Tuesday, February 8, 2011

Budget Situation in the MDUSD 2/8/11

Tonight's meeting will likely prove to be quite volatile.  The board may, or may not, choose to vote on an option tonight.  But it's a big decision.  Schools closed within the district over 30 years ago were never reopened, so it is with a great amount of thought, the board will be making the best decision they can.  I don't envy them in this position.

Below is a Budget Article put out by the district today.  It's meant as an education piece and hope you find it useful:

Mt. Diablo USD News Update
Where Kids Come First

February 8, 2011

Given recent news articles around our District’s budget and the dire State budget projections, we have decided to send out two newsletters about our budget situation.  The first article will focus on the status of our current budget.  The second article will focus on how the Governor’s budget proposal will affect our District.

The State Budget Crisis

The following two links to articles from EdSource provide a thorough overview of the State budget crisis and how it has impacted education funding in the State:

District Budget Crisis

The District budget crisis has been acutely affected by the following conditions:

  1. As cited in the EdSource January 11, 2011, publication, K-12 education funding has been reduced 10% between the 2007-08 school year and the 2010-11 school year.

  1. During the same time period, the District’s health care premiums have increased 31.19%, amounting to an additional $7.1 million.

  1. Over the same period, student enrollment has declined by 1,000 students which amounts to a revenue reduction of over $5 million each year.  Unfortunately, we can not reduce staff commensurate with declining enrollment.  For example, if all of the student enrollment reductions came from two or three schools in the District, cost savings could be more easily achieved by concentrating staff reductions on just those campuses.  However, the loss of these 1,000 students has been spread throughout the District, making it impossible to keep expenditure cuts away from the classroom.
  1. Every year, our costs increase due to inflation and employees receiving step and/or column salary increases.  For inflationary increases we use the Consumer Price Index to estimate the increase in the costs of goods and services.  Our negotiated salary schedules for certificated positions are based on the number of years of experience (step) and level of education (column).  For classified and management positions the salary schedules are based on job type and years of experience.  For step and column increases, we annually budget a 1.5% increase to our salary budget.
  1. In the 2010-2011 State budget, Governor Schwarzenegger vetoed AB3632 mental health funding.  The prior link to a January 11, 2011, EdSource article provides a concise overview of AB3632.  The Governor’s veto will cause the District to assume approximately $4.8 million in additional costs to provide mental health services.  Because the cut was mid-year this school year we may need to absorb $2.4 million in costs.  The District cannot legally eliminate these programs without jeopardizing federal funding we receive for all our Special Education students.  Governor Brown’s 2011-2012 State budget proposal reinstates these mental health funds for the 2011-2012 school year using Proposition 63 (Mental Health Services) funds, and he proposes a dedicated funding source in subsequent years if the continuation of the revenue enhancement is approved by the voters. However, this proposal does not resolve the funding problem for the current year, and Prop 63 supporters are challenging the use of those funds for AB3632 purposes. Therefore, it is very unclear whether AB3632 funding will actually be reinstated. 

So, what do these conditions mean for the District in real dollars?  Over the past several years, our revenue has decreased by $20 million while our costs have increased by the same amount.  Therefore, in order to create a balanced budget we needed to reduce our on-going budgets by $40 million.  To date, we have reduced expenses by approximately $25 million.  In order to avoid completely eliminating vital educational programs and to minimize staff reductions, we have used one-time federal funds, utilized the Tier III flexibility to transfer specific categorical revenues, and have been spending down our reserves.  Under current budget assumptions we are spending $11 million more than we receive in on-going revenues.  Legally, we have to maintain a minimum reserve of two percent.  Currently, we have $12 million reserves above the two percent requirement.  Under our current budget assumptions we will have less than $2 million in additional reserves by the end of next year, and have a projected negative ending balance of $11.6 million at the end of the 2012-13 school year.  This would completely deplete our mandatory two percent reserves and put the District in State control.

We are frequently asked whether we can eliminate more central office administrators and employees.  Over the past three years, we have eliminated approximately 20% of non-school based positions. To provide more perspective on the extent of these reductions in the 2000-2001 school year the District had 5.19 administrators per 100 teachers.  In the 2009-2010 school year, we had 4.12 administrators per 100 teachers.  This puts us almost fifty percent below the State approved rate of 8 administrators per 100 teachers.

We are currently negotiating with all of our associations in order to achieve a balanced budget.  To date, administrators have accepted a benefit cap at the 2010 Kaiser rates for current employees, a benefit for anyone who retires after June 30, 2011, prorated benefits for part-time administrators, and furlough days over the next several years.  We are asking our other associations for similar benefit and furlough day concessions. 

The next article in this series will focus on the Governor’s proposed 2011-2012 budget and the implications for the District’s budgeting process.

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