Warm weather. Daylight savings. California poppies. Spring is here as well as the school budget season! Throughout California, school districts are completing their 2018/19 Second Interim Budget Reports and discussing budget proposals for the 2019/20 school year.
The Carpinteria Unified School District leadership team and Board of Trustees review the district goals, the Local Control Accountability Plan (LCAP), district core values and core budgeting principles to guide the budget development process. This process includes budget discussions at school board meetings, special Budget Study Sessions and meetings with staff and parents to discuss the necessary resources for programs, services and activities that reflect our core values of academic achievement, respectful community and continuous improvement.
In this process, we review current reserves, projections for revenues, cost drivers and projected expenditures. We must also adhere to specific budget timelines set by the California Education Code. By March 15 certificated layoff notices must be served, and by June 30, public hearings must be held on both the LCAP and the proposed 2019/20 budget. Next, the school board must adopt the new budget and the LCAP.
California Education Code also sets specific budget requirements that county offices of education will review and approve on local school budgets and LCAP. These requirements mandate districts complete the school year with a positive fund and cash balance, are solvent with no less than 3 percent in the General Fund Reserve and can meet fiscal obligations for the current school year plus two additional years.
In most California school districts, the largest source of funding comes from the state budget General Fund. Proposition 98—passed by voters in 1988—continues to drive the overall funding totals that the state sends to K-12 districts and community colleges each year. The amount that each district receives is calculated using a Local Control Funding Formula (LCFF). Per pupil funding continues to lag far behind the national average. According to California Budget and Policy Center (Jan. 2017), “California ranked 41st among all states in spending after adjusting differences in the cost of living in each state.”
Carpinteria Unified is not funded through LCFF but as a Basic Aid district with funding generated by local property tax revenues. Proposition 13—passed in 1978—capped property taxes for residences and businesses, and as a result, tax rates are limited to old appraisals not the property’s current value. There are approximately 100 Basic Aid districts in California, typically high wealth districts, such as, Beverly Hills Unified, Laguna Beach Unified, Carmel Unified, Montecito, Santa Barbara Unified, Hope, Cold Spring and Goleta.
Moreover, Carpinteria Unified, like all California school districts, is facing significant fiscal pressures that destabilize the budget and force reductions. Among these fiscal pressures are rising employee pension costs, increasing employee health care costs, increasing special education program and transportation costs, and costs associated with recruiting, retaining and training effective teachers. The State Legislature sets the district’s pension contribution rates through CalSTRS for certificated employees and CalPERS for classified employees. These rates are rising dramatically. In 2013/14, the rates were 8.25 percent for CalSTRS and 11.44 percent for CalPERS. Now, in 2019/20, these rates will be 20.7 percent and 17.1 percent respectively. These rate increases cost CUSD $2.3 million more for both STRS and PERS without any associated increases in state revenue.
Across the board, teachers and staff salaries and benefits are the main expenditures in school district budgets, and that is true for CUSD. Currently, total statutory benefits (STRS or PERS, Social Security, Medicare, Unemployment and Work Compensation) are 19.94 percent of a certificated salary and 29.74 percent of a classified salary. For example, a CUSD teacher who earns $75,000, receives $14,955 in statutory benefits and $20,473 in health and welfare benefits, at a total cost to the district of $110,428 for that teaching position.
Districts have little ability to control these rising pension costs, nor the increasing cost of special education. The Federal Individuals with Disabilities Education Act (IDEA) requires school districts to provide a “free, appropriate, public education” to meet the unique needs of students with disabilities. Since 1975, when IDEA was first implemented, federal and state funds have not come close to covering the costs of local special education services which can include specialized instruction, personnel, transportation, nursing services and private school placement. Federal and state revenues for CUSD special education only cover 25 percent of costs.
According to Edsource, “the current funding system for students with disabilities is insufficient, inefficient and inequitable.”
Since 2013/14, the CUSD budget revenue has increased an average of 4.7 percent with expenditures increasing an average of 5.6 percent. CUSD General Fund Reserves declined to 5.87 percent in 2018/19. The state requires a minimum level of 3 percent in General Fund Reserves, meanwhile CUSD District Policy lists a desired minimum of 10 percent.
According to School Services of California, “the 2017/18 average reserves of unified school districts is 16.98 percent, and the Governmental Finance Officer Association recommends 17 percent (approximately two months of payroll) for all local governments.”
CUSD projected revenue for 2019/20 is $29,853,023 with projected expenditures at $30,518,741. This does not reflect our core principles, and it does not meet state or county requirements.
California school districts are severely limited to three options for raising revenue: private donations, parcel taxes (which require a two-thirds vote) or a seldom-used sales tax for schools (which also requires a two-thirds vote).
The CUSD leadership team and Board of Trustees are faced with challenging budget decisions associated with reductions in staffing expenditures for 2019/20.
Please join us as we discuss the budget at the CUSD school board meetings, April 9, April 23, May 14, May 30, June 11 and June 25, or log on to cusd.net.