The last couple of weeks have had their fiscal (and emotional) highs and lows. After Measure B passed (and with the increased District enrollment), it looked like our budget cuts for this year would be significant, but manageable. At our Board meeting on May 7th, the proposed cuts by the administration for the 2009-2010 school year included a reduction in groundskeeping and custodians, some reduction in supplies, modest reductions in professional development dollars, and a delay in payment to fund future employee retiree benefits.
However, a few things have happened since then. Based on the failure of the May 19th State propositions, the latest estimate is that our budget will be cut an additional $570K both retroactive to this current year (2008-2009) and for upcoming years. The offsetting good news is that we will receive some Federal stimulus money. The net effect will be to roughly offset the cuts for 2008-2009, but since most of the stimulus money is a one-time shot, we still face a significant deficit for this coming year (2009-2010).
Note that even with this offsetting stimulus money, we will have deficit spent over $2 million this year. We have exhausted most of our reserves. To put things in perspective, our District received a reduction of about 15% to our revenue in this year vs. last year, so that is why we effective had a 10% bottom line loss. And as you’re probably aware, the State kept cutting our revenue during the year (7% of our revenue cuts happened after this year’s budget was already adopted), so it’s near impossible to reduce costs when 80% of your expenses are employee-related (and most are bound by collective bargaining agreements).
So before the Board meeting yesterday, we were faced with a 2009-2010 deficit of approx $960K. And this already assumed the additional revenue from increased enrollment, the passage of Measure B, and the cuts in custodians and other areas already mentioned above. In prep for this meeting yesterday, the Administration proposed two things:
- Sweeping “categorical” funds held both at the District and the individual school sites in an amount equal to $365K. Although it would take too long to write a complete explanation of this, this was possible due to new legistation that allowed money previously designated for restricted purposes to be used by a school district for any purpose. But the result of this would be less dollars at each school site to spend on specific programs. But all of the principals agreed that sweeping this money was the lesser of two evils.
- Making an additional $213K in cuts, which would include 20% of K-4 Music, 40% of K-4 PE, 27% of Library Associates, and all site professional development for teachers.
This would have been absolutely devastating, and to say the least, I was not looking forward to yesterday’s meeting. Even if we did all of this, we would still be deficit spending by almost $390K next year. Obviously a lot less than the $2 million this year, but since our reserves are much lower, that $390K deficit would be the absolute maximum deficit we could have and still keep above our State-mandated 3% reserve level three years out (which if you don’t, you are taken over by the State, which would be the absolute worst-case scenario).
However, at the meeting, we did get some late-breaking good news from our CBO. Apparently the County informed us that we are due more stimulus money tied to expenses in Special Education. Since our (and everyone’s) Special Ed costs far exceed the restricted dollars given to fund it, these extra dollars would essentially be able to offset money in our general fund that would otherwise go to pay for Special Ed costs. This amount came to approximately $285K in 2009-2010 and $255K in 2010-2011.
So, essentially, we are now in the position where we could apply that extra money to the $213K in cuts and avoid making any cuts to Music, P.E., Librarians, or the majority of professional development. So, that’s the good news.
The bad news includes the following:
- Barring a dramatic economic turnaround, the budget discussion next year will be equally as hard. We may need another $200-$500K in cuts (or additional revenue) to stay above the 3% reserve level.
- This assumes the State doesn’t cut more, and as we all know, it hasn’t done a great job at projecting its finances recently
- We still need to renew Measure D, which expires at the end of the 2011 school year. Failure to do so will give us another hole about equal to $1 million per year.
So, I think we may have barely avoided the worst cuts this year, but next year could get ugly. It’s going to require a lot of hard work and some good luck. Also, as I mentioned yesterday, I think we have to seriously work on two major initiatives:
- Working with our employee bargaining units to be creative and figure out a way to reduce employee costs. The math just doesn’t work out any other way. Obviously I want to pay our teachers as much as we can, but we really need to work together to address this crisis. Our teachers did step up this year with effectively a cut in salary by reducing the work year, and I appreciate that. We need to continue that spirit of cooperation.
- We may need to work with the San Carlos Educational Foundation (SCEF) to borrow and/or use money from their endowment. Their endowment was set up last year based on a $1.5 million gift from the Palo Alto Medical Foundation. The original purpose of the endowment was so we could have more money for additional programs. However, as we struggle to hold on to just some of the basics, I think we’ll need to work with SCEF to look to that endowment as a potential emergency fund.
The next step in this budget process is that the Board will give its direction to the Administration at our meeting next Thursday (5/28), and that input will be used to start building the budget, which then won’t be officially approved until June. As always, I encourage everyone to attend those meetings!
Thanks to everyone in the community who has worked so hard to maintain our great education — raising money, helping Measure B pass, advocating for their children, etc. Let’s just hope we can slow down this rollercoaster ride a bit.
