CA State Budget Crisis – Confronting Reality
For the past six years, the normal cycle has been like this. The Governor releases a January budget proposing significant reductions to public education funding. Education groups like PTA, CTA and CSBA advocate for children and somehow the reductions go away. However, this time was different. On February 20, 2009 the signing of the 17 month State budget signaled a new reality for California school boards.
Confronting Reality
The approved State budget dramatically reduces the amount of ongoing revenue for a school district. For example for Alameda Unified, the beginning 2008/09 funding level of per student funding on July 1, 2009 was $5,801. On February 20 the funding level was lowered to $5,627. The news gets worse since the February budget continues into 2010. The 2009/10 funding level drops to $5,575 per student. For Alameda Unified with 10,000 students, the $226 decline in per student funding represents $2,000,000 of ongoing annual revenue lost. Meanwhile, ongoing expenses for personnel, technology and operations (energy, insurance, etc.) are increasing. Therefore, the gap between ongoing revenues and ongoing expenses is even larger and signals a need for a new level of budget review and preparation.
Clarifying Expectations
The three options for school districts (1. increase revenues 2. reduce expenses or 3. a combination of 1 and 2) needs to be decided when the school board approves their 2009/10 budget by June 30, 2009. The biggest challenge facing us is aligning the fiscal realities with community expectations regarding the services we have been providing. Programs like class size reduction are extremely popular with parents yet represent an area where significant cost reductions can occur if eliminated.
As I mentioned in this prior post on Budget Reductions and Community Engagement, starting an ongoing dialogue is crucial as it appears school districts finances will be facing significant reductions for a number of years.
Start With The Facts
In the coming weeks most of us will be issuing preliminary layoff notices to certificated employees. In addition, we will be approving our second financial reports. As we take action on these items, what story are we communicating to our community? Given the new reality of a State approved budget that permanently reduces general purpose funding back levels lower than 2007/08, how are we going to prepare our community for the upcoming tough decisions that need to be made? What is our overarching theme? What are our main talking points?
In preparing answers to these questions every Board should first take the time to learn more about the district budget. Before you can craft a story about the district impact of the State budget you should have your facts/data straight. Here are some areas each board member needs to know:
- Annual incremental cost of step/column expenses
- Annual incremental cost increases for inflation for items like insurance, energy, supplies, technology, etc.
- Current balances of categorical programs
- Impact of categorical flexibility to backfill general purpose funding reductions
- Percentage of expenses spent on administration compared to surrounding/comparable districts
- Impact of Federal Stimulus package on District budget
- Understanding the impact of using one-time monies to fund ongoing expenditures
- Thorough understanding of the assumptions on enrollment, State funding increases and incremental annual expenses on multi-year projections
While it is important to focus on the immediate issues of this budget crisis, it is highly likely that we are looking at a multi-year problem. Therefore, my final thought is each board needs to look at the possible scenario of no State funding increases through 2012 and what that means to our district.
Trust behaviors: Talk Straight, Create Trasparency