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LA County Schools Orders PUSD to Identify Additional Budget Cuts
Education Apr 26, 2018
Roy Boulghourjian, PUSD School Board President is under fire from County officials to
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Roy Boulghourjian, PUSD School Board President is under fire from County officials to
Revisit their adopted budget by July 2. Photo by Terry Miller / Beacon Media News
Adopted Budget Due to County Schools by July 2
By Terry Miller
In a letter sent to Roy Boulghourjian, PUSD School Board President, the Los Angeles County Schools Superintendent has ordered PUSD consider additional cuts due to the recent review.
“Under Education Code (EC) Section 42131, the Los Angeles County Superintendent of Schools (County Superintendent) has completed a review of the Pasadena Unified School District’s (District) 2017-18 Second Interim Report. Our analysis of the data provided indicates that the District may not meet its financial obligations for 2019-20 without implementing additional reductions that restore and maintain the required minimum level of Reserve for Economic Uncertainties (REU) in that year. We therefore concur with the District’s qualified certification and offer our comments and concerns.”
The letter goes on to state that the District’s Second Interim Report includes “unallocated expenditure reductions of $12.8 million in 2018-19 and $12.1 in 2019-20 as placeholders for adjustments that the Governing Board has identified and approved to address deficit spending. These adjustments, however, are still not sufficient to maintain the required REU in 2019-20, and additional reductions of $8.15 million are necessary. We are requiring the District to identify these additional reductions, and include them in the 2018-19 Adopted Budget, due to the Los Angeles County Office of Education by July 2, 2018.”
Finally LACOE states that “According to the information provided in the District’s Second Interim Report, certificated and classified labor contract negotiations for 2017-18 remain unsettled and potential changes have not been calculated and incorporated into budgeted salary and benefit expenditures. Because labor costs make up much of the District’s budget, we are concerned that any salary and/or benefit increases will continue to adversely affect the fiscal condition of the District.”
Immediate adjustments for any variances or changes to the plan. Furthermore, the County Superintendent is prepared to elevate the Fiscal Expert to a Fiscal Advisor with stay and rescind authority over the Board should the FSP not be implemented in its entirety, or should the Board take any action determined to be contrary to improving the District’s fiscal solvency, and further impeding the District’s ability to meet its financial obligations.
DEFICIT SPENDING
The District is projecting an operating deficit of $2.0 million, representing 1.46 percent of the District’s unrestricted General Fund projected expenditures and other outgo for fiscal year 2017-18. The District also projects operating deficits of $1.6 million and $10.5 million for 2018-19 and 2019-20, respectively. The District’s unrestricted General Fund ending balance is projected to decrease as illustrated in the chart below.
Unrestricted General Fund Projections
(S millions)
| 2017-18 | 2018-19 | 2019-20 |
| $12.9 | $10.9 | $9.3 |
| ($20) | ($146) | ($10.5) |
| $10.9 | $9.3 | $1.2 |
| $10.6 | $9.0 | ($1.5) |
4.55 percent 4.16 percent (0.67 percent)
Beginning Fund Balance
Projected Deficit Spending Ending Fund Balance
REU
REU Percent
We are concerned that the District has a significant underlying structural deficit that will severely impact the District’s solvency in 2019-20 if not fully addressed now by the FSP.
RESERVE FOR ECONOMIC UNCERTAINTIES
The District’s Second Interim Report includes unallocated expenditure reductions of $12.8 million in 2018-19 and $12.1 in 2019-20 as placeholders for adjustments that the Governing Board has identified and approved to address deficit spending. These adjustments, however, are still not sufficient to maintain the required REU in 2019-20, and additional reductions of $8.15 million are necessary. We are requiring the District to identify these additional reductions, and include them in the 2018-19 Adopted Budget, due to the Los Angeles County Office of Education by July 2, 2018.
RESTRICTED PROGRAMS – EXPENDITURE REDUCTIONS
The District removed unallocated program expenditure reductions of $5.3 million in 2018-19 and $8.1 million in 20 19-20 in the restricted General Fund, and current projected expenditures now balance with projected revenues. The details of these reductions, however, were not included in the District’s FSP, as required by our letter dated January 19, 2018. We continue to be extremely concerned about the District’s ability to identify and implement planned reductions, and warn the District that any deficit spending in these restricted programs must be covered by the unrestricted fund balance.
SPECIAL EDUCATION
The District was required to analyze the Special Education program expenditures and adjust spending accordingly to reduce encroachment on the unrestricted General Fund. The District’s Second Interim Report did not include any reductions in expenditures related to Special Education, as additional analysis needs to be done by the District. We continue to be concerned about the significant increase in contributions to restricted programs. The District needs to be diligent in accurately budgeting any potential revenue increases related to the increase in Special Education enrollment to help offset the significant increase in expenditures.
SELF-INSURANCE FUND
The District continues to project a negative ending fund balance of $2.8 million for the Self-Insurance Fund. This fund includes workers’ compensation, and the District has been experiencing an upward trend in claims and payouts. The District’s FSP identified transitioning to a new third-party administrator, which the District anticipates will have a positive impact on reducing liabilities. The District should include an update on the status of the fund with the 2018-19 Adopted Budget.
LABOR CONTRACT NEGOTIATIONS
According to the information provided in the District’s Second Interim Report, certificated and classified labor contract negotiations for 2017-18 remain unsettled and potential changes have not been calculated and incorporated into budgeted salary and benefit expenditures. Because labor costs make up much of the District’s budget, we are concerned that any salary and/or benefit increases will continue to adversely affect the fiscal condition of the District.
