FUHSD looks at grim budget for 2011-2012 - Official says district "out of cash" to pay obligations

The Fallbrook Union High School District (FUHSD) board of trustees was presented with initial projections for the development of the 2011-2012 school year budget at its meeting Monday, Jan. 24, and informed that the financial year would be difficult.

On Jan. 10, Governor Jerry Brown released his proposed 2011-2012 state budget, which includes revenue increases and expenditure reductions, but keeps school funding at the current year funding levels. According to the board meeting agenda, the governor’s plans are contingent upon voter approval to extend temporary tax increases.

“In the best case scenario, there will be a negative cost of living adjustment (COLA) of about $28 per average daily attendance (ADA),” said Wilson Hatcher, the district’s chief business officer. “This is based on a statewide ballot measure that extended taxes, but is scheduled to expire this year.”

Hatcher stated that the district’s budget is already suffering because of a decrease in student enrollment by 73 students, and a decline in ADA by 20 students to 2,895. Additionally there will be a deferral of 2010-2011 state apportionment funds, as well as a loss in Special Education Local Plan Area revenue for one class, resulting in a loss of $75,000.

“All of our American Recovery and Reinvestment Act (ARRA) funds will be fully spent, as will our funds from the Federal Education Jobs bill,” stated Hatcher. “We will have a reduction in ARRA funded positions, which are 2.0 certificated full time employees (FTE), 0.5 classified FTE and extra pay for tutoring and technology support.”

To maintain class size due to the school’s declining enrollment, there will also be a reduction of 2.8 certificated FTE and a reduction to temporary classified FTE positions.

The budget also must make expenditure assumptions that an increase will be made for longevity and extra pay for teachers.

“Other possible increases include utility rates and mileage reimbursement,” said Hatcher. “The three percent reserve will also be fully funded, as will the funds for categorical programs. We also had to take into account the projected unrestricted balance on June 30 from the first interim report of $963,000.”

One of the major issues the district is facing is deficit spending, said Hatcher, who stated that the unrestricted fund balance is shrinking and Fund 17 reserves will be exhausted after the 2011-2012 year.

“Once those funds are gone, we will have no way to replenish them,” said Hatcher. “We have significant cash flow issues, especially with the state apportionment deferral, which will be 28 percent in the upcoming year. Additionally, this is an ongoing deferral that may even increase. While our budgets may look ‘balanced,’ we are out of cash to pay our obligations.”

Hatcher stated that the funding loss and expenditure increases for the 2011-2012 financial year, would equate to a loss of $706,000 in “the best case scenario.”

To address the increases, Hatcher recommended that the district take several measures, including using part of the district’s fund balance ($418,000), reduce retirement savings for an executive assistant position ($15,000), make an adjustment to FTE to meet declining enrollment ($117,000) and reduce summer school classes from 24 sections to 16, which would save the district $15,000.

If the election for the tax extension is held, it would occur in June. However, if the ballot is not approved, educational funding could face a reduction of approximately $2 billion statewide, or approximately $330 per ADA. For the FUHSD, this would result in a reduction of approximately $955,000.

This would cause a fiscal challenge of approximately $1,661,000 for the upcoming fiscal year.

FUHSD superintendant Dale Mitchell presented several options to help the district cover the additional costs, including an increase to transportation fees across the board by $20 for home to school transportation ($15,000); increasing use of facilities charges by 10 percent ($21,000); eliminating district-funded frosh sports ($45,690); reducing the supply allocation to all sites and departments by 11 percent ($55,000); reducing a position in the business services department ($40,000); reducing Fallbrook High school counseling staffing by 1 FTE ($80,000); and increasing student teacher ratio by 1.25 students per teacher per period, reducing FTE by 5.00 ($350,000).

“We have been encouraged to build two budgets based on the best and worst scenarios, and we have already gone through all of the work,” said Hatcher. “This will not be something we have to do when already at crisis time.”

On Feb. 3, a meeting will be held with staff and the public. Various union representatives will be met with on Feb. 7 to discuss the financial issues. By Feb. 14, the board hopes to make its final recommendations and secure official board approval by Feb. 28.

“What is driving us to make these choices now is the fact that educational code requires that certified employees that may be laid off be notified by March 15,” said Mitchell. “If the timeline is not met, then the layoffs cannot occur.”

“We have to make our decisions based on the knowledge we have, not on the ‘what ifs,’” said Sharon Koehler, board president. “This is not going to be an easy decision.”

According to Mitchell, a “substantial effort” is being made to spread the reserves to meet needs while still maintaining some cash. However, a deficit for the 2012-2013 fiscal year has already been forecast as well. Mitchell asked the board and members of the public to help identify a strategy that would possibly lessen the impact of the budget crunch.

“We have to look at any areas that are still flexible and see where we can make changes,” said Mitchell, who stated that a majority of the district’s budget is made up of personnel. “When we meet with the individual associations, we want to make it clear that this is not a question of the quality of their work or performance. A four letter word that I have been using to describe this situation is ‘ugly.’”

The board seemed shocked by the suggestions made by Mitchell.

“I knew it would be bad, but on paper, the impact is shocking,” said Koehler. “I am also aware that this is a reality that we have to face. Perhaps we should also consider furlough days or a percentage reduction in pay for all employees to ease the pain. I trust these may be options that come up in dialogue and negotiations with the associations.”

Bill O’Connor, board clerk, also recommended a hiring freeze in the district.

“We are already looking at losing people, and we should also look at reducing department heads,” stated O’Connor. “If we can do something to save a teacher, we should look into it.”

During his presentation, Hatcher stated that while budgets are set and re-adjusted, it is important to remember actual money is required to run a school district.

“We have to ask, ‘do we have the cash in our checkbook to make the payment?’” said Hatcher. “Having a budget does not mean that we have money in the bank account.”

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