that's the second tier. You're and so Capistrano is kind of beginning to get to that phase. They'll probably be in it in the next couple of years in this bouncing in and out phase. Uh and there's other things that that affect it. So it's probably takes about 5 years for a school district to kind of then become fully basic aid because property values also go up. It's a factor of the state if the state suddenly has a great economy and they're funding schools then that
025may be outpacing your your property taxes so you stay non-basic aid. Well, that would be part of it. It's just that it's turnover in the homes. So and the increase in property taxes based on the church the turnover of homes because when a home sells, the property taxes reset. That usually runs about that it can average like 4 to 8% per region. So that clearly outpaces a lot of the COLAs over time. The this the state cost of living allowances for school districts. So you may hear of that Capistrano like in a year or two might be basic aid but they're not it's not like we're going to turn into Laguna Beach funding anytime soon. Okay. So now the district budget. So this is the revenue and expenses for Capistrano Unified and the revenue is
026broken down into what like we talked about state local property taxes which is about 92.5% and you have the 5% federal and then there's local 2.5%. Local funding is gift money and things like that. Booster Foundation donations and things like that and other miscellaneous local funding. And then on the expense side you have certificated teachers, classified staff, and the benefits. So a majority of that are employee related about 82% and then the rest is books, electricity, any legal fees, computers, Chromebooks, all other kind of incidental types of expenses. And then um other other debt service is very small about 1%. It would be in services. And that's where also you you have electrical electric, gas, water, utilities, things like that. Um anything like So then when the the school district as they build their budget
027so you saw with the local control funding formula that's how much money you're going to get. And then you look at what what are your expenses going to be. So you come up with some assumptions so you saw earlier with the local control funding formula the 1.07%. So that drives and then we're given estimates for the future years. So we can predict 25 26 26 27 what the cost will be for each of some of the the way the funding is calculated. And then the additional money that might be given like for here when they did the add-on for TK, that's the amount that comes in and then we calculate what the benefits rate are for retirement CalSTRS, CalPERS, state unemployment insurance and what the rates are. So those just get built into what our
028out costs are going to be. Then we look at what the lottery funding is so lottery is restricted unrestricted and we get about $191 unrestricted 82 Prop 20 ADA and then we get a mandate block grant because some we talk about mandated costs for the state will require school districts to do something but they don't pay for it. So a few years ago the state created a mandate block grant so they just if school districts opt into it which we did most have, you get it just a lump sum to cover all these mandates. And then they'll adjust it by COLA and but usually the mandates outpace it. So this is the amount you receive per student for the mandates to cover those mandates. Cuz in the old in the old days you had to
029show what your expenditures were. There was a lot of effort in saying here's what we spent on this mandate now we need to get reimbursed. It was a lot easier for the state to say okay, we'll just pay you an amount per student to get past all that. And it's it's it's a opinion on whether that covers the true mandates or not. And then [clears throat] we also look at our average daily attendance. So we look at our attendance rates and our enrollment and what that calculates to in the future and of course we'll talk about it later but Capistrano Unified is declining enrollment so we have to factor that into how we're creating our our multi-year projections. And then also we with the changes in minimum wage we have to look at our salary
030schedules. Anything that's below minimum wage has to be benchmarked back to minimum wage as those change. And then the sites are provided discretionary funds so they have the gift funds so from donations and things like that it goes into their sites. So the schools if they qualify will receive some of that restricted money from the federal government or from the state. Here are some examples there. And then there's an amount per high school for co-curricular transportation and supplies for each high school and then there's a per child allocation. Those are just like the site funds for materials and supplies for the for the year. And we adjust those over time. And if it's a brand new school then there's more to kind of stock the school for that year to get it rolling then they
031go to the usual per student allocation like other schools. And then there's the Prop 28 art and music grant which is passed by voters and so that's a separate part of money that goes to schools. There are certain restrictions behind it and how it has to be spent. So this chart here I know you can't read the numbers but it's broken into the general fund that we talked about earlier and it's restricted unrestricted restricted then child development fund and these are all the revenues expenses any transfers we talked about earlier and then what the fund balance is so the cash in the bank basically is at the bottom and then above that is how much you spend and how much money you're earned the revenue you're receiving. And then there's deferred maintenance capital facilities school
