This is the second of a three-part series by Dixon Unified School District Superintendent Brian Dolan related to a significant Board Meeting agenda item for August 7, 2014. The first article ran on July 30th and the last will appear on August 3rd. In the first article of this series I discussed the history of debt the school district has taken on while we have built schools over the last 25 year period. The purpose of this article is to review our overall financial situation as of today and to connect it to the facilities debt issues outlined in Wednesday’s article. To begin, it is worth mentioning that the period beginning in 2007 through 2013 was the most challenging time the District has ever faced in terms of its financial health. In 2007 it became apparent that the District’s finances had not been adequately monitored and managed. The Superintendent and Chief Business Official both left the District in the fall of 2007 and Dee Alarcon and Lettie Allen from the Solano County Office of Education served as our acting Superintendent and Chief Business Official most of that school year. We began budget cuts that year, including the closing of Silveyville Elementary School. By 2008 the economic crisis had begun and funding from Sacramento began to be reduced significantly. Federal stimulus money helped to replace some of the lost revenue, but we continued to make substantial reductions in programs and services to remain solvent. The increases in class sizes and loss of support services negatively impacted our academic performance and added stress to students, staff, and parents. Over this entire period of fiscal trouble we monitored and limited spending. With the addition of the one-time stimulus funds we were able to build a significant reserve, some said too large actually, and have been spending that down over the course of the last two years. It is important to note that this was planned deficit spending, not a lack of monitoring or oversight. Last December, at the time we had to file a budget update with the County, we were able to certify a positive budget status for the first time since 2006. This certification was an official statement of fiscal health. It is a reasonable question to ask how we can move from being fiscally healthy in December, and again in March when we filed another update with the County, to discussing big concerns over our finances today. As is always the case, many things changed from then to now, and most of them were things out of the District’s control. As of March, we projected to end the 2013-14 school year with an ending balance of $2,966,244. In late June as we adopted our 2014-15 budget, the projected ending fund balance had changed by less than $85,000 to $3,049,679. I cite these figures as evidence that the challenges we face are not about over spending or not monitoring our current year budget effectively. At budget adoption we were responsible to complete a multi-year projection showing the 2014-15 budget that we were adopting, but also the 2015-16 and 2016-17 years. It is in these projections that we see the urgency of our situation. From March to June the projected unrestricted ending fund balance for 2014-15 decreased from $1,763,839 to $1,252,865, a decline of $510,974. From March to June the projected ending fund balance for 2015-16 decreased from $1,965,718 to a negative balance of $2412, a decline of $1,968,130. With the new budget adoption we were required to add an ending fund balance projection for 2016-17 for the first time. This projection is a negative balance of $1,748,299. The decline in the projected ending fund balance is highly alarming and not a path that we are not legally allowed to walk down. As a result, we have identified the need to make $1,000,000 of on-going adjustments in the 2015-16 school year and another $800,000 of on-going adjustments in 2016-17. This is a total of $2,800,000 of on-going adjustments in the two year period of 2015-16 and 2016-17. An adjustment is a term that has been used in recent years to soften what they have really meant – cuts. Adjustments can also mean revenue increases, although those are much harder to identify and even harder to enact. So, why this big change for the worse? Is the District mismanaging its budget as was seen in the past? Our answer is no, we are not. A number of factors contribute to this swing and deserve careful explanation. First, in a last minute surprise from Sacramento, the Governor and Legislature decided to address funding issues for the retirement systems for teachers and classified employees. While individual employees and the state will have increases in what they must contribute, school districts are getting battered. Beginning in 2014-15 and for the two subsequent years we will pay an increased amount of $174,000, $493,000, and $757,000. That is a total of $1,424,000. Second, due to changes in funding for the Solano County Office of Education we will lose $150,000 in annual funding for Career technical Education purposes. That is a total of $300,000 is our multi-year projection. Third, many people are aware of the new funding formula called the Local Control Funding Formula (LCFF) and the required plan to accompany it called the Local Control Accountability Plan (LCAP). Under these new systems, each district in the state is required to develop a plan to serve all students, with a focus on poor children, English Learners, and Foster Youth. As required, we have developed our plan and from it generated about $520,000 in new expenditures. This is a total of $1,560,000 over the three year period. These new expenditures or loss of revenue total $3,284,000 or $484,000 more than the $2,800,000 in adjustments that we need to plan for. Again, we are responding to factors beyond our control in paying for the pension increases, seeing revenue end, and completing the requirements of the LCFF and LCAP. This great challenge we now face is real, and while we know that projections can and will change over time, it is clear that we must consider all options to address our financial health. One of these options is to eliminate or reduce the $735,000 in annual debt payments we are making from our General fund as described in the previous article in this series. The final article on Sunday will describe options that the Governing Board will consider on August 7th. Again, I encourage you to read that article and attend our meeting to share your input.
Posted on: Fri, 01 Aug 2014 20:22:11 +0000
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