December 2007 News
Friday, December 14, 2007
Interim Financial Reports: Reporting and Planning the Districts’ Financial Position
At the Tuesday, December 11, 2007 board meeting, the board of education approved a healthy budget for the current 2007-08 school year, but certified the districts’ first interim budget report as “qualified,” since the districts may not be able to meet financial obligations in fiscal year 2009-10, including meeting the three percent state minimum reserve level. The multi-year financial projection anticipates, that absent a reduction on going expenditures, the districts will experience a multi-million dollar deficit by the 2009-10 fiscal year.
The current budget and three-year projection presented by Eric Smith, interim assistant superintendent of business services, shows undesignated general fund balances (above the three percent reserve) as follows:
| 2007-08: | $2,023,000 |
| 2008-09: | $ 550,000 |
| 2009-10: | ($4,567,000) |
Smith noted that the rate of overspending in 2008-09 ($1.5 million) could be mitigated by budget cuts in preparation for next year’s budget and that state COLA estimates are dropping. The 2009-10 balance looks particularly bleak because the prior year revenue limit guarantee for funding based on 2007-08 ADA will drop due to declining enrollment.
The multi-year financial projection rest on a series of assumptions, including but not limited to, forecasted levels of state funding, forecasted increases in personnel expense, and assumptions regarding the continued decline in student enrollment. In the event that some of the assumptions do not materialize as expected, the multi-year financial projection could change as well.
Twice each year, the Santa Barbara School Districts Board of Education is asked to certify interim financial reports regarding the districts’ financial position and submit them to the Santa Barbara County Education Office for review and analysis. For each interim report, the districts must certify one of the following: Positive: that the districts can meet the current year and subsequent two-year obligations; Qualified: that the districts may not be able to meet the current year and subsequent two-year obligations; or Negative: that the districts cannot meet the current year and subsequent two-year obligations.
The districts’ administration will now start the process of developing a plan that aligns future revenues with projected expenses in order to guarantee the long-term fiscal solvency of the districts.