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This page was last
updated on
September 27, 2007.

September 2007 News

Friday, September 7, 2007

Undesignated Budget Reserves

The Santa Barbara School Districts’ budget updates at the August 14 and August 28, 2007 board of education meetings corrected the figures presented to the board on June 29, 2007. After the June report, the districts’ Business Office moved quickly to determine the accuracy of the budget figures through analysis by the Santa Barbara County Education Office, an independent fiscal consultant, as well as the new district director of fiscal services.

The report cautioned that because of the districts’ declining enrollment in recent years, state revenue, and budget projections for the next three years, it is fiscally prudent to prepare for their continued impacts on the districts’ finances. While the final year-end balance for 2006-07 is not complete, current corrections to the districts’ $119 million budget for 2007-08 leaves the following undesignated budget reserves (beyond the state-required three percent reserve for economic uncertainties):

• Revised 2007-08 undesignated budget reserve = $2.9 million.
• 2008-09 projected undesignated budget reserve = $1.85 million.
• 2009-10 projected undesignated budget reserve = (-$2.75 million).

Undesignated budget reserves in 2007-08 will help maintain fiscal health in 2008-09. Otherwise, it is highly likely that the districts would be facing a negative undesignated budget reserve, and more cuts, in school year 2008-09. Of course, the budget is fluid. These numbers will continue to change.

There are several questions district staff and the board are working to answer, including:

1. What will the closing balance be from last year’s budget? The actual closing balance will become the corrected starting balance for this year’s 2007-08 budget and is expected to be presented to the board at the September 25, 2007 board meeting.
2. Are the assumptions used to project future revenue and expenses correct? General fund revenue is based mainly on enrollment assumptions based on our declining enrollment and state revenue projections are derived from data provided by School Services of California. As we know from past experience, that data are critical to accurately predicting future balances.
   In our elementary district, student enrollment at non-charter elementary schools dropped three percent last year. The enrollment decline at secondary schools was two percent. Official enrollment counts will be made in October.
   The districts are also exploring other revenue stream options.
3. What additional amount in undesignated reserves should the district maintain in order to make the three-year projection, plus the state-required three percent reserve for economic uncertainties, without needing to make more budget cuts during the 2008-09 school year? The three-year projection will be updated at future board meetings as budget amounts are known.
4. What other future liabilities not currently included in the budget should be designated? The board will have further discussion on this matter.
5. What program cuts made in April 2007 can be restored now? The board will be considering additions to the elementary music program–currently provided by two teachers–at the September 11 board meeting. Other programs may be considered in the future.

As answers to the above questions are known, the board will be facing difficult decisions on the districts needs and priorities.