PAUSD Parcel Tax Information Since January 2003, the district has cut $6.

5 million from its budget and used approximately $3.4 million dollars from its reserves. The major factors contributing to the budget cuts were: loss of funding from the State including $1.2 million in basic aid funding. enrollment growth (the district receives no money for additional students) increased costs such as health care costs, required employer contributions to the state retirement system, workers comp., utilities, etc. relatively flat property tax growth due primarily to the decline in commercial property taxes (the district receives approximately 70% of its revenue from property taxes and about 35% of that is from commercial property) As a result, during the past two years the district reduced its administrative staff by 13%, teaching staff by 2% and classified staff by 7%. Leaders examined all facets of operations to look for efficiencies, including eliminating or reducing outside contracts, combining or eliminating positions and departments, reducing expenditures for overtime or substitutes, and eliminating the district warehouse. The budget for 2004/05 includes reductions to: elementary librarian time the spectra art budget elementary reading specialist time teaching positions at the secondary schools leading to reductions in course offerings school site funds for instructional materials and support funding for sports funding for Camp Anytown maintenance/landscape staff technology support and more. The current parcel tax of $293 is set to expire in 2006. It provides $5.5 million annually for PAUSD programs including class size reduction. In order to ensure the ongoing quality of the PAUSD education program, the funds from the existing parcel tax plus additional funds are needed. On February 8th, the Board of Education voted to place a parcel tax measure of $493 on the June 7, 2005 ballot. If passed, the new parcel tax will replace the current parcel tax and will provide $9.3 million annually for six years. Funding from the parcel tax will be used to retain teachers and avoid teacher layoffs, preserve small class sizes in K-10, and restore some of the more critical cuts to secondary class offerings, counselors, and elementary literacy, math and art. The budget is updated throughout the year as new information is received, such as new property tax information from the County Assessor, enrollment numbers, and budget information from the State. For additional information, call Cathy Kroymann at 321-4133.

BOARD OF EDUCATION PALO ALTO UNIFIED SCHOOL DISTRICT TO: FROM: SUBJECT: Board of Education Gerald F. Matranga, Associate Superintendent Parcel Tax Election Resolution #2004-05.13

Attachment: Date:

Action

02.08.05

BACKGROUND At the meetings of January 11, 2005, and January 25, 2005, the Board of Education considered placing another parcel tax request before the voters. Proposed Resolution for a June Parcel Tax Staff has worked with Larry Tramutola to prepare a formal resolution and ballot language (Attachment AA) for a new parcel tax. The resolution and ballot language take into consideration the desire of the Board of Education to make the language more positive, set the parcel tax at $493 per year per parcel for six years, incorporate an optional senior exemption, and have an independent oversight committee and annual audits. The ballot language states: To preserve small class sizes; maintain educational programs that enhance student achievement; and restore some essential educational programs including elementary literacy, math, and art support, and middle and high school class offeringsshall the Palo Alto Unified School District replace its current parcel tax with a $493 yearly assessment for six years with an optional exemption for senior citizens and an independent oversight committee? Summary As background, the agenda items from the meetings of January 11, 2005, and January 25, 2005, are attached to this enclosure. Recommendation It is recommended that, after the Public Hearing at this meeting, the Board of Education approve the amount and duration of a PAUSD parcel tax. It is also recommended that the Board approve the following revised Resolution #2004-05.13 and the ballot language for a parcel tax measure that could be placed on the June 2005 ballot.

ATTACHMENT AA

PALO ALTO UNIFIED SCHOOL DISTRICT RESOLUTION NO. 2004-05.13 RESOLUTION OF THE BOARD OF EDUCATION OF THE PALO ALTO UNIFIED SCHOOL DISTRICT PROPOSING A QUALIFIED SPECIAL TAX AND ESTABLISHING SPECIFICATIONS OF THE ELECTION ORDER WHEREAS, the Board of Education (the Board) believes that a qualified special tax is necessary to maintain quality education for the students of Palo Alto Unified School District (the District); and WHEREAS, Section 4 of Article XIIIA of the California Constitution and Sections 50075, 50076, 50077, 50079 and 53722 et seq. of the California Government Code authorize a school district, upon approval of two-thirds of the electorate voting on the measure, to levy a qualified special tax for specified purposes following notice and a public hearing and WHEREAS, the Board of Education has conducted a noticed public hearing, as required by law, on the question of whether or not to request the Districts voters to authorize funding to continue the programs identified below; and NOW THEREFORE, THE BOARD OF EDUCATION OF THE PALO ALTO UNIFIED SCHOOL DISTRICT DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: Section 1. That the Board has determined in its best judgment that in order to maintain quality education in Palo Alto, an election is advisable and on that basis hereby orders the Santa Clara County Registrar Voters to call an election and submit to the voters of the District the question of whether to adopt a qualified special tax to maintain high quality education in our neighborhood schools, avoid deeper cuts to classroom instruction, maintain manageable class sizes, and preserve educational programs that attract the best teachers and school employees, and enhance student achievement in order to maximize learning by our communitys children. Section 2. Said qualified special tax shall be in an amount not to exceed $493 per year for 6 years beginning as of July 1, 2005, assessed against each parcel of taxable land in the District. Said qualified special tax replaces the qualified special tax approved by the voters of the District on June 5, 2001. A parcel shall be defined as any unit of land in the District that now receives a separate tax bill from the Santa Clara County Assessors Office. All property that would otherwise be exempt from property taxes will also be exempt from the imposition of said qualified special tax. Section 3. An optional exemption shall also be available for a person 65 years or older who owns and occupies as a principal residence a parcel (as defined above) and applies to the District for such exemption in accordance with guidelines established by the District.

ATTACHMENT AA Section 4. That the date of the election shall be June 7, 2005. Section 5. That the purpose of the election shall be for the voters in the District to vote on a ballot measure, a full copy of which is attached hereto and marked Exhibit A and incorporated by reference herein. As required by California Elections Code section 13247, the abbreviated form of the measure to appear on the ballot is attached hereto as Exhibit B. Section 6. That the Board has the authority for ordering the election. Section 7. That the authority for the specifications of this election order is contained in Section 5322 of the California Education Code. Section 8. That this Resolution shall stand as the order to the Santa Clara County Registrar of Voters to call an election within the boundaries of the District on June 7, 2005. Section 9. That the Clerk of the Board is hereby directed immediately to send a certified copy of this Resolution to the Santa Clara County Registrar of Voters, the Santa Clara County Board of Supervisors, and the Santa Clara County Superintendent of Schools so that said Superintendent receives it no later than March 11, 2005. Section 10. That the Santa Clara County Superintendent of Schools is hereby requested to deliver this Resolution, which constitutes the order of election, and a formal notice of the election to the Santa Clara County Registrar of Voters no later than March 11, 2005. That the Santa Clara County Superintendent of Schools is hereby requested to perform the duties under Education Code Section 5302, to call the election, prepare recommendations, statements, or arguments for the election as required and to receive petitions, as necessary. Section 11. That the Santa Clara County Superintendent of Schools is hereby requested to prepare a Formal Notice of School Parcel Tax Election (the Notice) containing the information specified in Section 5361 of the Education Code, in substantially the form attached hereto as Exhibit C and to publish and/or post the Notice as required by law. Section 12. Pursuant to Section 5303 of the Education Code, the Santa Clara County Registrar of Voters is hereby requested to take all steps incident to the preparation for and the holding of the election in accordance with law and these specifications. The Board requests that the Registrar of Voters deliver a copy of all published notices to the Clerk of this Board pursuant to Section 12113 of the Elections Code. Section 13. The Board of Supervisors of Santa Clara County is authorized to canvass the returns of the election pursuant to Section 10411 of the Elections Code. Section 14. In accordance with Education Code section 5342 and Elections Code section 10402.5, it is hereby requested that the special election to be held hereunder be consolidated by the Santa Clara County Registrar of Voters and the Santa Clara County Board of Supervisors, for all purposes, with the Statewide election scheduled for the same day and with any and all other elections also called to be held on June 7, 2005 insofar as said elections are to be held in the same territory or in territory that is in part the same as the territory of the District.

