The Yosemite Unified School District proposed budget approved by the board on June 26 reflects $1.3 million in deficit spending during the current fiscal year (July 1, 2017 - June 30, 2018) and about $240,000 and $44,000, respectively, over the next two years.
The district’s ending balance in the third year (2019 - 20) is currently at $533,000, $32,000 below the state mandated 3% reserve.
This shortfall triggered a ‘conditional approval’ of the three-year budget by Madera County Office of Education MCOE) Superintendent Dr. Cecilia Massetti.
The budget was prepared by the District’s Business Services Office under the direction of then interim Superintendent/CBO Leonard Kahn.
As of July 1, Dr. Cecilia Greenberg has been contracted by the district to serve dual roles as superintendent and CBO.
The MCOE has a fiscal oversight role for all county school districts including the Yosemite Unified School District which includes Yosemite High School, Coarsegold and Rivergold elementary schools, the Educational Options Programs, continuation schools and day schools.
Following the examination of a district’s budget, the county superintendent may approve, conditionally approve or disapprove that budget with a Sept. 15 deadline. AB1200 sets the guidelines for this process.
“You are in a fiscal crisis,” said Steve Carney, chief business and administrative service officer for MCOE Steve Carney told the board at a Nov. 1 public workshop held in Yosemite High School’s library. “That’s a huge concern of ours.”
In addition to the lack of reserves, Carney voiced MCOE concerns of the district’s inability to identify and follow through with the necessary steps to make the needed cuts. He pointed to a “lot of turnover in the business department.”
“The district is able and has the ability to make the required cuts,” Greenberg said. “I have extensive experience working in districts and leading the process of making substantial budget cuts and enhancing revenue. The new high school principal also has experience working in districts that faced the need for substantial, ongoing budget cuts. Changes in job descriptions and duties [are] in direct line with the district’s goal to better align needs with skill sets, as well as reducing costs to revenue.”
Layoffs planned to balance budget
In a Sept. 14 letter to Christine Wilder, district board president, Massetti advised the district, “The rationale for a conditional approval is, the multi-year projection (MYP) ... by YUSD does not meet the required reserve balance in year three.”
Massetti’s letter points to the district’s proposal for layoffs to reduce the budget by $670,000 by Mar. 15, 2018 and another reduction of $170,000 by Mar. 15, 2019.
“In order to meet the required reserves in the third year, YUSD must reduce salaries, benefits and expenses by the equivalent of these numbers in order to meet the 3% required reserves,” Massetti said in her letter.
Generally, 80% of a school district’s budget is designated for staff salaries and benefits.
The district’s MYP also shows a 25% decrease in supplies, 10% decrease in services for year two and an additional 8% and 5% decrease in year three. “Without these layoffs or the equivalency of reductions in labor, benefits and other expenses, YUSD will not meet the required reserve of 3% in year two,” Massetti said.
According to Greenberg, a number of factors have contributed to this budget crisis including a declining Average Daily Attendance (ADA) trend.
Additionally, YUSD has been making interest only payments on a number of Certificates of Participation (COP) used to finance construction projects and other purchases. Some of these were prior to the unification of the Yosemite Joint Union High School and Coarsegold Union School Districts.
The MCOE is also “very concerned about” the COP payments which represent non-voter approved debt. A COP is a general fund loan where several “items” can be combined giving budget relief for a few years.
The payments on the COPs have been growing, according to a presentation by Greenberg at a previous board meeting.
“Debt is increasing from $128,000 (2014-15) to $400,000 (2018-19) to $523,000 (2026-27), [and] does not include additional COPS [for water-related needs].”
“There were numerous smaller COPS ... that were used to fund restrooms, buses, vans, needed construction and repairs (some of which was prior to unification),” Greenberg explained in an email. “The feeling at the time was that developer fees would pay for them. Developer fees dried up, which means that this debt then fell on the general fund ... YUSD proactively ... brought in [the] state’s preeminent consulting organization, Fiscal Crises and Management Assistance Team (FCMAT) to dive deep into fiscal concerns and make recommendations which will be forthcoming.”
Carney explained that when the district refinanced the COPs several years ago, they front loaded the savings,” Carney explained. “Most of the savings of refinancing was taken in the first five years. This was at a time when ADA was declining. The problem when you refinance and take the savings up front [is], it caused the back end of the COP payments to increase. It is not that the debt is increasing. The value of the COP remains the same. It’s just that the payments are lower in the first five years and after that the annual payment increases.”
Additionally, taxpayers currently pay a property tax assessment on 1998 General Obligation (GO) Bonds. That assessment will end in 2024.
District looking at options
Looking at options to relieve the district’s financial woes, YUSD is researching the possibility of placing a bond issue on the Nov. 2018 ballot. A representative of Dale Scott and Company, a company specializing in advising school districts on financial matters, presented their analysis during the Nov. 1 workshop.
“The district could go back to voters and ask them to extend this tax [the property tax assessment] for a period of years,” the representative said. The illustration provided was a $9 million GO Bond. If certain designations were made, it could be used to pay off the COPs (about $3.8 million) with $4.8 used for other projects. The illustration extended the property tax assessment another 20 years.
“The district has been working with the County Office of Education as part of the normal annual budgeting process,” said Wilder in an email. “The district pro-actively brought in FCMAT to dive deep into fiscal concerns and make recommendations. We look forward to the report and will continue working with all of the shareholders as we move through this process.”
YUSD is not the only district with financial woes. School districts throughout the state are struggling to adopt balanced three-year budgets as required by law. This is despite $92.5 billion that California will provide to K-12 education during the current fiscal year.
“Many districts around the state are facing similar MYP challenges of falling below required 3% reserve in large part because of statewide, inescapable high-cost retirement programs eating into the budget,” said Greenberg. “The former CBO knew that we were going to need to make cuts for 2017/18 and built them into the budget. He thought that they would not have to be made as quickly because of potential one-time money. The problem was that the figures for the budget cuts were plugged into the budget but staff did not develop a plan for those extensive cuts. This is why we are developing the plan and have already begun the process of budget cuts.”
The next board of trustees meeting will be at 6:30 p.m., Monday, Nov. 13 in the administration building board room.
Public Input Sought
YUSD is seeking input via its website at www.yosemiteusd.com. Click under the Financial Input for YUSD header and the survey will pop up. Respondents may leave a name and/or email if they wish and then list their ideas to reduce expenses, increase revenues and prioritize the programs they value. The survey is expected to be on the website for several months.