While some school districts’ budget shortages have recently led to layoffs, the San Marino Unified School District has been able to mitigate state revenue shortfalls with a “cushion,” keeping all employees unscathed amid a projected trend in deficit spending.
During the March 12 Board of Education meeting, Chief Business Official Michael Lin presented the findings of the second interim financial report and projections for the next two years based on current financial standing. Deficit spending is defined as when a school district dips into additional reserves from its general fund.
Though Lin reported that SMUSD’s projected fiscal year 2023-24 end-balance is about $16.2 million, compared to its beginning balance of $23.1 million, he said the district remains in “good shape,” thanks to money set aside for rainy days.
“So basically, we’re in deficit spending but we’re still in very good shape. We have a total of $8 million in committed funds — that certainly provides a cushion to help the district weather the state budgetary shortage storm that we are currently in,” Lin said.
The makeup of the committed funds includes $2 million for future fiscal stabilization, $2 million for cash flow reserve, $1.5 million for future certificates of participation (COP) payments and $2.5 million for declining enrollment.
Contributing to about 16% of the district’s budget, Superintendent Linda de la Torre said the $8 million in committed funds were saved during the pandemic, when SMUSD received an influx of one-time state and federal funds. She added that the district consistently allocates restricted funds first, which frees up the General Fund.
“The $8 million in committed funds provides fiscal stability in our budget,” de la Torre told the Tribune. “Our students are the lifeblood of our school district, and our employees are the intellectual capital that allows us to continue to perform at a very competitive and high level. We are constantly monitoring our expenditures in order to retain our talent, who provide an excellent educational experience for all our students.”
Lin also shared the news that SMUSD has received a positive certification on its second interim financial report, meaning the district can meet its financial obligations for the current year, as well as two subsequent years.
The report’s revenue assumptions are based on three components, one of which is the steep decrease in state funding, as proposed in Gov. Gavin Newsom’s California budget. The cost-of-living adjustment (COLA), according to the proposal, is expected to plummet to 0.76% in 2024-25 from the current 8.22%, and then it is expected to rise again to 2.73% in 2025-26.
“School districts are using this new COLA information to announce layoffs. … SMUSD does not need to do that because of the healthy ending balance we have,” Lin said.
The other two revenue assumption components are SMUSD’s enrollment increase of 184 students from the 2022-23 school year, as well as the district receiving donations from local community organizations, like the San Marino Schools Foundation, PTAs, ASBs and more. All of those contributed to its bottom line — and all for which, Lin said, the district is “eternally grateful.”
The first interim report is due in October, the second is due in February/March. The governor’s budget comes out in January and the governor’s revision is in May. The district budget must be adopted and sent to the county in June.
When comparing the report’s key revenue assumptions to the first interim revenue reported in end-October, one observation made was the change in the local control funding formula (LCFF), which decreased to $32.9 million from $33 million. Lin said this amount took a slight dip because student attendance decreased.
“It’s not enrollment that has decreased since the first interim, but the attendance,” explained Lin, who noted that students in TK through third grade that were absent or took partial days resulted in the loss of 16.84 attendance units. He also added that some money was lost in this category because lower grade levels get more money in relation to attendance units.
Meanwhile, special education funding increased to $4.54 million from $3.97 million. The rise was primarily due to an increase in local revenues from the Special Education Local Plan Area (SELPA), which is an organization in the west San Gabriel Valley that pools resources for special education in the region.
Sixty-two percent of SMUSD’s General Fund revenue comes from LCFF, with 35% made up of property taxes and 27% coming from state aid and the Education Protection Act. Since the $18.6 million in local property taxes do not generate enough for all four schools, Lin said the district receives $14.3 million in state subsidies to make up the difference.
“LCFF is a funding formula dependent on student demographics and SMUSD students generally come from affluent families, and as a result do not qualify for more state aid like many other districts do,” Lin said. “In some school districts, property taxes alone pay for the education provided by local schools.”
To help close the funding gap in San Marino, parcel taxes generate another $6 million, accounting for about 11% in General Fund revenues. Parcel taxes contribute to teaching positions, as well as instructional technology support.
The San Marino Schools Foundation’s annual grant of $2 million makes up 4% of the total revenues. This donation pays for 20 teaching positions — five at each of the four schools — and this has been consistent for many years. Lin said this has remained the case even though minimum teaching salaries have risen due to the increase of cost of living for the district’s lowest-paid teachers.
The remaining pieces of the revenue pie are special education funding at 8%, bringing in $4.5 million; other state revenues at 7%, or $3.5 million; federal funds contribute 5%, or $2.5 million; PTAs, ASBs and miscellaneous bring in 2%, making $1.08 million; and facility use and interest income bring in 1% with $827,416.
Seventy-one percent of SMUSD’s expenditures represent salaries and benefits — certificated teaching salaries at 34% with $19.7 million; employee benefits at 21% with $12.2 million; and classified salaries at 16% with $9.1 million.
Operating expenditures make up 17% of the budget with $9.8 million. The services under this category are instructional and non-instructional licenses, insurance, utilities, rentals and repairs, legal services, internet and W-Fi, consulting agreements and more.
The remaining expenditures include equipment at 5%, with $2.8 million, and books and supplies at 7%, with $4.09 million.
“Our current financial state is strong thanks to the San Marino Schools Foundation, PTAs, booster clubs, PTAffiliates, Rotary Club, Chinese Club and the community at large,” de la Torre said. “Overall, the second interim report demonstrates fiscal solvency based on the funding factors from the governor’s January budget proposal.”
SMUSD, like many other school districts, is awaiting the state’s budget revision to arrive in May. Whatever results may come, de la Torre said, SMUSD will need help to update the aging school site facilities — an ongoing project for which the district has not yet established how it will be paid.
“As one of the lowest-funded public schools in the state, we continue to need the community’s support in capital facilities, which is not only an investment in our students’ safety and education, but an investment in high home property values,” de la Torre said.
First published in the March 21 issue of the San Marino Tribune
