Q & A with the Superintendent Spring, 2013 For this cycle of my “Spring Tour,” I have prepared the answers to six questions that may be on everyone’s mind as we move toward the end of 2012-13 and look forward toward 2013-14.  This information was shared with BOTA and CSEA Leadership on February 13, 2013, and the request was made to provide a written copy of the information that would be shared in this round of school site visits.

 

1.         Now that Proposition 30 passed, what new funds will be coming to BOUSD?

According to the most recent estimates in the Governor’s Budget Proposal, Prop 30 and Prop 39, with a slowly recovering economy, are targeted to bring in $4.9 billion in additional funding for schools.  There are four primary uses proposed by the Governor for these funds:

·         $1.8 billion would be used to “buy back” some of the deferrals implemented in prior years.  This use brings in no new funds to our budget, but does improve our cash flow.

·         $400 million is set aside for school energy projects.  How those funds will be distributed remains unknown, but will provide no General Fund revenue to apply to compensation, furlough days or staffing levels.

·         $1.6 billion would be applied to begin the implementation of the Governor’s realignment of K-12 school financing, now called the “Local Control Funding Formula.”  Because BOUSD does not have large concentrations of English Language Learners or students considered Socio-Economically Disadvantaged, we expect to see less new funding than several surrounding districts.  If implemented as the Governor proposed, current estimates show BOUSD receiving about $600,000 in new funding, although we are not being allowed to budget these funds at this time due to the uncertainty of how, or if, the LCFF will be implemented.

·         Most of the remaining new money under Prop 98 would help fund a COLA for school districts.  Current estimates show BOUSD receiving about $500,000 in COLA funding next year,

2.         What does this new money mean for BOUSD’s budget picture?

BOUSD provides updated budget estimates four times a year.  At our last update, called the First Interim Report, the 2013-14 school year showed a projected deficit of $3.7 million, which is about 11.3% of the total unrestricted operating budget, or the equivalent of about 12% in salaries for all employees.  How is that so, you may ask…

·         In 2009-10, “real” cuts to school funding were implemented by increasing the Deficit Factor to over 10% of our funding in 2007-08.   This is where the State calculates what is owed to districts by statute and law, then arbitrarily reduces that funding to help balance the State budget.  The current Deficit Factor has the State only paying the District 78% of what we should be paid.

·         In 2009-10, the District implemented lay-offs to make up 4% of that cut.  We also implemented furlough days, and used one-time federal funds and reserves to balance our budget.

·         In 2010-11, the “real” cut to funding stabilized around 10%.  The ongoing staff reductions, furlough days, federal funds and reserves allowed us to balance the budget again that year.

·         In 2011-12 and 2012-13, the same scenario and solutions allowed for balancing the budget, with the mix of using ongoing staff reductions, furlough days, federal funding and reserves varying each year.

·         It needs to be noted that other costs in the budget, such as utilities, employee health benefits and the cost of supplies, continued to rise over these four years at about 1.5% per year.

·         That finds us looking at 2013-14 with furlough days sun setting and no federal funds or excess reserves left to help balance the budget.  The 6% structural deficit has not been solved, and has been increased by about 6% due to increasing costs.

·         The COLA mentioned in question #1 above can help solve about 2% of our problem.

·         That still leaves us with a 10%, or $3.1 million problem.  Even if the LCFF funding is received by the District, the remaining deficit is still $2.5 million, or about 8%.

3.         Does that mean that there will be lay-offs again this year?

Lay-offs are one solution available to the Board to help balance the budget.  Unfortunately, the size of the deficit makes it very challenging to develop a lay-off list that would solve the deficit in its entirety and still be able to operate the District.

4.         Does that mean that there will be furlough days again in 2013-14?

Furlough days are a negotiated solution to help fill a budget deficit.  Negotiations with BOTA and CSEA have not yet begun, so all furlough days in 2012-13 will not continue into 2013-14 unless negotiated at some point in the future.  The size of the deficit also makes balancing the District’s budget through furlough days alone not possible in most situations.

5.         I hear you are selling Olinda.  Can those funds be used to solve our budget deficit?

The process to begin the potential sale of Olinda was authorized by the Board on February 25, 2013. We will not know if there is an acceptable offer until mid-June, 2013, and perhaps later.  This uncertainty, along with the uncertainty of whether land sale proceeds can be used to replenish a depleted District reserve, make this option something that we cannot count on.  Also, under current waiver proposals for land sale proceeds, only the funds necessary to replenish depleted reserves can be used.  Considering that the District’s reserves are about $1.4 million, the size of the deficit also makes balancing the District’s budget through land sale proceeds alone not possible.

6.         So what is your plan to balance the District’s budget?

As you can see from the information above, a long term solution to the District’s budget deficit may need to come from a variety of sources, most of which are uncertain or unclear at this time. Hopefully, a recovering California economy will produce new funds over time that will erase the current deficit, but that may take several years.  Until then, the Board and labor unions will be faced with the challenge of creating blended solutions that keep the District’s budget balanced, supports our employees as best as possible, and maintains the standards of excellence in education for which BOUSD is known.