Visalia Unified School District CFO says number has already shrunk and only represents 1.8% of the total budget
By Reggie Ellis
visalia – Last week’s special meeting of the Visalia Unified School District Board of Trustees was light in length but weighty in its significance.
Among the items considered was an agreement for agricultural pathways with College of the Sequoias, a review of the district’s Local Control Accountability Plan (LCAP), which determines how much state money the Visalia Unified School District (VUSD) will receive, and the first interim financial report for the current fiscal year 2019-20. The latter was concerning as the presentation for the report included a $6-million deficit in the district’s unrestricted general fund. Unrestricted money makes up about 85% of the district’s budget so the number was cause for concern.
In reality, said Nathan Hernandez, chief financial officer for VUSD, the deficit represents just 1.8% of the district’s total $342 million budget. Hernandez said when the district passed its budget in June it was projected to finish the 2019-20 year with a $5.28 million surplus between its unrestricted and restricted general fund but by the end of October was showing a $6.17 million deficit. He said the shortfall is primarily due to an $8 million increase in salary, which was negotiated after the budget was passed, and a carry over of $9.15 million in one-time costs originally budgeted for the previous school year. Those costs included $6.15 million for instructional materials, $1.74 million for facility projects, furniture and classrooms and over $1 million in other costs included in the previous budget.
Hernandez used the example of Denton Elementary School, which opened this fall. He said the construction costs had been spent prior to the current fiscal year but classroom and equipment costs were not paid until after the start of the 2019-20 year. These funds are then reallocated in the current year and the budget is adjusted.
“Some of Denton Elementary’s actual expenses hit in the current year but were budgeted in the prior year’s budget along with the revenues,” Hernandez said. “Projects that carry over from one year to the next make it look like deficit spending.”
The deficit is projected to be even less next year based on conservative averages. After adjusting for the rise in projected revenue and expenses, the 2020-21 FY is projected to have a $4.88 million shortfall, which represents less than 1% of next year’s budget and by 2021-22 will be just $380,000, or a fraction of a percent of the total budget.
The budget had already been reduced even as board members discussed the report as Hernandez said the district had received $2 million in one-time, unrestricted revenue last month for special education preschool enrollment that would go toward eliminating the deficit. The first interim report also did not include an increase in average daily attendance funding the district will receive in April for an additional enrollment of 332 students.
That doesn’t mean reducing the deficit will be easy. Hernandez said there are significant financial challenges facing the district including $5 million increases to pension over the next two years, a $1.5 million increase in minimum wage over the next two years and a $3 million annual increase in special education programs.
School board member Neissen Foster said that the district received a “positive” financial rating from the Tulare County Office of Education, the highest rating it can receive. Hernandez said the designation means that the district has met its requirement to have 3% of its total budget in reserve for the next two fiscal years. Foster also noted that the during a previous term on the school board from 1999-2002, the district’s reserve fund barely met the 3% requirement but currently sits at 9.7% or about $36 million.
“I think our district is doing a fine job,” Foster said. “I really think the citizens of Visalia have very little to worry about. I think we will be able to solve this deficit pretty easily.”
The board unanimously approved the vote 5-0 as board members Joy Naylor and Lucia Vazquez were absent.
The second interim report will be presented to the board in March and cover district finances through Jan. 31, 2020. After the Governor releases his budget proposal early next month, Hernandez said his staff will ask the board to consider a budget reduction. He said financial staff is already working with principals, directors, department heads and union leaders to identify the reductions in order to present a balanced budget in June for the following fiscal year.