Claims data will be monitored closely. Based on market and historical data, a 10% increase is reasonable for the preliminary 2019-2020 budget projections. 28 Administration will continue to work with a representative group of staff to identify ways to adjust the plan design, negotiate discounts, and incorporate wellness activities such as free membership and low-cost fitness classes for staff through the Center of Clayton that will maintain a competitive benefits package. Retirement Contributions - Retirement contributions for PSRS members and employer matching have been approved by the retirement system at the same percentage as 2018-19 which is 14.50% of retirement compensation. Retirement contributions for PEERS members and employer matching have also been approved by the retirement system at the same percentage as 2018-19 which is 6.86% of retirement compensation. Retirement compensation includes salary, extra pay, and medical, dental, and vision insurance contributions. Neither PSRS participants nor the District contributes to social security and participants are not eligible for social security benefits based on employment with the District. PEERS participants and the District both contribute to social security and participants are eligible for full benefits. School Building and Department Budgets For 2019-2020, school building and department budgets will be established through the ZBB approach as previously described. This represents approximately $5.0 million of the overall operating budget. All members of the District Leadership Council will share in the experience of analyzing budget trade-offs and making tough decisions between building and department requested wants and enhancements. It is recommended not to increase this operating budget to be fiscally prudent. However, through the ZBB approach, District leaders will ensure the District’s resources are allocated to programs that support its mission, vision and core values as well as to secure the District’s ability to continue to provide our students with a rich and rigorous educational experience. Capital Expenditures The District defines capital expenditures and projects as follows: • Capital Expenditures – Any purchase of furniture, equipment, vehicles, or permanent improvement having per unit cost of $1,000 or more and useful life of more than one year is classified as a capital asset. Purchases of $3,500 or more will be competitively bid, and sealed bids will be required for purchases that may exceed $15,000 as stated in District Policy DJF -2 – Purchasing. • Capital Project – An activity that does not occur routinely or annually, has a scheduled and definitive beginning and ending, and results in a capital improvement or acquisition. Funding for this activity is from local revenue sources. • Capital Projects Bond Program – Major technology infrastructure and facility needs such as new construction, or upgrading existing facilities are funded through the sale or refunding of bonds. As part of a bond elections process, the District develops a framework of the projects to be addressed. These projects are determined through internal staff analysis and input from the community. Once the projects are identified, specific project budgets are established on a project basis. Facility Services – The Director of Facility Services and key stakeholders work to develop a five-year capital projects budget each January and February. General building maintenance needs are considered as well as educational needs. The needs throughout the District are analyzed and prioritized. This list is continuously updated as the needs of the District and its students change. Each spring the District asks the Board to approve the top priority projects that fit within budget parameters that need to be completed at that time. As a result, many projects get deferred over a period of years. Some of these projects include: 29

As a result, many projects get deferred over a period of years. Some of these projects include: 29  Safety and security improvements at every school.  Infrastructure improvements that were identified in the District’s Facilities Master Plan but were not pressing enough to be included as part of the 2009 bond issue.  Updates to learning spaces/libraries to meet the evolving needs of today’s learners.  Improvements to The Center of Clayton which serves Clayton High School’s physical education and athletic programs. Due to the successful passing of Proposition E, an additional $675,000 a year in funding for facility and maintenance needs will be budgeted. Total proposed maintenance Capital Improvement Plan (CIP) expenditures for 2019-2020 will include funding at the same level as 2018-2019 of $625,280 with an additional $100,000 from Proposition E for a total allocation of $725,280. The remaining $575,000 of the additional $675,000 from Proposition E will be used to pay the annual financing payments for improvements at the Center of Clayton. A contingency fund of $50,000 has historically been maintained to deal with unanticipated maintenance needs and emergency repairs. In addition, requests to expend funds from the sale of the Maryland Building will be presented during the 2019-2020 school year. These funds are not part of operating funds and are not reflected in the operating budget. The Board has committed these funds for capital projects and must approve each expenditure from these funds. The first request will be to hire an architect to perform a safety audit of our buildings. Facility staff are currently prioritizing other maintenance projects to bring forward for approval. Many Facility Service projects are completed during the summer months and therefore projects that are not completed prior