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Commentary: State Budget Gimmick a Blow to School District

A one-time charge per student creates a $3.4 million loss for the Santa Barbara district

On July 28, Gov. Arnold Schwarzenegger and the Legislature finally agreed on a budget package to close California’s massive $26 billion deficit.

The budget deal was finalized through a combination of spending cuts to virtually all programs, deferrals, major borrowing from local governments, accounting gimmicks and other one-time solutions. Most Capitol observers predict that projected revenues will come in far below anticipated expenditures, and that the budget as proposed could unravel as early as Thanksgiving.

The state budget looks very similar to what the Santa Barbara School Districts based its budget on in June, with one significant exception. To reduce the amount of money owed to school districts in 2009-10, the state utilized an accounting gimmick to reduce the amount of revenue given to school districts in fiscal year 2008-09, thereby lowering K-12’s funding entitlement. It did this by inflicting a one-time cut of $254 per student in fiscal year 2009-10. The reduction will result in a one-time loss of about $3.4 million between both of our districts.

The way the cut will be implemented varies depending on whether a school district’s unrestricted revenue is funded under revenue limit (i.e., a combination of state aid and local property taxes) or by basic aid (i.e., exclusively by local property taxes).

Since it is anticipated that the Santa Barbara Elementary School District will be certified as basic aid this year, the one-time cut of $1.09 million must be imposed on state categorical program dollars. In the Santa Barbara Secondary School District, the one-time cut of $2.4 million must be imposed 50 percent among unrestricted and 50 percent among state categorical program dollars.

These cuts must be implemented this year, so we have no choice but to implement a midyear reduction. Moreover, we have placed a freeze on state categorical spending until we figure out exactly how much each categorical program will contribute toward the revenue reduction.

Last June, we informed the Board of Education that given the compressed time frame, we were unable to produce a list of cuts equaling $4 million in one month, and that a portion of the structural deficit would roll forward into the subsequent fiscal year. Based on multiyear projections, it is now clear that the amount of the structural deficit that rolled forward, compounded with the impact of the $254 per student one-time reduction to the revenue limit, will present us with some very difficult fiscal challenges.

We anticipate that ongoing cuts in the range of $2.5 million in fiscal year 2010-11 and $2.8 million in 2011-12 must be made to maintain the districts’ fiscal solvency. To that end, we will establish a time line for the board to make additional adjustments to the budget, including expenditure reductions, this fall so that we may prepare multiyear projections at the First Interim Report that show the districts meeting their minimum reserve requirement in the current and subsequent two fiscal years.

— Eric Smith is deputy superintendent for the Santa Barbara School Districts.

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