Commentary: What Does Seven Million in Budget Cuts Look Like?

DJUSD knows what it is like to try to reduce a $4.5 million deficit because they attempted to do so last year. $4.5 million would have meant at least 114 teacher layoffs, possibly a closed school, definitely some ended programs like music, art, maybe da Vinci High as well--at least as they knew it. But while Davis experienced threats, they never had to go through with it. The May revise came in better than the midyear budget estimates. The Democratic legislature restored funding cuts. Davis used one-time monies from its reserves and got a $1.7 million gift and was able to escape last year largely unfazed.

I say all of that because at its core, $4.5 million in budget cuts would have been devastating. Now imagine $7 million in cuts. That is what Woodland is facing right now. That is what the Woodland School Board did on Thursday night, they voted to reduce expenses by $7 million. That is more than twice the deficit Davis is facing right now.

How does one cut $7 million? The Woodland Daily Democrat hardly gives a vivid description of this. Although apparently the public outcry got them to restore a number of programs including the elementary music program.

"Trustees also allotted $793,773 in funds to restore several programs and positions -- two high school vice principals, zero and seventh period, the Elementary Music Program, a high school librarian, an elementary school counselor and an extra teacher for Pioneer High School's Block Scheduling -- that were set to be cut."

It continues:

"While the elementary music program was restored, the board made several reductions to other programs, school budgets and at the district level.

School sites throughout the district froze open positions and cut 10 percent of discretionary funds, the enrollment center was restructured, elementary vice principal positions were cut, and teachers were reduced along with many other cuts. After much discussion, the board agreed to close both Grafton and Willow Spring Elementary schools."

That's right Woodland voted to close two elementary schools.

"Willow Spring and Grafton elementary schools were hotly debated reductions with many parents speaking in favor of leaving the schools open, to no success.

While Trustees Carol Souza Cole and Rosario Ruiz-Dark said they were not in favor of making these decisions without more information or more community input, other trustees said the schools were already set to be closed and students would get a good education no matter where they went. The board voted 5-2, with Trustees Souza Cole and Ruiz-Dark opposing the recommended cuts."

I will leave it to our friends at the Woodland Journal to work out the rest of the details. I have heard enough. This is not about picking on Woodland. Woodland is not alone. School districts all across the state are having to make veritable Sophie's choices between closing down programs and closing down schools. Many will have to do both.

Davis is quite fortunate in a lot of different ways. Some people have suggested in light of certain decisions that they regret voting for Measure W. Well let's do the math. Without Measure W just add another $2.5 million to the deficit that Davis has. That would put Davis' deficit for next year up over $5 million. Take out the generosity of the Davis residents and their $1.7 million in donations last year. We would be looking at the kind of cuts that Woodland is right now.

In other words, Davis is fortunate. A wealthy school district, in a wealthy community that is generous and supports its schools. That is a great thing.

The horrible thing is that across the state many students are not nearly so lucky. They do not live in communities that can dip into their bank accounts like Davis did last year. Heck, Davis probably could not do it so easily this year as they did last year. The economic crisis has hit home in this state. The unemployment rate is over 10%. Tax receipts are way down. The state is slashing billions from schools. That means millions slashed from local school districts, most of whom do not get parcel tax money to make up the difference.

The result of this is that the relatively wealthy and well off students in places like Davis will get by just fine. Their community will give just enough to avoid the kind of wholesale draconian cuts that Woodland is facing. We will tighten our belts. Our teachers may have to take pay cuts or face a small number of layoffs. But at the core our programs will survive and our students will thrive.

There are people on this blog who seem to take these things for granted. They seem to believe that schools have failed us. They seem to believe that there will be no consequences from cutting billions across the state from schools. I disagree with that assessment. I don't think schools have failed us. I think we've failed our schools. Not in Davis, but across the state of California.

California ranks in the middle of the country in per pupil spending, and that was data from a few years ago before the latest round of cuts. California was below the national average. And those are in absolute dollars, it does not account for the higher cost of living in California compared to many of the states below California in per pupil spending.

There was good breakdown last year in my other publication, the California Progress Report.

“The Census Bureau numbers show that California still spends $652 less per student than the national average, even though their figures on "student spending" include funds from outside the state that never make it into the classroom, which arguably inflate the figures. The Census Bureau estimates lump in payments made into the state retirement system, as well as federal funding beyond what the state spends. But even including those calculations, California's significantly below-average spending on students is abysmal. By comparison, the non-partisan national publication Education Week issued a report showing that California spends $1,900 less than the national average, because it only includes the actual funds spent by each state on each student.”

Also:

"even though we have extremely high costs, housing in particular, our teachers are still paid below the national average on a per pupil basis: $3,479 in California - compared to the national average of $3,811."

The bottom line is that we get what we pay for. If California were near the top of the barrel in terms of students scores, then maybe, just maybe we could justify our lack of spending. But it is not. It is towards the bottom.

For years we are told that the problem is just that we pay too much on administrators. Sorry folks, the district has laid the budget numbers bare. Only a tiny percentage of DJUSD's general fund budget goes to administrators. And that percentage has gone down. Davis has cut out it's Associate Superintendent of Education Position, it has cut to the bone its fiscal office. There is nowhere else to cut. The raised salaries that people are moaning about do not amount to a hill of beans in the scheme of things--and even they are probably coming off the books and then some.

Davis is not alone. Across the state, districts have done the same. This is not pork. Many of these are essential positions and their absence requires other people to do more work for no additional pay. A lot of additional work. For years, teachers have had to purchase educational supplies out of their own pockets. The same teachers who are paid below national average per pupil--which means that we are teaching to more kids than the national average. California teachers teach to about 22 kids whereas their counterparts teach to 15 kids. Think that might make a difference in the service they receive in return?

The sad thing is that all of the numbers I have just shared with you are numbers that existed before we cuts roughly $7 billion from the state's educational budget this year on top of whatever cuts were accrued last year and the lack of COLA for increased costs of living.

We indeed balanced our budget temporarily through huge real cuts (not simply slowing down the increases to programs, but actual cuts) and tax increases, but we did at a huge cost. Go to Woodland and you can see the very human cost it is going to take.

Remember that this is the childhood of those kids. This is their education. This is their future.

One final note: Somebody had the audacity of accusing me of being a Republican yesterday because I favor fiscal responsibility in the city of Davis and will not support new taxes without an assurance of accountability and responsible new contracts for upper level city employees. What these individual apparently do not get is that we do not have the money and resources anymore to be living the way we did in the 1990s or even the 2000s. We have to pick and choose what programs to support. For me, education has to be THE priority. Everything else has to come second.

The priorities in the city of Davis are out of whack. We are sitting on a $13 million deficit of unmet needs. That's road repairs and infrastructure upgrades. If we do not get our public employee compensation and pension system under control, we cannot keep up with the things that we really need to put money into.

Sorry but there is really not one pot of money for schools and one pot for the city. It is but one pot of money and we have to make tough choices.

A liberal in these times has to be fiscally responsible because there is no money to just throw around anymore.

---David M. Greenwald reporting

Focusing the Debate on Davis High School's Stadium Renovation

Back in December, the DJUSD school board made the decision to prioritize the modernization of the football stadium over that of Emerson Junior High. This has generated a lot of criticism for the school district from a number of different quarters. In general this criticism has been ill-founded and based on misconceptions of funding and other factors.

The purpose of this article is to clarify some of the issues. While there seems to be a good deal of criticism to go around, it should be criticism that is fact-based rather than based on misinformation.

I largely decided to do this article because the school board and district's perspective is, we had a full public discussion about this at least twice in open meetings. People can view the tapes of those meetings if they are confused.

That is of course not how it works. The district needs to do a better job of communicating with the public. People do not watch the meetings and they will not watch the tapes of the meeting. At least most people will not. They may not even read the newspaper on the issue. But that will not stop them from forming opinions and even expressing those opinions.

Likely then that means the issue of communication falls to entities such as the Vanguard which can breakdown complex issues and discuss them at length rather than being confined to 500 words, 800 words, even 1200 words.

For that reason I have decided to go ahead with this explanation, even though I'm not sure what decision I would have made had I been a board member in December or February. Criticisms as I said should be fact-based and then people can make up their own minds.

A letter appears February 20, 2009 in the Davis Enterprise from 24 teachers at Cesar Chavez Elementary School.