to the end of the fiscal year will continue to be carried over into the following year’s budget. Technology – The District finalized its “technology toolbox” and recommendations were approved by the Board on January 25, 2017. The recommendations include additional support for technology beyond previous allocations. As a result, the Technology Improvement Plan (TIP) was increased from $500,000 to $600,000 in 2017-2018 with a 2% inflationary increase over the next 2 years. As a result, TIP funds will be budgeted at $624,240 for 2019-2020. Further, an additional $50,000 contingency was established to handle unanticipated needs. The Board will receive an update on the approved TIP during 2019-2020. The primary purpose of TIP funds is to maintain a replacement cycle for computers, tablets, Chromebooks and servers. Because many of Technology’s projects are completed during the summer months, projects that are not completed prior to the end of the fiscal year will continue to be carried into the next fiscal year. Clayton Recreation Sports and Wellness Commission The Clayton Recreation, Sports and Wellness Commission, Inc. (CRSWC) is a not-for-profit organization, which provides a shared use facility called the Center of Clayton (Center) to address the athletic and educational needs of the community. The goal of the Center is to cover operating costs; however, feasibility studies conducted prior to the opening of the Center recommended establishing a funding mechanism for capital and equipment replacement costs. These expenditures had not been factored into the original projections and unexpected capital costs would be difficult if not impossible for the Center’s budget to fund. Historically, expenditures in the capital and equipment replacement fund have been provided through a total annual capital contribution of $100,000 to $150,000 by each parent organization (the City of Clayton and the District). The Center is projecting parent contributions for FY 2019 to increase from $150,000 to $200,000 for each entity of which would be primarily for capital and equipment replacement. The Center consistently reviews staffing and revenue projections to minimize operational losses. Although, if the Center experiences an operating loss, additional financial support from each parent organization would be necessary. Based on preliminary projections prepared by the Center’s staff, an operating loss is 30

Although, if the Center experiences an operating loss, additional financial support from each parent organization would be necessary. Based on preliminary projections prepared by the Center’s staff, an operating loss is 30 anticipated for the end of the fiscal year. The District would be required to fund half of this loss. Projections include funding to the CRSWC only at the $200,000 level. Adjustments to the budget will be made if more information becomes available. It is also recommended that the Board continue to commit to placing in reserve $100,000 a year to cover the costs of potential major capital repairs to the building and grounds. This reserve would accumulate up to, and be maintained at, a $500,000 fund balance. 2018-2019 represents the fifth year totaling the recommended $500,000 in reserves. The funds are recorded as committed on the balance sheet for the governmental fund financial statements as well as not included in fund balance projections. The Center finalized a facility needs assessment and presented it to the CRSWC board for approval on February 17, 2017. The project was put out to bid in March 2019 and construction is expected to begin June 2019. The overall project will:  Preserve the aging facility and protect our investment.  Enhance the facility to maintain/increase membership and continue to cover operational costs.  Improve energy conservation/sustainability.  Request from the City to replace the mulch pile with a new parking lot (the City donated the property to the CRSWC).  Stay within a $10.6 million total budget. The Board approved the issuance of Certificates of Participation (COPs) to fund the $5.0 million District portion of the capital improvements to the building and also approved the release of $300,000 of the District reserves committed for capital improvements at the Center for the District’s portion of the expansion of the parking lot. The estimated $575,000 annual COPs payment is included in the projections. Finally, on January 9, 2019, the Board authorized the solicitation of bids for the new Power Lifting Room that will have exclusive use by the District. District staff are finalizing the results of that bid and will present to the Board for approval when finalized. It is recommended that committed funds be used to fund this expenditure. After both of these projects are completed, the reserve is estimated to have $120,000 remaining and will be replenished at an amount up to $100,000 annually until accumulated up to $500,000. Family Center The Family Center budget has historically been developed through a ZBB approach. Funding is allocated based on operational needs. District administration will continue to review the Family Center’s fee structure to ensure tuition maintains competitiveness with market programs and covers the historical percentage of operating costs. Historic funding levels and District support are provided in the following chart and gap analysis: 2013- 2014 2014- 2015 2015- 2016 2016- 2017 2017- 2018 2018- 2019* 2019- 2020* Program Revenues $711,489 $795,967 $769,746 $743,045 $813,688 $825,000 $835,000 Operational Costs $381,421 $458,376 $399,302 $406,795 $441,623 $491,760 $559,690 Program Costs $662,088 $725,237 $744,649 $762,832 $799,383 $836,020 $878,930 Total Expenses $1,043,509 $1,183,613 $1,143,951 $1,169,627 $1,241,006 $1,327,780 $1,438,620 District Support $ $332,020 $387,646 $374,205 $426,582 $427,318 $502,780 $603,620 District Support % 31.82% 32.75% 32.71% 36.47% 34.43% 37.87% 41.96% Program Generated 68.18% 67.25% 67.29% 63.53% 65.57% 62.13% 58.04% 31

