A recently agreed upon increase in teacher salaries will leave the Santa Monica-Malibu Unified School District (SMMUSD) in the red by about $20 million this year but school officials said the overall budget projections are more beige in color. 

In a budget updated presented to the SMMUSD Board last week, district staff said SMMUSD will continue to be a “basic aid” district and despite the cost increases associated with raises, planned budget cuts will return SMMUSD to the black next year. 

State funding, known as the Local Control Funding Formula (LCFF) would provide SMMUSD about $83.4 million in funding however, the district is due to receive $106.3 million from property taxes this year and when the property tax revenues are larger than the State aid, the district becomes “basic aid” meaning its gets to keep all the tax revenue. 

“I think it’s good every time we talk about it, especially the first interim, to point out that $23 million we received from local property taxes, that’s over and above the funding that 90% of the school districts in the state get from their LCFF funding,” said Boardmember Craig Foster. “So in many ways we’re incredibly financially fortunate. When we talk about basic aid, that’s $23 million of benefit to the district from the fact that our property taxes fund us above the level that the state would find us left to their own devices.”

Basic aid revenue is considered more volatile than State funding as it fluctuates with tax rates and it’s distributed to the district mid-year rather than at the start. 

The district had some changes to revenues and expenditures. While some cash was spent on maintenance, text book purchases and service costs, the bulk of the District’s budget shortfall is due to a new contract with staff. 

In July of this year, SMMUSD approved rates for contracts going into the 2022-23 school year, with teachers earning 10% wage increases. Teachers will also see a 0.57% salary increase as part of “step and column” increases, which essentially provide increases to salaries in a “step” program to incentivize teachers to retain employment with the District. The raises are retroactive back to Jun 2021.

As salary/benefit costs account for about 86% of the budget, the retroactive payments and ongoing expenses combined to create a one year shortfall of about $19.5 million. The District is covering those costs by dipping into its reserves dropping savings down to 13.12 percent. While that’s below targets of about 25 percent, staff said it wasn’t cause for concern given the known impact of salary increases. 

Boardmember Jon Kean said the district needed to address how it’s funding the pay increases. 

“The district will not be fiscally sound long term if we continue to pay for raises out of reserves. It’s an impossibility,” he said. “So we need to address the structural issues that would allow that.”

Kean said there’s plenty of time to address the problem provided the Board spent time creating a policy on how to use its reserve funding. 

Student enrollment continues to decline each year by about 300 students with the District’s current enrollment estimated at 8,835. 

The District has several million dollars worth of cuts scheduled for coming months and if completed, the financial picture would rebound from a multi-million dollar loss this year to a small gain ($1.2 million) next year and $4.3 million in 24/25.

Kean said as an update, the current figures were no cause for alarm or joy and that the board would be hearing more fiscal updates in February. The Board said future discussions will include debates about needed cuts and ways to balance staff levels with enrollment numbers. 

“I would call this a very beige first interim,” said Kean. “There’s nothing exciting.”

editor@smdp.com

Matthew Hall

Matthew Hall has a Masters Degree in International Journalism from City University in London and has been Editor-in-Chief of SMDP since 2014. Prior to working at SMDP he managed a chain of weekly papers...