They wrote:

"Fourth, we oppose the plan to build a $10 million high school stadium while there are schools such as Emerson Junior High which, last year, was under consideration for closure due to dilapidated facilities. Additionally, the long-term effects of the stadium financing on the general fund are not clearly delineated, and a clear payment plan has not been developed."

For this we need to back up several steps. Last spring, the district was facing a $4.5 million deficit. To that into perspective, what we face now which is roughly $3.1 million is a two year deficit. The scale of that deficit dwarfed this one in a lot of ways. So one thing the district was looking at was they knew off the bat they could save over $600,000 by closing a school.

The next part of this was the condition of Emerson Junior High. The district knew that it needed upgrades and repairs. However, what they did not know at that time was whether those needed upgrades and repairs were safety violations. This all happened so quickly that the district was in danger of making decisions based on less than complete information. This is very important to understand, to a good degree, the condition of the facilities in Spring of 2008 was unknown and all discussions were speculation.

Based on this and the problems of logistics that arose, the district made the decision not to close Emerson Junior High at that time and evaluate the facilities at a later point.

In June 2008, the district completed its evaluation. The evaluations indicate that the district will need to spend between $10 and $15 million on upgrades to Emerson. However, what they were told was that this was not an imminent safety problem. Much of the needed upgrades and repairs were to get it up to date with current code requirements. According to the consultants at the December meeting, that can happen at any time. Basically those requirements only kick in if the school were to do a major construction project.

School board Tim Taylor made it a point to talk about this back in December. He acknowledged rumors of deteriorating conditions in the buildings at Emerson but again added that there rumors were not borne out by the actual surveys by architects.

So when the teachers say there were school such as Emerson that were under consideration for closure due to dilapidated facilities, that is both misleading and really out of date information. The correct statement would have been that the district was looking to cut costs last spring and the conditions of the buildings while not known at the time, were cited as a possible reason for closure of the school.

I have said before and I will say again, I do not believe that any board members or any administrator wants to close Emerson. That is based on personal discussions with just about all of them. Moreover, looking at the three year finances, I do not see a reason that the district would need to close Emerson. They may play with the configurations, but I believe with strong certainty that Emerson is in no danger at this point of closing.

I spent more space than anticipated addressing the Emerson rumor, but that was important to put to bed. At a future point, there will be an article that fully explains the financing of the football stadium at Davis High School.

At this point, here is what we know. The district believes it can get redevelopment money for a portion of this project. That redevelopment money can only be used for school facilities, not for teacher salaries or other instructional expenses.

Second, the district is planning on borrowing about $4 million against future revenues from the school district's community facilities districts. Again those funds can be used for school facilities only, not for teacher salaries.

See a pattern here. I am uncertain what the teachers meant when they stated: "the long-term effects of the stadium financing on the general fund are not clearly delineated." To my knowledge there will be no impact on the general fund since these monies do not and CANNOT come from general fund monies.

There has been considerable public outcry to this point about the project. In part the money issue is driving this. Part of that stems from the perception that the district is starving for money on one hand but taking up a $10 million project on the other. Again, that perception is wrong and misplaced because of the differential in types of funding.

The other issue with funding is that the district chose DHS over Emerson. They did this in December. There is no getting around the fact that they consciously prioritized DHS Stadium over Emerson. As I have already explained that does not mean they are closing Emerson. They simply believe that DHS Stadium is more pressing.

Again, I turn to a letter to the editor, this one from New Year's eve:

"Unquestionably, the appalling condition of the Blue Devils' stadium calls for its replacement. But in these desperate economic times is a costly restoration the best option? Especially when it likely means stalling desperately needed restoration at Emerson."

One of the questions is of course whether the restoration at Emerson is really desperately needed.

However, what is clear is that this is not merely an issue of the football program at the high school. This is not merely a matter of putting academics ahead of athletics or the appearance of vice-versa.

What this comes down to is a health and safety issue. The district was told by consultants and by students that there are safety issues not just with the football field, but with the track and with the stands. The district believes they face liability if this issue is not corrected and that liability would come out of the general fund whereas the repair comes from facilities money.

Again, that is the issue and the basis on which they made their decision. Are there alternatives to renovating the field? That is subject to debate and discussion. The district seemed to consider alternatives such as using Toomey Field, that seemed to be cost-prohibitive as well. Moreover it was impractical for everyday usage. Remember it is not merely the athletics programs that use the facilities but there is everyday usage.

Regardless, I think the question about alternatives is a fair discussion point. I also think the question about prioritization is a fair discussion point as long as understand the facts at this time suggest that Emerson is not going to be shutdown due to health and safety issues and the district's consultants believe that DHS Stadium faces more imminent and significant health and safety concerns than Emerson.

So to quickly summarize here: Emerson is not closing due to health and safety concerns. DHS Stadium will not use monies that could go to the classroom. The district believes the situation is more critical at DHS Staidum where Emerson mainly faces code upgrades that are not needed until construction occurs in the future.

---David M. Greenwald reporting

District Teachers Face Agonizing Choices

Under ordinary conditions, it seems unlikely that one would find a person more supportive of teachers than myself. I come from a family of teachers, I have myself been a teacher at times, and I believe in general teachers are unpaid for the importance of the job that they perform. Most people who suggest that teachers have an easy job and work only nine months, have either never taught themselves or never put a full effort into teaching. I am constantly amazed that teachers have the stamina to teach for eight hours and then go home to grade papers (no easy task) and prepare lesson plans.

I say this because after reading the full comments from the teachers from Casar Chavez Elementary School who also spoke up during public comment on Thursday evening at the school board meeting, I'm not sure I could really disagree with them more.

They write:

"First, we do not accept being placed in a position of choosing between salary reductions or seeing colleagues lose their jobs. It is the responsibility of the budget officer, the superintendent and the board to make informed, honest, transparent and responsible decisions.

At the all-district staff meeting held by Superintendent James Hammond on Feb. 11, we were given an ultimatum: Either we agree to a 4 percent permanent salary reduction, before a state budget is even approved, or there will be layoffs this year. We believe there are many more options than just salary reductions or layoffs, and it is incumbent upon the board to ensure that all options are thoroughly investigated."

I am unsure of where these individuals have been for the past few months, but if they read the newspaper at all during that time they might realize that across the state government employees (of which they are one) are having to make this painful decision across the board.

Yolo county employees have taken voluntary furloughs as the county faces a $22 million deficit for next year, in hopes that their colleagues will not be laid off. State employees represented by SEIU have reached agreement with the Governor to take what amounts to a 5% paycut, which is an improvement over the 10% paycut imposed by the Governor. These furloughs and paycuts are happening across a state that has recently had to cut $15 billion in spending due to the worst economic recession in 70 years.

The same thing is happening in the private sector--employees are being laid off in scores. There has been at least 500,000 and sometimes approaching 600,000 job losses per month. So the fact that the district is giving them a choice as to a paycut or pink slips, is hardly unique or surprising.

The teachers have a choice to make because right now the district is running deficits for the foreseeable future in the $3 million range.

The school board takes no joy in this. In fact, I have spoken recently to just about every member of the board and the reactions I have gotten borders on heartbreak for having to make these decisions. They did not run for school board to lay off teachers. But that is the choice that they now face.

I don't see many options other than salary reductions or layoffs and I have been over the budget as much as anyone this side of Bruce Colby. But I suspect if you have a counter-proposal the district would be glad to hear it.

"Second, the top four district administrators made an offer to reduce their salaries. This offer is contingent on the Davis Teachers Association's agreement to teacher salary reductions. It is wrong to pressure the teachers with a misleading public gesture. These administrators have recently negotiated with the board a raise for the 2009-10 school year as well as ongoing yearly increases. These increases add up to as much as 15 percent since October 2006."

I agree with the teachers that it was a mistake for there to have been any kind of raise for administrators. I think one of the worst decisions made was the decision to give Bruce Colby a 5% raise in December. It set a bad precedence and it looks bad to the public. Unlike last year, I think we had a pretty good idea as to what coming down the pike.

