Like all household budgets in America, a school district’s budget is the driver for many of the things that occur each year. Like a household budget, school districts have costs for facilities, utilities, transportation, materials/supplies, and personnel. Like a household budget, the costs associated with the individuals that make up the household (i.e., families or personnel) seem to require a majority of that budget. School districts have very similar challenges to most households in that approximately 80% or more of any school district budget is allocated to personnel and benefit costs for its employees.

Because individual school districts have local control and are allowed to make decisions about how and on what they spend their base funds, not every school district has the same level of compensation (e.g., hourly/monthly pay, health benefits, etc.). While there is so much more to creating a positive working experience for an employee than money, we all know that compensation is important in any job. Due to the rising cost of employee benefits and the rising cost of living in California, school districts are finding it difficult to provide the raises desired and deserved by their employees. Saugus Union School District (SUSD) is one of those school districts who is struggling with the current economic demands all of the competing factors create.

To understand how a school district’s budget works, one must understand the connections between student enrollment, attendance, and staffing of classroom teachers. In California schools receive $7459 (TK-3) and $7571 (grades 4-6) dollars for every student as its base funds, plus an additional $776 dollars for every student in grades TK-3 for class size reduction, and an additional amount ($459 (TK-3) & $422 (grades 4-6)) dollars per student who is in one of the unduplicated categories (English Learner, Foster Youth, or socio-economically disadvantaged). Districts whose unduplicated students are greater than 55% of their enrollment get an additional grant amount. SUSD in not one of those districts. The unduplicated population in SUSD is 27.84%. The LCFF (Local Control Funding Formula) is fully funded for 2019-2020 and SUSD can expect to receive following funding as a result:

2017-2018 History of Budget and Class-size
As stated earlier the number of students enrolled drives the number of staff needed. Each year SUSD examines its projected enrollment for the coming school year, reviews its anticipated budget and then determines its expenses. This is a standard budgeting process for any business or institution. Late in the 2017-2018 (May) school year, the District entered into an agreement with all three of its associations (Saugus Teachers Association (STA), California School Employees Association (CSEA), Saugus Administrators Association (SAA)) for an increase in salary (2%) and an increase in benefits ($650/month per employee for medical or $250/month per employee for cash-in-lieu). In 2015-2016 SUSD agreed to increase compensation, too (5% for salary; $600/month for benefits). To allow for the agreed upon level of compensation to be ongoing, it was necessary for SUSD to do two things – deficit spend for a couple of years and to actually implement a class-size building block that has been part of its agreements since 2013.

Following the Great Recession, California schools have been allowed to have class-sizes that were higher than the original “class-size reduction” language in Education Code (24 students in grades K-3) if they had an agreement with their teacher association that indicated a larger number. In 2013 SUSD and STA had an agreement (MOU) that stated: “The grades Transitional kindergarten (TK) through third (3) maximum average class-size enrollment shall be 28:1. For all subsequent school years, the District agrees, if financially viable, to make progress toward 24:1 average class-size goal in grades TK-3 at each site…” That agreement was added to the official collective bargaining agreement in 2018.

In 2017-2018 and in 2018-2019 class-size was established using the ratio of 24:1 (TK-1) and 26:1 (grades 2-3). Grades 4-6 have been set at 31:1 for many years and continue at that level today. There is no additional funding to support lowering class-size in these grades. Maintaining the lower class-size while providing the increased compensation caused SUSD to deficit spend (i.e., spend more money this year than it received) approximately $2.2 million projected in December, 2018 for this school year. This was allowable as it was always intended to be a single year solution for implementing the true building block of 28:1 in TK-3 in future years.

While SUSD has been in declining enrollment for several years, the 2019-2020 school year shows and unexpected decline of 184 students. This was a blow to the budget, but it was a bigger blow to future budgets as SUSD is projected to lose 336 students over the next 2 years. Remember, fewer students mean fewer dollars and fewer students mean the need for fewer classes. SUSD deficit spent $743,322 for the 2017-2018 school year, is projected to deficit spend $1,818,385 for the 2018-2019 school year, and is projected to deficit spend $1,113,785 in the 2019-2020 school year. School budgets, like household budgets, can be very fluid month to month so these are the projected numbers. We won’t know the actuals until the end of each year.