032facility funds special reserve for capital outlay and then we have an insurance fund that tracks our workers compensation costs and property liability insurance. So these are a lot of the way we we're self-insured essentially. But this chart here reflects every single dollar that the school district receives, spends, or transfers within its budgets. Every single dollar is reflected here. And then they were required to keep a 2% reserve and that reserve is calculated so down here you can see this number here ending fund balance has to be greater than or equal to 2% of the combined restricted unrestricted expenditures. But it the ending fund balance has to be this amount has to be in the unrestricted side only. So that the restricted side doesn't matter. But you have to reserve for the unrestricted restricted expenditures as
033well. So that's basically the rules that the Capistrano Unified has to live by from a fiscal standpoint. You have to end your year with a 2% reserve or better. And the smaller the school district the higher the reserve requirement is. So like LA Unified is 1% where our district our size is two. Small districts will be three. And then when you get very small school districts you get it's 4% or or a dollar amount whichever is higher. So this is a really I really like this chart because it shows the way everything flows between the school districts. Remember the the graphic that showed the unrestricted restricted funding and the little dollars for transfers? So those are right here. So, here's -99 million 848,000 from the unrestricted being transferred over to the restricted side. That's part
034of it, yeah. It's primarily special ed and special ed transportation. Uh they're um but that's the majority of it. So, now these are some of the things that drive how school districts are funded. So, the way we receive our money uh is based on enrollment. So, here's the history of the enrollment in Capistrano Unified. You can see as Orange County was becoming from going from orange groves to no oranges are grown in Orange County uh there was lots of housing development and schools were being opened. So, 11 schools in this time frame, five schools here, and 15 schools were opened between 2000 and 2007. And then we peaked enrollment at 52,006 students in 2009-10. And then as students who were attending the schools who lived in the homes that were built aged out the parents
035didn't sell their house to a new family with kids. They stayed in the house. So, uh they the they're aging in place. So, those students who now Whoops, that that house is no longer generating students for the time being. So, that's what then you begin to get the downturn in the enrollment over time. There's other factors and we'll talk about that as well besides just the aging out. And on this chart, you can see even during all of this growth, there were um because the district is large, there's there's a uh this we closed some schools four schools over this time frame. And now we we've opened uh Esencia K8 in 2018. And Rienda will be opening in 2027. And that's from the Rancho Mission Viejo development. But that growth is not offsetting the the
036the loss that we're receiving in the other parts of the district. So, why are we declining? So, one is I like I explained the aging out of the neighborhoods but also that there's been a significant decline in birth rate at the same time. So, the birth rate has gone from almost 6,000 births per year and now we're down to 3,600. If you right the right off the bat, there's a 2,000 roughly difference. So, those things those two things combined then create these smaller student cohorts. So, the incoming kinders um are the the group of incoming kinders is much smaller than the outgoing um 12th graders. And then in general, if you look at the it's about if you look at the birth rate about 2,000 difference, then you would expect at some point in time
037you'd have graduating seniors about 2,000 more than incoming kinders. But we're not declining 2,000 students in Capistrano Unified. We we decline like 4 to 500 600. It was much more during um COVID but it's that's generally about 4 to 600. So, we get some in intergrade growth. Uh where people people move into the district from out of state. They move into the district from other parts of the California. They uh put in their kids into the our schools um after they've maybe done private school for from till third grade or till fifth grade and then they come into Capistrano in the middle grades or they do private till eighth grade and they go to high school here. So, we see a lot of inner growth in those intervening years between um first grade and 11th
038grade. And then of course, there's private schools, but they're private schools are suffering the same decline in enrollment and birth rate impacts as uh Capistrano Unified. And so, they've been declining just like we have. But the impact on the on our enrollments has very minimal, about 50 students. We see the the kinders kinders will go to private schools. Um and it's it's a small amount compared to the 2,000 change in the declines. So, the here's the birth rate. So, you can see we peaked our birth rate was nearing 6,000 and then we hit our peak enrollment in 2010. But the birth rate was already starting to decline. So, now we're at 3,830 in 2025. So, these kid these last from 2022 to 2025, they're going to be the incomer incoming kinders soon. And you can
