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MDUSD School Board to discuss District budget on Wednesday, December 8
Posted 12/3/21

The Mt. Diablo Unified School District's Governing Board will review the District's updated three-year budget projections during its meeting on Wednesday, December 8, which starts at 6 p.m. in the Multi-Use Room at Monte Gardens Elementary School, 3841 Larkspur Drive in Concord. Information about watching the meeting online will be posted here.


Budget report

The “First Interim Budget Report for 2021-22” is a snapshot of the District’s budget as of October 31, 2021 and is required by the state to provide an “early warning” system to indicate whether a District can meet its financial obligations in current and future years.

 

If the District expects to be able to pay all of its bills in the current and next two fiscal years (2021-22, 2022-23 and 2023-24) while also maintaining a state-required reserve of 3% for economic uncertainties, it can certify its budget as “positive.” If the District anticipates that it may not be able to pay all of its bills through 2023-24 with its expected revenues, it must certify its budget as “qualified.” And if the District realizes it will be unable to meet its financial obligations for the remainder of the current year or subsequent two fiscal years, it must certify its budget as “negative” and seek to remedy the situation by making budget cuts.

 

Staff is recommending that the Board certify the budget as “positive,” based on current revenue and expense assumptions, which are detailed in the budget report. The Contra Costa County Office of Education will review the District’s budget and either agree with the certification or change it, based on its analysis, before submitting it to the state.

 

Chief Business Official Lisa Gonzales explains the assumptions behind the First Interim Budget in this “Ask the CBO” video

 

 

However, it is important to note that the District is projecting that it will spend more each year than it receives in revenues, which means it is deficit-spending and dipping into its previously saved unallocated ending fund balances to cover its shortfalls. This is not sustainable. In order to ensure that the District will be able to maintain its 3% required reserves in the future while providing the raises our Board and Superintendent are committed to, it is critical for the District to implement a budget solution that addresses pension liabilities, costs increases, and revenue losses due to declining enrollment.  

 

Decreased revenues
The District’s enrollment decline of about 1,893 students from 2019 to 2022 will reduce revenues by $22.3 million starting next year. Also, federal and state emergency funding related to the pandemic will not continue.


Increased costs
Meanwhile, “step and column” salary increases for all staff are estimated at 2% annually, not including raises that may be negotiated with unions. In addition, Health and Welfare costs are anticipated to rise by 5% annually, indirect costs will increase by 6%, and pension costs will rise by 6.4% over two years - 2.2% for STRS and 4.2% for PERS. We are also adopting new textbooks, expected to cost $6.7 million this year and $8.5 million next year.


Deficit spending
Although the District currently has enough money in its ending fund balance to pay its bills, it must find ways to stop deficit spending to maintain balanced budgets in the future. This means the District should only spend as much as it receives each year in revenues. Instead, the District expects to spend nearly $30 million more than it will receive in revenues in 2022-23, and to spend another $20.4 million above its revenues in 2023-24 based on current assumptions and data provided by the state.

 

One-time cushion due to emergency pandemic funding
In 2020‐21, the district utilized CARES Act one‐time funds to pay for some costs, which provided a  cushion that eased the impact of ongoing deficit spending and helped the District build a reserve for raises for staff. Next year, however, expenses are expected to rise, while state funds will significantly decrease due to declining enrollment.


How would the District-offered salary increases change the budget projections?
To help the Board, staff and public understand the rationale behind the District’s recent offer of 7% in salary increases over three years to the Mt. Diablo Education Association (MDEA) teachers’ union - which would be extended to all District staff due to “me too” contract clauses if ratified - the District has prepared a budget analysis that includes those increases (See graphic below, which is on page 8 of the District's Budget PowerPoint Presentation). This analysis shows that the District would spend its entire unallocated ending fund balance by 2023-24 and would need to cut $18.8 million in ongoing expenses over the next two years from its budget to make ends meet.

 

Salary proposal

The District’s Governing Board is committed to salary increases for staff that also allow us to maintain a positive budget certification. In order to afford the raises currently on the table, the District would need to implement a sustainable ongoing plan to reduce costs and staff due to the loss of funds related to declining enrollment and discontinued one-time emergency pandemic funding.

 

How can we know the District’s numbers are accurate? 
In an effort to ensure that the District is making appropriate assumptions and not being overly conservative, it asked School Services of California (SSC) to come in and review the budget and historical records. School Services is a well-respected advocacy and advisory firm that works closely with Sacramento and school districts throughout California. The District wanted an outside, independent agency to vet its numbers and make sure it is making accurate projections. The District opened all its books and asked SSC to look at everything, including the assumptions it’s using for both revenue and expenditures. SSC looked at past history (unaudited actuals) and they looked at projections for the next several years. They are in agreement that the District is deficit spending and has a structural imbalance that must be addressed. In other words, the District’s budget problem is very real.


Other items up for Board discussion or review
At its meeting Wednesday, the Board also expects to appoint a Vice Principal for Bel Air and Rio Vista elementary schools in Bay Point and to hear reports on the District's Strategic Technology Plan for 2021-31, Tobacco Use Prevention Education support for students, and fiscal health. In addition, the Board will elect a Board President and Vice President, receive an update on staffing, review proposed calendars for the 2022-23 and 2023-24 school years, review updates to its Suicide Prevention policy, and review School Plans for Student Achievement.


More information is here.