"Third, when asked about the magnitude of the administrators' raises, Superintendent Hammond expressed that removing these raises 'would not solve the budget problem.' The teacher whose position is erased by these raises certainly will have a budget problem to solve. "

On the other hand, they have offset these raises by cutting back on their own support staff, not through layoffs but through attrition. In essence, each of these individuals are having to go without support staff or performing the work of multiple individuals. Again I understand the point the teachers make, I agree with them to some degree, but they are focusing on literally pennies on the dollar here. There could have been no raises, and we would still be focusing on this plan which would require either layoffs or salary cuts. This is largely a distraction from the main issue.

"Fourth, we oppose the plan to build a $10 million high school stadium while there are schools such as Emerson Junior High which, last year, was under consideration for closure due to dilapidated facilities. Additionally, the long-term effects of the stadium financing on the general fund are not clearly delineated, and a clear payment plan has not been developed."

My understanding is that there are no impact of stadium financing on the general fund. That money comes strictly from facilities money. There was redevelopment money used to finance a portion of this. There was a strong safety issue and liability issue that exists with the stadium in its current conditions. My understanding of the issues with Emerson is that much of the repair and upgrades have to do with being out of date with various codes and can be addressed at a later point. No one believes that there are either safety or liability issues with Emerson.

While I would tend to agree in part that the district has done an exceedingly poor job of explaining this to the public. That it looks bad to be crying poor at the same time you undergo a $10 million renovation of a football field. Nevertheless, much of that public outcry is based on poor understanding of how school financing works and the fact that facilities money and general fund money that would go to instruction are completely separate, money available for facilities upgrades is not available for use in the classroom.

"We believe that salary reductions should be negotiated fairly and honestly, and only after the state budget is approved and allocations to the Davis school district are clear. Additionally, the offer of the top four district administrators should not be contingent on teachers' agreement to salary reductions."

To me this represents a lack of understanding of the collective bargaining process. The district cannot unilaterally impose changes to a contract. The changes to the contract such as reduction of salary must be approved by the Davis Teachers' Association. Therefore to a large degree the ball is in their court on this one.

As DTA President Ingrid Salim said on Thursday, it was her perspective and possibly that of the DTA membership that they would take their chance with 20 layoff notices (by her count, although the district is approving 36.6 FTE position cuts) than taking a salary cut. That is within their right to determine.

The second part of that is that they are demanding the administrators take a cut regardless. That cut is largely symbolic anyway. We are talking about maybe $30,000 or $40,000 in savings against a deficit of over $3 million over the next two years.

I am all for them taking it, but let us not make this out to be bigger than it is.

Unfortunately the district and board are taking a fiscally responsible step of identifying all of the necessary cuts up front and proposing a balanced budget for the three year period.

The really bad news is that this may not be rock bottom. There is increasing belief that the May revised budget from the state will have another deficit in the 11-figure range that will result in more cuts to education funding.

In short, while I sympathize with the position of teachers and all district employees as well as all state employees, I think that there is going to be little choice but to make the tough decision between salary cuts and pay cuts. I also think that the teachers are setting themselves up for deep layoffs in May, deeper than projected right now by not taking a further look at pay cuts.

By all means identify alternative budget cuts. All entities should do that. But if you look at the district budget, you quickly see where the majority of money goes, and it is to teachers.

It is my hope that the teachers work together with the district and board to make this as painless and cooperative a process as possible given the horrible circumstances that we face in this district, in this county, and in this state at this time.

---David M. Greenwald reporting

Dunning Misunderstands the Need for Local Agencies to Maintain Reserves

The Vanguard has all but stopped responding to Bob Dunning columns from the Enterprise, but his column from Friday is so outrageous, irresponsible, and most importantly just plain ignorant it would be irresponsible not to respond.

The title of the column is "It's Time We Let Go of Our Reservations."

He writes:

"SURPLUS SPENDING - as the economy - locally, nationally, globally (take your pick) - continues to fall off the cliff, it was encouraging to me to intercept an e-mail from Councilman Steve Souza to a local resident bragging about how fat and sassy we are in the City of All Things Right and Relevant - noted Souza: 'Almost all of the cities around us would love to have our financial woes instead of their own. We have a 15.2 percent or $5.35 million reserve.' - wow, 5 million here and 5 million there and pretty soon you have a billion -

But, as nice as a reserve is - and I don't care if we're talking about the city of Davis or the local school district - when you start talking about laying people off instead of dipping into the reserve, your priorities are backward - if we're saving our reserve for a rainy day, I'd like to point out that today is that rainy day - it has arrived - anything we can do to preserve the jobs of city and district employees should be priority one - laying anyone off for fiscal reasons when we have a healthy reserve is contrary to what this town should stand for..."

The first question that comes to mind is whether Mr. Dunning ever does research on his columns, would he like talk to the finance directors from either the school district or the city and ask them about their reserves? Would he talk to Souza himself to ask him about his email?

Here's the best explanation of the city's reserve:

"The City maintains a “reserve” much like an individual or household would keep a savings account accessible for an emergency. The City Council has adopted a policy to have a General Fund reserve equal to 15% of the City’s General Fund revenues. This is a contingency reserve for general operations to help mitigate the effects of unanticipated situations such as recession, man-made or natural disasters, variances in financial forecasting, or costs imposed by other governmental agencies. The City does not use the reserve to fund ongoing services..."

Basically the way you maintain a reserve is you pretend like the money does not exist unless such an emergency situation arises. One reason for that is that city's in general cannot take on debt like the federal government can. So if an actual emergency came up, and the city spend its reserve on say employee salaries, then the city would be in deep trouble.

The city developed this reserve policy back in 2006. According to policy, the reserve acts as a "risk management" tool, it provides a buffer against revenue fluctuations inherent in economic cycles, and most importantly the policy prohibits the use of reserve funds for ongoing operating expenditures.

The key to remember is that the reserve is one-time money. Once you use it, the money is gone.

Dunning's column mentions the school district as well. School districts are required by Ed Code to maintain a fund balance reserve every year. That money cannot be touched at all without severe consequences. The district generally maintains its own reserve above and beyond that much the same way as the City does as a risk management tool and a protection against fluctuations and emergency situations.

In the late 1980s, an increasing number of school districts were facing fiscal insolvency. Laws were enacted that created budget standards and increased fiscal oversight for all local education agencies. One of these standards was that local school districts set aside a certain percentage of their budget as a reserve for economic uncertainties. This reserve provides a cushion against unanticipated fiscal needs that may arise and thus reduces the risk of fiscal insolvency and the associated need to borrow and increase district debt.

Failing to meet the reserve requirement does not have a mandated consequence, however, as we know from other discussions, the County Office of Education oversees the finances of all local school districts. If DJUSD were to eat into its required reserve it would increase the likelihood the county superintendent of education intervening into local school district affairs.

DJUSD carried the state-required 3 percent financial reserve, which is just over $2.1 million. However, they cannot touch that reserve. The district also carries its own one percent contingency reserve which comes to about $650,000.

Interestingly enough, the district discussed this very issue on Thursday and the Davis Enterprise covered it in this morning's paper.

Given the fiscal situation in the state, districts are being given greater flexibility with some of these reserves.

But a key point with these reserves is that they are one-time monies. They will get depleted rather quickly given the nature of the economic crisis. As Bruce Colby put it, last year was a crisis, this year is a crisis, 2010-11 will be a crisis, 2011-12 could be a crisis.

Moreover, in general one has to balance the three-year budget using ongoing revenues, not one-time monies.

As Tim Taylor put it:

"From my perspective, you would spend it in a situation where you have an emergency need, something that would not commit you to ongoing year-after-year obligations."

Bottom line here is that using reserves is not going to solve our fiscal problems, and it could make them worse as time goes on. Bob Dunning needs a better understanding of the fiscal policies, rules, regulations, and economic crisis before he makes such irresponsible statements.

Getting back to his column, there is another key point that needs to be addressed.

Here he quotes Councilmember Stephen Souza:

"Almost all of the cities around us would love to have our financial woes instead of their own. We have a 15.2 percent or $5.35 million reserve."

Davis is in better condition that a lot of other cities but it has very little to do with the reserve. I would and have argued that our fiscal policies are just as bad as many other cities--if not worse. And we are going to have to deal with that. Having that reserve just means we can weather an immediate crisis better than other cities. We still have an ongoing structural deficit. We still have an ongoing problem of unmet needs. We still need to fix our unfunded mandates. We still have to fix the pension system. We still have to reign in employee salaries at the top end of the scale.

