With the coronavirus pandemic causing sudden market volatility and widespread economic distress, local schools districts are facing increased financial uncertainty.
Although the long-term impact to school budgets is currently unknown, smaller changes are already being seen. Locally, the Los Altos School District is losing revenue from those who rent and pay to use district land, while also saving money by not having to operate school sites. For the current school year, it looks as though all the changes may balance out financially.
“Roughly we might break even on this through the end of (the school year),” said Randy Kenyon, the district’s budget director. “It’s just a rough guess at this point.”
The district expects to see decreased rental income from those who rent campus space, such as before- and after-school child care providers at the elementary schools and Stepping Stones Preschool at Covington School.
Although the district hasn’t yet received any formal requests for rent relief, Kenyon said that doesn’t mean they won’t come in the future.
“They’re not able to operate right now,” Kenyon said of the programs. “I’m assuming they’re going to have to pay staff members and they’re going to have trouble being able to meet their rental obligations.”
The district plans to suggest deferring rent, but some may be unable to make up lost income, according to Kenyon. If no rent is collected for April through June, the district would lose an estimated $170,000.
The district also receives rent payments from the current tenants on the 10th school site at the corner of California Street and Showers Drive in Mountain View that the district purchased last year. Under the terms of the sale, the current tenants, which include 24 Hour Fitness, Kohl’s and Joann fabrics, are permitted to stay until December 2022.
At least one tenant has already asked for rent relief, Kenyon said. The plan is to offer to defer rental payments for April and May, to be paid back starting in October. However, Kenyon said it will be a negotiation and he doesn’t yet know how much of a financial hit the tenants ultimately will take because of the pandemic.
“From a conservative standpoint, I would expect we will have difficulty collecting rents from any and all (tenants),” Kenyon said.
There also may be delays in receiving fees from developers, as projects are postponed. Developers pay fees to school districts because real estate projects can increase student enrollment. However, because the projects are likely to be delayed rather than canceled, Kenyon said this may be more of a cash-flow issue.
Revenue is also being lost because with school facilities closed, the district is not earning fees from community groups that pay to use the space when school is not in session. Groups from youth soccer to square-dancers lease district facilities. None of that can happen under the current shelter-inplace order, and Kenyon expects $220,000 in lost revenue.
Despite the lost revenue, the district is saving money by moving to virtual schooling. With schools sitting unused, the district could see as much as $200,000 in reduced gas, electricity and water bills.
Fewer substitute teachers are now being used because teachers aren’t completing the in-person professional development training that would typically take them out of the classroom. The decrease in the use of substitute teachers could save the district another $200,000.
With schools closed, there’s also the potential to save $50,000 in contracted services, such as legal fees and repairs to facilities.
The pandemic itself has come with its own costs, including increased school cleaning and purchasing hotspots for students who lack internet access at home. The district is set to receive $72,000 from the state to offset the costs of dealing with the coronavirus, which Kenyon said may end up covering much of the expenses incurred.
Big unknowns remain about what the future holds, including how long the pandemic will last and what the long-term economic impact may be. Looking ahead, Kenyon said it’s possible budget cuts may be necessary.
“My message is the sooner we start to react and take steps, the better off we’re going to be in the long run, so we’re not caught short,” he said.
For more on how local school districts are planning for the long-term financial impact of the coronavirus pandemic, check out next week’s Town Crier.