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NUSD's Five Budget Realities for the Coming School Year

Here is the latest installation of Karen Maloney's CFO Corner column.

The following is from a column called CFO's Corner written by  Chief Financial Officer Karen Maloney. Her columns are published occasionally on the district's website, www.nusd.org.

As the completes the 2011-12 school year with marked improvement in student achievement, we again face the challenges of a state budget that significantly underfunds education. This is the fifth year that school districts have not received a state cost-of-living adjustment (known as COLA) and instead are being funded at 77 percent of the revenue limit. For NUSD, the non-funding of a COLA represents a loss of $1.6 million for the 2012-13 year. The total loss of funding for the five years is $39 million, which is equivalent to one year's funding for NUSD.

Budget Reality No. 1

The governor's budget does not increase school funding. It will decrease by $441 per student, or $3.3 million for NUSD, if the November tax measure fails.

A flat budget is really a negative budget as a COLA is not provided to give the necessary funding for Step and Column growth, increases for insurance, utilities, books and other supplies, and the loss of federal one-time funding. NUSD will pay out $2.5 million more in expenditures than it will receive in revenues. Had the state funded the stated COLA, NUSD would have received an increase of $212 per student, or $1.6 million.

The state budget assumes that the tax initiative will be approved by voters in November 2012. Should that not occur, funding for schools will be cut in January 2013, the seventh month of the school year. For NUSD, the estimated cut will be $3.3 million, or $441 per student.

Budget Reality No. 2

NUSD's expenses exceed NUSD's revenues. 

For the past four years, the district has offset the shortfall of revenues due to one-time federal stimulus funding. Funding for 6.6 full-time certificated positions and 20.53 classified positions was provided by the $1.6 million from the Federal Jobs Bill last year. That funding is not continued into the 2012-13 year, resulting in deficit spending as positions were maintained rather than eliminated.

As there will not be any additional state funding or federal funding coming in, district costs were reduced in the 2012-13 year and significant cuts will be needed for the 2013-14 and 2014-15 years to correct the structural deficit. Employee salary and benefits comprise 89 percent of the expenditures of the district.

Budget Reality No. 3

NUSD has a multi-year structural deficit that must be corrected.

To achieve and sustain financial solvency, it is necessary to solve the multi-year structural deficit with ongoing expense reductions. Difficult decisions need to be made to reverse the current spending plan where expenses exceed revenues. A study of comparative districts prepared by School Services of California will provide data as to class size ratios, teacher work days, instructional days, staff work days, spending levels per student for books, supplies and services.

Together, the school community consisting of teachers, classified workers, administrators, parents, community members and trustees, will examine the study along with the district budget to present solutions to fix the structural deficit. The Budget Advisory Committee will begin meeting in early August to begin this work.

Additionally, program budgeting was introduced to the district with principals and budget managers responsible for identifying and implementing more than $700,000 in budget reductions for 2012-13.

Budget Reality No. 4

Given no new revenues, new local resources must be identified and current sources must continue at the current rate or increased. 

The largest revenue source for the district is from the revenue limit — alias average daily attendance, or ADA — which makes up 65 percent of the total revenue as compared to 67 percent in 2007-08. It is imperative that students attend school each day for instructional and funding purposes and that the district identifies alternative solutions when students are unable to attend.

Investment in technology and other solutions will be required. Additionally, the district is undergoing a facility study that will provide information on how to maximize assets in order to generate revenues or to lessen the burden on the operating fund.

The district receives $4.3 million from a $251 parcel tax that expires in 2015. This funding provides for many things, including but limited to, libraries, counselors, athletics, instructional technology, reducing class size, and attracting and maintaining staff. The parcel tax has been the safety net for the district providing much needed funding for district positions. It is critical that the district continues to receive the support of the community through this parcel tax.

Budget Reality No. 5

Given no new revenues and known increases in expenses, both employee concessions and layoffs must be considered.

With flat funding provided from the state, possible mid-year reductions estimated at $3.3 million, expenditures exceeding revenues, and that salaries and benefits comprise 89 percent of the NUSD's unrestricted budget, the district has few options with which to overcome the budget shortfalls.

Governor Brown and the legislators in adopting the 2012-13 budget provided for school districts to reduce the number of instructional days from 180 to 160 days both in 2012-13 and 2013-14 for a total of 40 days over the two year period. 

Funding for school districts in California continues to be uncertain and inadequate. However, the needs of the 8,000 students at the 13 NUSD school sites remain constant. It is because of these children who receive instruction and other services from dedicated teachers, staff, administrators, food services workers, bus drivers, and the very many others, that make the decisions clear and meaningful.

Difficult financial decisions are before us. However, I am confident that together with student and family needs identified, the NUSD community will come together to make those difficult decisions.

Jerry July 03, 2012 at 04:22 PM
Budget Reality No.5.1 The governor and the legislature are holding our schools hostage until the voters approve a tax increase. Like most hostage takers they are not going to change their ways once they get the ransom. They will only do it again and again. They have been doing this since 1999. Why should they stop something that works? Budget Reality No.5.2 California voters elect the same people again and again no matter how bad things have gotten in Sacramento. ("Our guy is a nice guy; it’s those other guys that are evil.") Budget Reality No. 5.3 Unless things get REALLY bad --a Crisis! -- Realities 1 thru 5 will continue
Brant July 03, 2012 at 05:41 PM
Budget Reality 5.4: The NUSD recently gave teachers a 2% raise despite knowing all of the above. How did the District plan to fund that raise?
Tina McMillan July 03, 2012 at 07:55 PM
The district has a back up fund with money to cover costs when the state doesn't come through. When the teachers negotiated their 2% raise they discussed the need to retain qualified teaching staff as part of the value the district puts on education. They were right to take a stand. Our district, compared to like size and like funded districts pays significantly more to its administrative staff than to its teachers and classified employees that work directly with students. We need to focus spending on the students, teachers, classified staff and schools and reduce spending on the administration. I am not certain they can cut more but they can certainly stop any raises until there is a balance in how individuals are reimbursed.
Jim Phelps July 07, 2012 at 12:52 AM
"Our guy is a nice guy; it’s those other guys that are evil." Spot on.
Suzi August 12, 2012 at 03:10 PM
Anyone know if Novato is participating in this? "districts across the country to vie for almost $400 million in grants." http://news.yahoo.com/government-opens-competition-school-grants-040308696.html?_esi=1

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