Written by Maureen Magee |Signon Dan Diego.Com/San Diego Union Tribune| http://bit.ly/td9EQ9
7:40 p.m., Dec. 2, 2011 :: San Diego city schools chief Bill Kowba issued a sobering letter to some 14,000 employees Friday, warning about grim finances and layoff notices set to land in mailboxes before the holidays under the threat of midyear cuts.
From: Smolens, Michael
Sent: Friday, December 02, 2011 5:01 PM
To: Smolens, Michael
Subject: FW: First Interim Report and Mid-Year Budget Cuts
Attachments: image001.jpg; image002.jpg
Dear District Employee:
The purpose of this email is to provide you with a “heads up” about a public
discussion that will take place over the next few weeks about the district’s
first interim financial report and mid-year cuts. At the Board meeting on Dec.
6, 2011, I will present budget reduction recommendations to accommodate an
estimated mid-year cut of approximately $26-30 million. At the same time,
there will be an initial reading of draft first interim report budget
solutions to balance a $91-97 million budget shortfall in 2012/13. On Dec. 13,
2011, there will be a second reading of the first interim report budget
First Interim Financial Report
As background, every year the district is required to submit a first interim
financial report to the San Diego County Office of Education (SDCOE) by Dec.
15. This report highlights information on our financial condition for the
first four months of the current fiscal year and a projection of our financial
position for the next two years. With the submission of the report, the Board
certifies the district’s ability to meet all financial commitments. Per SDCOE
guidance, in this year’s first interim, we are required to assume that the
State will impose a mid-year cut to K-12 funding and that we will not receive
a Cost of Living Funding Adjustment (COLA) in 2012/13. As a result of these
two assumptions and other fiscal planning factors, we have calculated a budget
shortfall in 2012/13 of $91-97 million. To address the mid-year cut and next
year’s shortfall, the first interim report will require the submission of a
preliminary list of budget reductions for both scenarios. At this point, the
list of reductions cannot include any assumption of negotiated budget savings
from collective bargaining that may or may not materialize in the coming
Mid-year Cut Reductions and Timing Issues The State budget approved in June
included a legal provision that automatically imposes funding cuts on K-12
education should state revenues fall below targeted projections by more than
$2 billion. Under this provision, the Governor must consider the more positive
of two revenue assessments, one from the Legislative Analyst Office (LAO) and
the other from the Department of Finance, in making a trigger decision. The
LAO projection, released before Thanksgiving, estimated a state revenue
shortfall of $3.7 billion, which, if confirmed by the Finance Department
projections, would result in a mid-year General Fund reduction for San Diego
Unified of approximately $26-30 million. The projection from the Finance
Department will not be released until Dec. 15, after the district’s deadline
to submit the first interim report to the County. Simply stated, we must act
on a mid-year budget cut strategy before the Governor has the required
financial reports that will determine if the mid-year cut trigger must be
At the Dec. 6 Board meeting, I will present recommendations to the Board to
mitigate the mid-year cut by obtaining monies in the following areas:
* $22M – Projected year-end fund balances,
* $4.5M – Real estate sale proceeds,
* $1.7M – Mid-year classified staffing reduction savings, and
* $1.5M – Hiring freeze savings.
I will be initiating a strategic hiring freeze on all non-essential positions
for the remainder of this fiscal year to help replenish our year-end balance
and mitigate the scope of the 2012/13 deficit. In order to achieve the needed
budget reductions in this fiscal year, the classified staffing reduction must
be initiated this month to provide impacted employees with the required 45-day
notice. Unfortunately, the timing of the mid-year cuts requires that the Human
Resources Department begin the notice preparation process before the winter
2012/13 Budget Development
Like the mid-year cut scenario, the 2012/13 $91-97 million reduction situation
must be addressed before the Governor has acted. In this case, the Governor
will not release his draft 2012/13 budget until early January 2012. The first
interim report must also include a list of solutions to address the projected
deficit without negotiated employee concessions. After five years of
significant budget reductions totaling more than $450 million, it is extremely
difficult to achieve budget adjustments of this magnitude without drastic
staffing reductions. Consequently, this list of budget solutions will include
recommendations for significant layoffs touching all stakeholder groups,
programs, and organizations in the district.
As the new year opens, we will be increasing our advocacy efforts in
Sacramento and consulting with our employee groups about concessions that can
mitigate the drastic staffing reductions that must be included in the first
interim report submission to the County Office.
I believe that we can weather this storm if we continue to work together
collaboratively and creatively on a range of solutions. Advocacy with our
elected representatives must be ongoing to urge them to find revenue solutions
for the California budget crisis that can stave the tide of devastation
hitting public education in California.
Thank you for your continued dedication and commitment to our students as we
continue to face this unprecedented economic crisis.
Teachers are safe from midyear job cuts under state law that requires any potential layoffs to be signaled with March pink slips. Cafeteria workers, clerks, janitors and other workers may be terminated after a 45-day warning.
Superintendent Bill Kowba
About 55 nonteaching jobs are up for elimination by Feb. 2. However, a wave of layoff notices would be dispatched throughout the district to accommodate the seniority-based bumping process that gives seasoned employees the ability to take a position held by less-experienced colleague.
The San Diego Unified School District’s budget woes have been well-publicized for months and are unlikely to come as a surprise to employees. Even so, Kowba sought to provide all personnel with a “heads up” on the situation in Friday’s memo.
The district is bracing for midyear cuts of $26 million to $30 million to it’s $1.057 billion operating budget, based on disappointing financial projections from the state, setting the stage for a potentially devastating budget scenario for the 2012-13 school year. In October, Kowba made the alarming announcement that midyear cuts could push the district into insolvency and potentially force a state takeover of local campuses.
Making it through this school year would require the district to drain $22 million from a reserve account, spend $4.5 million in real estate proceeds, and impose a hiring freeze to save $1.5 million, Kowba said. Another $1.7 million to plug the shortfall would come from eliminating about 55 nonteaching jobs.
Kowba acknowledges the poor timing in his memo: “Unfortunately, the timing of the midyear cuts requires that the Human Resources Department begin the notice preparation process before the winter break.”
Next year, many more employees could lose jobs, Kowba said in the memo. The superintendent will release preliminary cost-cutting measures on Tuesday as the school board lays the ground work for another grim budget.
“... it is extremely difficult to achieve budget adjustments of this magnitude without drastic staffing reductions,” Kowba said in the letter. “Consequently, this list of budget solutions will include recommendations for significant layoffs touching all stakeholder groups, programs, and organizations in the district.”
Like other districts up and down the state, San Diego Unified has been bracing for midyear budget cuts ever since California’s independent legislative analyst issued dire revenue projections in November. A second and pivotal fiscal forecast is set to be released on Dec. 15 by the state Department of Finance.
The state balanced its current budget under the assumption that revenues would grow by $4 billion. Automatic cuts to state programs will start if revenues fall more than $1 billon short of that mark.
The report released last month from the state’s legislative analyst predicted revenues would come in $3.7 billion short, enough to trigger $1.35 billion in cuts to schools.
Gov. Jerry Brown must rely on the most favorable of the two state fiscal reports to authorize the triggers. But districts must begin balancing next year’s budget under the assumption that midyear are a given.
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