Denair Unified School District left with painful options as financial insolvency looms

DENAIR -- At Denair Unified, jobs were Job One.

The district drained savings to avoid painful layoffs and salary cuts because, as school board member John Plett put it, "In a small town like this, you know every name."

But the well is about dry. Savings won't be enough to pay the bills for 2012-13, Denair's centennial year. In the coming days, the Stanislaus County Office of Education expects to issue an official notification that the district is on the brink of insolvency, believed to be the first such notice in the county's history.

Other districts in the county have avoided such a plight by making the pay and job cuts Denair has resisted. Modesto City Schools, for example, laid off teachers and support staff and shortened the school year by a week to close budget gaps as enrollment declined. It also has hired teachers on a one-year, temporary basis.

Denair Unified's situation "is uncharted territory for us," said Don Gatti, head of the county office division that reviews school district financial reports.

Gatti's office blew the whistle when Denair's fall enrollment report came up short of projections, too low to support its $10 million budget. In 2011-12, the district spent $745,676 more than it made, leaving it with only $448,808 in reserves to start this year.

Even without midyear state funding cuts — for which the district had no contingency plan — Denair must slash $300,000 from this school year's budget to stay in the black, and an estimated $1 million for 2013-14.

"Without large, ongoing budget reductions in the next few months, the district will have a difficult time staying in business," Gatti said.

His office brought in a fiscal adviser for the district. "She's helping them develop a financial recovery plan and is a resource for us in helping get the district to react in time," Gatti said.

Denair Superintendent Ed Parraz said having an outside expert will help bring folks to the table. "It's a third party giving information. There it is. It's black and white," he said.

Difficult decisions ahead

If Denair Unified fails to act, it risks the state stepping in to put its fiscal house in order, replacing the superintendent with an overseer who doesn't know anyone's name.

Only about a dozen districts in California have gone that far, but more have come close, Gatti said. "Sometimes those things can go up to 11th hour. These are very, very emotional and very difficult decisions," he said.

For Denair, the depth of the hole means its difficult decisions inevitably will come down to people. "Our priority is to preserve jobs. That has gotten us into this situation," Parraz said.

In 2010-11, the most recent Ed-Data figures show, the district had 30 percent more administrative help than the state average and 25 percent more teachers per student. That year, Denair had about 19 students per teacher. That ratio fell to 16 students this year, while most California districts went in the opposite direction in the face of state and federal cutbacks.

By contrast, Sylvan Union School District has raised class sizes from 20 to up to 32 per class. It cut teachers and support staff, but left salaries alone.

"Budget reductions are the most heartbreaking decisions I've ever had to make as a school board member," said Sylvan board President Terriann Zeek. "We've had to cut back on maintenance and grounds workers, custodians, librarians, middle school deans, counselors and a resource officer, to name a few. Each reduction was extremely painful."

Pressure to cut salaries

Budget reductions for Denair will be harder at this point in the school year, with salary cuts at the top of a short list of viable options. The district already cut the maximum of five school days. Those furlough days added up to a $646 per year concession by teachers, who last took a salary cut (1 percent) in 2008, Parraz said.

But in a measure of how difficult cutting school budgets can be, Denair teachers continue to get extra pay for seniority and college credit. By district figures, so-called step and column pay will cost a cumulative $123,000 this year, while the five furlough days saved only $54,000.

Denair Unified Teachers Association President Barry Cole disputes those figures, saying he's heard different numbers. "I need to be able to trust what's being put out there," he said.

By law, teachers cannot be laid off this school year, but Cole said he knows the pressure's on to agree to salary cuts. "We're already among the lowest paid in the county," he said.

Layoffs could be on the table for next year.

"I understand there's going to be cuts districtwide. What cuts and where, that's the discussion," Cole said.

The district's fiscal problems came to public light at a special board meeting Nov. 1, when Gatti laid out its unsustainable spending. At its next regular meeting, Dec. 13, the board is expected to vote on a course of action.

Plett said he's confident the board and employees can come together to right the ship. "I think we'll weather this. We have some good people working on it," he said.

Bee education reporter Nan Austin can be reached at naustin@modbee.com or (209) 578-2339. Follow her on Twitter, @NanAustin.

WHAT OTHER DISTRICTS DID

All California schools districts have contended with five years of lower state funding and increasingly irregular payments.

• EMPIRE UNION dealt with drastic declines in enrollment. It laid off teachers to match the loss of students and, after a difficult and draining community debate, closed Teal Middle School to save money. It leased the facility to Aspire Public Charters and receives some income from the property.

• CERES UNIFIED had rising enrollment but wanted to keep class sizes small and the school yearlong. In 2010, it got a whopping 8.5 percent salary concession from all its employees, with a deal structured to each year bring back 1 percent of salary and raise class sizes by one student. Salary savings and stable enrollment allowed the district to weather the cuts and let attrition reduce the ranks. Ceres board members this month conditionally approved a small raise for 2012-13.

• MODESTO CITY SCHOOLS enrollment is leveling off after several years of declines. The district laid off teachers and support staff and sliced a week off the school year to close budget gaps. It has hired teachers on a one-year, temporary basis and tied specific jobs to special funding, giving it flexibility to shrink staffing if funding drops.

• SYLVAN UNION raised class sizes from 20 in primary grades to up to 32 districtwide to keep ahead of the fiscal curve. The far fewer numbers of teachers, custodians, clerks and other staff members allowed it to leave salaries and the number of school days untouched.