ATTACHMENT AA Section 15. Subject to two-thirds approval of the voters, the qualified special tax shall become effective as of July 1, 2005 and be collected by the Santa Clara County Tax Collector at the same time as and along with, and shall be subject to the same penalties as general ad valorem taxes collected by said tax collector. The tax and penalty shall bear interest at the same rate as the rate for unpaid ad valorem property taxes until paid. Section 16. The members of the Board, the Superintendent of the District, and officers of the District are hereby authorized and directed, individually and collectively, to do any and all things and to execute, deliver, and perform any and all agreements and documents that they deem necessary or advisable in order to effectuate the purposes of this Resolution, including, without limitation, to prepare and submit for inclusion in the voter information pamphlet an argument in favor of passage of the ballot measure. All actions heretofore taken by the officers and agents of the District that are in conformity with the purposes and intent of this Resolution are hereby ratified, confirmed, and approved in all respects. Section 17. The members of the Board, the Superintendent of the District, and officers of the District are hereby requested and directed, individually and collectively, to provide accountability measures pursuant to Government Code Section 50075.1 that include, but are not limited to, all of the following: (a) A statement indicating the specific purposes of the qualified special tax, (b) a requirement that the proceeds be applied only to the specific purposes identified pursuant to subsection (a), (c) the creation of an account into which the proceeds shall be deposited, and (d) an annual report pursuant to Section 50075.3. of the Government Code, as provided in Section 20 hereof. Section 18. Pursuant to Section 50075.3 of the Government Code, the Board directs that the chief fiscal officer of the District file a report with the Board no later than January 1, 2006, and at least once a year thereafter. The annual report shall contain both of the following: (a) The amount of funds collected and expended, and (b) the status of any project required or authorized to be funded as identified in subsection (a) of Section 19 hereof. Section 19. The Districts Superintendent, and her designee, are hereby authorized and directed to make any changes to the text of the measure described in this Resolution, or to the abbreviated form of the measure, or to the text of this Resolution, as may be convenient or necessary to comply with the intent of this Resolution, the requirements of elections officials, and requirements of law. ///

ADOPTED, SIGNED and APPROVED this _____ day of _________, 2005. AYES: NOES: ABSTAIN: ABSENT: 3

ATTACHMENT AA BOARD OF EDUCATION OF THE PALO ALTO UNIFIED SCHOOL DISTRICT

By: President ATTEST:

By: Clerk of the Board of Education

ATTACHMENT AA

STATE OF CALIFORNIA SANTA CLARA COUNTY

) ) )

ss.

I,______________, do hereby certify that the foregoing is a true and correct copy of Resolution No. __, which was duly adopted by the Board of Education of the Palo Alto Unified School District at meeting thereof held on the _____ day of ________, 2005, and that it was so adopted by the following vote: AYES: NOES: ABSENT: ABSTENTIONS:

By

ATTACHMENT AA

EXHIBIT A FULL TEXT OF SPECIAL TAX MEASURE For PALO ALTO UNIFIED SCHOOL DISTRICT

Palo Alto Unified School District Quality Public Education Preservation Act of 2005 INTRODUCTION To maintain exceptional public education in our neighborhood schools, avoid deeper cuts to classroom instruction, preserve smaller class sizes, keep educational programs that attract the best teachers and school employees and enhance student achievement in order to maximize learning by our communitys children, shall the Palo Alto Unified School District be authorized to levy a qualified special tax in an amount not to exceed $493 per year for 6 years beginning as of July 1, 2005, assessed against each parcel of taxable land in the District, with an optional exemption annually available, upon application, for senior citizens? Said qualified special tax would replace the qualified special tax approved by the voters of the District on June 5, 2001. PURPOSE To provide local revenue that cannot be taken by the State and to maintain exceptional public education in our neighborhood schools, the Palo Alto Unified School District proposes to levy a qualified special tax for a period of 6 years, beginning July 1, 2005, at the rate of $493 per year on each assessors parcel located within the School District, with an optional exemption annually available, upon application, for senior citizens, and to implement accountability measures in connection with the special tax to provide oversight and accountability to ensure that funds are used to: Restore some of the programs and replace some of the funds lost or reduced due to budget cuts; Sustain achievement in reading, writing, and mathematics for all students at all grade levels by preserving smaller class sizes, while maintaining the ability to attract and retain quality teachers; Maintain essential academic programs, including science, reading, math, music, and art; Protect the taxpayers investment in education and ensure District accountability by providing for oversight and independent financial audits of revenues and expenditures.

The Board of Education will fund all of the programs listed above, unless the Board of Education determines in any given year that changes in student population, fiscal constraints, or other changes in state or federal funding make doing so infeasible or inadvisable. In any event, the

A-1

ATTACHMENT AA Board of Education will not fund any program or reduction other than those listed above from the proceeds of the special taxes. OPTIONAL SENIOR CITIZEN EXEMPTION AVAILABLE An optional exemption from the special tax will be made available annually to each individual in the District who will attain 65 years of age prior to July 1 of the tax year, and who owns a beneficial interest in the parcel, and who uses that parcel as his or her principal place of residence, and who applies to the School District on or before July 1, 2005, or July 1 of any succeeding tax year. Any application for such exemption must be renewed annually. ACCOUNTABILITY MEASURES In accordance with the requirements of California Government Code sections 50075.1 and 50075.3, the following accountability measures, among others, shall apply to the special taxes levied in accordance with this Measure: (a) the specific purposes of the special tax shall be those purposes identified above; (b) the proceeds of the special tax shall be applied only to those specific purposes identified above; (c) a separate, special account shall be created into which the proceeds of the special taxes must be deposited; and (d) an annual written report shall be made to the Board of Education of the District showing (i) the amount of funds collected and expended from the proceeds of the special taxes and (ii) the status of any projects or programs required or authorized to be funded from the proceeds of the special taxes, as identified above. In addition to the accountability measures required by State law, an independent Community Oversight Committee shall be appointed by the Board of Education to advise the Board on the expenditures funded by the measure in order to ensure that said funds are spent for the purposes approved by the voters. The Community Oversight Committee will monitor the expenditures of these funds by the District and will report on an annual basis to the Board and community on how these funds have been spent.

PROTECTION OF FUNDING Current law forbids any decrease in State or Federal funding to the District because of the Districts adoption of a parcel tax. However, if any such funds are reduced because of the adoption of this parcel tax, then the amount of the special taxes will be reduced annually as necessary in order to restore such State or Federal funding.

A-2

ATTACHMENT AA

EXHIBIT B

SPECIAL TAX MEASURE For PALO ALTO UNIFIED SCHOOL DISTRICT (Abbreviated Form) *

To preserve small class sizes; maintain educational programs that enhance student achievement; and restore some essential educational programsincluding elementary literacy, math, and art support, and middle and high school class offeringsshall the Palo Alto Unified School District replace its current parcel tax with a $493 yearly assessment for six years with an optional exemption for senior citizens and an independent oversight committee? Tax - Yes Tax - No

* Limited to 75 words pursuant to California Elections Code section 13247.

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ATTACHMENT AA

EXHIBIT C FORMAL NOTICE OF SCHOOL PARCEL TAX ELECTION

NOTICE IS HEREBY GIVEN to the qualified electors of the Palo Alto Unified School District of Santa Clara County, California, that in accordance with the provisions of the Education Code of the State of California, an election will be held on June 7, 2005, at which election the following measure shall be submitted to the qualified electors of the District and voted upon: To preserve small class sizes; maintain educational programs that enhance student achievement; and restore some essential educational programsincluding elementary literacy, math, and art support, and middle and high school class offeringsshall the Palo Alto Unified School District replace its current parcel tax with a $493 yearly assessment for six years with an optional exemption for senior citizens and an independent oversight committee? Tax - Yes Tax No

All of the purposes enumerated in the foregoing measure shall be united and voted upon as one single measure, with precincts, places of holding the elections and officers appointed to conduct the elections shall be the same as those provided in the local consolidated election, under the notice of election adopted ________. The County Superintendent of Schools of Santa Clara County, by this Notice of Election, has called the election pursuant to a Resolution of the Board of Education of the Palo Alto Unified School District, adopted ___________, 2005, in accordance with the provisions of Education Code Sections 5325 and 5361. IN WITNESS WHEREOF, I have hereunto set my hand this ____ day of ___________, 2005.