However, the bottom line is the city of Davis has been hit less hard than other cities with the foreclosure crisis. It has been hit less hard than other cities because its property values have not plummeted as others have. We rely less on sales tax revenues than other cities as well, so while the declining economy is producing a tax revenue fall off, it is not to the point where cities like Roseville who are facing eight figure budget deficits.

The bottom line is that while we have a deficit for the next few years of at least 3 million and as much as five million (and notice if we used the reserves to fix that, they'd be gone after next year), we can probably survive short term by adjusting our spending and tightening our belts.

That is not to suggest that we do not have bigger issues. It is just to suggest at this point the economic crisis is not devastating us like it is many other cities or even Yolo County.

So yes, Councilmember Souza has good reason to express optimism, but it is not because of our reserves. Our reserves would be depleted very quickly in this crisis, if that was their intent.

Dunning has a large amount of influence in this community and his column is undoubtedly the most widely read feature in the Davis Enterprise. With that influence requires a degree of responsibility to research and understand the issues on which he has opined. In this regard, he has failed in his duties by suggesting the city or the school district are being irresponsible by maintaining fund reserves. In both cases, maintaining reserves is either required by law, required by city policy, and necessary and prudent for these entities to whether the uncertainty of such a downturn. It would be the height of irresponsibility for them to use these reserves in an effort to avoid making tough decisions in the coming year.

---David M. Greenwald reporting

DJUSD Looks at State Budget Impact

DTA Stakes Out Position Against Salary Cuts

For the first time, DJUSD last night began working with real budget numbers rather than rough approximations. The bottom line is that California education took a pretty hard hit and unfortunately, they did not get the kind of full categorical flexibility that they were hoping for. In the coming days and weeks, we will examine some of these numbers more thoroughly.

Right now, we will just offer a brief summary of the district's budget picture and focus on some interesting responses from DTA and the community regarding the issue of the Davis High School Football Field and Track Renovation as well DTA's believed preference to take the 20 RFK's rather than a salary reduction.

But first a brief look at the budget climate at least right now. The state decided not to cut the number of school days. So the 180 day school remains in effect. The school district could have saved $250,000 for each day that was cut from the schedule, but that did not make it to the final budget.

Nor for all effective purposes was flexibility in the text books categorical funding. That would have been a way to save over $800,000 by forgoing updated English and Math text books. But again, that is not to be.

Finally, the speculation is that the state is going to soak up all of the federal stimulus money in order to balance their own budget. There was at one point speculation that DJUSD could get one to two million from that pot, but that is believed to be off the table as well.

There is some categorical flexibility, but that flexibility is off-set by nearly one million in categorical fund reductions. Moreover, there are decreased penalties for going over the 20:1 ratio for class size, but it is not a full flexibility either.

In short, the district is going to have to find a way to reduce its deficit and the most likely to occur either through salary cuts to employees or through pink slips.

STADIUM ISSUE

What is becoming interesting at this point is where the teachers and DTA stand in terms of what the district ought to be doing. Several came up and spoke during public comment expressing displeasure at the district's decision to fund the construction of the new DHS football stadium.

This has become a source of great criticism within the community. Indeed in the Davis Enterprise yesterday appeared two letters criticizing the building of the new stadium.

The most pointed read:

"'Teachers asked to take 2.5% pay cut' along with a higher headline citing the school board's decision to proceed with a $4 million plan to upgrade the football stadium. What a travesty!

Obviously, a stadium is more important than classrooms and teachers and student learning."

Coupled with the criticism during public comment, Superintendent James Hammond responded in perhaps his most heated manner yet attempting to explain once again the funding issue.

What the district needs to understand on this point is that they are not only losing this public relations battle, they are getting killed by it. In terms of the facts, the district is right, the funding sources are different, funds that are available for construction cannot be used for instruction.

Guess what? The public is not going to understand that. They see multimillion dollar upgrades to a football stadium and at the same time the district is contemplating about cutting teacher positions or asking them to take salary cuts, and the public is going to be suspicious of the school district.

The district now puts itself into a bad position. They either have to try to explain this to the public, which will be difficult and perhaps not fruitful. Or they can allow these beliefs to fester. There is no election at this point in time, but people do not forget these kinds of things.

From the teachers standpoint, DTA President Ingrim Salim laid it on the line last night.

"I want to address the stadium question because it is out there. I think what you should all be aware of is that certainly there is different pots of money and many of us can grasp that, but not all of us does. That’s just confusing. It’s going to be really hard to mitigate the effects of the confusion.

The second piece from the DTA standpoint is that while probably from the community standpoint they supported the stadium, certainly within the teaching community, they really wanted to see Emerson renovated. There’s not a way to fix that perception either."

The teacher issue thus is somewhat different. They understand the funding differences, at least in theory, but they believe that the priority should have been Emerson rather than the high school.

The district has a difficult position here because they are correct on two essential points. As mentioned before the funding. And the second problem is that the current situation is untenable. You have a serious safety risk, and that is a liability to the district.

However, the timing of this could not have been worse.

DTA WOULD RATHER TAKE PINK SLIPS THAN A SALARY CUT

Ingrid Salim's follow up comments were just as interesting. As she laid out for the district the likely but not official DTA position on salary cuts. Basically they would rather take the 20 position cuts rather than a reduction of salary.

Here is her lengthy statement from last night:

"Last year we did have reserves and yet we RFK’d 114 people. So people are just suspicious even though I can look at the budget numbers and see what happened as a result of last year and now we’re not being quite so conservative. But last year there was money in reserves that weren’t applied immediate to personnel. So we RFK’d people, we didn’t end up laying off, and we backfilled. We filled back in with DSF money… But we didn’t use those reserves right away. So that might give some understand about why people keep questioning about are there reserves and are suspicious that there might be. I personally don’t question that, I think we’re using them differently than we did before. That’s just the background of where that suspicion comes from.

The last piece of that is that it’s just real hard to correct misinformation that gets out. Whenever people are defensive and afraid for jobs and for money or whatever they certainly spin things. We can do our best job to try to correct misinformation but it’s just a battle. So just to know that. We can civilly disagree but the battle of misinformation will still be there. And perceptions are very hard to fight.

The other dicey piece is that you asked both unions to consider salary cuts and where w are is a combination of all of these perceptions. The reality is that we would have to have all of our membership voting or over half of them… Our union will be doing a survey to see where people are in terms of what they want to do.

But the undercurrent that we’re getting if we’re really talking about 20 jobs, and last year it was 114 and we weren’t talking about a salary cut, that probably the majority of the people say that’s okay. It’s okay to cut 20 jobs. Basically that’s programs that probably need to be tightened anyway if we’re going to have sustainable education with a smaller budget. The bulk of people that we’re hearing and getting information from, and like I said we don’t have a formal hearing to say that for sure, but that’s sort of the sense we’re getting…

We’re certainly going to ask, we’re certainly going to push forward with this concept, and there are people who say no, let’s take a cut for everyone. But that’s kind of what’s out there right now.

The final part is that there are places where we’d say it would be okay to increase class size, for instance at the 9/ 10. I’m not speaking for DTA, I’m just saying things that we might say. The 9/10 English and Math to [a class size of] 24 instead of 22. That’s not a huge impact on class size reduction. That would be preferable to something like considering a salary cut.

We do worry about the logistics of putting into place something like a salary cut or anything like that, because of the exit strategy—when do you change it? What happens to retirees? And all those little tiny things that just seem huge and overwhelming.

We will start that process next Tuesday [petitioning our members]. We’re pretty comfortable about where things are right now in terms of going forward. We’re going to be going over the budget pretty closely ourselves, finetooth combing, trying to find other ways to meet this deficit."

From my standpoint, the position laid out by Ms. Salim makes a good deal of sense from the teacher's standpoint. Salary cuts are problematic for a number of reasons including the difficulty of making ends meet during tough economic times.

Furthermore two other essential points were raise. First, the sheer number, if it is indeed 20, one would think the likelihood of anyone losing their job was pretty small. For one thing you have attrition through retirements and through people moving.

Second, she makes the point, a point that was made on this blog at times, that if we want to have a sustainable education on a smaller budget, and a smaller budget is the reality right now, then tightening up the programs is probably a way to do it.