039see it's it's in the 3,000 range. So, this is what a kind of an animation. This was done last night by the superintendent at the board meeting. An animation of kind of how it looks when um when the birth rate's declining and and you get the aging out. You see each year at the top as we go down, you can see the birth rate on the left declining and the enrollment increasing because these are the kids during the high birth rate years are in the system. The birth rate's declining, so you'll see the lower grades TKK12 dropping. And that bubble moves through. And you can see the enrollment total on the right just dropping. So, now that's kind of where where we are. This This includes the new the TKs which has helps helped school
040districts a lot with the incoming TKs. But the the most important number is that that low birth rate. So, that on top of the aging out of the of the um the homes where they they just know there's not as many kids in the home as well. And that's what happens when neighbor neighborhoods age out. It's just the way it goes. And then what will happen is you have a new neighborhood significant growth in students that ages out and then you get into an equilibrium enrollment. And that equilibrium enrollment is just entirely based on the birth rate happening within those homes plus as homes turn over. So, you you might the home turns over, family moves in with kids, they have kids, but it's not nearly as much as when neighborhoods are first built. This
041is this number of this is for illustration purposes only. This is just um this doesn't include a a couple thousand of special program students. So, this the idea behind this was just to illustrate the the TK-12. But there's some like the CHEERS program or now prep isn't in here. So, why is it so impactful when you're declining? Because if on the flip side, when you're increasing enrollment it's a the benefit is um is fantastic and you'll see why as we in 2024-25, we lost 479 students. So, at about 12,259 dollars per kid, that's a revenue loss of 5.8 million. And with those 479 students now not here, you need fewer teachers. And that's about 16 fewer teachers you need. So, you save you know, you get you have retirements, so you don't need to rehire.
042You save about 1.9 million, but you still have almost 4 million of of a loss. So, you need to make reductions to account for that. And since the peak, Capistrano Unified has lost about 12,000 students. And in a 12,000 student district that is about an 11 elementary. Those are about 11 elementary schools. You have a district that has 12,000 students in it in California, they have about 11 elementary schools. So, we've lost like an entire school district of kids. But it's was expected, it was predicted, and it it's normal for the way school districts um grow like Capistrano Unified did. And for the first time, Irvine Unified was in was in a big growth phase. They were kind of like 5 years behind us, 10 years behind us, and now they're for the first time
043they've declined this year. So, now another driver. So, that's our enrollment. So, the other one is attendance, students coming to school. They they had the we saw earlier they have to attend to get the funding. So, for any reason if a student is not in their chair at school, we do not receive funding. And that's about $93 per day per student um loss if their if their seat's empty. And the way it's calculated, average daily attendance, is only for the first 137 days of the 180-day school year. And that 137th day, sometimes it's 136 days, is called P2, the second principal apportionment time frame, which is in the March time frame. Then it cuts off and that's that's your funding, your average daily attendance funding for the for the year that you would receive. So,
044the impact of the of the pandemic was all school districts across California saw a significant decline in their attendance rates. So, in Capistrano Unified, historically we were around 96% cuz that the 4% accounts for illnesses, unforeseen things that students can't be at school. But about 90 95 and a half to 96 and a half percent kids are attending. Post-pandemic, it it dropped significantly after the pandemic and it's come back up, but it's not come back to to the previous levels. We're about 94 and a half percent and that's about 7.6 million dollars less per year that we receive. Um and then compared to 100% attendance because we're only one of six school districts that receive attendance-based funding uh if we you just receiving an enrollment-based funding uh it would be $28 million more funding. So,
045this chart represents our our attendance in last year and uh year-to-date this year. And the white line is the average each day of the the average cumulative This is the the white line is the average cumulative attendance. And the blue line is the daily attendance each day. And the reason why it's choppy like that is Mondays and Fridays. Low Mondays, higher in the middle of the week, and then it drops on Friday. Then it goes back up Tuesday, Wednesday, Thursday, and then back down. And the variance between these is much more significant than it was pre-pandemic. Pre-pandemic, there were still Monday-Friday absences were higher, but it was a much tighter swing than it is now. Um so, the orange bar is the 96% average. This is what we would end the year at, the orange
