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Public school districts are required by the State to certify, twice each year, the ability to meet their financial obligations for the remainder of the fiscal year and two subsequent years. This report shows actual activity for the period of July 1, 2020, through October 31, 2020. Financial projections are made through June 30, 2021, and for fiscal years 2020-22 and 2021-23.

The purpose of the report is to identify if deficit spending is occurring so that corrective action can be taken in time to avoid financial insolvency at year end. The report highlights the General Fund although all funds are included. Projections show adequate year-end fund balances in all funds.

The projected unrestricted June 30, 2021, Ending Fund Balance for the District's General Fund is $7,327,219.24. Of this amount, $15,000 is set aside for revolving cash and other nonspendable purposes. The Board identified 6% reserve for economic uncertainties is $3,106,178, and the remaining unassigned and unappropriated amount is $4,053,351.24.

The projected restricted June 30, 2020 Ending Fund Balance for the District's General Fund is $2,774,819

Management is pleased to present a Positive Certification of Financial Condition, meaning that the District will be able to meet its financial obligations for the current fiscal year and subsequent two fiscal years and meet the 3% minimum State Reserve for economic uncertainty. The District is projected to meet the Board-identified 6% minimum reserve in fiscal year 2020-2021 and 2021-22 only. The projected reserve for 2022-23 is $1,815,490, or 3.49%

The primary factors impacting the annual budget include the following:

Loss of supplemental tax income after first year of Community Funded
Uncertainty about whether enrollment decline
Insufficiently funded mandated programs, including Special Education
Historical deficit spending leading to diminishing reserves

Due to the influx of local, state, and federal support, The District projects contributing $1,100,948 to reserves in the current year. It is important to note that this support (e.g., CARES Act) is one-time and is not expected in future years. Careful financial planning will be necessary in future years to ensure the financial stability of the District. Identifying additional revenue sources will be important as will identifying programmatic and operational reductions and efficiencies.

The State and Federal governments only provide a portion of the revenue necessary to support the required mandated programs of the District. As a result, approximately $7.2 million in unrestricted general fund contributions are necessary to support those required programs. While effort is being put forth to manage these programs, the costs continue to rise with increases in frequency and severity of student needs, as well as escalating costs of contracted services.

The District's solvency depends significantly on two parcel taxes (Measure R and Measure K) that are currently generating approximately $3.4 million in annual revenue for the District. The District is grateful to the community for supporting Measure K, which will provide funding through 2022-23, and Measure R, which will provide funding through 2024-25. In addition, the District continues to celebrate and depend on the SchoolForce Foundation. Without these two funding sources, our children would not have access to the quality education they deserve and receive in the Belmont-Redwood Shores School District.

Staff will continue to provide updates to the Board. In January 2021, the Governor will present revised projections for 20-21 as well as a proposed budget for 21-22.

Staff recommends approval of the 2020-21 First Interim Fiscal Solvency Report, as presented.