District’s Budget Workshop Shows Huge Deficits for Next Two Years

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The Davis School Board met last night for a budget workshop. Given the fiscal situation and uncertainties in some ways the district stands in a much more challenging landscape than they did last year at this time. The chief reason for that is that while they are working off the governor’s budget assumptions, we do not really know what the budget is going to look like if and when it is passed by the legislature.

As a result, the key objectives for the district are to look for ways to build capacity. There is an additional challenge of finding where the district can build in cuts outside of the categorical funds.

The district’s priority is to find ways to reduce spending and get by through 2010-11 without taking money from educational programs. That is a tricky endeavor.

If there is good news, it is that despite the uncertainty, despite how bad the economic times are, right now it looks like the district if given flexibility by the governor and the legislature, a big if at the time this is written, the district can escape through 2010-11 without massive layoffs.

In part that is due to the district putting itself in viable fiscal position the last few years, in part that is due to a stabilized enrollment, and in part that is due to the generosity of the people of this district who came through with one-time money through the Davis School Foundation last year and through the passage of Measure Q in 2007 and Measure W in 2008.

Again, because there is no state budget, the district due to laws and regulations still has to adhere to a March 15 deadline for having an interim budget for 2009-10. Right now they are working off the Governor’s budget assumptions until and unless there are changes and a more certain path.

The Governor’s budget builds in cuts in the range of $2.5 million this year (as in 2008-09), another $3.3 million reduction next year with no funding for COLA, and right now no cuts for 2010 but minimal funding for inflation (COLA) and no funding restoration.

The Governor’s budget does provide flexibility. Some of the key flexibility is that it allows districts to transfer money from their fund balance for categorical programs. This means that money that is normally restricted in use can be used for the general fund. For a district like Davis, this is a huge advantage. There is however considerable question as to whether this will hold. Democrats are opposed in general to this kind of flexibility for a variety of reasons.

In addition the Governor’s budget also allows the district to reduce its reserve requirement. In essence this is one-time money that will quickly get depleted, but it will allow some districts to survive for a couple of years.

Finally, the Governor’s budget, and again, this is subject to legislative approval, calls for the reduction of the school year by up to 5 days. More on this shortly.

The good news for the school district is that ADA is up, meaning there is no the problem we faced last year with declining enrollment. The bad news however is that our cash investments are earning less. In fact, we expect negative interests for the rest of the year. In a normal year these interests would yield around $750,000. Right now, Bruce Colby has this budgeted as zero income, it could in fact end up in the negative somewhat by up to $200,000.

Bruce Colby then showed where we currently stand. We are pretty much operating in the red, living off our fund balance and our reserves with no changes this year. And then we would end up in the hole $2.5 million for next year and $7.7 million for 2010-11.

In order for that not to happen, we are going to have to make cuts. The first set of assumptions are based on the ability to alter the student to teacher ratio from 20-1 to 22-1. That would save us $700,000 just for the K-3 and another $300,000 for the 9th and 10th grades. However, as Mr. Colby stated during his presentation, this is not likely to hold. The legislature of all the cuts and changes is most likely to keep the ratio. As you will see shortly, that will alter these assumption by quite a bit as the district will have to find another million.

How is the district going to make cuts with minimum impacts on education programs?

Well they are going to cut from the district office and not fill vacancies for risk manager, fiscal services, account tech, and board secretary. In essence, Bruce Colby will serve as risk manager and the fiscal services director ends up requiring additional work for him as well. That cuts about $200,000 from 2009-10 and 10-11.

Other cuts will include to counseling services and classified staff reduction. Both of those are simply through attrition. They will simply not fill vacancies. It will not require layoffs.

They will have some spending reductions, we’re talking about $100,000 there. They think there is some flexibility in unused parcel tax funds where they can shift around for $200,000.
Finally the issue of the reduction of the work calendar. Right now they are discussing two days which would be $500,000. Every day they do not work, it is $250,000. One of the questions is how much of that has to come from instructional days. The board seems willing to double that to four days given the amount of money this would save. Part of this depends on the legislature approving the reduction of school days.

Those cuts still only save about $2.3 million for 2009-10 and $1.8 million for 10-11. The remainder of the money will come this year from the transfer of categorical fund balance. The next two years they will transfer $1.1 million from categorical allocations. They think reductions in restricted funds can give them $400,000 and for this year there was a $200,000 Adult Education Fund Balance that the adult school director volunteered to give back to the district.

With those cuts, you can see that we remain in deficit spending but we remain in the black across this period in terms of ending fund balance. Notice that the reserve is gone though by 2010-11 which means we could be facing problems for 11-12 if the state budget situation does not improve and it is not expected to.

So if the district gets class size reduction flexibility, we are in decent shape.

Without that flexibility, we are still okay but we have $1 million less next year and $2 million less in 2010-11. That means that our fund balance will be almost gone by then and we will really face potential problems in 2010-11.

The bottom line is that we are most likely going to be okay through 2010-11 given current assumptions and hoping that the state budget picture does not get much worse.

From my perspective it is not clear that we will have that categorical flexibility that the governor has built into the budget. But we’ll have to see what the legislature and governor eventually decide when they finally agree on a budget.

Of course all bets are off if the state actually starts running out of money has to default on payments to local schools.

