As a result of a fifth year of reduced state funding, The Board of Education voted March 6 to send notices to more than 1,600 notices to teachers and other certificated staff members that their contracts may not be renewed for the 2012-13 school year.
Under the state Education Code, the Board must provide an update to the county office of education each quarter that it has funding, under the conditions existing at that time, to meet obligations for this school year and the next two.
Also required under the Education Code, the Board must send preliminary notices to certificated staff (teachers, nurses, librarians) by March 15 if they won't be offered a contract for the 2012-13 year.
San Diego Unified currently faces a $122 million budget deficit for the 2012-13 school year. Given this context, the district is at a crossroads for budget solutions. On March 1, 2012, Board President John Lee Evans and Supt. Bill Kowba held a news conference announcing that there are only two paths to a balanced budget: Layoffs or Employee Concessions.
At the onset of 2012, our school district continues to face significant financial challenges stemming from the deep and prolonged state budget crisis. Five years of K-12 education cuts has taken its toll on everyone. All of us who care deeply about preserving the quality of education will struggle with balancing tough trade-offs in the weeks and months ahead.
In this letter, I provide a first look at the 2012/13 budget to establish a common appreciation of the district’s fiscal realities. During this very difficult time, it is critical that we all comprehend the realities that we must face together and that we openly communicate with one another about our concerns. I believe that it is important for every employee, parent and community member understand the basics of our budget situation and to appreciate the difficult work underway by the Board and our staff to balance our budget. I am very sensitive to Board meeting testimony and casual conversation that suggests that this will be a better budget cycle with new resources and minimal cuts. That is not the case based on current information.
The fiscal landscape is a very sobering one as outlined below.
Budget Reality #1: The Governor’s Budget Does Not Increase School Funding. The proposed November Ballot Measure Does Not Improve K-12 Education Funding.
Contrary to some early media reports, the proposed 2012/13 budget IS NOT a good one for school districts. The great ambiguity associated with state revenues, the legislative turmoil in Sacramento, and the high stakes gamble of a November ballot measure has put us out on a limb.
Budget Reality #2: Our Expenses Exceed Our Revenues.
For several years, San Diego Unified has been able to partially offset our revenue shortfall by using one-time funds and reserves. This amounts to deficit spending and it must stop. We continue to face a reality that the district’s total operating expenses significantly exceed our total annual revenues. Given that there are no additional monies forthcoming from the state, we must significantly cut district costs again, recognizing that more than 90% of our expenses are connected to salaries and benefits.
Budget Reality #3: We Have to Fix a Multi-Year Structural Deficit Problem.
To achieve and sustain a stable financial footing, it is necessary to solve our multi-year structural deficit with ongoing expense reductions and limit the use of one-time solutions like proceeds from the sale of real estate. My goal is to guide the Board to a plan that can stabilize our budget not just for next year, but for the foreseeable future to avoid the annual trauma of program cuts and layoffs.
Financial stability is dependent on making very difficult reductions for the 2012/13 and 2013/14 budget years. Our list of cuts, reviewed by the Board at the first interim financial report presentation on December 13, will serve as the basis for more than $150 million in reductions to our General Fund Unrestricted budget over the next two years. These adjustments include significant class size increases and educational and support services decreases, actions that no one wants to even consider…but unfortunately that is our reality.
Budget Reality #4: Given No New Revenues in Sight, Both Employee Concessions and Layoffs Must Be Considered.
With flat budgets looming in the “best case” scenario and expenditures exceeding revenues, the District has few options with which to overcome the budget shortfalls. We are at a crossroads where the choices are bleak and severely impact both central office and campus operations.
At this juncture, the Board has asked that we reach out to our unions to address a package of employee concessions that can help the district mitigate the number of layoffs needed to balance the budget and safeguard our academic and administrative programs so critical to student achievement.
We are hopeful that the conversation with the employee collective bargaining teams will begin in the very near future. Some suggested concessions include deferring the negotiated salary increases in current contracts, continuing the current five-day furlough of the last two years, applying salary rollbacks, and/or reshaping health benefit contributions. Contingencies also have to be considered in response to mid-year cuts. We all must approach these negotiations open minded and committed to equitable agreements that lessen the blow of personnel reductions and personal sacrifices.
