Over the next few months, expect to hear and read about local school districts struggling to balance budgets that a state strapped for cash will surely slash.
The Los Altos School District is especially vulnerable, facing a larger deficit than the Mountain View Los Altos Union High School District.
But how much do residents really understand about why and how school officials make such cuts? The budget process can be complicated to comprehend, particularly when deep cuts are involved.
Every January, local district officials begin the budget planning process for the following school year. After Gov. Jerry Brown unveiled his proposed state budget last month, district administrators began preparing for the worst. Although Brown vowed to limit cuts to education – aided by a possible tax extension on the June ballot – any changes at the state level usually occur later than school districts are required to submit their budgets to the state.
“The governor’s proposal puts everything in limbo until after the elections,” said Joe White, associate superintendent for business services for the Mountain View Los Altos Union High School District. “It doesn’t change how we forecast, because there are too many unknowns.”
During each calendar year, the local high school and elementary districts work on two budgets simultaneously – closing the books on the current year’s budget and revising the next year’s.
Districts are required to submit a final budget to the state in June. In recent years, the state budget has been submitted late, hindering the school districts’ progress toward closing the books on the current year.
“We are having to take actions prior to knowing what the state budget is – prior to knowing what the outcome of our local tax election is,” said Randy Kenyon, assistant superintendent for business services for the Los Altos School District.
Projections and updates from the state following the June deadline may require revisions to the current budget throughout the year, most significantly in December, March and May. The books aren’t closed on one school-year budget until after the next one begins – in September.
In addition to planning the current and next-year budgets, district officials prepare a projection of the budget for the following three years. The elementary school district has a Citizen’s Advisory Committee for Finance, which helps administrators plan a six-year forecast.
“We aren’t just being shortsighted,” Kenyon said. “We are looking for long-term solutions and long-term impacts.”
Where does the money
The local elementary and high school districts receive the majority of their revenue from local property taxes. But there is some disparity in the amount of money each district collects – a big disparity.
Because Los Altos is a community comprising mainly residential properties, which, in turn, create high enrollment, the district will receive approximately $25 million from property taxes this year. That accounts for approximately 60 percent of the elementary district’s revenue.
The high school district, which serves Mountain View, Los Altos and most of Los Altos Hills, has a larger and more diversified area from which to collect property taxes. Mountain View, in particular, has many commercial businesses, which do not impact enrollment but do pay property taxes. The high school district this year will collect approximately $40.2 million in property taxes, accounting for 80 percent of its revenue.
The high school district not only receives more revenue, but it has fewer students to spend it on than the elementary district. Mountain View, Los Altos and Alta Vista high schools have a combined 3,683 students; the seven elementary schools and two junior highs have a total of 4,400 pupils.
Kenyon said that California has fallen in per-pupil funding since California voters passed Proposition 13 in 1978. California spends $7,920 per student per year, $2,580 below the national average.
Proposition 13 amended the California Constitution so that property taxes can total no more than 1 percent of the assessed value. The initiative also capped annual increases of assessed value at 2 percent. Properties that have been owned by the same person or business for a long period of time – like many in the Los Altos area – pay significantly lower property taxes than recent buyers. Kenyon said approximately 25 percent of households in the district pay property taxes on an assessed value of $200,000 or less.
The sluggish economy hasn’t helped. The recent economic downturn has led to a drop in home values, and property-tax growth has slowed to nearly zero.
In addition to property-tax revenues flatlining, the elementary and high school districts have taken a financial hit from the state, which cut an additional $1.5 million from the education budget. Because both local districts receive most of their funding from property taxes and not from the state, California has recently required them to take a fair-share hit against their revenues.
Because the elementary district collects less money in property taxes and serves more students than the high school district, it has depended increasingly on parcel-tax income and donations from the Los Altos Educational Foundation.
“One of our greatest challenges is figuring out how we convince the local community to help us financially,” Kenyon said. “Because of Proposition 13, the parcel tax is the only way we can get additional funds.”
The elementary school district collects $597 per parcel, generating approximately $7.5 million annually. The educational foundation has supported the elementary district during the dip in the economy, pledging to collect $2.35 million this year to reduce the number of cuts to district programs.
The Mountain View Los Altos High School Foundation committed to raise $850,000 this year to support classroom programs, tutorial centers, college preparation tools and more.
Other funds come to the districts from the state but is earmarked for specific programs such as English language learners or special education. In recent years, to ease state funding reductions, California granted districts the flexibility to sweep some of the particular funds into their general funds.
While the high school district has been hit with its fair-share of cuts, the state also cut funding for adult education. The high school district runs a robust adult education program but has had to cut funding in the past few years.
White said the high school district has been using the state allowance of flexibility on categorical funds to finance adult education. The governor’s recent proposal extends that freedom for the immediate future. But White said the freedom to apply those funds in such a way would not last forever, so the district will have to begin deficit spending when the state removes the flexibility of those funds.
The high school district faces a $735,788 deficit, which White said the reserve fund is easily able to absorb. The district has covered its fair-share hits through cuts outside of the classroom, by reducing classified positions and other areas of the budget.
The elementary district has not been as fortunate. It has had to send out pink slips to teachers and classified positions for the past two years to brace for the worst-case scenario.
Following the governor’s budget proposal this year, the Los Altos School District confronts a number of unknowns. The district faces a $4.7 million deficit – prompting the May request for an additional parcel tax.
Because the district is carrying such a large deficit, it would benefit from some of the governor’s proposals – such as an $8.8 billion tax extension. That will not happen without two-thirds support in the Legislature and subsequent approval from a majority of voters in June.
Unfortunately for the district, administrators must notify teachers and other staff of possible layoffs by March 15 – meaning they cannot account for any potential additional funding from the tax extension or parcel tax. Cuts this year will indicate a worst-case scenario, Kenyon said.
“The solution to our budget issues will come from a number of sources,” elementary district Superintendent Jeff Baier said. “A combination of expense reductions and revenue increases is how we hope to solve the problem.”
In an attempt to control the district’s current structural problem, spending more than it receives in revenue, district officials are in discussions with teachers regarding concessions they might make in their compensation and benefit packages.
“We don’t have the revenues to keep up with our commitment to benefits,” Kenyon said. “We are working to make that a sustainable model.”
Although the district will have to make cuts this year, Baier said administrators would not lose sight of providing quality education.
“We recognize and understand very clearly that we have a responsibility to deliver an outstanding education, and that is going to happen,” Baier said.