Solana Beach School District eyes future budget challenges - Del Mar Times

Solana Beach School District eyes future budget challenges

The Solana Beach School District board held its public hearing on the proposed 2018-19 budget on June 14 as it looks ahead to approval at the next board meeting on June 28. At board President Debra Schade’s request, the board designated $350,000 in next year’s budget toward enhancing the district’s mental health and guidance program, something she had hoped to be included in the past year’s budget.

“My point last year was let’s develop a program that is state of the art, that can be used and modeled in California for these issues we have,” Schade said, noting she would like to see funds put toward more than just hiring but training and coordinating staff to provide services to take care of kids in need.

At the June 28 meeting, staff plans to present the board with four different options to look at improving staffing around guidance but the board wanted to make the funding designation now to show that student safety and well-being is a priority.

The 2018-19 projected budget includes $46,193,979 in revenues and $48,574,319 in expenditures, representing a $2.7 million deficit. The projected ending reserve fund balance would be $11.9 million or 24 percent, much higher than the state required reserve level of 3 percent.

Lisa Davis, assistant superintendent of business services, said the “two monsters” in the 18-19 budget expenditures are the district’s contributions to the state retirement systems — California Public Employees Retirement System (CalPERS) and CalSTRS (California State Teachers’ Retirement System). While the rates had held steady at about 8.25 percent since 1990, CalSTRS rates started to climb beginning in 2014 and the contribution is projected to increase gradually over the next seven years, up to 19 percent by 2020-21.

The 2018-19 budget includes a 16 percent contribution to CalSTRS and an 18 percent contribution to CalPERS.

The CalSTRS rate can only be set by legislation while the CalPERS rate is set by the CalPERS board each year, projected to grow to 24.6 percent in 2021-22.

For the close of the 2017-18 school year, the district is projecting a $6.3 million deficit. Davis said the district is required to include all budgeted expenditures but historically they do not spend all those dollars. She said in unaudited actuals that the board won’t see until the fall, she is anticipating that the $6.3 million deficit will be about $3 million less.

In his last board meeting, outgoing SBSD Superintendent Terry Decker wanted to share his views about the budget challenges the district faces moving forward.

“I care very deeply about what happens in this district now and in the future,” Decker said. “We all have to take a step back and take a look at where we are from a budget standpoint and where that takes us.”

Stated simply: the outgo is bigger than the income and as the district continues to deficit spend, they will continue to chip away at its reserves.

Decker pointed out that for the next three years out they are projecting deficits: In 2019-20 they are looking at a $3.9 million deficit and in 2020-21, they are projected to deficit spend by $3.9 million, dropping the reserves eight to nine percent every year.

Using “reasonable assumptions” of continued revenue growth of 4 percent and expenditure growth of 3 percent, Decker projected the budget situation out another four years.

“By 2022-23, we see some real concerns if we post another $3 million deficit. Our standard and special reserves would be down to 9 percent,” Decker said.

If the district continues to deficit spend, the district could exhaust its special reserves by 2023-24.

“We are in good shape for a while but we have to attack and deal with it effectively,” Decker said. “If we start right now, we can create a trajectory to get us to where we need to be without slashing and hacking and destroying programs across the district.”

Decker said much of the budget’s issues can be attributed to those increasing rates with the state retirement systems.

“The state is now pushing that responsibility out to the school districts and it’s costing every single school district in the entire state a tremendous amount,” Decker said. “We are not alone in this.”

For Solana Beach, with its $22 million in certificated salaries at next year’s STRS rate of 16 percent, that is $3.6 million going into the system.

Decker said if Governor Jerry Brown came out and waved a magic wand and rolled the numbers back to the 8.25 percent rate it was at five years ago, that contribution would go down to $1.8 million.

Looking at the PERS number, the contribution at the 18.6 percent level is about $1.3 million in 2018-19—at the old rate of 11.44 percent five years ago, it would be about $835,000 contribution.

Decker said just those raises alone account for about $2.2 million—when the district is projecting about $2.7 million in deficit spending, if those rates went back down, they would all but wipe out the deficit spending that they’re seeing this year.

Schade remarked that what the STRS and PERS contributions is doing to other districts in the state is “devastating,” noting that many districts have already been forced to cut.

“We have breathing room,” Decker said. “But we know in this county there are school districts that really don’t know what the next year is going to look like.”

Board member Richard Leib pointed out the picture Decker painted might be even less “rosy” as in 2011 there was a 7 percent drop in property tax revenues and expenditures could increase more than the 3 percent a year estimate he used.

Decker said either way, the reality is that the district knows that those issues are out there and now is the time to plan to address them in a strategic way to be able to maintain quality programming. He advised allocating resources where students have the most need, ensuring any new programs are “mission critical” and keeping the financial health of the district and what’s best for kids in mind.

“If we aren’t healthy as a district, we can’t serve our children,” Decker said.

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