District administration will continue to review the Family Center’s fee structure to ensure tuition maintains competitiveness with market programs and covers the historical percentage of operating costs. Historic funding levels and District support are provided in the following chart and gap analysis: 2013- 2014 2014- 2015 2015- 2016 2016- 2017 2017- 2018 2018- 2019* 2019- 2020* Program Revenues $711,489 $795,967 $769,746 $743,045 $813,688 $825,000 $835,000 Operational Costs $381,421 $458,376 $399,302 $406,795 $441,623 $491,760 $559,690 Program Costs $662,088 $725,237 $744,649 $762,832 $799,383 $836,020 $878,930 Total Expenses $1,043,509 $1,183,613 $1,143,951 $1,169,627 $1,241,006 $1,327,780 $1,438,620 District Support $ $332,020 $387,646 $374,205 $426,582 $427,318 $502,780 $603,620 District Support % 31.82% 32.75% 32.71% 36.47% 34.43% 37.87% 41.96% Program Generated 68.18% 67.25% 67.29% 63.53% 65.57% 62.13% 58.04% 31 Parents as Teachers State funding for the Parents as Teachers (PAT) program has been reduced significantly in recent years. The $60,000 funding level projected for 2019-2020 is approximately $46,000 lower than the historic high of $106,854 received during the 2007-2008 school year. Historic funding levels and District support are: 2013- 2014 2014- 2015 2015- 2016 2016- 2017 2017- 2018 2018- 2019* 2019- 2020* State Funding $52,679 $60,237 $61,800 $63,820 $64,191 $60,000 $60,000 District Support $44,363 $35,290 $27,264 $26,284 $23,053 $38,810 $41,150 Total Cost of Program $97,042 $95,527 $89,064 $90,104 $87,245 $98,810 $101,150 Children Served 350 321 313 305 287 N/A N/A Families Served 204 206 211 211 198 N/A N/A *Budgeted 32

The $60,000 funding level projected for 2019-2020 is approximately $46,000 lower than the historic high of $106,854 received during the 2007-2008 school year. Historic funding levels and District support are: 2013- 2014 2014- 2015 2015- 2016 2016- 2017 2017- 2018 2018- 2019* 2019- 2020* State Funding $52,679 $60,237 $61,800 $63,820 $64,191 $60,000 $60,000 District Support $44,363 $35,290 $27,264 $26,284 $23,053 $38,810 $41,150 Total Cost of Program $97,042 $95,527 $89,064 $90,104 $87,245 $98,810 $101,150 Children Served 350 321 313 305 287 N/A N/A Families Served 204 206 211 211 198 N/A N/A *Budgeted 32 Early Childhood Special Education The Early Childhood Special Education (ECSE) program, including all staffing, is funded through a pass-through grant from DESE. ECSE is approximately 80% state funded and 20% federally funded. Over the past several years, DESE has advised the District that the ECSE funding exceeds DESE guidelines. In 2013, DESE stated that it would only fund the ECSE grant for less than half of the submitted full-time equivalencies (FTE). The District successfully appealed DESE’s decision. (Note: The grant approval takes place in arrears only after the funding has been provided the year prior.). While DESE approved the 2013 grant at the higher FTE level, it advised that it would no longer provide staffing levels as requested by the District. The District, with the assistance of an outside consultant and state officials with the ECSE program, completed a study of its ECSE program to determine appropriate staffing levels for the future. It was determined that projected staffing levels needed to serve students in the ECSE program at the Family Center were acceptable and it is anticipated that ECSE staffing should be covered by the DESE grant and District support should not be necessary. During the review of both the 2015-2016 and 2016-2017 final expenditure reports, DESE determined staffing levels were again too high and despite appeals by District administration, grant funding was reduced at a cost to the District of approximately $18,000 and $46,600 respectively. District staff will continue to monitor staffing levels and be proactive with working with state officials with the ECSE program to ensure staffing is maintained at the proper levels. Summer Programs It is recommended that the District maintain an overall investment in summer programs of $250,000. Academic summer programs will be budgeted at a total cost of $250,000 and recreation summer programs as fee-based revenue/expense neutral but operate with the intent to generate revenues where possible. Debt Service Currently, the District has bonds outstanding of approximately $92.8 million. In 2019-2020, the District will pay $7.85 in principal and interest payments and is budgeting the receipt of $845,580 in subsidy income direct from the federal government on federally subsidized debt as described below. All of the bond issues presently outstanding will be paid in full by 2030.  Series 2009C and 2010C are Taxable Build America Bonds – Direct Pay with a 35 percent interest rate subsidy.  Series 2010A are Qualified School Construction Bonds with a 96 percent interest rate subsidy.  Series 2010B is a Recovery Zone Economic Development Bond with a 45 percent interest rate subsidy. General obligation bonds outstanding at June 30, 2018, were as follows: Issue Date Maturity Date Rate of Interest Original Issue Amount Balance as of June 30, 2018 10/14/09 03/01/24 1.37% $9,185,000 $9,185,000 11/03/09 03/01/21 0.80%-4.75% 10,720,000 4,410,000 11/03/09 03/01/19 4.80%-5.60% 19,290,000 19,280,000 09/08/10 03/01/27 4.70% 3,987,000 3,987,000 09/28/10 03/01/30 4.70%-5.0% 16,205,000 16,205,000 09/28/10 03/01/28 3.90%-4.70% 16,270,000 16,270,000 12/27/17 3/1/29 4.00%-5.00% 23,465,000 23,465,000 $92,802,000 33