BP 3100 — Budget

Section: 3000 - Business and Non-Instructional Operations
Status: Active

Adopted: 2021-09-09

Revised: 2022-11-17

Policy text

BUDGET

The Governing Board recognizes its critical responsibility for adopting a sound budget each fiscal year which is aligned with and reflects the district’s vision, goals, priorities, local control and accountability plan (LCAP), and other comprehensive plans. The district budget shall guide decisions and actions throughout the year and shall serve as a tool for monitoring the fiscal health of the district.

The district budget shall show a complete plan and itemized statement of all proposed expenditures and all estimated revenues for the following fiscal year, together with a comparison of revenues and expenditures for the current fiscal year. The budget shall also include the appropriations limit and the total annual appropriations subject to limitation as determined pursuant to Government Code 7900-7914.

Budget Development and Adoption Process

In order to provide guidance in the development of the budget, the Board shall annually establish budget priorities based on identified district needs and goals and on realistic projections of available funds. The budget should also be developed with the intent to offset or pursue additional funding to support the priorities of the district to the greatest extent possible.

The Superintendent or designee shall oversee the preparation of a proposed district budget for approval by the Board and shall involve appropriate staff in the development of budget projections.

The Board shall hold a public hearing on the proposed budget in accordance with Education Code 42103 and 42127. The hearing shall occur at the same meeting as the public hearing on the district’s LCAP and the local control funding formula (LCFF) budget overview for parents/guardians.

The Board shall adopt the district budget at a public meeting held after the date of the public hearing but on or before July 1 of each year. The Board shall adopt the budget following its adoption of the LCAP, or annual update to the LCAP, and the LCFF budget overview for parents/guardians. The budget shall include the expenditures necessary to implement the LCAP or the annual update to the LCAP.

The budget that is presented at the public hearing as well as the budget formally adopted by the Board shall adhere to the state’s Standardized Account Code Structure as prescribed by the Superintendent of Public Instruction (SPI).

The Superintendent or designee may supplement this format with additional information as necessary to effectively communicate the budget to the Board, staff, and public.

No later than five days after the Board adopts the district budget or by July 1, whichever occurs first, the Board shall file the adopted district budget with the County Superintendent of Schools. The budget and supporting data shall be maintained and made available for public review.

If the County Superintendent disapproves or conditionally approves the district’s budget, the Board shall review and respond to the County Superintendent’s recommendations at a regular public meeting on or before October 8. The response shall include any revisions to the adopted budget and any other proposed actions to be taken as a result of those recommendations.

Budget Advisory Committee

The Superintendent or designee may create a Joint Fiscal Management Committee (JFMC). The committee may submit recommendations during their meetings or during the budget development process. All recommendations of the committee shall be advisory only and shall not be binding on the Board.

Budget Criteria and Standards

The district budget shall be developed in accordance with state criteria and standards specified in 5 CCR 15440-15450 as they relate to projections of average daily attendance (ADA), enrollment, ratio of ADA to enrollment, LCFF revenue, salaries and benefits, other revenues and expenditures, facilities maintenance, deficit spending, fund balance, and reserves. In addition, the Superintendent or designee shall provide the supplemental information specified in 5 CCR 15451 which addresses the methodology and budget assumptions used, contingent liabilities, use of one-time revenues for ongoing expenditures, use of ongoing revenues for one-time expenditures, contingent revenues, contributions, long-term commitments, unfunded liabilities, status of collective bargaining agreements, the LCAP, and LCAP expenditures.

The district budget shall provide for increased or improved services for unduplicated students at least in proportion to the increase in funds apportioned on the basis of the number and concentration of unduplicated students in accordance with 5 CCR 15496. Unduplicated students are students who are eligible for free or reduced-price meals, English learners, and/or foster youth.

The Board may establish other budget assumptions or parameters which may take into consideration the stability of funding sources, legal requirements and constraints on the use of funds, anticipated increases and/or decreases in the cost of services and supplies, program requirements, and any other factors necessary to ensure that the budget is a realistic plan for district revenues and expenditures.