The part that somewhat surprised me is that the teachers support a slight increase of class size at the 9/ 10 level, a level given full flexibility by the state, from 22 to 24. She argued that was not a huge impact on class size reduction but was preferable to taking a salary cut.

The bottom line here is that a salary cut would have to be negotiated with the DTA through the collective bargaining process. This was a strong and public signal that DTA is not there right now.

The school district has an ongoing perception problem in dealing with the DHS stadium repair. They had better get on top of that issue or it could backfire on them in the future.

---David M. Greenwald reporting

Prospective Budget Includes Deep Cuts to Education

No CSR Flexibility*, Categorical Flexibility

At the outset, I should qualify this analysis as saying that it could change in a final budget bill or could get thrown out the window if there is no budget deal.

For this year, the budget has a $2.4 billion reduction for what was budgeted in the 2008-09 Budget Act. It has a $5 billion reduction in Prop 98 Funding from 2008-09 to 2009-10.

Cuts to Categorical Programs and Categorical Flexibility

The Governor proposes $1.9 billion in K-12 program reductions split evenly between revenue limits ($945 million) and categorical programs ($945 million) in the current year. These reductions continue in the budget year, growing to $2.4 billion, an increase of approximately $535 million. More than 50 categorical programs will be subject to across-the-board reductions that will be allocated proportionally and are estimated at roughly 15 percent. Deficit factors are established for revenue limit reductions in both years.

The budget provides comprehensive categorical funding flexibility over the next five years to mitigate program reductions. Specifically, the budget allows local educational agencies to transfer unlimited funds from more than 40 categorical programs to their general purpose accounts commencing in the current year. Another 11 programs are subject to reductions, but are not subject to categorical flexibility programs. [Eight major Proposition 98 programs are excluded from any categorical reductions or flexibility, including Child Development, Child Nutrition, Economic Impact Aid, Special Education, Home-to-School Transportation, After School Education & Safety, K-3 Class Size Reduction, and Quality Education Investment Act.]

This is the big one because it allows the district to have flexibility with left over categorical funds. However, it does not include flexibility with regards to Class Size Reduction (CSR).

*That said it does reduce the penalty for exceeding the maximum class sizes allowable under the k-3 CSR program for a four year period.

There will be no COLAs, which will save the state an approximate $2.5 assuming a COLA of 5.02%.

The bill allows prior-year categorical fund balance to be used in the general plan for the current year and the budget year. However it excludes access to fund balances from seven programs [Economic Impact Aid, Special Education, Targeted Instructional Improvement Block Grant, Instructional Materials, Home-to-School Transportation, CAHSEE Supplemental Services, and Quality Education Intervention and Achievement.]

The bill suspends the statutory requirement to purchase newly adopted textbooks and other instructional material.

It reduces Routine Maintenance Reserve requirement from three percent to one percent for five years.

It suspends reserve and reporting requirements for deferred maintenance for five years.

What Do This Mean For DJUSD?

One of the key questions here is what it mean not to have the CSR Flexibility but a reduction of the penalty for exceeding maximum class sizes for a four year period. I suppose this is a compromise to keep the provision on the books but to give districts a greater degree of flexibility. It will be interesting to see if this sticks in the budget and how DJUSD interprets it.

That point aside, I think this puts us back to the earlier budget assumptions.

Does this put us back to the budget assumptions from January 28, 2009?

That would add $1.1 million or so for the Categorical Allocation Transfer in 2009-10 and $400,000 in reduced restricted maintenance transfer.

The question then is what the district will do. Recall that without CSR, that is one million that the district does not have for 2009-10 and two million for 2010-11.

That gives the district probably four options for balancing the budget through 2010-11. Option one is to use the categorical flexibility and keep CSR as it is, and keep salaries where they are. According to the budget model from January, that would force the district to eat up the remainder of its fund balance.

Option two is to bring the CSR adjustment to 22:1 or 23:1 as some of the board members favor. That would free up $1 million at 22:1 or $1.5 million at 23:1. How many teaching positions would that mean would be lost? Does that require pink slips or can simply attrition achieve the changes? Part of this will depend on what the penalties are for being out of compliance? The other part will depend on the interpretation of Measure Q's bringing down the ratio to 20:1 when the state's requirement is 22:1.

Option three would be to keep CSR as it is and reduce teacher and classified employee salaries by 2.5%. The advantage of this would be that there would be guaranteed zero layoffs. The disadvantage of this is that with categorical flexibility, there is likely no way that DTA would submit to pay cuts.

Option four would be a combination of reduction in CSR with some pay cuts.

It is clear that DTA will push very hard for Option One. It will be interesting to see if these indeed are the options at this point and what the district recommends.

All of this assumes the budget eventually passes with these provisions. That is in doubt at the moment. If the budget remains unresolved, then all bets are off and the future looks far more bleak than it currently does.

---David M. Greenwald reporting

This is the Worst Possible Budget Deal But It Needs to Pass

Given the fact that this is the bicycle capital of the world, I risk a lot by saying this, but the priorities of people are a bit off in this country. Originally the state legislature was going to meet at 9 am this morning to vote on the budget agreement.

However there is one problem. Tomorrow in Davis there will be the Amgen Bike Tour. In Sacramento that will be today from 1 pm to 4 pm. There will be 100,000 people in downtown Sacramento today. Not of course to watch the budget vote, but to watch Lance Armstrong.

As a result, the State Legislature will be pushing off their vote on the budget to 5 pm on Valentine's Day Evening. If you're keeping score at home bike racing > Budget > Love and Marriage.

Now that we're clear on our priorities, let us lay out the stakes as if you do not know it. The most immediate stake is that there will be 20,000 state workers laid off their jobs if the budget does not pass. I am certain that some people reading this thinks this is a good thing, I would strongly suggest they put themselves in the shoes of those who make a modest income to begin with and will suddenly not know where their next paycheck is coming from.

That is just the immediate impact. The state is literally out of money. So right now, as we learned from Yolo County's Assistant Administrator Pat Leary on Wednesday, the County is not receiving its normally $5 million in monthly payments from the state in order to carry out its state mandated functions. Those are all of the social service functions the county provides. The county is still performing them, but they are taking the money from an emergency joint fund that is shared money from the cities and other jurisdictions in this county. They have to pay the money back with interest. They will get the money back probably but again, they will lose the interest. This is on top of the $22.5 million deficit the county is facing next fiscal year.

At some point, the state will not only be issuing IOUs to state employees, but to jurisdictions themselves. That means that at some point schools, counties, and municipal governments will have to operate without any state money. That will be an interesting challenge.

The bottom line, and I have spoken to a lot of people about this. There will come a point when the state starts defaulting on its obligations and those entities will basically have to shut down. If that happens, the entire state could come crashing down and then the state's economy will go from on the brink of disaster as it stands now to over the cliff. This is not an exaggeration.

Let's be honest up front--nobody is going to like this deal. No one. It's a bad deal. It's a horrible deal. And it is one that we have to sign because if we do not, things get so much worse. I cannot tell you how many different people have said this same thing in their own words.

On Wednesday, Senate Republican Leader Dave Cogdill called this deal the best they were going to get.

"My deal, one more time, has always been that I would try my best to get it to a position where I felt it was as good as I could get and I was willing to release my members. That's where I am. So I'm not guaranteeing any votes; it's up to them (his members) to make that decision… But I've negotiated it to the point where I think it doesn't get any better…"

He did say he was turning them loose to allow them to vote if that’s their decision.

In fact, the Senate leader himself would not commit to supporting the package saying:

"We're waiting to see all the language and all of that so I'm not ready to commit who the votes will be at this point."

The question is whether or not they have the votes and one-by-one Republicans announced that they were not voting for it. Until there were just three Republicans who had not announced that they were not voting for it, but they also hadn't announced that they were not voting for it.

This is what Shane Goldmacher from the Sacramento Bee said:

"The field of potential Republican votes for the budget compromise in the Senate -- widely viewed as the most challenging caucus to corral support -- has narrowed so significantly that only three members have yet to throw cold water on the tentative deal.

That happens to be the bare minimum of Republican votes needed to pass the $40 billion-plus budget plan.

Those three are Senate Republican leader Dave Cogdill, Sen. Dave Cox of Fair Oaks and Sen. Roy Ashburn of Bakersfield."

Here's the Senate Republican Caucus' Morning release:

"What They Are Saying About the Bipartisan Budget Solution...

