At last night’s Board Meeting, the Superintendent and CBO outlined the current state of district finances, and specifically what happens to our reserve level under different scenarios. As most of you already know, the District by law is required to keep a 3% reserve (measured as a % of expenses). The recent letter from the Superintendent outlines the budget hole we need to fill, and the measures we need to take include a $1.2 million reduction in compensation expenses.
The chart below shows the historical and projected reserve levels based on a few scenarios. All of the scenarios below assume the sunset of the Measure D parcel tax.
Chart of District Reserves
The dotted orange line is the scenario with the currently contemplated budget cuts. Under this scenario we will finally go from two years of deficit spending to basically being breakeven in 2010-2011. The following year (2011-2012) then reduces the reserve below the required 3% minimum if we lose the Measure D parcel tax revenue. If we are able to renew it, then the line would stay roughly level. Of course all of the above assumes no dramatic changes in state funding, and we all know there is downside risk there.
The other lines illustrate why these cuts we’re contemplating are so necessary. With no cuts at all (the gray dotted line), we literally run out of money next year. If we just include the administrative and program cuts we’ve already agreed to but do not cut compensation expenses (the solid blue line), we drop below the 3% level next year, and then completely run out of money the following year.
Of course it is devastating to have to make cuts to teachers and other employees, but sadly there are no other alternatives. And as I mentioned in the Board meeting last night, I like to think the glass is “half full,” meaning we have actually done an amazing job at mitigating impacts to teachers, the classroom, and overall cuts because of our efforts in fundraising with the SCEF, the early cuts we made to administration, as well as the efforts of our Superintendent to create new revenue generating services. We only need to look at so many other school districts in the state which have implemented larger salary cuts and made larger class size increases. This is not to say we’re proud of what we have to do, but we do need to appreciate all of the hard work by so many people which has enabled us to minimize the impact of the devastating state cuts to education.
If you would like to better understand how we got into this situation and how California education finance works, I encourage everyone to watch my video on the topic. It outlines the history of education finance in this state, how districts are funded, the relationship between the state and the local districts, and what our options are.
