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Laura Blackman made reference to the Capital Funding Policy and that there was a discussion at a work session in January, and the Board requested to look at the draft policy. Chair Carey verified that the Board never adopted the language, but adopted the plan and the practice, and the plan was implemented. Budget Director Donna Coffey said that the County has been practicing the policy to a certain extent. The Board has agreed to allocate four cents of the tax rate to recurring capital. Three cents would be far school capital and one cent would be far County recurring capital. To date, only two cents have been allocated to the school recurring capital, and the County recurring capital has not been allocated. Donna Coffey gave background on the Capital Funding Policy. Since 1996, the County has had one in place. In November 2004, the Board adapted a policy of practice that said that it would allocate 60% of pay-as-you-go capital funding to schools and 40% to the County projects. Fallowing the adoption of this policy, in May 2005 the Board chose an option on haw to allocate school construction impact fees, etc. Donna Coffey went over the highlights of the policy, which is incorporated by reference. Regarding lottery proceeds, last year the state said that Orange County could expect $2.7 million in lottery proceeds this current fiscal year. The County budgeted $2.4 million to offset debt service, which was the equivalent of two cents. The first quarter deposit in October was promising. The second quarter proceeds were dawn significantly. Based on the numbers from DPI, the County will be about $300,000 short an lottery proceeds collections. One of the recommendations is to budget lottery proceeds in arrears -not include them in the current revenue stream, but once it is collected, then it can be budgeted. Commissioner Nelson asked if there has been feedback from the school boards an haw to divide up the lottery proceeds and it was answered no. Laura Blackmon said that the collections of lottery proceeds are very unstable as far as the collections. There are bills being introduced that may change the distribution of the proceeds. Donna Coffey said that attachment 3 shows all of the bills introduced related to the lottery. Commissioner Nelson said that it would be helpful to have input from the school boards about the spending of the lottery proceeds, as early in the budget process as possible. Chair Carey said that mast of the bills seek to allocate funds based on average daily membership. He asked if this was in the County's favor. Donna Coffey said that it is allocated now an average daily membership, but a lot of the counties want to see the effective tax rate come out of this. Commissioner Gordon asked about budgeting in arrears. Donna Coffey said that in the 2007-08 year, no lottery funds would be budgeted. In 2008-09, the County would budget the amount that was collected in 2007-08. Commissioner Gordon suggested acknowledging this practice in the capital funding policy of budgeting lottery proceeds in arrears. Chair Carey agreed. Commissioner Gordon asked about the four cents on the ad valorem tax rate and asked haw the County would be able to handle this. She said that by the time the upcoming debt is issued, there will be no room to implement this policy for several years. She suggested restating the policy somehow to say that the equivalent of revenue equal to four cents is the targeted rate, however, it might be awhile before it can be done. She suggested having a bigger footnote (attachment 1, fourth bullet}. Laura Blackmon suggested some language as follows: "The equivalent of the revenue estimated to be produced each fiscal year, not to exceed four cents on the Countywide ad valorem tax rate, so that there could be adjustments depending upon the fiscal nature of the upcoming year." Chair Carey said that Commissioner Gordon is probably right and they are not going to be able to do four cents in the next few years. However, he likes the affirmative statement that