"...what lawmakers and voters must understand is that the choice is not between this budget and some theoretical better deal; it is between this budget and fiscal meltdown."

-- Los Angeles Times editorial, February 13, 2009

"... there is one overpowering, compelling reason that legislators should approve it: It is the best possible deal that we can imagine out of a dismal reality - economic and political - that has left California government at the brink of insolvency."

-- San Francisco Chronicle editorial, February 13, 2009

"...the tentative budget deal being worked out by the governor and legislative leaders is probably the best we can get. Perhaps the only positive thing about the proposed deal is that its spreads the pain fairly evenly."

-- Fresno Bee editorial, February, 13, 2009

"Given the scope of the state deficit, any budget compromise will contain ugly and unpopular components. But further delays are an even worse option."

-- Modesto Bee editorial, February 13, 2009)

"When Republicans unveiled their budget draft back in December, they put forward their wish list of government changes they wanted as part of any budget agreement. And though details are still coming into focus on the tentative budget deal, it looks as if Republicans made progress in nearly all of the areas they wanted changed."

-- Capitol Weekly article, "Republicans win concessions in budget plan," February 12, 2009)

"While this budget contains a painful mix of cuts and tax increases that nobody loves, the cost of inaction is much, much greater. Every day we wait to pass a budget means further economic devastation, the loss of thousands more jobs, and the shuttering of small businesses up and down the state."

-- Jim Earp, Executive Director of the California Alliance for Jobs, press release, February 12, 2009

"If we don't pass this budget now the pain will only get worse and the budget hole will only get deeper. It took courage for the Governor and our legislative leaders to make these hard decisions but they stepped up to the plate and addressed their responsibilities."

-- Danny Curtin, Director of the California Conference of Carpenters, press release, February 12, 2009"

So do we have the votes? Find out tonight.

What's in the bill?

A mix of spending cuts, tax increases, and borrowing. $15.8 billion in spending cuts, $14.3 billion in tax increases, and borrowing of $10.9 billion some of which will require voter approval.

How bad are the cuts? $5.646 billion from education this year. Another $2.955 billion next year. Higher education will get a 10% cut across the board. In other words, it's really bad. We do not know to what extent this includes budget flexibility. It looks like Class Size Reduction remains however.

The Los Angeles Times declared business the big winner in the budget plan. While we are having to pay more taxes, there is $1 billion in corporate tax breaks.

"About $1 billion in corporate tax breaks -- directed mostly at multi-state and multinational companies -- is tucked into the proposal. Opponents say the breaks will do nothing to create jobs, and the Legislature has rejected such moves repeatedly in the past. But now, to secure enough Republican votes to pass a budget that would raise taxes on everyone else, the Legislature is poised to write them into law with no public hearings at a time when the state treasury is almost out of cash."

Some of this was contingent upon the federal stimulus giving at least some money to California. Some of that borrowing is coming from stimulus money. We will have to see how that plays out.

The bottom line, this is again an awful budget. Horrible things will happen as the result of it. But if it does not pass, it is going to affect everyone's life in profound ways that you cannot imagine.

---David M. Greenwald reporting

Frequently Asked Questions (FAQ) About the DJUSD Budget Situation

The school district in order to answer questions from district personnel about the budget and budget process has put together a Frequency Asked Question (FAQ) sheet. They put one together prior to Wednesday's meeting and now will put one together based on the questions received at Wednesday's meeting.

Here's the original FAQ that was emailed to all district personnel.

1. What is required of the district in terms of a budget process?

The district is required to submit a multi-year budget that shows fiscal projections over a three year period. The Second Interim Budget due by March 15th must include projections in the current 2008-09 year and the next two years 2009-10 and 2010-11. By June 30th the district must submit an “Adopted Budget” for 2009-10 that includes a multi-year projection for 2009-10, 2010-11 and 2011-12. These budgets must show fiscal solvency over these time periods.

2. What does a "qualified" budget mean?

A “qualified” budget means that the district cannot provide a fiscally solvent budget plan in the second or third year of the budget. The district is required to develop a fiscal plan of action to address the budget shortfalls. Depending upon the size of the shortfall and the district’s ability to address the issue, the County Office of Education can require outside interventions to move the district toward fiscal solvency. This means persons outside the district can become involved or even direct budget decisions and timelines.

3. What would a "negative qualification" mean to the district?

A “negative” budget means that the district cannot show a fiscally solvent budget plan in the current year of the budget or is at risk of running out of cash due to the budget shortfalls. This “negative” status occurs at any time including the current year if/when reserves no longer meet contractual commitments. The district is required to develop a fiscal plan of action to address the budget shortfalls. The County Office of Education would require outside interventions immediately to move the district toward fiscal solvency.

4. Why are cuts to school districts budgets so difficult compared to private sector?

1. Districts’ have little or no control over funding levels. For example, right now we are being required to meet statutory deadlines even thought the legislature has not me theirs.

2. A portion of the district’s dollars (15%) are “categorically” attached to specific programs and services. Right now, it is unclear what state categorical dollars are “flexible” and can be used to address the budget deficit.

3. Employee compensation accounts for over 85% of the operating budget and the majority of the employees work under employee collective bargaining associations. Compensation accounts for 90% of the unrestricted budget.

4. Over 10% of our funds are programs protected by parcel tax measures. This means these programs or services will not be eliminated.

5. Approximately how many jobs would be saved with a rollback?

A 2.5% rollback would save approximately 20 jobs. A 4% rollback (i.e. back 18 months) would prevent layoff notices from being administered this year.

6. How does our situation compare with the state and the nation?

Our situation is in line with a deep economic downturn affecting the country. The California unemployment rate is at an all time high and could climb above 10% in the coming months. There have been thousands of corporate layoffs over the last few weeks. Some major corporations are trimming up to 10% of their employees. The State of California is currently putting workers on furlough with potential layoff for state employees that could reach 10,000 workers.

7. How would a more favorable than expected state budget affect our decisions?

If the approved State budget gives the district flexibility, fewer reductions would be needed and any layoff notices administered could begin to be rescinded.

8. How would a rollback affect retirement?

This question would have to answered on a case by case basis. A STRS employee with fewer than 25 years of service, absent any negotiated agreement to mitigate the reduction, would be adversely affected.

9. What impact would categorical "flexibility" have on the budget shortfall?

A large portion of State education funding is allocated to districts for specific programs (Categoricals). DJUSD receives state funding of $7m for these programs. Categorical flexibility means that instead of using the money in specific categories (e.g. CSR, textbooks) we would be able to use the money as part of the general fund. This would allow our district to make local decisions how to use these funds to cover our state revenue reductions. Even if we were allowed the most flexibility that anyone has suggested it would only cover $2 million of the total $5 million deficit over the next three years.

11. Are we using the reserve?

At this point we are using all the reserves we are allowed to use.

12. What relationship does the stadium have to the general fund or the budget shortfall?

It has no relationship. This is an example of how complex school funding came be. In the middle of devastating general fund losses, we have redevelopment funds that cannot be used to help us with our educational funding. There are monetary advantages and safety consideration that make moving forward with a project at this time a reasonable thing to do. Even so, the direction of the Board was simply to move forward with planning. No money has been expended, borrowed, or promised beyond the redevelopment funds that could only have been used on such a project. In the event a facility load is used to finance the project, the funding stream to pay the debt would come from secured property taxes earmarked for facilities only.

District Lays It All Out for the Teachers and All District Employees

There was a surreal feeling sitting in the partially filled auditorium on the Davis High School Campus. The all-employee meeting was perhaps closer to half employees, but still a robust showing. Superintendent James Hammond, about to lay it on the line for the teachers and other employees, did not recognize the uniqueness of the moment. This wouldn't have happened under his predecessor.

Perhaps it sunk home at the end, after the bad news had been laid forth, all reasonable options had been exhausted, he thanked those in attendance for coming, and they responded by clapping. It is not often news of this sort is delivered and you hear clapping, but that is what happened on this day.

There will be many tough days ahead for the Davis School District. They and the DTA still do not see eye-to-eye on specifics, though they all agree on the basics.

The purpose of this meetings, as Superintendent Hammond put it at the start was to lay out the budget status and assumptions for all to see. Discuss the possibility of salary reductions. And reiterate again that unlike the state, this school district is not going to go outside of the negotiation process.

