With a dark cloud lifting from the district
’s financial picture, Morgan Hill School Board trustees approved
the estimated 2003-2004 budget and the proposed 2004-2005 general
fund budget of $54.6 million.
With a dark cloud lifting from the district’s financial picture, Morgan Hill School Board trustees approved the estimated 2003-2004 budget and the proposed 2004-2005 general fund budget of $54.6 million.
The 2003-2004 general fund budget was $57 million.
“The district has faced extremely difficult fiscal times in the past two years and earlier this year, with $7 million cut during that time,” Deputy Superintendent Bonnie Tognazzini said Tuesday. “In fact, we can say unexpected financial income has changed the picture.”
The next fiscal year’s budget is lower than this year’s because budgets are built without carryover, said Tognazzini. The proposed budget is built each year on income projections and cost estimates.
“This budget is the most tentative of all the budgets you will see,” she told trustees Monday night. “When you see it again in October – that’s when we rebuild it stem to stern – it will have real numbers from the state, it will truly be your budget.”
The new fiscal year starts July 1. State law requires the district to adopt a budget before July 1.
Until the Legislature passes a budget and the governor signs it the financial picture for the district remains somewhat uncertain.
In April, trustees were faced with the prospect of cutting $1.6 million from next year’s budget. After recommendations by the budget committee, they agreed on $900,000 in cuts from the committee’s “consensus” list, including $57,000 in reductions in classified staff, a 5 percent reduction in technology and $50,000 in travel, mileage and conference reimbursements.
The elementary music program, with a price tag of $120,000, was not cut, nor was a district nurse position, trustee stipends totaling $22,000 per year, or the Live Oak High Associated Student Body (ASB) clerk position at $40,000 per year. These programs and positions were on the chopping block but were spared.
Tognazzini told trustees at their May 24 meeting that the financial picture had brightened, thanks to the release of the governor’s May revise of the state budget and increased ADA (average daily attendance funds).
During Monday’s meeting, Fred Gallacinao, director of fiscal services for the district, told trustees that nothing had changed since the last time they saw the budget figures.
“There’s nothing new,” he said. “There have been minor changes to the budget as presented to you earlier.”
The proposed budget does not include any funds for pay raises, other than the step and column increases that certificated and classified workers receive, and the cumulative longevity bonuses received by 17 district administrators.
Tognazzini said the increased COLA (cost of living adjustment) in the governor’s May budget would provide revenue, but the increase is mainly taken up by step and column increases.
“It is anticipated there will be full funding of a 2.41 percent cost of living adjustment across all programs,” Tognazzini told trustees in May. “This is an increase from the 1.84 percent projected in January. Also, school districts receive about 97 cents on the dollar for the entitlement of state funding; it is anticipated we will now receive 97.9 percent cents on the dollar. These two increases provide for an additional $1,255,276 of revenue in the 2004-2005 school year.”
The district has received a total, including the COLA for this year, of 8.41 percent since the 2001-2002 school year.
“The district only received 97 cents on the dollar, and step and column is a new expenditure every year,” said Tognazzini. “It has used 4.78 percent, cumulative, of that 8 percent, and there was a raise in 01-02 that used an additional 2 percent. That leaves 1.25 COLA that we were able to make decisions with.”
Three financial changes account for the brighter budget picture, Tognazzini said.
“Three things came at the end of the year that have made a big difference,” she said. “The RDA dollars, which was a prior year adjustment, the increase in ADA and the settlement of the lawsuit with Jacobs resulting in a $350,000 reimbursement for attorneys’ fees.”
The settlement money and the RDA are one-time windfalls, she said.
“This was a prior year adjustment, so it’s just for this year,” said Tognazzini. “This is the first time we’ve received RDA funds separately. The RDA funds are supposed to continue until 2008-2009, but there’s a possibility the state will try to recapture these funds.”
Trustee Shellé Thomas said she had two concerns before voting on the proposed budget Monday night.
“First, the economic uncertainty, then, we have a potential $500,000 deficit for the end of next year,” she said. “We’re looking at a $151,000 in liability insurance and $272,000 to restore our required 3 percent reserves. I just want to make us aware of that. We’re looking at this even without looking at operating funds for new schools.”
Thomas had asked for an information item, an update on the implementation of recommendations from the annual financial audit, to be moved ahead of the vote on the proposed budget.
Tognazzini told trustees the auditors come twice a year, once at the end of the school year and once in November, and the report is then prepared, with the board typically reviewing it in January.
Two major findings were reviewed by Tognazzini: controls of spending have not been enforced, and the district is spending down reserves.
She told trustees that the district is taking steps to address these concerns.
The human resources department “has been trained and has begun the implementation of position control for 2004-2005.” And a letter from Tognazzini has gone out to all district managers reminding them that “expenditures which exceed the amounts budgeted in the major budget classifications shall not be approved.”
Also in response to the audit report, several fiscal safeguards have been put in place while building the 2004-2005 budget, said Tognazzini. The state equalization proposal – now being debated in the senate budget committee – which would bring an extra $26 per student to Morgan Hill, was not included in the budget. All open teaching positions are budgeted at the average salary range, not beginning range. The budget includes two additional teaching positions, something the district has not done for two years, in the event there are increases at specific grade levels once school opens without an increase in enrollment.
Once the state budget is passed, Tognazzini said, she will meet with state fiscal expoerts to determine the impact it will have on Morgan Hill.