County Superintendent of Schools, Santa Clara County, California

J:\wdocs\00981\007\res\00099044.DOC

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BOARD OF EDUCATION PALO ALTO UNIFIED SCHOOL DISTRICT TO: FROM: SUBJECT: Board of Education

Attachment: Date:

Discussion

9 01.25.05

Mary Frances Callan, Superintendent Gerald F. Matranga, Associate Superintendent Parcel Tax

Background On January 11, the Board discussed whether or not to place another parcel tax request before the voters. This two hour discussion was based on information contained in the staff report, a summary of a poll conducted by Gene Bregman & Associates, comments from the District's consultant, Larry Tramutola, and input from the community. A copy of the January 11 Staff Report (Attachment 1) and a copy of the poll results (Attachment 2) are attached to this report. Based on the discussion, the Board expressed interest in placing another parcel tax measure on the June 2005 ballot. This interest was based on several factors. In order to retain the $5.5 million generated from the District's current parcel tax, voter approval must be obtained before November 2005, or the District will need to reduce this amount from its budget. In addition, the Board discussed the current financial situation that has required over $6.5 million in reductions and the use of over $3.4 million in reserves over the past 24 months. This financial situation has been caused by: lowered State revenues to the District, increasing enrollment, increasing health and welfare costs, and declining property tax growth. The Board also noted that 66.03 percent of voters (over 22,000 yes votes) supported the November 2004 Measure I Parcel Tax. This indicates broad community support for the local schools and educational programs. In preparation for this discussion, the Board requested staff to do the following. 1. Provide an update of the District's estimated Property Tax growth for the 2004-05 fiscal year; how any estimated growth will assist the District in addressing its projected structural deficit; and proposed additional costs being transferred to the District from the State. 2. Provide two options for a new parcel tax. One option would be for $493. The first option would explain how the amount was derived and what it could provide to preserve and restore the District's nationally recognized educational programs. The second option would be for a lower amount of $465. Staff would illustrate what this lower amount would be able to do. 3. Provide information from Gene Bregman on the effect on voter approval of lowered parcel tax amounts. 4. Provide a resolution for a June parcel tax with the needed supporting documents. 5. Provide a list of the additional reductions that the District would need to make if a parcel tax measure was not successfully passed by November 2005. The remainder of this report addresses these requests.

Update on District's Estimated Property Tax Growth for 2004-05 As noted in the January 11 staff report, the District has had uncertain and reduced property tax growth over the past two years. As a basic aid district, the actual property tax growth is not known until after the fiscal year in which it is spent. In the 2003-04 fiscal year, property tax growth that had been projected at 3.77 percent in July 2003 ended up being .92 percent in June 2004. As a result of this and the ensuing reductions that had to be made, the District projected 1.0 percent property tax growth for the 2004-05 fiscal year. At the Districts first quarterly meeting with the County in August, the estimate was projected to be 6.1 percent. This was due to the sale of the Stanford Shopping Center and some revenue from the building of the Hyatt Classic Residences. (It should be noted that the Hyatt Classic Residences are leaseholds and not fee ownership units. This means that the District will not see large property tax increases as these units are occupied.) At our second quarterly meeting with the County in November 2004, the estimated tax growth was reduced to 5.84 percent due to continued downward reassessments of businesses and losses in the unsecured roll. It was also noted at this meeting that a large reassessment request being made by a local corporation might be granted in May 2005. As a result, the District left its projected property tax growth at 1.0 percent for the First Interim Report. The next quarterly meeting of basic aid districts with the County will be held in mid-February. However, staff did call the County and requested an update. The County asked that the request be made in writing so that staff would be able to better respond to the questions. A copy of that request is attached (Attachment 3). While staff did not receive a reply from the County in time for it to be included in this report, an update will be provided during the meeting. Staff is also discussing increasing the projected Property Tax Growth for the Second Interim Report from 1.0 percent to 2.0 percent for fiscal year 2004-05. This would be in keeping with the projections used by the District prior to 2002-03. This increase would erase the District's current structural deficit, but would still leave the District with a possible deficit from the State. The extent of this deficit will not be known until the adoption of the State budget. If the Governor's proposal is accepted, the deficit could be as high as an additional $1,000,000. Erasing the current structural deficit also does not leave any additional dollars in the General Fund to address growing enrollment, increasing employee costs, or restoration of any educational programs that were reduced. At best, the above information indicates the District may be able to address its current structural deficit, but continues to face uncertain financial issues. Options for a Parcel Tax In 2001, the voters approved a $293 parcel tax that generates $5.5 million per year for the District. The funds from that parcel tax were to be used to attract and retain qualified employees by increasing salaries in 2001, to reduce class size in targeted grades, and to maintain programs. The money was allotted for those purposes. The District also added further funding to reduce class size in Grades 4 and 5 to 20 to 1. A summary of the report that discloses expenditures from parcel tax proceeds in included in Attachment 1. Since the passage of that parcel tax, the District has reduced its budget by $6.5 million and used $3.4 million in reserves. If the District wanted to restore the $6.5 million in reductions and renew the $5.5 million parcel tax, a total of $12 million dollars per year would be needed. This amounts to $631 per parcel.

Due to the current financial situation faced at the local, state, and national levels, the Board realized it would not be reflecting community needs if it requested full restoration of the $6.5 million reductions along with the renewal of the $5.5 million. Therefore, the Board placed a $521 parcel tax request on the November 2004 ballot. Measure I would have maintained the current parcel tax amount and added $228 per year for a total of $9.8 million per year. As noted previously, it was narrowly defeated. Table 1 illustrates how the $9.8 million could have been used.
TABLE 1 $521 Parcel Tax - $9.8 Million Potential Distribution of Proceeds 1 2 3 4 5 6 7 8 9 10 11 12 Description Maintain Current parcel tax (Measure D) expenditures. Additional costs of current class size reduction for Grades 4-8 and 10. 6.8 FTEs at the high schools to provide for greater class offerings and academic support. 6.8 FTEs were reduced. 1.0 FTE Deans at each high school to provide student support. 2.0 FTEs Assistant Principals were reduced. 2 FTEs Teacher on Special Assignment (TOSA) to provide academic and student support. 3.7 were reduced. 4.3 FTEs at the middle schools to provide greater class offerings and academic support. 4.3 FTEs were reduced. 2.0 FTEs counselors at the middle and high schools. 2.0 FTEs were reduced but the district has grown by 600 students in the past three years. 4.0 FTEs at the elementary schools to support literacy and math. Funding for 4.0 FTEs were reduced by the State. 0.5 FTE elementary psychologist. 0.5 FTE was reduced. Spectra Art program at the elementary level. $20,000 was reduced. 2.0 FTEs elementary librarians. 2.0 FTEs were reduced. 8.0 FTEs classified support for instructional programs and student support. (4.0 FTEs at the high schools, 3.0 FTEs at the middle schools and 1.0 FTE at the elementary schools. This would restore about half of the classified support reduced at the sites. Restore $25 per student for instructional materials and academic support at the school sites. Restore $100,000 staff training at the sites. $135,000 was reduced. TOTALS FTE Amount $5,500,000 $1,400,000 $595,143 $243,000 $175,042 $376,340 $175,042 $350,084 $50,000 $20,000 $175,042 $352,000

6.8 2.0 2.0 4.3 2.0 4.0 0.5 2.0 8.0

13 14

$260,000 $100,000 $9,771,693

31.6

In developing an amount for a new parcel tax measure, one must keep in mind the educational needs that exist as well as the financial concerns of the local citizens. Each of the following options would bring differing amounts into the District to address the educational needs that exist. In developing these options, the actual cost to the District of class size reduction was reviewed. K-12 class size reduction costs the District $7.2 million. With the States contribution of $3.2 million and the parcel tax contribution of $1.4 million, the Districts General Fund contributes $2.6 million (see Attachment 4).