Fund Balance

The District hereby establishes and will maintain classifications of Fund Balance, as defined herein, in accordance with Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. This policy shall only apply to the District’s governmental funds. Fund Balance shall be composed of nonspendable, restricted, committed, assigned and unassigned amounts.
Nonspendable Fund Balance consists of funds that cannot be spent due to their form (e.g. inventories and prepaids) or funds that legally or contractually must be maintained intact.
Restricted Fund Balance consists of funds that are mandated for a specific purpose by external parties, constitutional provisions or enabling legislation.
Committed Fund Balance consists of funds that are set aside for a specific purpose by the district’s highest level of decision making authority (governing board). Formal action must be taken prior to the end of the fiscal year. The same formal action must be taken to remove or change the limitations placed on the funds.
Assigned Fund Balance consists of funds that are set aside with the intent to be used for a specific purpose by the district’s highest level of decision making authority or a body or official that has been given the authority to assign funds. Assigned funds cannot cause a deficit in unassigned fund balance.
Unassigned Fund Balance consists of excess funds that have not been classified in the previous four categories. All funds in this category are considered spendable resources. This category also provides the resources necessary to meet unexpected expenditures and revenue shortfalls.
Minimum Fund Balance Policy
The governing board maintains a minimum fund balance policy for the General Fund in order to protect the district against revenue shortfalls or unpredicted one-time expenditures. The policy requires a Reserve for Economic Uncertainties (REU) consisting of unassigned amounts equal to no less than four percent of General Fund expenditures and other financing uses.
Committed Fund Balance
The Governing Board hereby establishes the following committed fund balance:
Community Funded Differential – Commitment of an amount equal to the difference between the calculation of annual property tax revenue and the state local control funding formula target.
Adult Education – The District has and may elect to continue the use of the Adult Education Fund 11. Any existing balance and future transfers into the fund are considered committed for Adult Education.
Facilities Repair and Replacement Program – The District has elected to use the Special Reserve for Capital Outlay Fund 40 as a restricted account based on a twenty-year projection of the cost of facility construction, repair, maintenance and modernization, known as the Facilities Repair and Replacement Program (FRRP). Once funds are transferred into the Facility Repair and Replacement Fund, those funds are committed to the purpose of this fund and the commitment can only be removed with a four-fifths vote of the Governing Board.
Aliso Property – The District has established a reserve for the accelerated option under the Option to Re-Purchase Agreement with National Church Residences of Laguna Beach. The agreement extends until 2041, but allows for the payoff of the Housing Urban Development (HUD) loan and transfer of the grant deed in case of default. The executed grant deed is held in custody trust at U.S. Bank. The reserve is committed for the Aliso Property in the Special Reserve for Capital Outlay Fund 40.
Capital Improvement Plan – The District has elected to establish a reserve to fund prioritized projects in a 10-year plan.
Other Commitments – Commitments may be added or removed by approval of the Governing Board.
Authority to Commit Funds
The governing board is the highest level of decision-making authority for the district. Commitments may be established, modified, or restricted only through budget adoption or resolutions as approved by the governing board.
Authority to Assign Funds
The governing board or designee (Assistant Superintendent of Business Services) may assign amounts for specific purposes.
Spending Order Policy
When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, the district considers restricted funds to have been spent first. When an expenditure is incurred for which committed, assigned, or unassigned fund balances are available, the district considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds, as needed, unless the governing board has provided otherwise in its commitment or assignment actions.
Annual Review and Determination of Fund Balance Classifications
Compliance with the provisions of this policy shall be reviewed, presented, and discussed as part of the Unaudited Actuals Financial Reporting process and presentation to the Governing Board. The amounts of nonspendable, restricted, committed, assigned, and unassigned fund balances shall be reported in the Unaudited Actuals report.
FINANCIAL RESERVES
“Fund Balance” is specifically implemented to re-align terminology and comply with GASB 54. Therefore, the corresponding reserves are classified in this policy as follows:


A.1	State Mandated 3% Minimum Reserve	Unassigned – REU
A.2	Local Requirement of 2%	Unassigned - REU
A.3	Routine Restricted Maintenance 4%	Restricted
A.4	Facility Repair and Replacement Program	Committed
A.5	Basic Aid Differential	Committed
A.6	Aliso Property	Committed
A.7	Capital Improvement Plan	Committed
A.8	Specific Assignments (Designations)	Assigned