046bar. We're getting there at the end of September now. Our average hits that bar Yeah, end of September. We're we're already doing worse than we were pre-pandemic. It's all money. Yes, it is. Yeah. >> So, that's Mhm. >> [clears throat] >> Yes. And what what's the We did we count it? We're We're doing pretty good, but I mean, it's not going to It doesn't offset the significant Yeah. Like it Yeah, quarter percent. It's It's a small small amount. Every little bit helps, yeah. So, then another uh one is special education. So, the important part of this slide is the yellow sticky note. And that is that in 1975, the federal government passed IDEA, Individuals with Disabilities Education Act. And it promised to fund students that had an IEP, an individual education plan, 40% of the
047funding for their needs. And they've never reached that amount. They're at We're at like 8%. 5% from the federal government. Mhm. It might be even in the $35 million range more. So, but and then the importance of this chart is the orange bars are our student enrollment. We just talked about it, it's declining. Special education funding's based on all your students. So, every student that you have generates a little bit of special ed ed funding. And it's based on that orange bar. So, if the orange bars are going down, that means your special education funding's also declining. But, students with IEPs are increasing. One of the one of the great things Capistrano Unified School District does is people will come here for the for the special education uh we provide. So, but you can see
048this graph, you know, the funding is dropping, number of students on IEPs is increasing. So, that becomes a challenge when the federal government's only funding 8%. So, that reflects the increase in the amount of transfers that have to occur from the general fund to the unrestricted to the restricted fund. And you'll recognize that 99 million was in the chart I showed earlier. So, now that kind of gives you a picture of kind of how we're funded, a very very simple, easy-to-understand funding formula, but then all the other challenges that are that create um uh issues on the expense side and and the revenue side. So, pre- and post-COVID. So, one of the uh things that the superintendent mentioned last night and we've been mentioning is that um we're now talking about the declining enrollment. Well,
049so but we've been declining since 2010, why are we now just talking about it? Well, we had the Great Recession, which kind of that was a mad panic for reductions because the funding was were being sl- funding was being slashed. But at the same time, we're also losing enrollment. But the funding cuts from the state were far greater and and that was the source of most of the panic. Then came um the local control funding formula and that we the funding have over time was restored back to like 2018. And things were doing okay. It wasn't great, but it was getting better, but we were still having our you know, we were addressing the declining enrollment, but funding levels were being restored. So, that kind of helped smooth that out for us. Then the pandemic
050came, and what happened with the pandemic is we should have been on this these salmon-colored bars, or prawn, if you prefer the prawn color. It's salmon. The the This would be what our trajectory would be in funding and enrollment, a decline. And we would be addressing our budget, making reductions, but uh what happened was the pandemic hit, so we had one-time pandemic funding, which is this blue bar represents the COVID relief funding. And also had uh protection from the decline in enrollment. They call that ADA hold harmless. Uh if the year of the pandemic, they didn't count. So, we got to use 1920 funding again. And then they let us average, which factored 1920 in twice for 2 years. But you can see the the impact of that extra funding as if we had more
051students, but we were still declining, but we were it was it was not visible to us because we were getting all this one-time additional funding. And so, that was what we were basically operating under in the last several years. But you can see now 25-26 that we're those those funds are all done. We're past all of that. So, now we're now where we are is addressing our declining enrollment. And so, this is a an example of what happened is we had 1920 was in our funded ADA for many years. Which meant for example, in 2021-22, we were funded on 5,062 more students that we didn't actually have. Because they were allowing us to use previous um enrollment or attendance. And then the the green numbers is the amount basically in dollars that that represents. So,
052in addition to the one-time COVID funding, we also received about $165 million in additional funding on the ADA hold harmless and the new uh averaging. We could instead of using your when you're declining, you can use your prior year. Yes. So, those are the two reasons why during the the pandemic and the recovery from the pandemic, we weren't really talking about declining enrollment. We were busy uh rec- um recovering from the pandemic. And I really can tell you that the school district did an amazing job because we're now before our students are performing better than they did prior to the pandemic. So, we used that money wisely, and these are some of the things we used it on. Um Chris, this was that that was part of that bubble of money, which is now gone.
