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In-Depth Report: School District confronts history of buried budget woes

Posted on December 7, 2017 by Sonoma Valley Sun

In October, a concerned parent filed a records request for September communications between the Sonoma County Office of Education (SCOE) and the Sonoma Valley Unified School District (SVUSD). What this parent learned, and has shared with The Sun, was alarming.

A September 29, 2017 letter from SCOE stated that they had “very serious concerns” that the District was “at risk of insolvency” and mandated that SVUSD freeze spending immediately, and cut at least $2 million from its $49 million operating budget by January 17, 2018, or risk being taken over by the County. (It should be noted that 2010 and 2016 bond funds are separate from the District’s operating budget and therefore use of bond funds is not part of this reporting.)

It also required that all expenditures be “reviewed and approved by either the Superintendent or his designee(s)” to ensure “adequate monitoring of expenses.” Within hours of the parent’s sharing the letter with other parents, the SVUSD made the letter public. Since then, parents and community members have been wondering how these serious circumstances arose, and why this was the first they had heard about it. Until then, the situation had apparently gone undetected by the board of trustees, and not shared with the public.

The District administration had been receiving concerned letters from SCOE regarding the budget since 2013. These communications were shared with staff, but not with trustees or the public.

While school districts occasionally deficit-spend, SVUSD’s deficit spending for three consecutive years is, according to SCOE, unsustainable, since it would put the District’s reserves below the legal limit; the state requires that all schools maintain a minimum 3 percent reserve.

At board meetings, trustees and the public were not presented with comparisons of actual spending versus the approved budget. Further, budget and spending questions from the public and some trustees were ignored and went unanswered.

When John Kelly joined the school board in December of 2016, he expressed concerns about the budget and fiscal reporting. He was accused of being abrasive, and the substance of his questions was largely dismissed. At recent board meetings, Kelly and Trustee Britta Johnson have tried to clarify that, while some deficit spending was planned, actual expenditures exceeded those that were authorized, compounding the shortfall.

Over three years, there were $11 million in non-budgeted expenses.

In March of 2017, Kelly read that the Santa Rosa City Schools had received a letter from SCOE warning that its deficit was too big. Since that deficit was smaller, percentage-wise, than SVUSD’s, he contacted Judy Thomson, Fiscal Services Director for SCOE, to find out why SVUSD had not received a similar letter. She informed him that it had, and forwarded him that notice, dated September, 2016.

The letter, which was then shared with the entire board at Kelly’s request, stated that “deficit spending of this magnitude is of grave concern and must be addressed to maintain fiscal stability.”

The administration’s trend of uncontrolled spending can be traced back to the 2013-14 fiscal year. In 2012-13, the District’s finances were in good shape. Justin Frese, Deputy Superintendent in charge of finance, had steered the District through the recession and state budget cuts in 2009; reserves were at a healthy 17 percent. At that point, Frese left the District, and was never replaced.

After Frese’s departure, the District adopted a budget that projected three years of deficit spending. District staff justified this by saying they were intentionally spending one-time money and said it was not a cause for concern, given the District’s reserves. Board President Dan Gustafson recently explained to The Sun that the District did some “investment spending,” including using reserve funds for the implementation of Common Core State Standards. “We added some positions and training up front to accelerate that process,” he said. In short, for the last three fiscal years, although the District’s revenue went up, the growth in expenditures outpaced revenue growth. The District covered these shortfalls from its reserve fund, which has now dwindled perilously close to the minimum reserve. The current 2016-17 budget was approved with a narrative about the administration’s intent to adopt a budget reduction plan by September 12, which did not occur.

Last spring SVUSD hired Total School Solutions (TSS) consultants to review the District’s budget. TSS noted that it was difficult to get a handle on the budget because there was no draft budget for their visit in late May, which was highly unusual. The report noted that it was also unusual for a district of this size not have an Assistant Superintendent of Business Services – a position unfilled after Frese’s departure. In addition, they recommended budget adjustments throughout the year. Because these were not being done, it was “nearly impossible” to project ending fund balances.

District administrators dismissed the TSS report on the grounds that it was not credible. Although a public presentation of the report findings was in the TSS contract, and was requested by trustee Johnson at the August and September board meetings, no presentation ever occurred.

One of SCOE’s requirements for SVUSD was to form a team to “develop budget reduction proposals of at least $2 million.” At the recent November 14 school board meeting, Superintendent Chuck Young announced the formation of a committee of district staff that would do a first pass at a budget to identify cuts that would meet SCOE’s requirements. The committee’s findings will then be presented to a larger budget committee which would include teacher union representatives, community members, and other stakeholders.

Their first order of business will be to identify cuts and other means of closing the deficit for the current fiscal year ending next June, and opportunities for future savings. Since 87 percent of the budget is comprised of salaries and benefits, this category will surely be impacted. The budget recommendations will be presented to the school board on December 12.



One thought on “In-Depth Report: School District confronts history of buried budget woes

  1. Sounds like an investigation is needed into how un-budgeted money was spent, where it went and who approved it. Hopefully no jiggery-pokery was involved and the administration was merely experimenting with a new Advanced Placement home econ. elective in Cooking the Books.

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