Based on the most current news from Sacramento, the California Economic Outlook is not good. Remember the age-old adage: “As the state economy goes, so do school district budgets.”
Interest rates are still high, the cost of housing is extremely high, people and businesses are leaving the state for better opportunities in other states like Arizona, Nevada, and Texas. The state budget deficit is either $38M or $73M depending on the source. Also, job growth is anemic, tax receipts are less than expected, and the current Cost of Living Allowance (COLA) is projected to be 0.76% but could end up at 0% by the time the May Revise is released.
Additionally, most school districts in California are experiencing declining enrollment for any number of reasons and should be adjusting their budgets accordingly. With this ominous outlook, school districts should be prepared with some version of a budget stabilization plan. Whatever your budget certification was for your 2nd Interim Budget submission, a budget stabilization plan will allow you to weather the storm and be prepared to navigate through the stormy waters ahead.
We at EH&A/MGT have been instrumental in assisting numerous school districts with their budget challenges. The following is a list of budget considerations that we have used to assist school districts with their budget challenges. The considerations are applicable at all levels of your organization, whether at the Strategic Level (S), Implementation Level (I), or the Day-to-Day Operations Level (D).
| Consideration | Strategic (S) |
Implementation (I) | ||
Day to Day Operations (D) | ||
1 | A review of your student enrollment both past, present, and future. | (S, I) |
2 | For the LCFF calculation, what is the impact of the three-year rolling average on revenue projections? | (I) |
3 | With the one-time COVID funding due to expire on September 30, 2024, are there any ongoing expenditures tied to the one-time funding? | (I, D) |
4 | Are you using your restricted funding first to alleviate the burden on the unrestricted side of your budget? | (I, D) |
5 | With passage of Proposition 2, most school districts are allowed a reserve of no more than 10% of all expenditures. Hence, any remaining funds above the 10% threshold need to be committed for a specific purpose. Are those commitments still valid? | (I, D) |
6 | If you are experiencing declining enrollment, are student to teacher staffing ratios still adequate, e.g., are you staffing at 26:1 for grades 4-8 when you could be staffing at 30:1? | (I, D) |
7 | Are you back filling vacant and retiree positions when they could remain unfilled? | (I, D) |
8 | Have you considered the impact of layoffs? | (S, I, D) |
9 | What is trade-off of not renewing temporary teacher contracts? | (S, I, D) |
10 | If you are experiencing under enrollment at your school sites because of declining enrollment, you should be thinking about consolidating your schools, e.g., a school that has a capacity for 800 students, but only 300 students are enrolled. | (S, I, D) |
11 | Do you have vacant property that could be leased or even sold? | (S, I, D) |
12 | What is your student attendance percentage, and could it be improved? | (S, I, D) |
13 | Do you have adequate position control? | (S, I, D) |
*The list of budget considerations is not exhaustive by any means but should serve as a guide for establishing your budget stabilization plan.
As you review your budget situation and contemplate some/if not all the considerations listed above, also keep in mind the following themes as you move forward:
- What are the political implications of your proposed budget adjustments? Board members prefer to keep budget adjustments as far away from the classroom as possible.
- Consider the short-term as well as the long-term implications of your budget adjustments.
- Do not forget the potential labor implications associated with your budget adjustments.
- Lastly, are you doing what is best for the children of your community?
As we come to the end of the current fiscal year and await the new fiscal year, best of luck with your budgeting process.