053So, now we're back to to normal, normal class sizes uh and things like that. And many of these things uh for the most part, we had embedded it into our practices. Would you say, Greg? So, when we we did some of these things to help with learning re- learning loss, we embedded it in into our practices uh so that it can continue on. So, to try to leverage that one-time money and and have it have an impact that can keep going. So, now how are school districts held accountable for their funding and their spending and and making sure that they can keep their uh doors open. So, Assembly Bill uh 1200 AB 1200 was passed in 1992 as a result of some school districts going bankrupt and the the um state having to bail them
054out. So, that made certain requirements of school districts. So, they had to develop um uh interim uh budgets. Uh if you've heard of FCMAT, the Fiscal Crisis Management Assistance Team, that was formed to help school districts in financial distress. And it requires school districts tw- uh two times each year to report on their finances and how they're doing in the current and fol- and what they project for the following 2 years. And if you're at any time negative, then you have to do a third report. And these reports are as of um the end of October and they're due by December, end of January, due by March. Those are the two time frames that you give those. And then there's another one I think in June. I've I've only had to do a third interim
055once in my career, so try to avoid those. So, that's AB 1200. It's a very good bill. It really it really does help. And part of it is doing a multi-year projection. That's the the critical part of AB 1200 is um doing projections out so that school districts can look and see how they're doing and then certify that they're going to make their financial they're going to be financially viable in 2 years. So, these are the things that we develop our multi-year projection on, you know, enrollment projections and staffing step and columns. So, that's as people move across the salary schedules, we have to factor that in inflation, energy cost increases, any salary increases that we might have have a in the pipeline for settlements. And then also the state and economic overall changes. So,
056changes in statutory benefit rates, uh cost of living which would impact how much revenue we would receive. And then um the economic ability for the state to fund it. So, the state may say we're going to give it the cost of living because it's just a a calculation. Uh Say it comes out to be three 3%. Everything's rose in 3%. The state may not have the money to pay that 3%. That happened during the Great Recession. So, they would just not fund the cost of living allowance. But we haven't seen that in quite a while. Luckily, there hasn't been another great recession. So, that's the certifications. You have if you're positive, you means you can meet your financial obligations in the current following two years. Qualified is you may not. And negative is you will
057not be able to meet your financial obligations. And you'd never want to be running out If you run out of Once you run out of cash and you can't pay your bills, then you have to go to the state and get bailed out. And usually the bailouts are in the millions of dollars. And they're like mortgages. It's like a 20-year loan. And while that loan is in being paid off, the state runs the school district. There's no superintendent. There's a state administrator. And they have stay and recent power over the local board. So, the board basically uh loses its power until that loan's paid off. And the downside is it's We're looking at 10 20 years to pay that money back. So, you never want to be there. So, it's it's important to And the
058beauty of that multi-year projection and in in Capistrano, we go out 5 years just internally. We kind of keep an eye out. Um especially when you have declining enrollment and then all this volatility is you want to make sure that you're ahead of the game. So, that you can make these adjustments more gracefully and they can't be it's not so abrupt students. And we'll talk about that a little bit here. So, the budget challenges in prioritizing resources. So, there's the the big challenge challenges for school districts are internal external challenges. The internal ones are declining enrollment like we talked about, the attendance rate. Um looking at the positions you have in your multi-year projection. So, that you're if you're declining enrollment, you saw earlier how you instantly lose revenue, but you can't make the reductions
059fast enough. So, you have to go in and look at it. The positions are out there supporting schools. And then um you're managing your reserve balances and then managing special ed costs as you saw earlier, that's a big factor in our budget. Then the external challenges are the state budget and what they're going to fund, special education funding from the federal government, any legislative changes that might change school district funding or what efforts they have to provide that isn't funded like unfunded mandates. As the the last one. So, stability. So, the key for a school district is to to be to be stable. Manage things and be stable. And we all know that children thrive in a stable environment. School districts thrive in a in a stable fiscal environment. So, what's important for a school
060district to do is to make sure that they're ready and address the challenges they have, the internal challenges so that they have the ability to meet any external challenges that might come across come to them. So, that's why it's important to maintain reserve balances not just at the bare minimum. And we'll talk about that. So, this chart is the green bars the service level to students. And you'll see in our multi-year projections that we show, you see red bars, green bars, and up and down. And that's perfectly normal because you're you're really estimating the future. You're not seeing what it's going to look like. And you're plugging in what you do know. And if your if your expenditures are going to outpace your revenue increases, then you need to make reductions. So, the idea is
