This is probably the number one question I’m hearing from LTA members these days.  Well, let me take a stab at answering it.  WARNING: There is no quick and easy way to answer, so bear with me and I’ll try to take something that is REALLY complicated and make it somewhat more clear.  Somewhat.

I do not know how much money the District has in the bank at this moment, BUT their latest projection (presented to the School Board on 12/13/2011) is that they will have $9,481,228 in unrestricted reserves by the end of the 2011/12 school year.  They are required by law to have $1,603,352 in unrestricted reserves, meaning they will have an excess of $7,877,876.  Put another way, they need to keep 3% of the total budget in reserves, and they will have 17.7%

Now, a couple of caveats:

#1 – That’s not all in cash.  A lot of it is money that the state has promised the District but not actually deposited in their accounts.  The District actually has a pretty bad cash-flow problem because the state is screwing around with scheduled deposits (paying them Sept in Oct, Oct in Nov, Nov in Dec, etc., all so the state’s budget situation appears to be better than it really is).

#2 – From the District’s perspective, how much money they have in reserves at the end of the year is meaningless because they have to prepare and submit 3-year budgets to the county office of education.  The 3-year budget they presented to the School Board in December shows a 17.7% reserve at the end of this year (2011/12), a 10.4% reserve at the end of next year (2012/13), and a 5.9% reserve at the end of 2013/14.  They make a big deal out of the decline, BUT…

a) Right now, the District’s 12/13 budget is a projection based on assumptions of high costs and low income.  As any business should, the District over-estimates their expenses and under-estimates their income.  They have to make sure they have enough money so they budget very conservatively.  Then, the 13/14 budget is another projection, over-estimates based on the 12/13 over-estimates; they’re over-estimates squared!  Three years out, things are NEVER as bad as the District predicts.

b) Even if things are as bad as they predict, three years out, they’re still well above the 3% reserves they need.

#3 – The District just got the governor’s budget proposal for the state budget and are now factoring that into their budget.  IF everything goes as the governor plans, the District will have the same funding next year (and the following year) that they have right now, which means the 12/13/2011 projections will remain valid and we’ll have plenty of money to start undoing pay cuts and furlough days, etc.  HOWEVER, the governor’s budget proposal assumes there will be a temporary tax increase passed by California voters in November.  We NEED that tax increase to pass to be okay.  If it doesn’t, there could be a $370 per student cut in funding every year for the next few years (for reference, the District received about $5,006 per student this year from the state [the average in New York is about $11,472 per student!]).  That funding cut would mean that next year’s reserves would fall to about 6.8% (instead of 10.4%) and 13/14 reserves would fall to as low as -1.6% (instead of +5.9%).  Notice the negative sign.  The District WILL NOT let that happen and will try to make all kinds of drastic cuts, either through bargaining or imposition.

The problem is that no one – not them, not us – will know if we are looking at the “everything is fine” scenario or the “oh @#$%” scenario until November.  Yet in the next few months they will have to plan their budget and we will have to negotiate a contract.  But nobody knows how much money there will be next year.  We may end up having to negotiate two contracts – one in case the tax increase passes and one in case it doesn’t!

So, in summary, the District has tons of money right now.  But come next year (and the year after that), who knows.  They may have plenty, or they may have very little.

Footnote:  The two corollary questions to “How much money does the District have?” are usually “Can we get the remaining 1.5% salary cut back?’ and “Can we get those summer pay checks back?”  The short answer is, yes, we can get anything back that we are strong enough and united enough to demand back.  The longer answer is … maybe.  If the temporary tax increases go through and the governor’s budget remains more-or-less intact, then absolutely, there will be enough money in the District’s coffers that we should absolutely get the remaining 1.5% back and have no cuts or furlough days at all next year and maybe even get a small cost of living increase.  But if the temporary tax increases don’t happen, every bit we get back now will just make the deficit we have to deal with next year that much deeper.

On the summer pay checks, that’s not really an issue with the District budget because each of us is going to cost the District the same amount whether we get paid over 12 months or 10; our salaries would simply be divided differently.  The issue here is cash-flow.  The District doesn’t get most of its money from the state until after summer is over but it has to have cash on hand in the summer to pay us.  The School Board actually just authorized the District to seek a TRANs (Tax Revenue Anticipation Notes), which is a cash loan from the state to pay the bills.  [The sick/sad irony here is that the state hasn’t been giving the District money the District is entitled to by law, so the District has trouble paying its bills, and then the District has to borrow money from the state at high interest rates.]  I’m not an expert (yet) in exactly what the District’s cash reserves are, or how much cash they would need to pay those summer checks, but it is certainly something we’ll be looking into in the next few weeks.  And, as always,  how vocal members are willing to get in demanding that the District figure out a way to fund the summer checks makes a big difference too.  Julie has already started having conversations with School Board members about at least delaying the end of summer checks for a year, but the District will almost certainly start by saying “No,” and we will need to show them that this is an important issue for us.

Anyway, that’s more than enough for tonight.  Over the next couple of weeks I will try to do kind of a “District Budget 101” and explain the different parts of the District’s budget and why they matter to you.  I’ve got a feeling the real meaty discussions around bargaining this year are going to be pretty technical, and for you all to be better informed and better able to make your decisions, you’re going to need at least a basic understanding of the budget.  Good times!

Okay everyone, take care and be well,

Brian Guerrero