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Superintendent’s Spotlight - Questions On Budget Cuts

POSTED April 21, 2010 1:24 a.m.

As people look at the newspapers and listen to the media reports across California, many of them are asking me questions as to why the Oakdale School District seems to be in better shape than most other districts.

My answer is that the Oakdale School District has reacted to the state’s budget crisis quickly and has worked with our employees and parent groups to plan ahead for these tough fiscal conditions. I am, however, quick to point out that Oakdale schools are still facing difficult times as a result of the state’s economic downturn.

Even with good labor relations and excellent leadership we are still looking at cutting wages, increasing class sizes, taking furlough days and cutting programs to stay within our shrinking revenues. I have listed some of the frequently asked questions I have received and have summarized the answer. I hope this is useful information.

Has the district been mismanaged? If not, why do we have to make all these cuts?

The District has been well managed. With the current fiscal recession the district has had its revenues reduced by close to $3 million, and when accounting for the loss of COLA the dollar amount comes close to $6 million.

For the past two years the board and administration have been reducing expenditures and we have used budget savings of released state-restricted and federal dollars to meet our financial obligations. With normal inflation and salary schedule movement the district has been forced into a deficit spending model using a combination of reductions and one-time dollars. A major source of these one-time dollars has been federal stimulus funds. These funds will be completely exhausted by 2010-11 as mandated by the federal regulations.

I understand that the district has a very large reserve. So why do we have to make reductions?

The district is projected to have an ending balance of 15 percent. This gives us a reserve of $6.5 million after an estimated deficit of $3.6 million for the current fiscal year 2009-10. Under the budget proposal set forth by the governor’s office the district would have a deficit of $3.4 million for 2010-11 and $4.5 million for 2011-12. This is a total of almost $7.8 million for the two fiscal years, placing the district in a negative balance of ($1.3 million). The district would be out of compliance of state regulation of a 3 percent reserve by $2.5 million ($1.3M + 3 percent reserve $1.2M).

Without any new revenues anticipated the district must reduce expenditures by $2.5 million over the next two years. This is why we are making cuts in several areas and negotiating across the board salary reductions.

I heard that the district has other reserves that it can use? Why not use them instead of cutting salaries?

The district does have other reserves but these designated reserves are restricted by the board or the state. Of those funds the board could only release funds from Fund 40 ($1.3 million); all other funds are restricted by law and cannot be used for general fund purposes. The district Fund 40 was created by the elementary board in the 1980s and is designated for capital items. It is one-time dollars and once expended it is gone.

Why is the district so concerned about cash?

The state is solving its cash problems by delaying scheduled payments to school districts. The legislators have placed into statute a provision that allows 25 percent of base revenue limit owed the district to be deferred until the next fiscal year. This is about $4.8 million. In the current legislative session our state lawmakers have approved an additional bill that allows another $2 million to be deferred up to three times next year.

These deferrals will place several months of actual cash on hand into jeopardy, meaning that we may have to borrow from our other funds’ cash balances. If we borrow from state restricted funds, even though we own them, we must pay interest which would have to come out of general fund dollars. With the state making late and partial payments to school districts it means that we must keep as much cash as possible to make our payments on time.

What will happen if the district cannot fulfill its financial obligations?

When a school district runs out of cash and it can no longer maintain its fiduciary responsibility a state trustee will be appointed. By statute the Superintendent is released and the board of education is advisory only. The trustee remains for the length of the loan granted by the state, in most cases 20 to 30 years (this is absolutely not going to happen in Oakdale).

Why is the board asking for salary reductions?

Currently 83 percent of our total budget consists of salary and benefits, leaving very little to reduce from the remaining 17 percent. When looking at the magnitude of the amount of dollars being taken by Sacramento, salary reduction or a reduction in force (layoffs) may be the only way to balance the budget.

What is being done to keep the cuts as far from the classroom as possible?

The board of trustees has asked that the administration, budget advisory committee, teachers, classified employees and all other support groups to consider the needs of our students first and foremost when considering recommendations for program reduction or budget cuts. It has been and will be difficult to please everyone when we are required to eliminate jobs or reduce programs.

What is a furlough day?

A furlough day is a day off work without pay. A vacation day or a holiday is a day off work with pay.

I hope this give you an insight to some reasons for the recent budget cuts and the reasons they are required. In a future column I will be talking about the issue of safety in the Oakdale schools.

 

Superintendent’s Spotlight is a monthly column provided by Oakdale Joint Unified School District Superintendent Fred Rich, updating the community with information about school district activities.

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