At the School Board meeting March 15, the Board was given the Second Interim Report to the 2003-04 budget--that is, the budget for the current school year. At the time the Fiscal Recovery Plan and 2004-05 budget was presented to the Board in early February, it was expected that the current year budget would be balanced by year's end.
Since that time however, an unforeseen problem with revenues from the Special Education Local Plan Area (SELPA) and other issues make this a greater challenge and additional cuts in current year will need to be made (or additional revenues found). The aim of this article is to explain what happened and to summarize where we are now.
"Shocked" and "frustrated" were adjectives used frequently by Board members and administrators in relation to the new SELPA numbers, which result in the district receiving $1.5 million less than anticipated.
The bottom line is this: while the new problems create a current-year deficit of $867,000, anticipated revenue increases and expense decreases in 2004-05 balance those problems for 2004-05 and beyond. So the BUSD operating budget for 2004-05 and beyond remains balanced, including the required set aside for the 3% reserves.
It is important to note that this assumes no changes to education funding from the current proposed state budget for 04-05. While one hopes that the governor will stick to his promises relative to education funding, there is no guarantee of that, and changes are sometimes made in May, after a revision of state revenues and expenditures is released. This uncertainty is especially a factor for categorical funds, which might be eliminated in the state budget negotiations.
Let's go into a few specifics on the BUSD situation.
First, what is a Special Education Local Plan Area (SELPA)? In 1977, all school districts and county offices of education were required to join to form geographical regions of sufficient size and scope to provide for all of the special education service needs of children residing within the region boundaries. Each region developed a local plan describing how it would provide special education services. A SELPA has a variety of responsibilities that may include: Ensuring program availability for all children with disabilities; staff development; management information systems; transition planning; legal assistance; budget review and planning; interagency coordination; program specialists; community Advisory Committee support; curriculum
and program development; and, most pertinent to our discussion here, fiscal management.
Overall, what you need to take away from that list is this: the SELPA takes in special education revenue from the state and distributes it to the districts comprising the SELPA minus its own administrative and operating costs. The North Region SELPA is administered by the Alameda Unified School District and administers funds for the Alameda, Albany, Berkeley, Emeryville, and Piedmont school districts.
Unfortunately, the initial revenue numbers presented to the BUSD were far higher than the current numbers and this, coupled with the two year decline in Berkeley's overall student enrollment, led to a discrepancy of $1.5 million. At this point complete documentation to verify and check the numbers has not been made available to the district, officials said.
District administrators are requesting further information from the SELPA to further explain the difference between the expected and actual revenue. A finance meeting is scheduled next week to verify the numbers. The district is considering all options, including evaluating membership in an alternate SELPA.
Fortunately, there is some good news as well. Five changes to the budget have taken place since the Fiscal Recovery Plan was approved. Three of these improved the district financial outlook, but only in the 2004-05 year--not the current year.
The positive changes:
--Affecting 2004-05 only: There was a 1.06% increase in the projected Average Daily Attendance (ADA) used to calculate next year's budget. Since the district will have fewer students next year than this year, under state regulations this year's ADA is used to calculate next year's revenues. Remember too that ADA is not enrollment--every day that a student is sick, traveling, or otherwise not in class the district loses revenue from the state.
--Projected health and welfare cost increase is now expected to be 10%, rather than 18%.
--Affecting 2004-05 only: The state $15 billion bond passed, which allowed the district to book the 1.84% cost-of-living adjustment to revenue limit income [though there is still no COLA being applied to categorical funds--see last month's email for an explanation of this distinction]. The state's funding for revenue limit dollars also is now expected to move from 97% to 97.9% of what it "owes" school districts. Again, the caveat that the state budget is not final till it is signed.
On the negative side of the equation:
--Decreased SELPA income of $1.5 million
--A General Fund contribution to the Cafeteria Fund and the Vera Casey Center
The bottom line according to the Interim Report is this: "The district must make additional expenditure reductions of approximately $867,000 in the current year in order to meet the Board's stated three-year objective of producing a balanced and approvable budget for the 2004-05 fiscal year."
Another way to say it: In the current year, without further cuts, the district would need to dip into its reserves to cover the $867,000 deficit. This money then needs to be repaid to the reserve fund to meet the state mandated 3% reserve. The total reserve fund is about $2.75 million.
While technically there is wiggle room that would allow the district to delay the cuts until next fiscal year without violating state regulations, at this point the Superintendent feels that making necessary cuts and closing the 2003-04 books with no debt is a better option than going into 2004-05 with a negative number on the balance sheet and again putting the organization in disarray.
Since the March 15th deadline has passed there will be no lay-offs affecting teachers. Superintendent Lawrence had her cabinet in full session on Monday. She believes that since the spending cuts needed are one time cuts in current year they "are not likely to impact site programs."
Feel free to post this to your etree or PTA newsletter. Any errors are the responsibility of the author.
by Jay Nitschke jay@jaystoys.com