South Pasadena Unified School District (SPUSD) board members and administrators reviewed a dismal fiscal outlook Tuesday night based upon a funding scenario projected by the Los Angeles County Office of Education (LACOE).
The LACOE scenario assumed a major decline in state revenues and included the expectation that significantly fewer resources will be available to fund local school districts in the next three years.
“SPUSD has been challenged by a silent recession since 2013, working with a funding level in the bottom 10% of districts throughout the state,” said Superintendent Geoff Yantz as part of the regularly scheduled board meeting at district headquarters. “We had finally reached a point where our funding matched the level of the 2008 Great Recession when the pandemic hit. Now, we are facing a projected financial deficit that is dramatically larger than the Great Recession.”
For budget planning purposes, LACOE recommended that districts model a budget based on a zero percent cost of living adjustment (COLA). The annual COLA revenue increases are factored into the Local Control Funding Formula, which is the State source of SPUSD’s revenue. A zero percent COLA results in the district needing to make $3.5 million in reductions to the overall budget over the next three years in order to meet the minimum budget reserve requirements.
However, the California Department of Finance released a starkly different view of the budget implications caused by the COVID-19 economic impact. The dire warning from this department indicates that the funding deficit could be up to three times greater than it was during the Great Recession — an estimated negative 22% COLA. This estimate far exceeds the LACOE assumptions that were provided a few weeks earlier and would require the board and administration to reduce the District’s overall expenses by $10 million over the next two years. This reduction represents approximately 25% of SPUSD’s total state revenue.
“We recognize that COVID-19 has plunged California into the worst budget deficit in the State’s history, but a 25% loss of revenue to public education is simply not sustainable. It is our sincere hope that the governor’s May budget revision and subsequent budget revisions offer creative solutions for how the state will respond to ease the expected, extreme loss of funding,” said SPUSD Board President Dr. Michele Kipke. “Without significant federal and state aid, the path forward will be extremely painful. We will have no choice but to make significant staff reductions.”
Once the governor’s May budget revision is released, the District will be able to develop the three-year budget as required by law. District administration has recommended that the SPUSD Board take a step-by-step or phased approach to manage the budget reductions, systematically evaluating and addressing the financial impact once additional information is provided by the state.
Administrators also are counting on the state to offer a mix of tools that would help mitigate the impact of a huge funding deficit such as providing relief from CalSTRS and PERS employer contribution increases, relaxing kindergarten through third grade class size limits, permitting a negotiation of furloughs with collective bargaining units, supplying federal stimulus money, offering flexibility in use of funds, and more.
After the May revision is released this week, the governor and California lawmakers are expected to provide additional detailed guidance in June and again in August.