Option 1 $493 Parcel Tax A new parcel tax for $493 would generate $9.3 million in ongoing revenue for the District for a set number of years. Of this $9.3 million, $5.5 million would allow the District to continue the current parcel tax expenditures. These current expenditures include $1.4 million for class size reduction in Grades 4-8 and 10. In addition, the cost of the class size reduction brought about by the current parcel tax costs the District an additional $1.4 million from the General Fund (Attachment 5). A new parcel tax needs to produce at least $6.9 million to maintain the integrity of the class size reduction in Grades 4-8 and 10. This would leave $2.5 million for some restorations to instructional programs and academic support that have been reduced over the past two years. Based on discussions with principals, many of whom also met with staff and parents, $2.5 million would only allow for a minimum amount of restoration. Table 2 illustrates how the $9.3 million could be spent to maintain class size reduction in Grades 4-8 and 10 and to restore some reductions.
TABLE 2 Option 1 - $493 Parcel Tax - $9.3 Million Potential Distribution of Proceeds 1 2 3 4 5 6 7 8 9 10 11 12 Description FTE Maintain Current parcel tax (Measure D) expenditures. Additional costs of current class size reduction for Grades 4-8 and 10. 6.8 FTEs at the high schools to provide for greater class offerings and 6.8 academic support. 6.8 FTEs were reduced. 1.0 0.5 FTE Deans at each high school to provide student support. 2.0 FTEs 1.0 Assistant Principals were reduced. 2 FTEs Teacher on Special Assignment (TOSA) to provide academic and student support. 3.7 were reduced. 4.3 4.0 FTEs at the middle schools to provide greater class offerings and 4.0 academic support. 4.3 FTEs were reduced. 2.0 FTEs counselors at the middle and high schools. 2.0 FTEs were reduced 2.0 but the district has grown by 600 students in the past three years. 4.0 3.0 FTEs at the elementary schools to support literacy and math. Funding 3.0 for 4.0 FTEs were reduced by the State. 0.5 FTE elementary psychologist. 0.5 FTE was reduced. 0.5 Spectra Art program at the elementary level. $20,000 was reduced. 2.0 FTEs elementary librarians. 2.0 FTEs were reduced. 2.0 8.0 FTEs classified support for instructional programs and student support. (4.0 8.0 FTEs at the high schools, 3.0 FTEs at the middle schools and 1.0 FTE at the elementary schools. This would restore about half of the classified support reduced at the sites. Restore $25 per student for instructional materials and academic support at the school sites. Restore $100,000 $50,000 staff training at the sites. $135,000 was reduced. TOTALS 27.3 Note: Items 4-8 and 14 (shown in italics) are changes from Table 1. Amount $5,500,000 $1,400,000 $595,143 $121,500

$350,084 $175,042 $262,563 $50,000 $20,000 $175,042 $352,000

13 14

$260,000 $50,000 $9,311,374

These restorations to instructional programs and academic support do not take into account enrollment growth. However, they do allow the school sites the ability to provide some student offerings that were reduced or eliminated. Attachment 6 describes the impact of budget reductions on high schools. The restorations also allow for more site communication with the parents and the ability to address student concerns more quickly. It was for these reasons that the $493 per parcel amount was proposed. Option 2 $465 Parcel Tax Should the Board prefer to request a smaller amount for the new parcel tax measure, it was recommended by Gene Bregman that the Board consider a $465 parcel tax. This amount generates $8.8 million per year. As $6.9 million is needed to cover the current parcel tax and the cost of class size reduction as noted in Option 1 above, $500,000 would need to be reduced from Option 1. This translates to fewer instructional offerings and less academic support. Table 3 illustrates how these reductions could be made to maintain as much direct support as possible.
TABLE 3 Option 2 - $465 Parcel Tax - $8.8 Million Potential Distribution of Proceeds 1 2 3 4 5 6 7 8 9 10 11 12 Description FTE Maintain Current parcel tax (Measure D) expenditures. Additional costs of current class size reduction for Grades 4-8 and 10. 6.8 6.0 FTEs at the high schools to provide for greater class offerings and 6.0 academic support. 6.8 FTEs were reduced. 2 FTEs Teacher on Special Assignment (TOSA) to provide academic and student support 3.7 were reduced.. 0.5 FTE Deans at each high school to provide student support. 2.0 FTEs Assistant Principals were reduced. 4.0 FTEs at the middle schools to provide greater class offerings and academic 4.0 support. 4.3 FTEs were reduced. 2.0 FTEs counselors at the middle and high schools. 2.0 FTEs were reduced 2.0 but the district has grown by 600 students in the past three years. 3.0 FTEs at the elementary schools to support literacy and math. Funding for 3.0 4.0 FTEs were reduced by the State. 0.5 FTE elementary psychologist. 0.5 FTE was reduced. 0.5 Spectra Art program at the elementary level. $20,000 was reduced. 2.0 FTEs elementary librarians. 2.0 FTEs were reduced. 2.0 4.0 8.0 4.0 FTEs classified support for instructional programs and student support. (4.0 2.0 FTEs at the high schools, 3.0 1.5 FTEs at the middle schools and 1.0 0.5 FTE at the elementary schools. This would restore about half 25% of the classified support reduced at the sites. Restore $25 $15 per student for instructional materials and academic support at the school sites. Restore $50,000 25,000 staff training at the sites. $135,000 was reduced. TOTALS 21.5 Note: Items 3-5, and 12-14 (shown in italics) are changes from Table 2. Amount $5,500,000 $1,400,000 $525,126

$350,084 $175,042 $262,563 $50,000 $20,000 $175,042 $176,000

13 14

$156,000 $25,000 $8,814,857

The above options provide the Board information on how the proposed $493 was derived as well as how a reduced parcel tax amount could be used to assist with restoring some of the District's instructional programs and academic support.

The instructional needs of the students have suffered with the $6.5 million in reductions. There are fewer class offerings, larger class sizes at the secondary schools, fewer student support services, and fewer staff to work with parents on the questions and concerns they have. The options above do not restore, by any means, the reductions and support students and parents had two years ago. This is compounded by enrollment growth. The above options, however, do maintain current class size reductions and restore some essential services. Further reducing the above options does not appear to generate significantly larger voter approval. Effect of Lowered Tax Amounts on Voter Approval At the request of the Board, Gene Bregman provided a January 12, 2005, memo regarding the effect of lowered parcel tax amounts on voter approval. That memo is Attachment 7. In reviewing this memo and discussing it with Gene Bregman, it appears that the Board would need to seek a parcel tax reduction below $450 per parcel to have a significant impact on increased voter approval. There will always be a core of voter opposition in the community regardless of the amount of the tax. Larry Tramutola will be present to discuss this issue further and address any questions the Board may have. Proposed Resolution for a June Parcel Tax Staff has worked with Larry Tramutola to prepare ballot language for a new parcel tax. Following is sample language. To avoid deeper cuts to classroom instruction, maintain manageable class sizes, restore essential educational programs including teachers, counselors, school support staff, instructional materials, and academic support, shall the Palo Alto Unified School District replace its current parcel tax with a $____ yearly assessment for __ years, including an exemption for senior citizens. Attachment 8 includes a draft resolution and accompanying documents. Based on the Board's discussion, the amount and the length can be inserted into the language. Larry Tramutola will be present to discuss the language. This language reflects the above options being proposed for the parcel tax. Following this discussion, corrections can be made and a resolution and accompanying legal language prepared for the next Board meeting on February 8. There will also be a public hearing at that meeting. Additional Reductions if a Parcel Tax is not Passed The 2001 parcel tax expires June 2006. If it is not renewed by November 2005, the District will need to begin the process for reducing $5.5 million. These reductions in funding will result in the further loss of programs for students. The $6.5 million in reductions already made were kept as far from the classroom as possible. If forced to reduce another $5.5 million, programs that directly affect many of our students will need to be reduced or eliminated.

The District would need to consider eliminating all class size reduction. In addition, another $1.5 million in reductions would be needed. Below is a chart listing some programs that could be considered. The cost of these programs is based on the cost of the staff providing them. These reductions would be effective for the 2006-07 school year. Examples of Potential Reductions if a $5.5 million parcel tax is not renewed by November 2005 K-12 class size reduction net savings $2,500,000* Middle School 7 period day $1,120,000 Reductions in academic support and pupil services $ 670,000 High School 7 period day $ 630,000 Closing of one elementary school due to termination of class size reduction $ 580,000 *In reducing K-12 class size reduction, 82 teachers would be released. The District would also lose the state contribution. Therefore, the net savings is approximately $2.5 million. These are only examples. Due to the severity of these reductions, a community process would need to be used to determine the final reductions. Summary The above report and attachments provide information to the Board in response to the requests made at the January 11 Board Meeting. Staff and Larry Tramutola will address questions the Board may have in the course of its discussion. Following this discussion, at the direction of the Board, staff will prepare the necessary documentation for February 8 to place a parcel tax on the June ballot. Recommendation It is recommended that the Board discuss this report and provide direction to staff on the amount, length, and the resolution language for a parcel tax measure that could be placed on the June 2005 ballot.

