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FUHSD board approves budget, knowing it will be revised

Fallbrook Union High School District’s governing board approved a budget for the 2020-2021 fiscal year June 22 – with the understanding that the budget will almost certainly be revised in a couple of months once more information about the state’s budget becomes available.

The board unanimously approved the budget, which had previously been presented by FUHSD Chief Business Officer Brenda Mefford on June 8.

Mefford said at the earlier meeting that she expected large changes to the coming fiscal year’s budget by the June 22 meeting, as earlier state spending cuts proposed by Gov. Gavin Newsom were no longer expected to come to fruition but details had not yet been finalized.

However, while the governor and lawmakers announced June 22 they had reached an agreement on the budget, the details of the agreement – which will not result in any spending cuts to K-12 schools after all – were not available at the time of FUHSD’s board meeting.

“At the (June 8) public hearing, I had presented the budget, so all I have today is this version of that,” Mefford told the board June 22.

In the initial budget proposal Mefford presented for the 2020-2021 fiscal year, she projected total revenue of about $27.3 million and total expenditures of about $28.9 million, leaving a deficit of around $1.6 million expected to cut into the district’s approximately $5.1 million in reserves.

Her projections for coming years were even worse, with a $3 million shortfall predicted for 2022-2023.

But given the changes the governor and lawmakers were making to the state budget, Mefford said she expected the school district would revise the budget in the 45-day window allowed by law, and that she would return at a future board meeting with a revision.

“In the next three days, we will have details and at that time we will revise the budget and so we will be back in August,” Mefford said.

Gov. Newsom had proposed cuts to school budgets back in May as the coronavirus pandemic threatened state finances. School districts in California get most of their funding from the state, through something called the Local Control Funding Formula.

The state gives each district the same level of base funding per student, depending on grade level, and it can grant more depending on levels of high-need populations like low-income students, students in foster care and English learners.

That formula mostly leaves school budgets at the mercy of the state – which, right now, is facing plummeting tax revenue due to an economy that has been stalled by pandemic-related job losses. The state also was put in a tricky position when the income tax filing deadline was pushed back to July.

Since the state gets more than half of its revenue from income taxes, the delay in tax filings means the state won’t know how much revenue it will receive for the next fiscal year, which starts July 1, until it is already in the next fiscal year.

In his May revision, Newsom estimated the state will see a decline in revenue of around 22%, and proposed cutting the Local Control Funding Formula by 10%.

Categoricals – funds earmarked for specific purposes like special education or schools with certain programs – would be cut by as much as 50%, and the state will defer as much as $5.3 billion in education spending, the governor said.

But members of the state legislature indicated they did not back the education spending cuts and by June the governor and lawmakers were not as concerned as they were earlier in the pandemic about the state of their finances.

Newsom said in a news conference Monday, June 22, that there should be enough funding for schools to reopen in the fall.

“I think the funding will substantially exist,” he said. “We think a lot of that anxiety is mitigated.”

The agreement the governor and the legislature reached June 22 – which they have a July 1 deadline to pass – keeps funding for K-12 schools and community colleges at existing levels, includes language that prevents layoffs of teachers and classified employees, but does call for cutting nearly $1 billion to the California State University and University of California systems.

According to reporting from edsource.org, Newsom agreed to add $1 billion in one-time federal funding under the Coronavirus Aid, Relief, and Economic Security Act and to distribute the money to more districts to address learning lost during school closures, increasing CARES Act K-12 funding from $6 billion to $7 billion.

The coronavirus pandemic created a projected $54 billion revenue shortfall for next year and Proposition 98, the formula that determines spending for both public schools and community colleges, is expected to fall by $14 billion from Newsom’s first budget proposal in January.

Newsom and lawmakers both assumed the federal government would provide more stimulus funding to make up for that shortfall, but while the U.S. House of Representatives passed the $3 trillion HEROES Act, which includes more than $1 trillion in funds for state and local government, the U.S. Senate has not voted on the proposal.

Without that funding, Newsom proposed an 8% cut to school districts and $5.7 billion in deferrals – late payments – to school districts. However, in negotiating with the state legislature, Newsom agreed to get rid of the cuts and issue $12 billion in spending deferrals, a record.

Deferrals were a tactic used during the Great Recession to keep state funding levels for districts stable while not actually giving them the money until the next fiscal year. That keeps the lights on, but it creates some cash flow problems for districts, sometimes forcing them to borrow money to make it to the next year.

The information from the new agreement will certainly be in FUHSD’s revised budget but, on June 22, none of it was yet known to district staff or the governing board, who thanked Mefford for a presentation that they acknowledged would quickly be outdated.

“I give you a lot of credit, it’s like throwing a dart at a dart board that continually moves, isn’t it?” FUHSD Trustee Sharon Koehler said.

Mefford agreed.

“It’s very difficult to do a budget by revenue that you just know is not correct,” she said.

Will Fritz can be reached by email at [email protected].

 

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