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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