BOARD OF EDUCATION PALO ALTO UNIFIED SCHOOL DISTRICT TO: FROM: SUBJECT: Background Board of Education

Attachment: Date:

Discussion

5 01.11.05

Mary Frances Callan, Ph.D., Superintendent Parcel Tax

In June 2001, the voters in Palo Alto overwhelmingly passed a $293 parcel tax for the Pal Alto Unified School District. This tax was to be used to reduce class size, maintain programs, and provide a raise to staff in order to recruit and retain quality teachers. It netted the District $5.5 million in ongoing funds, allowed the District to add Grades 4 and 5 to the class size reduction program at 24 to 1, and to reduce class sizes in the middle and high schools in selected areas including math and language arts. (Due to property tax growth at the time, the District was able to further reduce Grades 4 and 5 class size to 20 to 1.) The tax was passed for five years and is now up for renewal. In the years following the passage of this tax, the District has seen a decline in revenue from the State, a decline in property tax growth, and growth in student enrollment. As a result, since January 2003 and continuing through the 2004-05 school year, the District has reduced its budget $6.5 million, using $3.4 million in reserves. The lists of reductions that have been made are attached to this report. Student Growth, Lowered State Revenues, and Increased Costs In the past three years, the District has grown by 600 students. As a Basic Aid District, no revenue is received from the State for these additional students. In fact, the $120 per student the District previously received was eliminated in the State budget reductions. This has meant an on-going loss of over $1.2 million in revenue per year. The District has also faced increasing health and welfare costs for its employees. This is in spite of the reductions and additional out of pocket expenses that staff have chosen in order to maintain coverage. Declining Growth in Property Taxes Decreasing Property Tax growth compounded the growth of students and the reduction of over $1.2 million in revenue from the State. In the 2003-04 school year, property tax growth that was originally estimated to be 3.77 percent ended up in July 2004 to be 0.92 percent. As with all Basic Aid Districts, the exact amount of revenue from property tax is not known until the end of the fiscal year in which it is being spent. This requires the District to be conservative in its estimates of revenues coming from property tax growth.

Uncertain Growth of Property Tax Because of the decreasing nature of the property tax growth, the District projected 1 percent growth for the current school year, 2004-2005. The exact amount of that growth will not be known until July 2005. However, due to the sale of the Stanford Shopping Center, the District was informed in August that the estimated tax may rise by 5.1 percent. That estimate was reduced to 4.84 percent in November and may go lower due to the loss of value in the unsecured roll and the number of businesses that are requesting decreases in their assessed valuations. Some of the revenue from Hyatt Classic Residences was also factored into this increase. As they are leaseholds rather than fee ownership, we do not expect ongoing increases when they change hands. The best that can be said is that it appears the growth in property tax may have stabilized and may not go down as much as it has the previous two years. This additional growth in property tax has allowed the district to address a $1.2 million deficit that remained in the budget despite the $6.5 million in reductions and to cover the increased cost of the reduced health and welfare benefits. However, there is no additional funding available to address the $6.5 million in reductions to programs and the growth in enrollment. Further, there may be a small continuing structural deficit in the budget if property tax growth for 2005 and beyond does not increase by more than 1 percent. Request for Local Property Tax to Ensure Quality Education Given lowered revenues and increasing student enrollment, the Board placed the renewal of the current property tax on the November 2004 ballot along with the addition of another parcel tax. Measure I would have continued the $5.5 million from 2001 and added another $4.3 million to begin to address a continuing deficit, maintained current program, and considered restoration of some essential programs. The Measure was narrowly defeated by less than 1 percent of the vote. It needed 66.67 percent to pass and received 66.03 percent. Even in defeat, it received 22,000 yes votes, more than any the District has ever received in all of its successful campaigns. The need for the renewal of the current parcel tax remains, as does the need for additional revenues to maintain current programs and to make some restorations in order to ensure the ongoing quality of program. In fact, a local parcel tax is one of the only ways the community has to ensure its priority for small class sizes is met. The State cannot capture locally voted parcel tax funds, and these funds are independent of property tax growth. In order to determine how another local property tax request should be made, a number of issues need to be addressed. These issues include the total amount to be addressed in a parcel tax request, the length of the parcel tax, the date for a parcel tax election, and the consequences to the District should the 2001 parcel tax not be renewed. These issues are addressed below. Parcel Tax Amounts As noted above, the current parcel tax brings $5.5 million a year into the District. This amount, in conjunction with the amount received from the State to assist with K-3 class size reduction, allows the District to maintain smaller class sizes. Should this parcel tax not be renewed, the District would have to make at least an additional $5.5 million in reductions above the $6.5 million it has

already made. Further, the District may face an ongoing structural deficit of $600,000 for future years even with property tax growth estimated for the 2004-2005 school year. This deficit does not address increasing health and welfare costs, restoration of any programs made by the reduction of the $6.5 million, or increasing demands caused by enrollment growth. Even if an assumption is made that property tax growth will increase by 2 percent, which was the percent used prior to the 2002-03 school year to project growth, only the on-going structural deficit is erased. The other pressures on the budget remain. It should also be noted that each year the parcel tax has been in place, the cost for class size reduction has grown as the district grows in enrollment and other employee and fixed costs rise. Staffing costs for class size reduction alone now total almost $1.3 million over the $5.5 million parcel tax and that is without any employee raises for the past two years. (See attached annual parcel tax report.) Should the $5.5 million parcel tax not be renewed, the district would need to reduce $6.8 million in March 2006 in order to accommodate the loss of the parcel tax and to address the encroachment on the General Fund of $1.3 million for class size reduction. This reduction translates into the loss of 79.62 FTE employees. It would mean the loss of all class size reduction programs K-12. This also assumes that property tax growth for the 2005-06 school year and beyond will be at least 2 percent and that there will be no structural deficit. In order to maintain current class size reduction programs K-12 and restore some essential programs for which this District is noted and for which it attracts residents, additional dollars over and above the current $5.5 million are needed. This amount could be as high as the Measure I request, an additional $228 per parcel that would have yielded $9.8 million in revenue per year for the District. However, given the defeat of the measure, even by a narrow margin, it would be prudent to reduce this amount. If a reduction were made to an additional $200 per year per parcel, the District would receive an additional $3.8 million per year over the $5.5 million for a total of $9.3 million. This amount is based on the retention of the senior exemption. It would bring the total parcel tax from $521 per year as proposed in Measure I, down to $493. This new parcel tax, generating $9.3 million per year in revenue would allow the District to maintain manageable class sizes, restore counseling ratios and some staffing and support services needed at the school sites, as well as restore some funding for instructional materials and academic support at each school. Currently data is being gathered from the community through a poll to better understand how to structure a new parcel tax request. Information from this poll will be available at the meeting. Larry Tramutola who is working with the District will be present at the meeting to address questions. Length of Parcel Tax Measure I requested the renewal of the current parcel tax along with an addition that would be collected for 8 years. Again, while there was little criticism of the length of the request, it would be prudent to shorten it. A 5-year parcel tax means that the renewal process needs to begin 12 to 18 months in advance to meet the dates for notices that must be given to staff should the renewal not be successful and to meet the deadlines for special elections. A 6- or 7-year parcel tax would allow the District to wait at least four and a half years between elections. It would also allow the community time to see the value of the programs being funded.

Timing of Election It is important to note that the regular election times left to the District before it has to make $6.8 million in reductions are June and November 2005. The cost of a regular election is $7 to $9 per voter or $377,762 to $485,694 depending on the number of items on the ballot. A June 2005 election would ensure that the funds needed for the 2005-2006 school year would be available in July 2005. In order to meet the deadline for the June ballot, the Board must have passed a resolution and filed all necessary paperwork by early March. That would mean staff would need to bring a resolution to hold a parcel tax election to the Board for its discussion at its January 25 meeting. This resolution could then be voted on at the February 8 Board Meeting. Recommendation It is recommended that the Board review and discuss the issues presented in this narrative and provide direction to the staff regarding the renewal of the current parcel tax and addition of a new parcel tax amount. That direction should include the amount and duration of the parcel tax along with the date of the election.

Proposed Budget Adjustments for the 2004-05 Budget (TABLE A)

# 1 2 3 4 5 6 7 8 9 Description Reduce the centralized Educational Services budget by $100,000. Reduce the Academy/Summer School budget by $54,000. Reduce the Information Technology budget by $70,000. Delete the remaining 0.17 FTE Assistant Business Manager position. This is a retirement and the position will not be backfilled Delete a 1.0 FTE warehouse position. 1 Delete the 1.0 FTE Project Specialist position in Business Services. 2 Reduce 1.0 FTE in Digital Publications. Reduce 1.0 FTE in Educational Services. Administrator Certificated FTEs* FTEs* Classified FTEs* Total Amount** $100,000 $54,000 $70,000 0.17 1.00 1.00 1.00 1.00 0.90 0.50 1.00 $25,250 $60,485 $106,868 $66,284 $53,461 $73,335 $40,742 $51,219 $50,739 $93,200 2.00 2.00 2.00 0.90 0.50 1.00 2.17 5.90 6.90 $219,824 $143,482 $143,482 $64,567 $35,871 $47,732 $1,500,541

Reduce the centralized library/media staff from 1.0 FTE to 0.1 FTE. 3 Delete a 0.5 FTE district teacher on a special assignment 10 position. 11 Reduce 1.0 FTE landscape position. 12
4

Reduce the high school funding by the equivalent of $15 per student.*** Reduce the elementary school funding by the equivalent of $20 13 per student.*** 14 Reduce 1.0 FTE high school Assistant Principal at each school. 15 Reduce elementary school library-media positions by a total of 2.0 FTEs.

