SMMUSD HDQTRS ¬ó The Santa Monica-Malibu Unified School District has to get its spending under control if it wants to stay out of the red in the very near future, school officials told the Board of Education Thursday.

The district shows deficits in each of the next three years, a pattern which will only get uglier if the state government continues to cut money out of public education, said Jan Maez, the district’s chief financial officer.

Maez mapped out three scenarios for coming years which she called “Best Case,” “Worst Case” and “Worst Case with Hope.”

Only in the best case scenario, which assumes no further cuts from the state level, does the district manage to maintain a fund balance by the end of 2014-15.

That balance is still $10 million less than the district has in the bank as the 2011-12 school year comes to a close.

In the other two, which assume almost $5 million in cuts from the state level, the district has a negative fund balance.

The “with hope” scenario optimistically assumes that the district will have $2 million in unspent funds each year. Although this has happened consistently over the past several years, it is not a budgeted savings and not a sure bet.

The negative numbers at the end of the third year in the two “worst case” scenarios could mean that the Los Angeles County Office of Education, which reviews school budgets, won’t accept the budget as it stands.

That could mean more cuts on top of the $2.5 million in reductions that the board approved after is Feb. 18 study session, in which it decided to cut positions and increase class sizes at some grade levels.

The fiscal situation for public education is dire now, and doesn’t appear to be getting better.

The state has already cut 22 percent of the funds the district “should be” receiving, Maez said, but the board can expect an additional $5 million loss if neither of two tax measures expected to appear on the November ballot pass.

The two taxes are the mystery element that means the difference between a “worst case” and “best case” scenario.

The first, proposed by Gov. Jerry Brown, would raise income taxes on California’s wealthiest and increase the sales tax by a quarter of a percent to 7.5 percent.

The other, by activist Molly Munger, would raise income taxes for most Californians, raising an estimated $10 billion.

As shown by the “best case” scenario, the district is still bleeding even if one of the two taxes pass.

“Even if the triggers aren’t pulled, we need to find a way to address the deficit spending pattern,” Maez said.

Members of the Financial Oversight Committee, an independent group that advises the board on budget-related issues, backed her up, calling for a strategy that would protect the district’s financial position.

In an organization where approximately 85 percent of the budget goes to pay for salaries, benefits and other employee-related costs, attempts to balance the budget often come on the backs of individuals.

The district has managed to dodge the dramatic cuts seen elsewhere in the state because of strong support at the local level.

Taxpayers fork over $10.9 million in parcel taxes each year and City Hall provided $6.4 million in a sales-tax sharing scheme that paid off for the first time in the 2011-12 school year.

Both the Santa Monica and Malibu City Hall contribute another $8.2 million on top of that, and the district pulls in $2.3 million from properties it leases throughout the district.

It hasn’t been enough to fully staunch the flow, and other factors outside of the district’s control weaken it further.

For instance, approximately 40 percent of the cash promised to the district by the state is delayed, creating a severe cash flow issue.

The district’s cost for borrowing money has been forced up, in part because of a calculation at the state level that assumes the district will get $17 million in new revenue from the dissolution of redevelopment agencies, entities that used property tax revenue for capital improvement projects and other things.

That money will never appear in district coffers, a fact the state will eventually recognize, but too late to save the district from borrowing to cover normal budgeted expenses.

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