News

Thursday, August 27, 2009

Impact of 2009-10 State Budget on the Santa Barbara School Districts

A message from Deputy Superintendent Eric D. Smith

On July 28, 2009, the governor and legislature finally agreed on a budget package to close the state’s massive $26 billion deficit. The budget deal was finalized through a combination of spending cuts to virtually all programs, deferrals, major borrowing from local governments, accounting gimmicks and other one time solutions. Most Capitol observers predict that projected revenues will come in far below anticipated expenditures and that the budget as proposed could unravel as early as Thanksgiving of this year.

The state budget looks very similar to what we based our budget on in June, with one significant exception. In order to reduce the amount of money owed to school districts in 2009-10, the state utilized an accounting gimmick to reduce the amount of revenue given to school districts in fiscal year 2008-09, thereby lowering K-12 educations funding entitlement. It did this by inflicting a one-time cut of $254 per student in fiscal year 2009-10. This reduction will result in a one-time loss of roughly $3.4 million between both of our districts.

The way this cut will be implemented varies depending on whether a school district’s unrestricted revenue is funded under revenue limit (i.e., a combination of state aid and local property taxes) or by basic aid (i.e. exclusively by local property taxes). Since it is anticipated that the Santa Barbara Elementary School District will be certified as basic aid this year, the one-time cut of $1,091,000 must be imposed on state categorical program dollars. In the Santa Barbara Secondary School District, the one-time cut of $2,400,000 must be imposed 50 percent among unrestricted and 50 percent among state categorical program dollars. These cuts must be implemented this year so we have no choice but to implement a mid year reduction. Moreover, we have placed a freeze on state categorical spending until we figure out exactly how much each categorical program will contribute toward this revenue reduction.

Last June, we informed the board of education that given the compressed time frame, we were unable to produce a list of cuts equaling $4 million in one month, and that a portion of the structural deficit would roll forward into the subsequent fiscal year. Based on multi-year projections, it is now clear that the amount of the structural deficit that rolled forward, compounded with the impact of the $254 per student one-time reduction to the revenue limit, will present us with some very difficult fiscal challenges. We anticipate that ongoing cuts in the range of $2.5 million in fiscal year 2010-11 and $2.8 million in 2011-12 must be made to maintain the districts’ fiscal solvency. To that end, we will establish a timeline for the board to make additional adjustments to the budget, including expenditure reductions, this fall so that we may prepare multi-year projections at the First Interim Report that show the districts meeting their minimum reserve requirement in the current and subsequent two fiscal years.