The Pasadena Unified School District’s budget is not doing well. For the first time in memory, we have negatively certified our budget. Approximately $6.3 million in reductions need to be made in the current year to restore our state-mandated 3 percent reserve. Another $15-$20 million in reductions is required for the fiscal year that begins July 1.
How could this have happened so quickly?
Fundamentally, a newer reality exists. Unrestricted revenue and special education revenue have actually decreased over the last two years due to declining enrollment and the lack of significant increases in state funding, from $192,201,544 to $191,638,837, a decline of $562,707. This is unusual, as state funding must increase about 4-5 percent a year to keep up with costs that increase each year that have their origin in inflation. These include annual increases in salary that are built in to collective bargaining agreements, increased health care market costs, increased costs of special education service providers such as nonpublic schools and agencies who serve our neediest children.
Added to this in recent years have been state-mandated increases in retirement contributions, which are in the midst of tripling in size over several years. In addition, the PUSD has added staff even while enrollment has declined, as the superintendent has staffed up to improve services.
Over the last two years, unrestricted salary costs have increased by 7 percent, or $5.4 million, which is a combination of more staff, annual built-in increases, and the 6 percent raise granted to all staff in the spring of 2016. Unrestricted benefits have increased by 21 percent, or $6.4 million, because of the state-mandated retirement contribution increases and increased health care market costs. The amount of unrestricted revenue that must be contributed for special education has increased by 25 percent, or $5.8 million, in just two years. So while revenue has declined by about a half-million dollars, three major drivers of costs have increased by $17.6 million. Those are the fundamentals of our budget crisis.
No, it is not because we are paying out large, increased sums in special education-related legal costs and settlements. Those costs are currently about $1.2 million annually out of total special ed expenditures of $56.6 million. No, it is not because our use of consultants has increased. Unrestricted contracted services have actually decreased over the last two years.
A large advisory committee of district stakeholders has met several times to come up with reductions for the 2018-19 school year and will present their recommendations to the board in January. Any and all discretionary spending will have to be cut. This includes the limited amount of non-special ed busing that we currently provide.
To immediately address the current year and future years’ shortfall, the board has recently acted to reduce its small budget by over 15 percent, staff is bringing forward staffing reductions to the board — the board approved a reduction of 53 aides on Dec. 14, the staff is decreasing contracted services/vendor costs where possible and repurposing staff, and the board is trying to get furloughs from staff — the Teamsters, our maintenance and operations staff, have agreed. Executive leadership will also take furloughs. January and February will see many proposed reductions presented to the board for approval before the district’s second interim budget must be approved in March. The staff will be attempting to present a budget by then that raises our reserve back to its mandated 3 percent, in order to avoid the appointment by the county or state of an overseer.
It is a newer reality. No longer can increases in state funding, combined with attrition of staff via retirements, keep up with increased costs and declining enrollment without making significant reductions to staffing annually. Some of these staff reductions may have to be made through the closure of schools, since some of PUSD’s very high number of PUSD schools are now very small. The board closed four schools for the 2006 school year and two for the 2011 school year. While this is difficult for the school communities, it may be required again soon.
Scott Phelps is a member of the Pasadena Board of Education.