16 Reduce certificated staffing by five periods at each high school. Delete the general fund support for the reading teachers at El Carmelo and Fairmeadow. Reduce the below the line middle school periods by a total of 0.5 18 FTE. 17 19 Delete the 1.0 FTE unfilled Secretary II middle school position. TOTAL
5

* FTEs are show for items in which 2004-05 FTE reduction is known. ** Total amount includes salary and employee benefits. *** The general purpose per student allocations are currently $100 elementary, $80 middle, $95 high school.
1

This was done last year. A position is available for this person.

1/6/2005

Proposed Additional Budget Adjustments for the 2004-05 Budget (TABLE B)

# 1 2 3 Description Credit 50% of the K-5 rental revenue to the General Fund. Appropriate the annual Adult Education lottery income to the General Fund. Charge Adult Education for custodial. Administrator Certificated FTEs* FTEs* Classified FTEs* Total Amount** $15,000 $65,000 $10,319 $70,000 $200,000 $16,000 $15,000 $11,000 $57,000 $20,000 $24,000 $20,000 $20,000 1.00 0.25 1.60 2.00 0.50 1.60 1.60 1.50 1.50 3.60 4.95 $128,084 $10,898 $114,785 $143,482 $49,148 $67,383 $67,383 $67,383 $1,191,865

4*** Use $70,000 from middle school carryover to balance the budget. 5*** 6 7 8 9 Transfer $200,000 to Routine Maintenance from B4E Planned Maintenance rather than the General Fund. Staff will provide enrollment projections in-house and therefore save on contracted expenses. Reduce the communications consultant contract by $15,000. Charge for actual cost of TB testing. Delete the K-12 site allocation for travel and conferences.

Require classified employees to take their vacation each year in 10 order to avoid payouts. 11 Delete the General Fund allocation for Camp Anytown. 12 Reduce the allocation for high school athletics by $10,000 at each site.

13 Reduce the support for Spectra Art by $20,000, leaving $45,000. 14 Delete 1.0 FTE administrator at the district office. 15**** Delete 0.25 FTE Account Technician position at the district office. Reduce the number of middle school support teaching periods by 16 a total of eight periods. Reduce the number of high school support teaching periods by 17 five periods at each high school. 18 Delete a 0.5 FTE psychologist position or equivalent. 19 Delete 0.8 FTE clerical position at each high school. 20 Delete a total of 1.6 FTE clerical positions at the middle schools. 21 Reduce the amount of clerical support at each elementary school by one hour. TOTAL Alternative: Remove 19-21 and substitute 22. 19 Delete 0.8 FTE clerical position at each high school. 20 Delete a total of 1.6 FTE clerical positions at the middle schools. Reduce the amount of clerical support at each elementary school by one hour. The savings for a two-day furlough for administrators, CSEA unit 22*** members, and confidential/supervisory employees is $199,092. This can be subsitituted for items 19, 20, and 21. 21 TOTAL 3.00 7.20 N/A N/A N/A

N/A N/A N/A $199,092

9.90

$1,188,808

*FTEs are shown for items in which 2004-05 FTE reduction is known. **Total amount includes salary and employee benefits. ***These funds are one-time, so the budget deficit will be increased in 2005-06 ****This position is currently vacant, so no person will be losing a job.

Budget Adjustments for the 2003-04 Budget Approved by the Board of Education May 13, 2003
# 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Description The GATE revenue from the State is estimated to be reduced by $10,938. Budgeted expenditures will be reduced by the same amount. The SIP revenue from the State is estimated to be reduced by $77,018. Budgeted expenditures will be reduced by the same amount. The PAR/BTSA revenue from the State is estimated to be reduced by $41,516. Budgeted expenditures will be reduced by the same amount. The EIA revenue from the State is estimated to be reduced by $14,601. Budgeted expenditures will be reduced by the same amount. The Miller-Unruh revenue from the State is estimated to be reduced by $12,957. Budgeted expenditures will be reduced by the same amount. The State Instructional Materials revenue from the State is estimated to be reduced by $74,487. Budgeted expenditures will be reduced by the same amount. The School Libraries Materials revenue from the State is estimated to be reduced by $6,534. Budgeted expenditures will be reduced by the same amount. The Instructional Technology (AB 1339) revenue from the State is estimated to be reduced by $8,129. Budgeted expenditures will be reduced by the same amount. The School Safety revenue from the State is estimated to be reduced by $17,545. Budgeted expenditures will be reduced by the same amount. The Tobacco Use Prevention revenue from the State is estimated to be reduced by $1,966. Budgeted expenditures will be reduced by the same amount. The Tenth Grade Counseling revenue from the State is estimated to be reduced by $2,554. Budgeted expenditures will be reduced by the same amount. Reduce the travel and conference budget for all departments by 50%. Increase the requirements for sites/schools to obtain substitutes and use overtime and capture and save approximately 1/6 of this budget. Reduce the use of cell phones in the district. Charge Building for Excellence for the direct costs incurred by the Routine Maintenance staff. Take advantage of energy management opportunities to reduce utilities expenditures by 7%. Reduce the Accounting Department budget by $50,000. Reduce Superintendent's annual contingency budget by $10,000. Reduce Board of Education budget by $7,500. Reduce the Information Technology budget by a total of $75,000. Reduce the Student Support Services budget by $35,000. Delete an overtime allocation in the Print and Mail Shop. Reduce the elementary per student school allocation from $128/student to $100/student. Reduce the middle school per student school allocation from $84/student to $80/student. Reduce the high school per student school allocation from $101/student to $95/student. Reduce the pool of dollars to fund the elementary school special needs allocation at the elementary schools from $300,000 to $250,000. Administrator FTEs* Certificated FTEs* Classified FTEs* Total Amount $10,938 $77,018 $41,516 $14,601 $12,957 $74,487 $6,534 $8,129 $17,545 $1,966 $2,554 $67,500 $80,000 $4,000 $75,000 $158,000 $50,000 $10,000 $7,500 $75,000 $35,000 $30,000 $125,692 $9,060 $19,674 $50,000

# 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42

Description Reduce the number of district landscape positions by 2.0 FTE. These have been held vacant. Delete the $25,000 of the $250,000 Staff Development budget spent on meeting support. Delete the budget for sabbatical leaves for 2003-04. Delete the 53 lead teacher stipends of $1,196/teacher. Replace a one coordinator position in Education Services with a TOSA. Also, replace a vacant director position in Education Services with a coordinator and leave the coordinator position vacant. Delete the 1.0 FTE allocation for Middle School deans. Delete the 0.5 FTE Assistant Business Manager position, currently managing renovation, mitigations and moves at Terman Middle School, effective October 31, 2003. Delete the Landscape Supervisor position and have the Manager of Maintenance and Operations supervise the landscape staff. Reduce the number of classified staff in Human Resources by 1.0 FTE. This position is currently unfilled. Reduce the budgeted expenditures for the Assessment Program by $59,000. Delete the contract to provide webmaster services and perform the activities in-house. Replace the Digital Publishing (WP) supervisor with a non-supervisory position. Reduce the secondary literacy resource teacher position from 1.0 FTE to 0.5 FTE. Reduce the General Fund support for the technology TOSA position from 1.0 FTE to 0.6 FTE. Fund the remaining 0.4 FTE with one-time AB 1339 funds. Fund a 0.6 FTE Mathematics TOSA position with Noyce funding rather than the General Fund. Delete the 0.7 FTE elementary literacy TOSA position funded by the General Fund. This activity will be supported by an existing 0.2 FTE General Fund position augmented by a 0.2 FTE federally funded position. Delete the 0.53 FTE General Fund science TOSA position. (The other 0.47 FTE of this position is currently funded by the expiring BASEE grant.) There will be a 0.5 science TOSA position multi-funded by categorical programs. Reduce the allocation for contracted counseling and behavioral support services at the secondary schools from $220,000 to $110,000. Some of these services will be performed by district staff. Delete the over-formula custodial FTE at Gunn High School for a full year. (Staff has already been transferred to a vacant position.) Paly was not over formula. Move support staff, including clerical and custodial staff, along with enrollment to the third middle school. Therefore, reduce the allocation for growth in support staff by $266,437. Reduce General Fund support to high school athletics by 50%, or $10,000 at each site. Reduce support to middle school athletics by 50%, or $7,500 at each site. Reduce the calendar and compensation for all administrators by two days. It is possible that the state will delete the funding for staff development buy-back days. If this funding is deleted, there will be a corresponding reduction in teacher calendar and compensation. Here, the assumption is that two days will be deleted. If all three days are deleted, the savings will be proportionately greater. The loss of income for 2 days of $323,000 and the savings in compensation of $572,000 yield a net savings of $249,000. This reduction was not made.

