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Tuesday, February 10, 2009

District Administration Opposes Self-Qualifying Option for Budget

Yesterday, the Vanguard published excerpts from the Vanguard Radio interview with DTA President Cathy Haskell and incoming President Ingrid Salim. One of the recommendations the teachers made during this interview, was support for self-qualifying.

Ingrid Salim:
"one of the ways that we would advocate that we would make the budget balanced now is what is called a self-qualification. On paper we acknowledge that that third year out we don’t make ends meet. We will deal with that over time. If we self-qualify that way and make a couple of other cuts, there are no cuts necessary right now in order to balance the budget right now. We say that we haven’t balanced it, we acknowledge that…"
"We’re looking at something like 70 percent of districts in the state of California who might be doing that. That’s just a reflection of not having a budget now, not having assumptions, and seeing that there’s no way to make it balance in three years unless you cut your staff."
As Cathy Haskell put it, the problem this year is the state's revenue stream to local districts, not our fiscal management.
"Last year we chose to show that we had a positive certification. And to be positive it means you have to show that all three years you will be in a positive cash flow.

This year the trouble isn’t how we’re organized as a school district, it’s the funding from the state. With the Governor’s projection of what the budget for the state will be, I don’t know a district in the state that won’t be in trouble the second year out. Most of them will be trouble next year. We now have some of that cushion of Q and W, but nobody has a cushion for a 16% cut."
Today in the second part of our series, we have the response from the district Chief Budget Officer, Associate Superintendent Bruce Colby, who opposes self-qualification.

Associate Superintendent Bruce Colby's response

It is the responsibility of the DJUSD Board and district administration to ensure a healthy district protecting kids, programs, and teaching. Maintaining fiscal solvency is part of maintaining a healthy district. It is the statutory responsibility of the Board to submit a multi-year projection to the County Office of Education at interim reporting periods. This report is used to assess the fiscal health of the district. If the district is unable to show fiscal solvency over the three year reporting period, the County Office of Education is required by law to put together a fiscal intervention plan to get the district back on a healthy fiscal track. A district can voluntarily go into this intervention status or it can be assessed by the County Office of Education.

This obviously becomes a challenge during tough economic times when the State funding levels are being reduced. In order to maintain our fiscal solvency, the district must develop and approve actions to reduce expenditures if needed to close our budget gap created by the State budget. Our district is responding to this challenge and our Board and Administration are developing plans to maintain a "positive" status, thus showing ability to maintain fiscal solvency without outside intervention. This is being fiscally responsible.

Unfortunately, the budget assumptions by the State are not clear and the district must review and discuss multiple scenarios based upon different levels of assumptions. The impacts of these scenarios have been discussed including the use of operating savings, "categorical flexibility", staff reductions and employee salary reductions. In the end, balancing the budget will most likely require the use of all these options.

The DTA leadership has opined on their preference, which is to maintain current staffing levels, spend down cash reserves and "self-qualify". The Board and the Administration does not believe this is in the best interest to the long term health of the district. It does nothing to solve our fiscal challenges and puts the district at greater risk in the future. DTA leadership is only looking at the problem from a high level. Fiscal solvency means adequate cash to pay the bills. Due to the drop in State funding, use of district reserves, and slowdown of State apportionments, cash levels for the district will be much lower than in the past, requiring higher levels of short term borrowing (TRANS). This borrowing will be a at risk if the district does not respond with a realistic reduction plan. The financial markets are very much aware of the State budget and the impact on school districts. The debt rating agencies will be asking very detailed questions regarding our financials. If we have no answers, we risk getting a loan. Without a loan, we are out of cash. The district can not take this risk.

The Board and Administration are in agreement with DTA in developing solutions to maintain staff in these challenging times. The district is trying to use staff attrition when possible to develop savings, reduce operating expenses and use "categorical flexibility". This however is not enough to close the gap, and the Board is asking all employees to agree to a possible 2.5% salary reduction to save staff cuts. In order to save staff cuts prior to the March 15th notice period, employee associations must agree to a salary reduction by the end of this month.

These options will be discussed an all employee meeting schedule for this week. I have attached a report from School Services of California that describes the process for fiscal status and interventions.

{Click on the top right to enlarge and read the full document}

SSC Fiscal Report Budget Reports

---David M. Greenwald reporting