Reserve Balance

Pursuant to Resolution No. 00-04 adopted by the Governing Board of the Laguna Beach Unified School District on November 14, 2000, the Governing Board determined that it is fiscally prudent to establish a reasonable reserve to mitigate revenue volatility and to plan for future expenditures. Therefore, the Governing Board has determined that its Financial Reserves shall be composed of the following components within the General Fund and Special Reserve Funds:
A State mandated General Fund Reserve for uncertainty which is currently legally required to be maintained at least three percent (3%) of the District’s current annual budget;
A Reserve for Economic Uncertainty which shall be an additional two percent (2%) of the total General Fund Reserve for uncertainty described in subparagraph 1 above;
Routine Restricted Maintenance Account (RRMA) under the School Facility Grant Program generally requiring a deposit of a minimum of 3% of the total general fund expenditures for each fiscal year, including other financing uses for the applicable fiscal year. With the elimination of the Deferred Maintenance Grant, the RRMA will increase to incorporate the deferred maintenance projects. Under resolution No. 00-02, the RRMA will maintain a 4% reserve balance in the General Fund.
A Facilities Repair and Replacement Plan (FRRP) Reserve, a restricted account based on a twenty-year projection of the cost of facility construction, repair, maintenance, and modernization. The reserve will be adjusted periodically for cost escalation in the original plan;
A Basic Aid Differential Reserve to be maintained in perpetuity based on annual recommendations to the Governing Board on the amount of the annual contribution to this reserve necessary to maintain this level of funding. A Basic Aid Differential is the cost of maintaining the District’s budget for a period of one year if funded at the Local Control Funding Formula (LCFF). Committed reserves in subfunds under the Special Reserve for Capital Outlay (Fund 40) may also be considered in the differential calculation. Caution: If onetime projects reduce reserves below two-thirds of the Basic Aid Differential, a plan should be developed to determine when reserves are projected to recover above that level.
Aliso Property Reserve for the accelerated option under the Option to Re-purchase Agreement with National Church Residences of Laguna Beach. The agreement extends until 2041, but allows for the payoff of the Housing and Urban Development (HUD) loan and transfer of the grant deed in case of default. The executed grant deed is held in custody trust at U.S. Bank.
A Capital Improvement Plan (CIP) Reserve, separate and distinct from the FRRP, to provide for the establishment of prioritized projects in a 10-year plan;
A Reserve for Specific Designations which shall be established by the Board annually based on actual anticipated expenditures.
The Reserve for Specific Designations shall be annually reevaluated when financial information regarding actual anticipated expenditures demonstrates that prudent financial management requires an allocation to this Reserve or reallocation from it.
The annual establishment of the funding levels of the above components of the District’s Financial Reserves funds and any periodic adjustment to the funding levels of those components shall occur only after a public hearing is held and before the adoption of the annual budget by the Governing Board.
Following the adoption of the District’s annual budget by the Governing Board, any subsequent action by the Board to appropriate or reallocate any of the reserve funds from either the State mandated General Fund, Reserve for Economic Uncertainty or the Facility Repair and Replacement Reserve shall require that four-fifths of all of the members of the Governing Board vote to approve such action.
The Board requires that the Reserve for Specific Planned Designation shall not be included in the Reserve for Economic Uncertainty as such reserve is defined by the Governmental Accounting Standards Board.
In September of each school year, the Assistant Superintendent of Business shall present a status report and recommendations to the Governing Board for the allocation of funds to the General Fund Reserve, the Basic Aid Differential Reserve, the Facility Repair and Replacement Plan Reserve, the Aliso Property Reserve, and the Capital Improvement Plan Reserve.

Long-Term Financial Obligations

The district’s current-year budget and multiyear projections shall include adequate provisions for addressing the district’s long-term financial obligations, including, but not limited to, long-term obligations resulting from collective bargaining agreements, financing of facilities projects, unfunded or future liability for retiree benefits, and accrued workers’ compensation claims.

The Board may approve a plan for meeting the district’s long-term obligations to fund contributions to the California Public Employees’ Retirement System (CalPERS) which, to the extent possible, minimizes significant increases in annual general fund expenditures towards pension obligations. The plan may include prefunding required pension contributions through the California Employers’ Pension Prefunding Trust Program pursuant to Government Code 21710-21716.

The Board shall approve a plan for meeting the district’s long-term obligations to fund nonpension, other postemployment benefits (OPEBs). This plan shall include a specific funding strategy and the method that will be used to finance the district’s annual fiscal obligations for such benefits in a manner that continually reduces the deficit to the district to the extent possible. The Board reserves the authority to review and amend the funding strategy as necessary to ensure that it continues to serve the best interests of the district and maintains flexibility to adjust for changing budgetary considerations.

The Superintendent or designee shall annually present a report to the Board on the estimated accrued but unfunded cost of OPEBs. As a separate agenda item at the same meeting, the Board shall disclose whether or not it will reserve a sufficient amount of money in its budget to fund the present value of the benefits of existing retirees and/or the future cost of employees who are eligible for benefits in the current fiscal year.

The Superintendent or designee shall annually present a report to the Board on the estimated accrued but unfunded cost of workers’ compensation claims and the actuarial reports upon which the estimated costs are based. As a separate agenda item at the same meeting, the Board shall disclose whether it will reserve in the budget sufficient amounts to fund the present value of accrued but unfunded workers’ compensation claims or if it is otherwise decreasing the amount in its workers’ compensation reserve fund. The Board shall annually certify to the County Superintendent the amount, if any, that it has decided to reserve in the budget for these costs. The Board shall submit to the County Superintendent any budget revisions that may be necessary to account for this budget reserve.

Budget Amendments

No later than 45 days after the Governor signs the annual Budget Act, the Superintendent or designee shall make available for public review any revisions in budgeted revenues and expenditures which occur as a result of the funding made available by that Budget Act.

Whenever revenues and expenditures change significantly throughout the year, the Superintendent or designee shall recommend budget amendments to ensure accurate projections of the district’s net ending balance. When final figures for the prior-year budget are available, this information shall be used as soon as possible to update the current-year budget’s beginning balance and projected revenues and expenditures.

In addition, budget amendments shall be submitted for Board approval as necessary when collective bargaining agreements are accepted, district income declines, increased revenues or unanticipated savings are made available to the district, program proposals are significantly different from those approved during budget adoption, interfund transfers are needed to meet actual program expenditures, and/or other significant changes occur that impact budget projections.

Replaced BP 3001 and 3003