What’s Next?
On Jan. 24, Chief Financial Officer Ron Little and I will present a budget overview to the Board of Education. In preparation for that meeting, we are collecting technical information, analyzing the proposed state budget, and updating our financial projections. A key element of this work will be the direction received from the County Office of Education about factoring midyear cuts into our proposed district budget.
We are also stepping up advocacy with our elected representatives in Sacramento. “The devil is in the details” and that is very true for the state budget. We are awaiting specific legislative budget language forthcoming in early February. It will provide more details about how school districts can be expected to implement a possible midyear cut, such as legislative authorization for a three-week school reduction as a contingency.
We will continue to face great uncertainty about our budget for the next six months. The state budget will evolve and change during a time when school districts are required to make layoff notice decisions. This is a terribly disconnected process where local agencies act on and react to State government decisions with no synchronization between the two parties. We are likely to face the reality of issuing March 15 certificated layoff notices in unprecedented numbers and subsequently rescinding some number as budget details are updated and employee group negotiations become finalized.
In conclusion, the budget situation is very serious, but one we can overcome through our demonstrated past resiliency and commitment to expending our best efforts. Let me assure all of you that I will continue to present complete and factual budget information to you and the Board. I will devote all of my energies to finding solutions that can minimize the impacts of these difficult fiscal realities.
Sincerely,
William Kowba
Superintendent
The upcoming budget reductions and achievements by students and staff are discussed by Dr. John Lee Evans, board president. Courtesy KUSI-TV. Watch video from KUSI-TV»
Superintendent Bill Kowba announced today that he will immediately initiate the restoration of funding in the district¹s 2011-12 budget necessary to restore the current student/teacher class size ratios for grades Kindergarten to 3rd grade for the next school year beginning in September. As a result of the level funding for K-12 education that was included in the state budget signed by the Governor last week, additional funds will be available to maintain K-3 class size ratios at current levels for one more year.
The Superintendent¹s plan will restore K-3 class size ratios to 24:1 at all schools and maintain a 20:1 ratio at 29 high-poverty schools that currently have that lower ratio. According to Kowba, the district¹s
initial analysis of the additional revenues that will be available from the adopted state budget will be adequate to support K-3 class size restoration which will retain approximately 300 teachers at an approximate cost of $22 million after accounting for state deferrals.
"The good news from the state budget is that we will have some additional funding for this year to bring back our teachers for our early grades where small class sizes are so important to student academic success," said Kowba. "But we must all realize that this funding may be temporary and we may even face mid-year cuts should state tax receipts fail to meet expectations. And the fact remains that our district still faces a huge deficit next year which means we may only be able to save these smaller class sizes and teaching jobs for this year only."
Kowba indicated that the District Chief Financial Officer has completed a preliminary analysis of the state budget from which he concluded that the district can budget an additional $36 million of revenues for 2011-12, but not all of those funds will be paid to the district in the budget year because of state payment deferrals. The state will defer nearly 40 percent of revenue limit payments to school districts until the next budget year and 50 percent of class size reduction (CSR) funding which will mean that San Diego Unified will realize only approximately $27 million in additional cash over the budget adopted by the Board of Education on June 28.
"The district budget for 2011-12 is very tight and there are still many uncertainties with state funding," said Kowba. "It is essential that we budget to maintain a positive cash flow throughout the next fiscal year and further restorations beyond this K-3 restoration could place the district in a negative cash position which we must avoid to pay our employees and bills on a monthly basis."
Kowba indicated that district finance staff will continue to evaluate the impacts of the state budget and the district¹s financial obligations and provide a more detailed update to the Board of Education on July 12 and July 19. The Board had directed the Superintendent to begin to implement restorations based on additional funding as soon as possible and to make K-3 class size restoration the top priority.
"While this restoration is a positive step our schools will still be dramatically impacted by more than $90 million in program reductions in the coming school year." Kowba concluded.
The Voice of San Diego and NBC 7/39 explain how schools are funded in California. Watch video»
The Voice of San Diego and NBC 7/39 in their "San Diego Explained" series look at bonds and why schools can build new buildings in a time of budget cuts. Watch video»
Board of Education Member John Lee Evans spoke with the media regarding the district's 2011-12 budget.
