Board Discusses Schools’ Bleak Financial Forecast

There is probably not a single meeting of a public agency in the nation that doesn’t include the inevitable grim financial forecast, and Tuesday’s Glendale Unified School District Board of Education session was no different, as historic budget shortfalls were discussed.
“On May 7, [Gov. Gavin Newsom] made it clear that this is not only a health crisis, but also a huge financial crisis,” said Steve Dickinson, the district’s chief business and financial officer. His presentation fell under the daunting title “District Plan to Maintain District Solvency and Financial Responsibility,” and Dickinson stated early on that current information regarding the financing of public schools “has many more questions than answers.”
Dickinson pointed to Newsom’s May Revise, the annual exercise of updating budget projections made after the first of the year based on early financial realities within the state, and reported a projected $54 billion deficit based on an estimated $41 billion decrease in revenues and roughly $13 billion in costs associated with the COVID-19 pandemic.
“To put that in perspective, that’s roughly 25% of the state’s budget,” said Dickinson. “If that 25% holds true, as it trickles down to different programs, what we believed to be our worst-case budget scenario when the crisis first came out has now become our absolute and probably unlikely best-case scenario.”
Dickinson stated that the GUSD had already projected an $8 million cut to the district’s $300 million budget for the 2021-22 school year, but the recent information puts the district “a year behind” of projected deficits. Following the 25% model, Dickinson stated that a $72 million funding shortfall would be “a huge hit” considering the fact that 80-85% of the district’s costs are in staffing and benefits. Dickinson’s numbers included projected cuts from the state of 10% in cost-of-living adjustments to the district’s funding source, called the Local Control Funding Formula.
“About 70% of districts were already projecting deficits and now we have a whole ’nother set of circumstances to be concerned about and 40% were planning some type of staffing reductions,” he said.
“A great district will not be overwhelmed by this and will start taking necessary actions.” Dickinson warned that there could be increased budget risks to the scenarios, including more COVID-19 costs and a lack of surety regarding economic recovery. He also mentioned that there are several factors in creating the May Revise that are still unclear.
“Because there have been so many delays in the tax payment deadlines, the state really will not know the tax revenue number they will need to build a budget until possibly late July or August,” said Dickinson. “So most likely what they do adopt in June could very likely change and it will cause us to have to adjust our numbers as well.”
Dickinson mentioned concessions proposed by the state in retirement, special education and other categories, but not enough to substantially reduce the deficit.
The school board will be discussing the budget at its meeting on June 2 and will have to vote on the proposed budget on June 16.
“We won’t have the details of the reduction plan that will be needed in 2021-22, but say, for example, we plug in all information that goes to that middle scenario that requires a $48 million budget reduction,” Dickinson said. “In that scenario we will have to say ‘a budget reduction of $48 million in ’21-22.’ We’re going to have to explain to LACOE [the Los Angeles County Office of Education] that we are going to start working on the details of this; Plan A, Plan B, Plan C, which could include the hope that some revenue comes. We will have to have some plan to address this.”
Dickinson also stated that the district will apply for a TRAN — a tax and revenue anticipation note — which districts often receive to help with cash flow.
“We are going to have a very large TRAN running on the side to make sure we can still meet payroll and pay bills as our fund balance will actually go negative,” Dickinson said. “These are words that I never thought I would ever be saying to a school board.”
Dickinson pointed out that the GUSD entered the COVID-19 era with a 10% budget reserve.
“You were in a great position to ride out a normal rough road,” Dickinson added. “I never thought we would see it all go away in one year, but that is very likely to happen.”
The GUSD has assumed declining enrollment of 1% in budget projections, but board member Shant Sahakian warned that there could be a “mass exodus” of students at all schools in Southern California based on the economic impact of COVID-19.
Dickinson urged the board to take a proactive approach.
On a much brighter note, the board approved the construction of new classroom buildings at both Glenoaks and Monte Vista elementary schools from Measure S funds. The Glenoaks project will cost $12.8 million while $12.7 is earmarked for Monte Vista, which is similar in scope. DC Architects and Rachlin Partners Architects will be designing the new two-story structures, which will replace bungalows.
“We have had a lot of very robust debates about these projects, so I am very excited to see the two classroom projects taking the next steps,” said Sahakian. “When you take a school, there are many things that make it a school but there is nothing more critical than the classroom environment that the students are in. It’s important that these two projects move forward, so that we can improve the classroom environment at those two schools who are currently in bungalows and the future students who are going to be in bungalows.”
Measure S was approved by voters in 2011 and set aside $270 million that can be used only for facilities. There is approximately $60 million remaining in the coffers.
The board also received an uplifting message during the superintendent’s update, as Glendale High School dance teacher Kelly Palmer was invited by Vivian Ekchian to participate in a segment entitled “remote learning best practices.” Palmer, who this fall will begin her 25th year in that position, showed a video that was created through segments submitted by her dancers performing a common number while at home. They danced in driveways, garages, foyers and even on a balcony, but — most important — they danced, expressing the indomitable spirit of youth.
“On March 13 we were two days from state, one week away from nationals and two weeks from internationals, for the 24th straight year,” said Palmer, who was in the board room for the presentation. “We immediately went from dancing 60 hours a week to nothing.”
Palmer offered two online dance classes per day and they were extremely popular.
“It is really sad and really exciting at the same time to be approaching this landmark,” said Palmer of her quarter-century of leading the award-winning program.