Unfortunately, it is no longer financially viable for SUSD to have class-size ratios of 24:1 and 26:1 in grades TK-3 and remain financially solvent. The District has a reserve fund of $11,113,283. This is 10.39% of the total budget. California law requires that districts have a minimum of 3% reserve funding for emergencies. The Government Finance Officers Association (GFOA) recommends districts have a 17% reserve fund (approximately two months’ expenses). This is important to note as a single payroll month for the district is $7.2 million. If SUSD was to continue to deficit spend to maintain the class-size of the past, the reserves would be below the required 3% in the 2020-2021 school year and the district would be in receivership/bankrupt.

School Employees Retirement Program – The SERP
In addition to knowing that we would deficit spend for a few years and that we must implement a larger class-size, SUSD was faced with the specter of a potential Reduction in Force (RIF). RIFs or lay-offs NEVER make for a positive environment or happy employees. Whenever possible districts try to avoid making cuts that will create RIFs as they destroy moral and devastate our future teaching force. But when the deficit is large, there is little hope of RIFs not becoming a reality. Remember, staff is 80% or more of any school district budget.

SUSD has averaged 11 retirements in its teacher group annually. Because of all of the factors discussed above, the District needed approximately 28 retirements in its teacher group to avoid RIFS. The use of the School Employee Retirement Program (SERP) offered SUSD and its more experienced employees a win-win. Employees 55 years of age or older with 5 or more years of experience could elect to retire early and they would receive an annuity over five years equal to 80% of their annual income (60% for management). This annuity is in addition to their regular retirement benefits. While there is a cost to the District for this program, that cost, combined with limited rehiring of staff created a savings of $2,985,866 for the 2019-2020 school year. The savings was within $100,000 of what was needed to avoid RIFS, implement the 28:1 class-size building block, and slow the deficit spending for the future.

It is absolutely amazing that 82 teachers, administrators and classified staff members will get a chance to retire early and enjoy more time with their friends and family. It is even more amazing that the District avoided laying off any teachers! Both of the presentations – SERP and 2nd Interim – that were given to the SUSD Board of Education on March 5 are included on this page. They detail all of SERP process, the savings, and the current/projected budget future.

2019-2020 and Beyond
It is essential that SUSD has a balanced budget in the near future so we can focus on spending “this year’s money on this year’s kids.” School districts are not in a business of making money or of saving money. We are in an endeavor where we receive a set amount of money and we are charged with doing all we can to achieve excellence within the scope of a single year.

SUSD has spent many years achieving excellence and will continue along that path for the future. During the coming years, we will have to spend time examining our needs, reviewing our regular annual expenses, and refining how we do business so we can ensure that we do not deficit spend any further. We want to “make progress towards 24:1.” For now, however, we will need to be wise with our spending and maintain our solid building blocks.

The Governing Board and Superintendent are participating in several legislative action events to advocate for “full and fair funding” for our schools. With California being 41 in per pupil spending it is clear as to how SUSD and many other districts are struggling to make ends meet. WE encourage each of you to help us advocate for full and fair funding by writing your local representatives at the state and national levels. Both Sacramento and Washington need to hear that education matters to us and that we need additional funding in order to continue providing America with an educated future.

Please join me at one of the following events where we will share our budget, answer questions, and take suggestions from our stakeholders:

Monday, March 25, 2019 – 6:00 p.m. at SUSD District Office

Tuesday, April 9, 2019 – 9:00 a.m. at Skyblue Mesa Elementary **Please note date/time change

Thursday, April 11, 2019 – 6:00 p.m. at Bridgeport Elementary **Please note date/time change

***Link to: Session 2 Curriculum, Instruction, and Assessment – the future in SUSD and Science Instruction (NGSS)***

Sincerely,
Colleen Hawkins, Ed.D.
Superintendent, Saugus Union School District