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Friday, Sep. 11, 2009

Five school districts on budget watch

County office of education gives 'conditional approval'

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Modesto City Schools and Sylvan Union School District have been put on notice that their finances are seriously out of balance and need to be adjusted, likely leading to deeper budget cuts in the next school year.

Modesto City Schools, the largest district in the county with about 28,000 students, projects it will spend $9.1 million more than it takes in this year. For Sylvan, the number is $1.6 million.

Deficit spending that depletes savings, declining student enrollment and unresolved union negotiations are among the red flags to the Stanislaus County Office of Education, which is required to review the districts' budgets.

In letters sent out last week, the county office gave only "conditional approval" to Modesto, Sylvan and three other small districts. If the districts can't make the necessary budget adjustments, they could face some level of state intervention.

Districts across the state are struggling financially because of the recession. In the Northern San Joaquin Valley, foreclosure and unemployment rates are among the highest in the state, affecting enrollment at many schools.

Typically, one or two small districts are placed on the county's list of financially troubled school systems. Modesto City and Sylvan have never been on the list. This year it also includes Keyes Union, La Grange and Roberts Ferry.

"Districts are going to have to cut expenses or increase their revenues," said Don Gatti, assistant superintendent of business services at the Stanislaus County Office of Education, who reviews finances for 25 districts. He noted budget cuts are the more likely of the two.

But cutting expenses is difficult to do once a school year starts because most school district budgets already are committed to employee salaries and benefits.

That means parents and students will notice the cuts during the 2010-11 school year — with larger classes, fewer sports teams and electives, fewer new textbooks and fewer building repairs.

This is the first time more than one Stanislaus County district has been red-flagged in the same year.

Gatti said smaller districts often are affected more in tough times because they have less money to shuffle around and cover shortfalls. They also have fewer employees to lay off and classes to cut.

That's not the case with Modesto City Schools, which has chopped $18 million from its budget the past two years. Superintendent Arturo Flores said Thursday he expects to cut $15 million to $19 million from the 2010-11 budget.

"We're looking at every option," he said.

The most likely moves include continued freezes on spending and hiring, negotiating more salary and workday reductions from employees, completing only necessary maintenance projects, conserving energy and boosting enrollment.

Flores said officials plan to close one elementary school for the 2010-11 school year, which would save $250,000 to $400,000 annually.

Sylvan Union Superintendent John Halverson said he was so "worn out from identifying reduction plans" over the last two years that he didn't finish the third year of projects that districts are required to estimate.

"We are on notice," he said about Sylvan's budget getting conditional approval. "(County officials) are saying things are bad, or they look like things could be bad."

Sylvan also has a higher percentage of special education students, who tend to cost more to educate. The district spends about a fifth of its budget on special education programs, Halverson said.

La Grange, a one-school district about 30 miles east of Modesto, is deficit spending one-sixth of its $310,000 annual budget. With 13 students and four employees, Superintendent Joseph Magnu is not sure where to trim. He also is the principal and teacher.