Administrator FTEs*

Certificated FTEs*

Classified FTEs* 2.00

Total Amount $96,828 $25,000 $70,768 $63,388

2.00 1.00 0.33

-1.00

$171,722 $71,100 $50,500 1.00 1.00 $103,000 $56,033 $59,000 $15,000 $12,000

0.40

0.20

0.50 0.40 0.60 0.70

$36,000 $29,000 $43,000 $50,000

43

0.53

$37,683

44 45 46 47 48 49

$110,000 1.00 $36,311 $266,437 $20,000 $22,500 $72,000

50

$249,000

# 51 52

Description Reduce the total number of Middle School Instructional Supervisor positions from current year 4.0 FTE to 3.2 FTE. Reduce the High School "below the line" allocations by 1.40 FTEs at each of the two schools. The reductions are 0.8 FTE technology support, 0.2 FTE senior project, 0.2 FTE WASC and 0.2 FTE AVID coordination. (The coordination duties will be funded through a stipend.) Reduce the Middle School "below the line" allocations by a total of 1.4 FTEs from current year. The reduction is 0.6 FTE technology support, 0.3 FTE all-city music, and 0.5 FTE AVID coordination. (The coordination duties will be funded by a stipend.) Staff middle school counseling positions at 400:1 rather than 360:1. Staff high school counseling positions at 400:1 rather than 360:1. Reduce the allocation for classified staff at each high school by 1.5 FTE. Phase out the warehouse. For 2003-04, delete a 0.88 FTE position and for 2004-05, delete another 1.0 FTE. Use one-time money to fund the 1.0 FTE position in 2003-04. The state has reduced the transfer to Routine Maintenance from 3% of the General Fund to 3% of the smaller Unrestricted General Fund. This calculation has cut the General Fund obligation by $700,000. At this point, it is intended that the General Fund will contribute an additional $290,000. It is hoped that the final state budget will not require the district to use these dollars to support the General Fund. At this time, no non-vacant maintenance positions will be reduced. Increase Targeted Instructional Improvement Grant income to include the deferred revenue for 2002-03 and additional income for 2003-04. TOTAL Additional FTE reductions. See note below.** GRAND TOTAL PERCENTAGE REDUCTION

Administrator FTEs*

Certificated FTEs* 0.80 2.80

Classified FTEs*

Total Amount $57,000 $196,680

53 54 55 56 57

1.40 0.61 0.89 3.00 0.88

$95,940 $44,943 $64,674 $129,294 $108,600

58

1.00

-$290,000

59

$298,000

3.73

8.22

10.08 6.62 16.70

$3,536,071

7%

1%

5%

*FTEs are shown for items in which 2003-04 FTE reduction was known. **Some of the reductions in the total amount column, where no staff are listed, did result in either certificated teacher reassignment or additional classified reductions. As a result, another 6.62 FTE classified positions were laid off, for a total of 16.7 FTE. Certificated teachers who were affected were offered alternative assignments which they may or may not have accepted. As a result, no certificated layoff reduction was made by the Board.

Mid-Year Budget Adjustments Made in the 2002-03 Budget Approved by the Board of Education March 4, 2003
# 1 Admistrator FTEs* Certificated FTEs* Classified FTEs* Total Amount $154,000

Description The mid-year reduction plan includes a 25% loss in state instructional materials revenue. The expenditure budget in this categorical program is reduced by a corresponding amount. The mid-year reduction plan includes a 50% loss in school library materials revenue. The expenditure buget in this categorical program is reduced by a corresponding amount. Savings from not filling a vacant part-time digital publications supervisor position for the balance of the year. Savings from filling a vacant custodial position, effective in April, with a transfer and not a new hire. Savings from not filling a vacant landscaper budget for the balance of the year. Savings from not filling a vacant Special Education secretary budget for the balance of the year. Savings from not spending a portion of the Superintendent's budget. Savings from transferring a portion of categorical fund balances to the general fund to offset midyear budget cuts (requires ABX1-8 being signed into law). Savings from the staff development budget.

$27,000

$15,000

$11,000

$19,000

$19,000

$5,000

$118,000

$10,000

10

Savings from not spending the major part of the recruiting budget. Overall savings from salary reconciliation and unfilled positions through the end of the second interim period. TOTAL 0.00 0.00 0.00

$20,000

11

$210,000

$608,000

EXHIBIT A

COSTS OF 2001-02 SALARY AND BENEFIT INCREASE 2001-02 ONGOING SALARY INCREASE AMOUNT FROM GENERAL FUND AMOUNT FROM PARCEL TAX REVENUE 8.50% $5,926,000 $1,807,365 $4,118,635

COSTS OF DISTRICT-FUNDED CSR TEACHERS 2003-04 Teachers Salaries STRS Medicare Health Benefits Unemployment Insurance Workers Compensation TOTAL COSTS FOR 30.87 TEACHERS AMOUNT FROM PARCEL TAX REVENUE AMOUNT FROM GENERAL FUND 30.87 30.87 71,255 8.25% 1.45% 7,494 0.30% 0.50% $2,199,642 181,470 31,895 231,340 6,599 10,998 $2,661,944 $1,400,000 $1,261,944

ATTACHMENT 4

PALO ALTO UNIFIED SCHOOL DISTRICT CLASS SIZE REDUCTION (CSR) COST ANALYSIS 2001-02 TO 2009-10
ACTUAL CLASSROOM TEACHERS WITH CLASS SIZE REDUCTION ACTUAL 2001-02 2002-03 FTE AMOUNT FTE AMOUNT K-5 6-8 9-12 TOTAL 207.00 114.11 143.04 464.15 $ 16,700,330 $ 9,206,158 $ 11,540,170 $ 37,446,657 229.00 115.17 145.71 489.88 $ 19,352,983 $ 9,733,114 $ 12,314,075 $ 41,400,172

2003-04 FTE AMOUNT 231.00 120.41 150.53 501.94 $ 19,919,309 $ 10,383,048 $ 12,980,319 $ 43,282,675

2004-05 FTE AMOUNT 235.00 120.34 149.61 504.95 $ 20,567,537 $ 10,532,329 $ 13,094,118 $ 44,193,984

2005-06 FTE AMOUNT 236.95 128.09 150.16 515.20 $ 21,357,730 $ 11,545,523 $ 13,534,825 $ 46,438,078

PROJECTED 2006-07 2007-08 FTE AMOUNT FTE AMOUNT 243.60 128.79 149.79 522.18 $ 22,206,609 $ 11,740,514 $ 13,654,876 $ 47,601,999 248.80 131.31 155.33 535.44 $ 22,938,626 $ 12,106,394 $ 14,320,968 $ 49,365,988

FTE 252.20 131.89 162.86 546.95

2008-09 AMOUNT $ 23,516,874 $ 12,298,337 $ 15,186,194 $ 51,001,405

FTE 250.75 141.09 167.25 559.09

2009-10 AMOUNT $ 23,648,213 $ 13,306,187 $ 15,773,335 $ 52,727,735

COMPUTED CLASSROOM TEACHERS BASED ON OLD RATIOS (WITHOUT CLASS SIZE REDUCTION) ACTUAL 2001-02 2002-03 2003-04 FTE AMOUNT FTE AMOUNT FTE AMOUNT K-5 6-8 9-12 TOTAL 157.92 107.73 134.41 400.06 $ 12,740,701 $ 8,691,135 $ 10,844,282 $ 32,276,118 161.31 108.12 140.19 409.62 $ 13,632,026 $ 9,137,253 $ 11,847,709 $ 34,616,987 164.90 109.89 144.92 419.71 $ 14,219,600 $ 9,475,703 $ 12,496,745 $ 36,192,049

