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Sweetwater School District Discovers $30 Million Hole in Annual Budget

September 28, 2018

By Sandra G. Leon

South Bay middle and high schools could face budget cuts after the district found it had $30 million less than it expected.

The District made the issue public at a monthly meeting of its Board of Trustees this Monday.

“When our staff was finalizing this [budget] report in late August, we detected some cause for concern of a potential shortfall in closing our financial books for the 17-18 school year,” reads a statement from its Board of Trustees and Superintendent Karen Janney.

The budget miscalculation seems to have been discovered after a new chief financial officer began working at the District last month.

Before Jenny Salkeld began her job, her predecessor and two other financial managers all retired within weeks of each other.

The major issue that led to the budget gap is connected to employee raises the District recently approved, which the District under budgeted by $16 million for this year, combined with having ended last fiscal year more than $20 million below what was expected due to lower enrollment rates and errors in accounting for expenses.

After making one-time fund transfers and funding changes among its construction funds, the District’s unrestricted general fund, which is used to pay regular expenses, is now expected to end up with a negative $4 million balance for this fiscal year ending in June, and the District has no reserve funds.

By state law, school district’s must maintain about 2 per cent of their annual budget in reserves, which for Sweetwater’s $350 million annual budget should equal more than $7 million.

“As a result of a shortfall in closing the financial books of 2017-18 school year, we will have to revise/rebuild our adopted budget for the 2018-19 school year,” the statement also reads.

Sweetwater has until October 8 to present a revised budget for next school year, but it has few options.
Cuts to certified teachers require a “pink slip” notice to have been given by March 15, so any such cuts could not come until next year. Cuts to classified employees, such as maintenance and support staff, only require a 60-day notice.

Additional cuts could come from books, supplies, consultants, legal fees, and other non-staff expenses.
According to state law, each of the California’s 1,050 school districts must approve their annual budgets each year without running deficits. Each county office of education must oversee and approve the budgets of each district within its county.

For Sweetwater, the San Diego County Office of Education and its board serve as the fiscal overseers of its budget.

When any district falls below the required financial levels for the following year, the district receives a “negative” rating, triggering on-site assistance from the county. At that point school, districts can seek loans to maintain cash flows.

If a district becomes fiscally insolvent, the county office of education is authorized to install an appointed administrator to run the district, and the school board’s authority is suspended.

During the past 17 years that the state oversight process, known as AB 1200, has been in place, only a handful of districts have fallen below the minimum financial standards that required a takeover, including Oakland and Compton school districts. Appointed administrators usually make drastic budget cuts to return the districts to financial solvency.

In both the Oakland and Compton takeovers, Randy Ward was tasked to serve as the appointed administrator. Ward later served as Superintendent of San Diego County Office of Education.

During his tenure in Oakland, Ward made changes to its internal operations, finances, closed schools, and fought for a school bond ballot measure.

The cuts Sweetwater will need to consider may have to include negotiations with its employee labor unions to seek concessions over the next few years.

The District’s public statement made it clear solutions would require input from stakeholders.

“Since we first noticed the concern, we have been sharing information with our Board of Trustees, site and district leaders, as well as our labor partner leaders. Our commitment during this process continues to involve voices, opinions, recommendations, suggestions as we move forward to rebuild the 18-19 budget,” the statement reads.

The next board meeting is scheduled for Oct. 8.

Sweetwater Union High School District educates approximately 42,000 students among its 27 middle and high schools in Chula Vista, Imperial Beach, National City, and south San Diego communities.

School Board Trustees include Board President Paula Hall, Vice-President Kevin Pike, Nicholas Segura, Arturo Solis, and Frank Tarantino.

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