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Despite AB 114, MDUSD doesn’t plan to restore cuts

By Theresa Harrington
Wednesday, July 20th, 2011 at 7:42 pm in Education, Mt. Diablo school district.

Some school districts throughout the state are restoring cuts based on the flat funding projections required by AB 114. But the Mt. Diablo school district is not among them.

Here’s an e-mail Q & A about the subject that I exchanged with CFO Bryan Richards:

“Q. I attended the SSC (School Services of California, Inc.) budget workshop today (Tuesday) in San Jose and plan to write about how AB 114 is affecting local school districts. Based on the SSC presentation, it looks like MDUSD cannot project $330/ADA cuts in the 2011-12 budget and must instead project flat funding, with respect to revenue limit funding.

I have heard that some districts are reinstating cuts, based on this.

Does MDUSD intend to reinstate cuts made to create the $10.7 million reserve, which is based on the $330/ADA (average daily attendance) projected revenue reduction? If so, which cuts might you reinstate? (Such as cuts to special ed assistants hours and benefits and furlough days.)

A. Not at this time.

Q. Also, SSC said that districts that have ‘restorative’ language in their contracts need to look at restoring concessions that were negotiated based on the reduced revenue projections. Do you intend to restore concessions, such as hours, benefits and furlough days?

A. Not at this time.

Q. As I’m sure you know, AB 114 would allow districts to handle possible mid-year cuts by reducing the school year by up to 12 days (seven on top of the five already allowed this year). Do you intend to try to negotiate 12 furlough days with district unions?

A. Not at this time.

Q. I understand the district has been instructed to create a corrective plan for its SIG (School Improvement Grant), showing increased instructional time for all students at the SIG sites. I also understand that the district’s new SIG application for Meadow Homes and Oak Grove MS was denied, in part because it didn’t include increased instructional time for all students. Does the district intend to try to negotiate no furlough days at SIG sites so that instructional time would not be reduced?

A. This has not yet been determined.

Q. Will you be presenting recommended revisions to the board Aug. 9?

A. As the District’s budget was built on the State’s revenue assumptions, and our expenditure budget is also aligned with those revenue assumptions, we do not anticipate bringing forward significant revisions to the budget at this time.”

After I received this response, I discussed MDUSD’s budget with Ron Bennett, of School Services of California, Inc.

He said AB 114 prohibits the district from setting aside a reserve specifically to cover a projected $330/ADA midyear cut. The district, he said, must build that $10.7 million back into its budget.

However, he said the district could justify continuing to set aside the $10.7 million if restoring the cuts would result in a deficit at the end of its multi-year projections through 2013-14. But, this would not be the case.

According to Richards’ June 28 budget PowerPoint presentation, the district would have nearly $16.2 million left over by June 2014, including its $330/ADA reserve.

This budget includes seven furlough days in the next two school years that haven’t yet been negotiated with MDEA (Mt. Diablo Education Association). I also spoke to Mike Langley, MDEA president, today about AB 114.

“My understanding is the law says the district is not allowed to set up a slush fund just in case,” he said. “It should go back into the general fund.”

If the state fails to meet its revenue projections, mid-year cuts to schools would be triggered. According to the law, districts would be allowed to reduce the school year by 12 days, dropping from 180 days to 168.

But that would require teachers’ unions to agree to furlough days. And if the school year is less than 175 days, teachers would lose retirement credits for their pensions.

I asked Langley if teachers would agree to take the seven furlough days already built into the budget next year, knowing that the district has an extra $10.7 million to spare.

“A trigger goes both ways,” Langley said. “There should also be a trigger to add back in negotiations.”

If the district can afford to pay teachers for a full school year in 2011-12, Langley said it would make sense for the district to also reopen its contracts with other unions (which have already agreed to the seven furlough days).

“Students need the services of all staff,” Langley said, “not just teachers — including in classrooms, in offices and on the grounds.”

On June 14, the board made $4.2 million in cuts, which could all be restored if the district put the $10.7 million set aside for mid-year cuts back into the general fund.

These include:

– $56,000 for a popular fifth-grade water environmental study program on the Brownlee boat in the Delta

– $1.2 million in special education assistants’ hours and benefits

– $300,000 for adult education programs

– $300,000 for instructional improvement block grants

– $908,731 for classified positions including: confidential administrative assistant, senior secretary, attendance/student records assistant in special education, electro-mechanical technician, equipment mechanic, general maintenance worker, inventory and materials storekeeper, medium equipment operator and three painters.

