Welcome to the Spotlight on Student Learning, Piedmont Unified’s monthly electronic newsletter. The theme of this Spotlight concerns the challenge of balancing the District budget due to costly new mandates imposed by the State. To maintain the financial health of the District, Piedmont Unified must re-balance revenue and expenditures and redefine priorities in the development of next year’s budget. To learn more, please visit the: PUSD 1st Interim Budget Report.
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This year, Piedmont Unified’s total annual budget is roughly $37 million. About two-thirds of this total comes from allocations from the State and federal governments. The balance — nearly 34% of the total — comes from school parcel tax and contributions from the Piedmont community, including money raised by the Piedmont Education Foundation, the Giving Campaign, Dress Best for Less, SCRIP, and the parent clubs and school support organizations. As I wrote in last month’s Spotlight, this level of financial support is remarkable and vitally important to the District.
Piedmont Unified’s Board of Education reviews the financial condition of the District at least twice during the school year (and typically does so more frequently), to affirm whether the District can meet its financial obligations for the current fiscal year and subsequent two fiscal years. The Budget Advisory Committee (BAC) — which includes representatives from each school site, employee association, school support groups, and the community — also meets several times each school year to review the multi-year budget.
At the recent Board of Education and Budget Advisory Committee meetings, we reviewed the “first interim budget” for 2015-16 and projections for 2016-17 and 2017-18. The findings are mixed. The good news is that we project a positive balance for 2015-16, with a healthy 4% reserve for economic uncertainty (the State mandates at least 3% in reserves). The ending fund balance will actually be slightly more than originally projected, due to higher-than-anticipated receipts of lottery funds, overtime savings, and reduced expenditures on post-employment benefits and contract services.
The bad news, which is discussed below, is that new State mandates have created a structural deficit for Piedmont Unified and many other districts. The structural deficit would become evident in 2016-17, as the District would dip into reserves to meet these new obligations, and the reserves would drop below the mandatory minimum of 3%. Piedmont Unified must address the structural deficit in the development of next year’s budget, by re-balancing revenue and expenditures and by redefining priorities.
A summary of findings concerning the first interim budget review follow:
Revenue From the State Is Increasing Slowly. The extreme turbulence in State education funding that started in 2008 is now over. The State now allocates money to school districts under a new Local Control Funding Formula (LCFF), which is designed to stabilize public education funding. The LCFF will gradually reverse the funding cuts that characterized the last seven years. Nonetheless, State funding to Piedmont Unified remains below the 2008 funding level, and will not be restored to the 2008 level until 2020-21.
Current Revenue Is Inflated By One-Time Allocations From The State. In addition to the LCFF allocation, the State provided $1.4 million to Piedmont Unified in “one-time money” in 2015-16. Although the District can hope for other, similar one-time allocations, it cannot rely on them to develop the budget for future years. For this reason, revenues are expected to decline sharply from the current levels.
Expenditures Are Rising Sharply Due to New Mandates Concerning CalSTRS and CalPERS Contributions. Expenditures rise each year due to automatic increases in salaries and benefits, as employees are entitled to increases in compensation based on their years of service and advanced training. This typically results in a gradual increase in expenditures which is built into the multi-year budget. Last year, the State increased each school district’s contribution requirements to the California State Teachers’ Retirement System (CalSTRS ) and the California Public Employees’ Retirement System (CalPERS). This increase is intended to remedy the State’s chronic underfunding of these programs by shifting a portion of the costs to school districts. These new contribution requirements will result in a sharp increase in annual expenditures.
Specifically, for 2015-16, Piedmont Unified’s contribution to CalSTRS and CalPERS is $340,000. Over the next three years, contributions to CalSTRS will total approximately $980,300. In addition, over the next two years, contributions to CalPERS will total approximately $271,000. These contributions will reduce the District’s general fund by $1.2M over the next three years.
To be clear, this sharp increase for required contributions to CalSTRS and CalPERS does NOT provide any additional retirement for teachers and staff. It simply looks to stabilize an already underfunded state retirement program.
Planning for a Balanced Budget. The decrease in revenue and increase in expenditures due to the new CalSTRS and CalPERS contribution requirements are critical factors in budget planning going forward. The District must resolve this structural deficit over the next few years by earning more and spending less, and by increasing efficiency and reducing waste.
Both the Budget Advisory Committee and the LCAP (Local Control Accountability Plan) Committee will play a leading role in reviewing Piedmont Unified’s goals and priorities, exploring opportunities for new revenue an increased efficiency. (For more information about the LCAP Advisory Committee, please click here: LCAP – Spotlight on Student Learning) These groups include representatives of the Parent Clubs, Site Councils, Piedmont Education Foundation, District Advisory Committees (English Learner Advisory Committee, Technology Advisory Committee, GATE Advisory Committee, Special Education Advisory Committee), and school support organizations. In addition, the LCAP Advisory Committee will host several evening meetings to review the goals and priorities and gather additional public input. All of these meetings are open to all.
A successful budget development process depends on input from the entire school community, so please join this conversation. Join your parent club or site council, attend any of the various District Advisory Committees or school support groups, and join in the important discussions about how the District may better serve our students, or attend one of the upcoming LCAP Engagement Nights, from 7:00 pm to 8:30 pm in the Piedmont Middle School Multi-Purpose Room on February 25 and April 26. And if you have questions about this, please contact me directly at email@example.com.
We know the holiday season is upon us with the fantastic PUSD Winter Concerts and Showcases. Please read the following articles that highlight our students and staff. Best wishes for the holidays and the new year,
Randall Booker, Superintendent