The meeting was preceded by emailed FAQs to all employees and it will be proceeded by yet another round.

At the end of the day, the district has just one month from this coming Sunday, four weeks really, to come up with their second interim budget.

The struggle as the district has made cleared each time they have gone through this, is that we only have the governor's plan to work off of. Yesterday morning it was announced that there was a budget agreement, and the budget will go forward for a vote. One of the key questions that Superintendent Hammond laid forth was to what degree the district will be afforded flexibility in the area of categorical funds and fund balance reserves. For now they have anticipated the worst-case scenario with no flexibility.

And yet do not hold your breath on the budget agreement. As much as an agreement was announced, there is still a strong possibility that the votes are not there to pass it. Even the Republican's negotiator was noncommittal on the prospect of voting for the bill, even as he said this was the best possible deal.

After a long and apologetic speech about the difficulty of the process and a number of other comments that conveyed his general discomfort with having to deliver such bad news--sincerely delivered, Superintendent Hammond turned the discussion over to Associate Superintendent and CBO Bruce Colby.

They spent the balance of the meeting briefly walking through the budget assumptions and challenges and then addressing questions submitted by card from the employees.

As Bruce Colby explained, the district closed the fiscal year 2008 with a fund balance of around 10 million. Due to ongoing structural deficits, the fact that expenditures exceed revenues, the current fund balance is now down to $8.8 million. This year we have a $2.5 million deficit due to midyear adjustments in the budget by the state. That $2.5 million will come from the fund balance.

The goal of the district remains not to notice any employees.

Right now, our budget challenge is such that we have a $2.5 million deficit for 08-09 (that will be paid for with the fund balance). That grows to $3.3 million for 09-10 and $4.9 million for 10-11.

With the budget flexibility carryover we can we reduce our deficits. The carryover brings up to $0.1 million in surplus for this year, but $2.1 million in deficit for 09-10 and increases the deficit to $4.1 million for 10-11 since we've spent our carryover in the first two years.

If we spend down our reserves as well, we reduce 09-10 to a $1.2 million deficit but increase 10-11 to a $4.5 million deficit.

Staff layoffs or a 2.5% salary rollback will take care of the deficit for 09-10 but we will still have a $3.3 million deficit for 2010-11.

They then threw out these two numbers. A one-day reduction in the work calendar for all employees is $250,000. A one percent rollback in salary for all employees is $500,000.

If all employees take a four percent paycut, the district does not need to lay off one single employee.

Bruce Colby, Superintendent Hammond, and Kevin French then answered a series of written questions.

The first question was why DTA and the Administration were so far apart on how to balance the budget. From the district's perspective part of the governor's plan says that you can go below fund balance. However, his plan does not change ed code and the district believes you have to operate according to ed code. That means you must operate using ongoing revenue or make ongoing cuts. Fund balance reduction is one-time money, not ongoing.

The next question is why aren't all administrators offering to take a five percent pay cut like the "big four." They did not address this directly but suggested that this was a choice. It had to be a mutually agreed upon decision and all have to buy into it or it is not going to make a difference. If only a small number of employees buy into it is, it is just a symbolic offer.

Temporary teachers are hired for a single year. Late in the spring they are notified and let go. Then depending on the fiscal situation, budget, and retirements they could be rehired. Because of how late this process is being pushed this might not occur until very late in the spring if it happens at all.

A question was asked whether the pay cut comes from this year's salary level or next year if one is getting a step and column increase. It was explained that there is a matrix to determine the steps and columns and each cell in that matrix would have a 2.5% decrease. So it would be based on next year's rate.

Next question was whether the salary reductions would be one-time or ongoing. Answer is that they will be ongoing until the district has the ability to restore them.

Next question asked about the impact of salary decreases on retirement. The answer is that while it would be different based on which retirement system the employee is on, they are trying hard to not let it impact retirement.

Then next question asked about self-qualification. A qualified budget is when one does not have the ability to balance the budget over three years. You can qualify in two ways. First you can say it is balance and the County Office of Education can qualify it. Second, if the district know it cannot balance the budget for the third year, they still have to put a budget together, it would kick in another reporting period requirement, and the county could bring in a fiscal advisor. Regardless the district would still have to have a plan and make salary reductions.

There were concerns about cuts in positions to the classified employee bargaining unit. At this time there are no plans to fill positions at this time given the budget. That means that existing employees have multiple responsibilities and job titles.

There was a question about changes in class size reduction requirements. If the district were to change the K-3, and the 9th and 10th single subject class size reduction requirements from the current 20 to 1 and decrease it to 22 to 1, that would be the equivalent of 14 full time positions or FTE.

There was a question as to the salary reduction DTA would have to take in order for there to be no layoffs. As mentioned earlier, the number is 4 percent.

There was a question about the DHS Stadium. The funding for the stadium does not come from general fund money. So it has absolutely no impact on the status of the budget or employee salaries. The district cannot transfer that money to pay for employee salaries. The district considers this a very serious problem and believe that the liability from an injury is strong enough that it could have to pay a settlement from the general fund in the millions.

As such, the district is set to receive county redevelopment money as a starting lone and then looking into a debt instrument for the remaining money. That debt instrument cannot be used for general fund purposes. Just like Grande and the Nugget Fields, the money from these purposes can only be used for facilities not general fund.

Finally they clarified that the four percent reduction would mean no notices and also no class size reduction modifications.

At this time of course, DTA is arguing that the district does not need to make these kinds of cuts and is arguing for a self-qualification. However, at the end of the meeting, the response was appreciative.

The other thing I think that needs to be mentioned is the anguish that the administration and school board are going through with regards to these cuts. No one wants to make these cuts. But they believe that cutting salary will prevent layoffs and given the economic times, losing one's job could be disastrous.

Unfortunately DTA does not appear poised to agree to these cuts prior to March 15 when the second interim budget report is due and therefore, you will likely see a repeat of last year with a number of teachers notified with pink slips. It is unfortunate and it could be avoided.

The district has been clear that if flexibility enables it, the salary cuts would be the first thing off the table. Also I reiterate, do not count on the budget being passed tomorrow. Right now the votes aren't there for it, and even if it does pass, the numbers are bleak.

---David M. Greenwald reporting

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

Publish at Scribd or explore others: Research davis school distric selfqualification

---David M. Greenwald reporting

Davis Teachers Respond To DJUSD Budget Crisis

The Davis School District is facing a multiyear, multimillion dollar shortfall due to the state's economic and budget crisis. Complicating the already problematic nature of the state's economy is the political impasse that has gripped the state's budget process. That has meant not only are local districts facing budget cuts, they are dealing with large unknowns. The word leaking out of Sacramento is that the big five have reached a tentative agreement that could be announced today. Many are expected the results of that to be devastating to local governments and schools.

As a result of the uncertainty, the district is planning for the worst--budget cuts with zero flexibility. That means pink slips and pay cuts are on the table. Right now the proposal is for a 2.5% cut for teacher salaries.

On Wednesday of last week, the Vanguard interviewed DTA President Cathy Haskell and incoming DTA President Ingrid Salim. You can catch the entire interview here.

This is the first of a two part series. Tomorrow, we will have the district's response from Associate Superintendent Bruce Colby.

From the teacher's perspective one of the biggest concerns is to avoid a repeat of last year when there were 114 pink slip notices sent out to teachers.

Ingrid Salim:

"You may recall that despite all of the pink slips that did go out, those are the RIF notices or reduction in work force, that say that teachers might get laid off. They sent out 114 of them. They rescinded I think all of them. They ended up hiring teachers this year because some of them had already found other jobs. So we knew that they were taking a very conservative path last year."

The teachers hope that we learned something from last year however.

"We think they had learned something about the impact that had had on morale in this district this year, and at least these expectations now, even in the worst case scenario... the expectations are that RIF notices will be much much smaller. Superintendent Hammond was mentioning [Wednesday] twenty-something perhaps and that's anticipated to even go down or be rescinded after the March 15 date when they have to get out."

One of the questions that arises is if the district has and is using carryover or reserve money this year to plug some of the gaps, why didn't they use that money last year.

Igrid Salim likened it to a leaky roof situation and whether you use your savings account to fix the leaky roof or you hold onto in case there is a worse problem down the line.

