CFO's Corner: A Look First Interim Financial Report for 2012-13

Anticipated mid-year cut of $3.3 million will not occur because of Proposition 30, but there is still an ongoing deficit.

The First Interim Report was presented to the Novato Unified School District Board of Trustees on Dec. 4, and it provides the actual financial activity from July 1 to Oct. 31 with financial projections for the school year ending June 30, 2013. The report also includes a multiyear projection (MYP) for the two subsequent years.

NUSD’s approved budget was based on the 2012-13 State Budget.  A major assumption of the 2012-13 State Budget was that Proposition 30 would be approved.  California voters did show their support of public education with an overall State approval rate of 54 percent and Marin voting yes at 68 percent.  As the revenue was included in the adopted state and NUSD’s budget, the passage will not bring new funding to NUSD; however, a mid-year cut of $3.3 million will not occur, either. This is very good news.

A budget reality (see CFO Corner dated July 2) is that even with the passage of Proposition 30, NUSD is projected to expend approximately $3 million in excess of revenues in the current and subsequent years.  This is a structural deficit that if continued, the district will fall below the state requirement of a 3 percent minimum reserve.

The Budget Advisory Committee began meeting in August to explore possible expenditure reductions.  Recommendations from the Committee will be presented to the Board in January 2013 for consideration.

As the threat of mid-year cuts is now behind us, we again scan the horizon to determine what budget adjustments are needed for the current and future NUSD budgets.

As noted in the budget narrative presented to the Board of Trustees on December 4, 2012, there are several external factors that could have a negative impact on the NUSD budget.

  • Federal Sequestration, commonly referred to as the “federal fiscal cliff”, could result in a reduction of 8.2% or approximately $175,000 should the Congress not reach agreement on revenue increases and targeted cuts. 
  • California school finance reform through the Weighted Student Formula is expected to be included in the 2013-14 California State Budget.  The effect to NUSD cannot be currently quantified as the state formula is still in the development phase.  However, NUSD was expected to lose base funding under the formula proposed in the 2012-13 state budget.
  • Locally, NUSD received a charter school petition requesting the formation of a charter school that is projecting enrollment of 544 students.  Based on petition signatures, NUSD could lose 484.22 ADA. The revenue loss would be offset by the savings due to reduction of teachers resulting in a net loss to the district in the amount of $1,393,718.  This potential loss is included in the ending fund balance as a contingency.
  • Locally, the parcel tax that generates approximately $4.3 million each year is set to expire June 30, 2015.

We will be watching these closely in the coming months.

— Karen Maloney, NUSD Chief Financial Officer

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