The $10.7 milion could also be used to help cover high school athletics costs outlined in the June 14 budget recommendations.

Or, the school board could try to justify the $10.7 million reserve, despite AB 114’s prohibition of setting aside money for mid-year cuts. This is because the bill has a huge loophole: there’s no penalty for districts that disregard it.

“This one doesn’t have any punishment with it at all,” Bennett said. “Someone might say: ‘This looks like it’s not in compliance with the law,’ and I don’t think there’s anyone who can say what happens.”

Do you think the Mt. Diablo district should use the $10.7 million it set aside for midyear cuts to restore positions, programs or furlough days?

JULY 21 UPDATE: I just spoke to Contra Costa County Office of Education spokewoman Peggy Marshburn. She confirmed that the county is no longer requiring that districts set aside reserve funds of $330/ADA, in anticipation of midyear cuts.

However, the county is advising districts to look at possibly maintaining higher than required reserves based on cash flow needs. She said the county is not advising districts regarding whether or not to reinstate staff or positions, since those decisions should be made by each district based on its own unique circumstances.

JULY 22 UPDATE: I have received further clarification from Richards, Bennett and the County Office of Education regarding their understanding of how AB 114 affects local districts.

Although the board made cuts in June in part to establish its $330/ADA reserve of $10.7 million to guard against midyear cuts, it doesn’t need to reinstate the cuts because it is still deficit spending, they agreed. The governor’s signing message allows districts to make cuts based on financial circumstances — such as declining enrollment, the loss of federal funds and cash flow management — which are unrelated to a possible midyear cut.

Here’s the clarifying e-mail I received from Richards:

“The budget was built based on flat funding of the revenue limit on a per ADA basis. If you look at form 01 in the budget document, you will notice that the District has a deficit of $2.6 million projected for the 2011/12 school year. The expenditure budget is built upon the projection that the District will negotiate 7 furlough days with MDEA and proportionate reductions of work year for the other bargaining units, which reflect agreements already made with Local #1 and CSEA (California School Employees Association). Our expenditure budget exceeds the revenue budget based on flat funding by $2.6 million, with the furlough days built in.

AB 114 does not require Districts to spend down existing 2010/11 fund balances in the 2011/12 year. It does require that the expenditure budget be based on a revenue budget incorporating flat funding. MDUSD’s expenditure budget already goes beyond the requirement of AB 114 and projects expending $2.6 million more than we expect to receive during the year.

The District still had to make a substantial amount of cuts to deal with the expiration of Federal funding associated with the American Recovery & Reinvestment Act and to deal with our continued declining enrollment. As Governor Brown noted in his signing message, districts are expected to make the required cuts necessary to deal with declines in other funding sources or enrollment and to protect their cash positions to remain solvent.

The district has done this.

Bryan Richards, CFO”

However, there is still some disagreement between Bennett and Bill Clark, associate superintendent for business services for the Contra Costa County Office of Education, regarding whether it is appropriate to retain a separate reserve with a specific amount set aside to guard against mid-year cuts. Bennett says “no,” but Clark says he is recommending that districts maintain such a reserve, although he can no longer require it.

“You cannot have a reserve specifically for the mid-year cut,” Bennett said. “We would say you shouldn’t do that. The law is vague in that area, but to be consistent with the law, you would just put it in your reserve and it gets put in your three-year projection to avoid fugure cuts, but not specifically a mid-year cut.”

Clark said he plans to recommend (but not require) that districts set aside $260 per ADA for unified districts, $250 per ADA for elementary districts and $300 per ADA for high school districts, based on School Services’ estimates of the maximum cut to districts if the state budget reduction trigger is pulled.

For Mt. Diablo, this would be about $8.4 million, or nearly $2.3 million less than the current reserve of $10.7 million. If the district reduces its reserve to the new amount recommended by the county, it could potentially afford to reinstate the special education assistant hours and benefits, as well as some other cuts.

But Bennett reiterated that AB 114 doesn’t require the Mt. Diablo district to make any restorations.

“That would simply be up to the board,” he said.

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