If all goes according to plan, Gilroy Unified School District could regain its financial independence by June.
Cash flow issues, problems with fiscal oversight and an usually high personnel turnover in the business office prompted the Santa Clara County Office of Education to step in last month and take financial control of GUSD on a temporary basis.
Nimrat Johal, the county-appointed adviser, walked district leaders through the roadmap to a balanced budget at the regularly scheduled Board of Trustees meeting Thursday night. Board members had little to say after her cursory half-hour presentation. Trustee Patricia Midtgaard and Superintendent Debbie Flores agreed that the district welcomes the county’s help and looks forward to getting back on track financially. It was a sparsely attended meeting. Only a handful of people showed up, half waiting for their turn to speak on another agenda item.
Johal plans to bring a list of proposed budget cuts to trustees on April 1, have trustees finalize those by April 19, then have them come up with a budget proposal by May 15. By June 20, they should have a balanced budget – just in time for the new fiscal year.
It’s unclear right now whether any of Johal’s budget cut proposals will include items that require negotiations with labor unions, she said. Johal doesn’t anticipate having to cut jobs, hours, pay or benefits, though some 80 percent of the $82.2 million budget goes to employee salaries and benefits. That means the cuts will come from services ($10.5 million of the annual budget), books and supplies ($3.1 million) or other miscellaneous expenses ($1.5 million) from the general fund.
“It’s important that we roll up our sleeves now,” said Johal, adding that there’s already enough staff support for the spending freeze in place and she heard many teachers would understand if they had to cut into the supply budget.
One of the first steps for Johal to take control of GUSD’s finances was to impose a hiring and spending freeze and get the district to borrow $3.8 million from the county to afford operating costs this year. The district will borrow another $2.8 million internally to prevent the money problem from trickling down to the classroom.
On top of the immediate shortfalls stopgapped by emergency loans, the district projects a growing rate of deficit spending of $200,000 this year, $2.1 million next school year and $1.5 million in 2014-15, according to a Feb. 26 memo Johal sent to Flores.
The problem, she told trustees Thursday, is that the district kept increasing spending as though funding levels never dipped during the recession and following snail-slow economic recovery. That dip in funding and rise in spending led to divergent trajectories that, on a graph, literally widen the budget gap. Once the district dug into reserves to stanch the bleeding, it started an unsustainable cycle it couldn’t halt without outside help.
Issues at GUSD identified by the county that needed to be addressed included:
• Missing deadlines to apply for deferred state payments so it could get emergency funds on time;
• A nearly million-dollar deficit in self-insurance money:
• A lack of a 3-percent reserve fund;
• A growing deficit;
• Failure to keep the county in the loop regarding input on labor contracts;
• A $2.3 million overpayment for workers’ benefits – caught after the fact and check cancelled;
• Missed payments for dental and vision insurance.
It’s rare for the county to step in and take the reigns, Johal said. The county sent several warnings before resorting to direct intervention.
Per-pupil funding for the 10,680-student district hasn’t been and won’t be affected, said Flores. Neither will salaries. She blamed the money mess on a year-and-a-half of high turnover in the business office. The whole fiasco was both a surprise and an embarrassment, Flores said, adding that she and other trustees are committed to cleaning it all up and cooperating with the county.
The good news is that the district will see more money come in this year, thanks to the voter-approved Proposition 30, which approved more money for schools and will help restore 10 furlough days for Gilroy teachers.
But it’s all been just talk so far. To earn a positive certification from the county – which is basically just a statement that the district can meet its financial obligations – trustees actually have to vote on some cuts and figure out ways to boost revenues. Johal said that hasn’t happened yet.
“They’re just paper reductions at this point,” she said at the Thursday meeting. “We have to figure out what are the next steps.”
