2016-17 Budget Matters: OUSD Continues to Face Financial Challenges

Marc Tafolla | March 23, 2017

The District is facing serious financial challenges and will need to make tough decisions between now and June to meet their financial obligations and avoid triggering county or state intervention. At the onset of these budget issues, we identified issues related to the current school year and issues related to next year (2017-18). This update is focused on the current year issues.

Revisiting the Issues

As you may recall, some of the issues that created financial pressures for this school year were:

1. Overspending during the 2015-16 school year which caused OUSD to spend its current year reserve [$5.5 million]
2. Choosing not to reduce the teacher force by the proportionate 35 teachers when enrollment numbers declined this year [$3.2 million]
3. Under budgeting for the current year for Special Education [$5.0 Million] and the updated financial system [$2.0 million].  

Those issues, coupled with flat funding for next year, caused the Board to take action in January. The Board adopted the Spending Limitations Protocol with the goal of saving between $11-13 million to pay for what is listed above. They also established an ad hoc budget committee to dig deeper into the budget issues by receiving ongoing updates and pursuing policy and practice solutions to ensure this never happens again.

The news did not get better when the District presented its Second Interim Financial Report in March:

1. The Spending Limitations Protocol was not initially successful and is tracking to save $1.5 – $2.0 million- instead of the $11-13 million goal.
2. New unexpected expenses emerged.
3. The District is operating on a very slim margin for error.
   • As of the Interim report, only $2.0 million were either not already spent, or already “encumbered” for an anticipated expense. This means that if any significant new expenses appear through this school year beyond $2 million, the District will be forced to use part of its Reserve for Economic Uncertainty. Since OUSD is already at the the minimum required reserve by state law (2% reserve), that could trigger state or county action.

Additional Spending Restrictions Through Year End

To achieve the $10 million reduction in spending, the District has made the following adjustments to its plans:

1. Bolstering the Spending Limitations Protocol: The revised Spending Limitations Protocol will restrict spending for unrestricted funds, including supplemental and concentration (funds targeted at higher needs youth). OUSD will be reviewing the current and planned spending at all school and central departments in an effort to identify additional areas for possible savings.
2. Revising its budget assumptions: Based on the revised budget assumptions, the District is seeking to identify $8.1 million in “encumbered” funds that they can save. As an example, if a school had encumbered $10,000 with a plan to spend it on professional development in the final months of schools, they are likely at risk of not being able to have that professional development.

Getting It Right Together

Put simply, there’s no positive spin to be put on this year’s fiscal challenges.  And, more than ever, we need leaders at all levels of OUSD to come together and do some hard things over the next few months to ensure that our District remains fiscally solvent.  While doing that, we must also make sure that we come together and address whatever policy or practices led to the District, our schools, and our students being put in this situation so that it never happens again.

For analysis of what the Interim Report says about the budget for the upcoming 2017-18 school year, click here.