"You have a savings account, do you fix the leaky roof now or do you keep the savings account because something worse might happen later and just live with the leaky roof? That's not a fair analogy here, but in the end it is the board who makes the decisions about how to use the money."

In the end she said, the board felt more comfortable in terms of the overall status of the budget, by sending out pink slip notices to quite a lot of teachers rather than eat into the reserves.

However both teachers felt that this had a hugely detrimental effect on the morale of teachers, the students, the parents, the community and even the board and administration.

"We did learn last year that if you lay people off, even if they’re rehired that it has an enormous price on morale, which in the end has a consequence in the classroom and for education overall. I certainly know that our chief financial officer Bruce Colby and our Superintendent Dr. James Hammond have been incredibly earnest about wanting to not lay off people. They have certainly learned that that was a horrible process to go through."

One of the key questions facing the district is how much flexibility the district will in dealing with the decreased amount of money.

Ingrid Salim:

"Things are going to be dire in terms the budget coming from the state which we don't have yet. We have a couple of proposals, the Democrats have one proposal, the Governor has a different one slightly. Each of them have a lot of different factors which will impact how much money we are not getting from the state, not how much we get, but how much they will take back."

However, regardless of the proposal, we could get something in the way of flexibility.

Cathy Haskell:

"We have looked at flexibility offered in the Governor's proposal and there's some in the Democrats' proposal, but where pretty sure we're going to get some flexibility."

The two biggest areas would be an ability to use more of the carryovers from the previous year than we normally would. That would be a chunk of money according to Ms. Haskell. The other chunk would come from class size reduction money, something that the teacher's would like to avoid even in Davis where that would simply mean going from 20 to 22 students per classroom.

Ingrid Salim explained how the categorical process works.

"Unlike our paycheck that we get every month that we can use however we want, budgets for school districts have little categories that you can only use for specific things, for example, buildings are called facilities money. You can't use those monies to pay teachers."

One item that might be cut would be money for new textbooks.

Ms. Salim explained that while the could use new Math and English textbooks, teachers are a much higher priority:

"We do have books, we could use new ones but we don't *need* them, we need teachers."

One of the big questions, and one of the things that the board and administration are asking teachers to do is to give up salary and possibly instructional days in order to balance the budget.

For both this seems to be the area of last resort, cutting salaries.

Ingrid Salim:

"We’ve talked long and hard about what we’d be willing to do. The short answer is this: there has been a suggestion that we give up a couple of days of salary, and the other union has been asked the same, and the administrators have been told that they will be expected to do that."

Cathy Haskell said that cutting two days from the instructional calendar would be approximately one percent pay cut. So a 2.5% pay cut would be the equivalent to five days of instructional time.

Ms. Haskell:

"There are some very interesting discussions about what does it mean to have one less day of school. Or does it mean that we still have that day of school, we just don’t get paid for it."

Ingrid Salim quickly followed up on that thought:

"So what she’s referring to is a voluntary cut in salary without a reduction in days. That’s another option on the table."

However, the teachers seem opposed to this option.

"We believe that there are measures that we can still take that on paper will of course balance the budget without us having to give up."

However, the district seems to feel otherwise and are now moving ahead with a plan to cut 2.5% from salaries. A plan that may not come to fruition depending on what the budget looks like as it announced today (if it announced today).

"Our reasoning is that it’s not just us giving up salaries, which absolutely we are affected by, but it certainly takes away from the educational process in this district. So if take away two days from instructional time, that’s two days students are not in class. If we take two work days from our time, that’s two days that we’re not preparing. We don’t feel that this serves education and we’re not willing to take the hit when there are other things that can be done."

She continued:

"Unfortunately it would impact real people who already make less than half of what our top administrators make. We don’t really want to point that out all the time, they do a tremendous job. But most of us are parents that have children that live and work in this city. We make the normal salary that teachers make, it’s not off the charts, it’s livable, but it would hurt us, we would feel that particular amount [of cuts]."

However, she said that as a last resort, and there is nothing else that can be done, they would be willing to enter into discussions on this. They simply believe that other options exist at this time.

Ms. Salim continued:

"If we felt we had to do that in order to put the district in a state where it had a balanced budget, I think we’d be willing to talk about that. We really do believe there are ways to begin addressing the budget deficit."

One of the biggest differences that is emerging between the board and the teachers is the issue of self-qualification. The district is required to show a balanced budget for a full three years. Under normal conditions that is a reasonable requirement. But when you do not actually have a budget, it gets tricky to try to budget for the third year.

As Ingrid Salim put it:

"It’s the absurdity of trying to balance the budget three years out without even a current to really work on. We’re talking about assumptions, putting numbers into a spreadsheet, plugging in equations, to figure out numbers for a budget that we don’t even have."

The district is moving toward more draconian cuts right now primarily because it is trying to have a positive assessment for 2010-11. The alternative is to balance the budget for this year and next year, and then address the problems with 2010-11 in the future when there is more certainty.

That is the approach the teachers favor.

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…"

She continued:

"We don’t want to cut salaries; we don’t to want to cut people. Let’s allow ourselves to be self-qualified. Let’s allow us to take our reserves down to the legal limit—it’s been hinted that we’d be allowed to drop them further than they are. That’s a little bit nerve wracking because it means you have less in your savings account. We advocate let’s do that first—yes, it’s less conservative, but we believe it’s a better policy to keep people and keep their salaries where they are and allow them to live, than it would be to do anything else."

The teachers feel respected in this process by administration.

"We’re feeling valued from them [the administrators]. We’re not completely sure that the board understands all of that. But then we acknowledge that none of them are fiscal experts. They are all people donating their time mostly to serve in this capacity. We really appreciate the amount of time and energy that they put in trying to wrap their minds around pretty big issues. It’s quite a lot for them to take in in small amounts."

Last year, the district tried like the plague to avoid self-qualifying. The fear was that the county would take over the school district and that would be a horrific outcome, we would lose out autonomy.

"Last year, don’t self-qualify… the county will come in… They heard this over and over. So they took action that was very conservative to prevent that. This year, they’re hearing the sky won’t fall in, it will be okay."

It is difficult to understand why that has changed now. However, according to the teachers, what has changed is the fiscal circumstance of the state.

Cathy Haskell was actually willing to take more of a chance last year rather than face the wrath of 114 layoff notices.

"I think it has to do with your level of risk that you have to take… 30% of the school districts last year ended up doing not a positive certifications. This year with the numbers the way they look it is for me not a surprise to hear that self-qualifying keeps you from doing some things that maybe you don’t want to do. I was actually ready last year to take more risk, but as a collection of people we couldn’t get there. I think we’re in a much different place this year, knowing that it’s not about this year, it’s not about next year, it’s about the second year out. Last year we were actually talking about the current year."

One of the things that has changed is that the process was horrible that no one wants a repeat of that scenario this year.

As Ingrid Salim explained, the entire point of self-qualifications is to prevent districts from mismanaging their money. During an economic crisis when the state is drastically cutting back its funding for local districts, counties are not going to immediately assume that districts are in the red in year three because of fiscal mismanagement. This is particularly true for districts that have a good track record.

"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."

Igrid Salim continued:

"Both from Bruce Colby’s understanding of what this means and the circumstances and the landscape changing, a self-qualification today isn’t going to mean the same thing that it meant a year ago."

Moreover, the hope is that seeing actual numbers will produce less drastic results.

"We want to wait and see how the budgets are going to really come in over the next year, and then we’ll accommodate that. We know that counties now are going to look at that and say okay, they’re thinking about that, they’re on top of it, they’re not losing it, they’re not going to be going bankrupt… So the reigns are a little bit more lax."

Ms. Salim also believes that because so many districts are facing these fiscal problems, that counties will be more reluctant to intervene, having not the resources to do so. In the worst case scenario, the county could hire an accountant to oversee the district's books. But she played down even this possibility.

“We don’t expect that to happen because there will be so many in this situation and because it’s a reasonable situation now. If we were flush with money, it wouldn’t be reasonable to be self-qualifying.”

One thing both agreed upon is that there is no way to cut our budget without deep cuts. The bad news is that we do not have a lot of pork and extra programs that can simply be cut. So any cut that the district makes will be painful.

Tomorrow we will see that the district does not agree with some of these assessments by the teachers, particularly with regards to self-qualification and also cuts to teacher salaries.

---David M. Greenwald reporting