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 solutions.
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 months.
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 implemented.
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 break.
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.
[Kowba Signature] Bill Kowba Superintendent
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