2004-05 FTE AMOUNT 170.10 109.89 142.85 422.84 $ 14,887,543 $ 9,617,531 $ 12,502,593 $ 37,007,667

2005-06 FTE AMOUNT 172.86 116.52 144.07 433.45 $ 15,580,913 $ 10,502,649 $ 12,985,897 $ 39,069,458

PROJECTED 2006-07 2007-08 FTE AMOUNT FTE AMOUNT 177.69 117.55 143.42 438.66 $ 16,198,244 $ 10,715,874 $ 13,074,186 $ 39,988,304 181.48 119.76 148.82 450.06 $ 16,731,920 $ 11,041,519 $ 13,720,765 $ 41,494,204

FTE 183.95 120.06 155.84 459.85

2008-09 AMOUNT $ 17,152,772 $ 11,195,226 $ 14,531,601 $ 42,879,598

FTE 182.89 128.21 160.54 471.64

2009-10 AMOUNT $ 17,248,342 $ 12,091,475 $ 15,140,515 $ 44,480,332

COSTS OF CLASS SIZE REDUCTION 2001-02 FTE AMOUNT K-5 6-8 9-12 TOTAL FUNDING SOURCES: STATE INCOME FOR K-3 CSR **Note 1 STATE INCOME FOR 9TH GRADE CSR PARCEL TAX DISTRICT GENERAL FUND **Note 2 $ 2,578,288 $ 293,109 $ 2,626,494 $ 290,980 $ 2,218,294 $ 297,494 $ 2,864,736 $ 320,528 $ 3,083,836 $ 315,150 $ 3,246,685 $ 348,296 $ 3,306,170 $ 360,772 $ 3,393,600 $ 404,892 $ 3,490,560 $ 385,956 49.08 6.38 8.63 64.09 $ 3,959,629 $ $ 515,022 695,888 ACTUAL 2002-03 FTE AMOUNT 67.69 7.05 5.52 80.26 $ 5,720,957 $ $ 595,861 466,366 2003-04 FTE AMOUNT 66.10 10.52 5.61 82.23 $ 5,699,709 $ $ 907,344 483,573 2004-05 FTE AMOUNT 64.90 10.45 6.76 82.11 $ 5,679,994 $ $ 914,799 591,525 2005-06 FTE AMOUNT 64.09 11.57 6.09 81.75 $ 5,776,818 $ 1,042,874 $ 548,928 PROJECTED 2006-07 2007-08 FTE AMOUNT FTE AMOUNT 65.91 11.24 6.37 83.52 $ 6,008,364 $ 1,024,640 $ 580,690 67.32 11.55 6.51 85.38 $ 6,206,705 $ 1,064,876 $ 600,203 2008-09 AMOUNT $ 6,364,103 $ 1,103,111 $ 654,593 2009-10 AMOUNT $ 6,399,871 $ 1,214,712 $ 632,820

FTE 68.25 11.83 7.02 87.10

FTE 67.86 12.88 6.71 87.45

$ 5,170,539

$ 6,783,184

$ 7,090,627

$ 7,186,317

$ 7,368,620

$ 7,613,694

$ 7,871,784

$ 8,121,807

$ 8,247,403

$ 1,400,000 $ 899,142

$ 1,400,000 $ 2,465,710

$ 1,400,000 $ 3,174,839

$ 1,400,000 $ 2,601,053

$ 1,400,000 $ 2,569,634

$ 1,400,000 $ 2,618,713

$ 1,400,000 $ 2,804,842

$ 1,400,000 $ 2,923,315

$ 1,400,000 $ 2,970,887

Notes: 1. The state income for K-3 CSR in 2003-04 was reduced by $460,748 due to the state's categorical funding reduction to Basic Aid districts. State revenues for future years are adjusted with projected state Cost of Living Adjustments (COLAs) and enrollment growth. 2. Funding from the district general fund includes contributions to both the district program funded by parcel tax revenue (grades 4-8 and 10) and the state programs (K-3 and 9th grade). In 2004-05, the projected contribution to the district program is $1,401,561 and the contribution to the state programs is $1,199,492.

ATTACHMENT 5

COSTS OF DISTRICT-FUNDED CLASS SIZE REDUCTION TEACHERS FOR GRADES 4-8 AND 10 FROM THE 2001 PACEL TAX 2004-05 COSTS

Teachers Salaries STRS Medicare Health Benefits Unemployment Insurance Workers Compensation TOTAL COSTS OFR 30.87 TEACHERS AMOUNT FROM PARCEL TAX REVENUE AMOUNT FROM GENERAL FUND

FTE 32.01

32.01

$70,856 8.25% 1.45% $8,021 0.65% 1.85%

AMOUNT $2,268,101 $187,118 $32,887 $256,752 $14,743 $41,960 $2,801,561 $1,400,000 $1,401,561

Impact of Budget Reductions on High Schools

Due to current economic conditions, falling commercial property tax revenue in Palo Alto, declining State revenues, an increase in the cost of health care benefits, and growing enrollment, our District has been forced to cut $6.5 million over the past two years, and use over $3.4 million in one time money. Our secondary schools have had a loss of $3.7 million ($2.1 million in the high schools and $1.6 million in the middle schools). Our high schools have experienced a reduction in administrators, teaching and support staff, and a reduction in per pupil allocations from the State and District. The high schools have attempted to offset budget reductions. However, these budget cuts are impacting our high school programs. Our High Schools Have Lost Teaching Periods Each high school has been reduced 10 teaching periods. These flexible periods allowed the high schools to offer a rich elective program. While schools continue to be staffed according to contractual agreements, many electives with lower enrollments are not being offered this year. For example: At Palo Alto High School, AP Physics, American Sign Language I, German 1, AP Art History, American Lit, World Lit 12, American Classics Honors, Shakespeare/Chaucer, Introduction to Gender Study, Ethnic Studies, and Sports Medicine will not be offered this year. At Gunn High School, Multicultural Literature, African American History, American Studies, Introduction to Business Communication, Computer Applications, and History of Women in America will not be offered. The loss of staffing allocations over the past two years has also eliminated additional classroom support at each high school for Digital High School, Site Technology, AVID Coordination, and Senior Projects. The student to teacher counseling formula changed from 360:1 to 400:1, along with a reduction of a school psychologist from a full-time to half-time position. Our High Schools Have Lost Administrators Our high school administrative staff has been cut to a minimum. Previously, each high school had a principal and three assistant principals. Each high school now has a principal and two assistant principals, a 25% reduction in administrative staff, at the same time we have experienced student enrollment growth. As a result: Administrative responsibilities have been reassigned to the principal and assistant principals. Each high school has created a Deans position (using classroom staffing allocation) to support student discipline and attendance.

Our High Schools Have Lost Classified Staff Positions The reductions in classified staff positions over the past two years have impacted teachers, students, and administrators. For example: Reproduction technicians have been reduced and teachers now do much of their own copying of materials, a poor use of teachers time. The athletic assistant position has been eliminated and coaches or the athletic director are now responsible for field and equipment set ups, transportation arrangements, and field trip paperwork for classes missed on game days. Attendance secretarial help has been reduced resulting in a loss of time to monitor attendance and send attendance notifications to parents. Allocations for Computer Lab Specialists have been reduced at both high schools. Our High Schools Have Lost Per Pupil Allocations from the State and District State allocations for various programs such as GATE (Gifted and Talented Education), SIP (School Improvement Programs), Instructional Materials, School Library Funds, and Instructional Technology have been reduced. The District has been forced to reduce the high school allocation per pupil from $101 to $80. For a student body of 1,700, this is a loss of $10,300. Additionally, $40,000 in support for each high schools athletic program has been cut over the past two years, and $12,000 for Camp Anytown has been eliminated. Funds for teachers to attend conferences, which supported professional development for teachers, were also totally eliminated, resulting in a loss of approximately $9,000 at each high school.

Our High Schools Have Attempted to Offset Budget Reductions To offset these reductions, the high school principals reviewed areas where they might seek additional funding sources, as well as areas where we might increase fees. The high schools are now fundraising for a variety of needs. While some fundraising can be done through service organizations (e.g. Kiwanis Club for Camp Anytown), most is done at the parent/community level. The loss of revenue has also resulted in increased costs to parents. For example, fees have increased for sports participation, parking permits, student body cards, lab fees, and copies of transcripts.

Our High Schools Are Among the Best in the Nation Exceptional teachers, challenging programs, dedicated parents, and support from our community all contribute to our high student achievement. Ninety-five percent of our graduates go to college Each year over 40 percent of Paly and Gunn students enroll in Honors and Advanced Placement classes Over 70 percent of our graduates complete the rigorous A-G University of California Admissions Requirements for high school course work Over 90 percent take the SAT College Board Exam with a combined Verbal and Math score averaging 1250