061to stay to keep that service level of students stable and know that sometimes when you surplus spend, you save the money so you can be ready for those times when they might be a little tough. And then so you can keep that green bar where it is. And always, of course, staying above the 2%. The the tough part is for when school when you're balancing down hitting the 2% hitting the 2% cuz then you're doing things that can impact that green bar. So, the idea is to have a fund balance that's healthy enough to support stability over time. So, prioritizing our resources. So, um how do we go about when we look at what what we need to do each year for students? We um start with the first thing is every student needs a
062seat in the classroom with a qualified teacher in front. That's the that's the basic beginning of it. And then the the the um the way what then what happens from there requires other things that are important. And those are that the facilities are safe, clean, and functional. So, that that teacher student work can't be effective if they're not in a safe, clean environment. So, that's number one is a nice environment. Then comes the direct student support. So, once you're safe, it's a clean environment, we want to remove any barriers to learning. So, make sure that the teacher may able to teach students as as can be as effective as possible. So, removing those barriers uh for students. And then all the things behind the scenes. I mean, down to the trash collection, cleaning the rooms,
063um transport transportation, the payroll, paying the bills, keeping the lights on, paying the electricity bills is all kind of behind the scenes. Uh so, to keep all of those functions going. So, that's kind of the the approach we have. And then down here is that every dollar is aligned with objectives. State Create stable, safe, well-supported learning environments. And so, one of the things we talked about here is the having a clean, safe school. And in conversations with parents over the years, whenever you talk about student safety, they they they tend to only think about um defense or the locked door. Uh things like that. Or or is there anything that the student might fall off of and if it is unsafe. That's when they think of safe. But really from from the school district's perspective,
064the safe student safety is about their physical safety, their emotional safety, and their academic safety. So, physical is pretty easy. We want to make sure they're physically safe, they're protected, and and they can learn, and they're and they're fed, which then blends into the emotional part. Are they being treated nicely by adults? So, they do they have good positive adult relationships and doing well with their peers? And are they happy? That's because you can't really have effective learning unless you have all those things. And then the other one is academic safety. Are they being challenged? Are they learning effectively? Um and and getting exactly what they need to to reach their maximum potential. So, from from the district's perspective, that's student safety. Um And then here are some of the things that revolve around those
065areas. areas. So, now back to the budget. So, this was at our first interim. So, we talked earlier about the two different interim reports. So, this was first interim. And it you can see the interim is the the current year and the following two years. And then we always look out in the future. But you can see this is this is our um bank balance percentage where it's required to be 2%. And this is whether we're spending more than we're earning. So, this is shows deficit spending in the, you know, 15 to 13 million dollar range. So, clearly these this chart first term shows over we need to address this. And And these go red because declining enrollment. Or the COLA's might be a little bit lower or like first term, they they might say
066your out your COLA's are 3 and 3%. And then suddenly, well, now they're 2 and 1/2 too. So, you you immediately see a loss of revenue in the future right there. So, we needed to address this. So, we've been busy making um fine-tuning our budget uh and uh making reductions where we can as far away from the classroom as we can. So, after you know, last night we talked about that in our board meeting. And anybody listening online, I'd recommend you go see the uh superintendent's presentation uh that was done last night. And so, now this is reflecting the reductions. So, uh you can see that our out years got better. The deficit out in the future is 7 million. And so, when we get to 2026-2027 and are now having an adopted budget, that
067third year comes online and it's red because it's less than 2%. So, that's 1.6%. So, it's only 0.4% away from being the minimum. But with the governor's budget proposal, which isn't is not reflected here, we expect this to be above the 2%. We'll be okay for when we adopt their budget. But um we won't do a certification at the adopted budget. That'll come at the first interim. But um if these were red, then when we adopted the budget, we would make a promise to the county office of education that we would cut a certain amount to make sure that by the first interim in December, those would all be in the green. The ones on the left, we would be above our 2%. So, that chart that we showed that goes to and down, deficit
068surplus deficit surplus. That if you were to run this chart out over time, you would see it kind of going up and down just like that. And the goal is to have this be above 2%. You see we've been pretty good. But the deficits, we can't deficit spend for too long. So, the reason why we look out in the future is we want to be as graceful as possible addressing these out years. And when you've gotten till 2028 2029, you've get you got a little bit of breath breathing room. Kind of take your time and do it thoughtfully. So, it reduces the amount of panic and you can also do things through attrition. Um without having to impact with with the the impacts of layoffs. But but when you have declining enrollments, sometimes layoffs are
069unavoidable. So, that is it That's a lot of information um packed into 1 hour. 1 hour exactly. >> [applause] >> So. Good. I think