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Basic aid status costs PUSD, leads to ‘qualified’ rating

Linda Satchwell
Staff Writer
12/23/2009


    In Plumas Unified School District’s first interim report and certification of financial condition produced by Director of Business Yvonne Bales, the district was given a “qualified certification.”
    This means that “based upon current projections this district may not meet its financial obligations for the current fiscal year and subsequent two fiscal years.”
    According to Bales, the qualified certification results from the district having to turn over $955,000 to the state. PUSD is a basic aid district and, like other such districts, was assessed its “fair share” commiserate with revenue limit districts.
    Most districts fund their schools in part through taxes. The state, through a convoluted, nearly incomprehensible formula, figures out how much money each individual district should have in total and supplies the remainder from state funds. This is called revenue limit, and most of the 1,000 plus districts in the state are funded this way.
    A few districts, between 60 and 80, actually receive more than enough money from property taxes.
    Basic aid districts are allowed to keep the extra; basic aid is, in effect, a perk.
    With the state budget debacle, each district’s budget is taking a hit: the state is cutting back on the amount it contributes.
    To take what the state sees as an equitable amount from every district, the state is requiring basic aid districts to give up some of their money as well—in PUSD’s case, $955,000 for the 2008–09 school year.
    It remains to be seen, said Bales, whether the state will require the same hit in coming years.
    Further, it’s possible the California Department of Education will look at the district’s finances and, based on its reserve and history, change the qualified rating to a positive one.
    Bales, in consultation with the state CDE, decided to err on the side of transparency and caution, letting the public as well as the state know there is a serious budget concern here.
    With a qualified rating, new requirements come into effect for the district, among them: The district “must allow the state Superintendent of Public Instruction at least 10 working days to review and comment on any proposed labor agreements and to render an opinion on whether the agreement would endanger the fiscal well-being of the district.”
    The district may not issue in the current or subsequent fiscal year any “non-voter approved debt instruments” (such as tax and revenue anticipation notes, or revenue bonds) “unless the (state superintendent) determines that repayment of that indebtedness is probable.”
    PUSD does have a good reserve put aside, which will stand in its favor when the state looks at its interim rating.
    The reserve has been a point of contention with some teachers and parents, however. They have said some of the money should be put into programs for today’s students, rather than put aside for a contingent emergency.
    Bales explained the district hired a highly respected, independent contractor, School Services of California, to do a financial health analysis for the district.
    Basing its report on the district data from the 2008–09 first interim report, the consultants figured the reserve would be needed if the district had to go back to revenue limit funding (where the excess money from high property taxes no longer exists).
    School Services figured the changeover should take three years so that the district could ease itself down to the lower funding amount.
    Bales explained that if the district had to take the hit in one year, there would have to be major cuts in jobs, since that’s where the district’s largest expenditures lie.
    If PUSD can make the transition over three years, she said, for the most part it could use natural attrition from teachers retiring or leaving to minimize job losses.
    But Bales said that would only be possible if the district has the large recommended reserve of 45 percent.
    Another factor that figures into the delicate financial balance, according to Bales, is the likely decrease in property taxes in the district and statewide.
    Since PUSD is basic aid, the tax loss affects it directly. It also affects the district indirectly, because all revenue limit districts count on the state for help. If the district’s taxes are down, either the state has to provide more funds or, more likely, everyone’s funding will shrink.
    District enrollment has been declining substantially every year since 2002–03, which also impacts the amount of money received from the state.
    Finally, the report targets labor negotiations as “another factor that can negatively impact the district’s fiscal stability.” The report notes that, while the district has traditionally had “relatively stable relations with its employees and their representatives,” the 2009–10 school year has yet to see a settlement resolution for either certificated or classified employees.
    Bales said the district has had its “dollars shrink incredibly. We can’t fund all the programs we would like to.”
    With shrinking funds, of course, comes the debate over what to keep and what to lose—often a heated debate when it centers on the education of children.
    In this case, the argument is one that won’t go away anytime soon.
    

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