Updates to the school budget were a textbook good news / bad news situation this week.
The good news: SMMUSD’s end of year finances were better than expected with about $7 million in additional revenues. The bad news: even with the additional money, the district ended the year with a deficit of $11.8 million , a historic high for SMMUSD.
However, swinging back towards the "good" news side, the deficit was intentional this year as officials knew they’d have to make a large one-time payment and they were prepared for the hit.
A special Sept. 13 meeting of the board featured the presentation of unaudited actuals from the 2022-23 school year budget, a report of all revenues and expenditures for the preceding fiscal year. The prior fiscal year formally ended on June 30, but final accounting tabulations are not generally completed by the district until the end of August.
Initially, SMMUSD expected to be over budget by about $19 million. That was due in large part to a 10 percent raise given to all teachers at the end of the pandemic. Not only did that raise take effect this year, it carried with it a retroactive payment for staff covering past years. District staff intended that money, about $20 million, to come from their reserve account and that was the source of the red ink.
The district actually ended the year with about $12 million more than expected from a combination of sources but chose to spend about $5 million to payoff a looming expense connected to healthcare costs.
The district recently made a change in health providers to the Self-Insured Schools of California (SISC), with those at the board meeting noting that the increase in health and welfare benefits from SISC was less than the increase would have been if they had stayed with CalPERS health plans. Paying down the liabilities also aids in keeping a healthy bond rating for the district.
Between the bonus revenue and final expenses, SMMUSD is ending the year with a deficit of $11.8 million and reserves of about $16 million.
The district’s reserves sit at about 16 percent which is lower than their target goal of 20 percent but well above the state minimum of 3 percent. At a recent meeting of the Financial Oversight Committee, General budget subcommittee chair JW Beekman stated that a reserve of 20 percent would account for "unforeseen fluctuations" in district costs.
Another note in the unaudited actuals is an interfund transfer from the general fund to the facility use department, which handles non-classroom spaces such as gardens, bleachers, tables and gymnasium facilities. Out of the $438,501 transferred to the department, about $100,000 will go back to school sites to be used for various facility use-related supplies, like gardening tools and landscaping supplies.
Over the past 12 years, the district has ended in the red six times and in the black six times. Surpluses have ranged from about $1 million to as high as $13 million. Deficits have ranged from as low as $222,496 to the $11.8 million this year.
Next up in the process of finalizing 2022-23 financials is an independent audit from Edie Bailly, LLP, with the draft audit report to be reviewed and recommended for approval by December.