—David M. Greenwald reporting

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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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13 thoughts on “District’s Budget Workshop Shows Huge Deficits for Next Two Years”

  1. My Version

    …In part that is due to the district putting itself in viable fiscal position the last few years, in part that is due to a stabilized enrollment, and in part that is due to the generosity of the people of this district who came through with one-time money through the Davis School Foundation last year and through the passage of Measure Q in 2007 and Measure W in 2008….Let’s face it, John Q. Taxpayer bailed the schools out in Davis. Don Shor showed there was no declining enrollment as the school district claimed when they opted to close Valley Oak. And I’m glad Bruce Colby has extra work to do – he should do extra work for getting a raise in the middle of a fiscal crisis.Furthermore, all of these figures given are assumptions by Bruce Colby – his version of the picture. I suspect more savings could be found in the school budget, but parents are kept in the dark bc the school district has made sure to make the picture …complicated… on its website.Yes the schools are in trouble, just like the local gov’ts are in fiscal trouble. Why? Bc of the nat’l mortgage meltdown. It will take some time to dig ourselves out of this one as a nation. So what else is new? We’ve done it before, and we will do it again. I have faith in the American people to weather the storm. Don’t have much choice but to do just that!

  2. Robin W

    Why would the school district have …negative interest… on investments? Are you talking about a decrease in the assessed value of real property they own? Or do they have money in the stock market?I am a little confused about increasing the K-3 and 9th/10th math/English to 22:1. Currently the state only funds class size reduction if the classes are no more than 20:1. Is the state considering changing that to 22:1? Otherwise the cost of increasing to 22:1 is prohibitive.

  3. Anonymous

    I was in classes all through elementary/junior high/high school that had up to 32 people in it. I didn’t learn any less. I really think the small class size thing is overrated. There’s probably a way to save some money there but people would complain. There are no studies that prove small class sizes are better.

  4. Robin W

    The class size reduction has a huge impact in English classes in 9th and 10th grade. Without it, teachers assign very few essays because of the time required to grade them, and don't have the time to give meaningful feedback on the ones they do assign. It is probably also very significant in the 9th & 10th grade math classes for kids who are struggling with math and could really benefit from individualized attention. Having had one child who went through the primary grades in Davis before class size reduction and one who went through with class size reduction, I also did not see noticeable educational benefits at that level — largely because Davis elementary classes tend to have a lot of parent volunteer help, and larger classes mean more parents available to help out.

  5. Anonymous

    The negaitive intrests. Refers to cash the DJUSD recieves from property taxes and the interst it earns from the county (while the county hold the money before it is distibuted to DJUSD), because of the state/County budget stituation (I believe this is how bruce explained it) We will not recieve intrest on that money as we have in the past.

  6. Anonymous

    Did negative interest have to do w/ service fees? You don’t earn any interest, but you have to cough up the service fee?Incentive to keep it all under your mattress.

  7. wdf

    Furthermore, all of these figures given are assumptions by Bruce Colby – his version of the picture. I suspect more savings could be found in the school budget, but parents are kept in the dark bc the school district has made sure to make the picture …complicated… on its website.I sometimes get lost just figuring out my own budgeting and accounting on Quicken on my home computer, but maybe that’s me. I expect that a large corporation (or DJUSD) would likely be more complicated.If you have any solid ideas for how to make the district budget any more understandable, I think you’ll find a receptive audience if you contacted the district or the Budget Advisory Committee (Don Shor is a recent new member).The Budget Advisory Committee meets on the 2nd Wednesdays of the month in the district offices, at 6 p.m., I think. Their meetings are open, and it’s a much better place to try to begin to understand the DJUSD budget. The meetings are more informal than school board meetings, and sometimes non-committee members can get away with jumping with questions outside of public comment.

  8. Rich Rifkin

    …I really think the small class size thing is overrated. There’s probably a way to save some money there but people would complain. There are no studies that prove small class sizes are better….I wish your assertion were true. It’s cheaper and easier to have larger class sizes. However, you are not only wrong in your conclusion; you are wrong in your assumption. The effect of smaller class sizes has been scientifically studied, and those studies prove that they have a large and positive effect.If you would read The Tennessee Study ofClass Size in the Early School Grades, you would better understand this question.This is from its conclusion: …After four years, it was clear that smaller classes did produce substantial improvement in early learning and cognitive studies and that the effect of small class size on the achievement of minority children was initially about double that observed for majority children, but in later years, it was aboutthe same. … (The second) phase (of the study) confirmed that the children who were originally enrolled in smaller classescontinued to perform better than their grade-mates (whose school experience had begun in larger classes) when they were returned to regular-sized classes in later grades. … Under the third phase, Project Challenge, the 17 economically poorest school districts were given small classes in kindergarten, first, second, and third grades. These districts improved their end-of-year standing in rank among the 139 districts from well below average to above average in reading and mathematics. The Tennessee class size project … is one of the most important educational investigations ever carried out and illustrates the kind andmagnitude of research needed in the field of education to strengthen schools….–http://lexicondaily.blogspot.com

  9. Anonymous

    …The effect of smaller class sizes has been scientifically studied, and those studies prove that they have a large and positive effect….Thanks for posting that, Rich.

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