Tuesday, Sept. 5, 2006 | Although no one’s popping champagne corks, school administrators in San Diego County are greeting the state’s 2006-2007 education budget with welcome relief. After years of cutbacks and uncertainty, schools are opening this fall with extra money educators never thought they’d see.

As usual when school starts, districts and sites engage in debates about the budget, only this time they are discussing a good kind of problem: how to spend all the new money.

“There is a lot of money coming in,” said Lora Duzyk, assistant superintendent for business services at the county’s Office of Education. “This is a much better scenario than in the last few years. It is a much happier atmosphere.”

At the San Diego Unified School District, there is discussion taking place now on the instructional side about how to spend the new money. But “there is some caution,” said Ken Leighton, SDUSD’s director of accounting operations. “We don’t know when we will get the money, or whether it will be maintained.”

Leighton’s caution is justified, Duzyk said. “All districts are being pretty careful,” she said. “We fully expect things will not be as rosy next year. When you add a program, you have to think about next year. They could have a cash flow problem if they try to start new programs.”

If Gov. Arnold Schwarzenegger wins in November and stays in office, “then education is clearly a priority for him,” Duzyk said. “These are his programs he’s funded.”

But there is skepticism out there, she said. “Everybody’s thinking there might not be the dollars next year.”

The cash flow uncertainty, coupled with declining student enrollment, is dampening some enthusiasm for this year’s flush education budget, Duzyk said.

The state funds most school districts in California on a per-pupil basis, based upon the number of students in school each day. This is referred to as Average Daily Attendance. So when students are absent or enrollment declines, districts lose money.

The catch with all this new funding, Duzyk noted, is that districts “may not net out with more money” due to declining enrollment.

At SDUSD, the largest district in the county, the effect of declining enrollment this year translates into a loss of $16 million in state funding, according to Leighton.

Fewer students reduces the need for teachers and support staff, so this loss in income is offset by a savings of $11 million, he said, leaving the district with a net loss of $5 million.

Not including students in charter schools, enrollment last year was about 115,000, Leighton said. This year, it is expected to be around 112,000, down about 3,000. The district has about 13,000 students – about 10 percent – enrolled in charter schools. Finance departments don’t like to include charter school students in budget numbers because school districts do not receive state funding for those students.

Even though enrollment is declining at SDUSD, the budget is up. According to Leighton, last year’s budget was $1.04 billion, and this year’s projected budget is $1.09 billion. That’s an increase of $50 million.

Contributing to this is the governor’s massive increase in education spending, which bumps up the amount SDUSD will receive per-pupil from Sacramento to $5,532, from last year’s per-pupil number of $5,150.

Some say part of the problem with education budgets is the generally accepted method of starting with the prior year’s base, without evaluating the effectiveness of entrenched programs that may or may not be justified. In an era of declining enrollment, this budgetary approach seems inherently faulty.

Zero-based budgeting, which requires that a program be justified from the ground up each fiscal year, may be the preferable alternative to using prior funding levels as the basis for further adjustments.

Programs, and the money to fund them, need to be tied more directly to student numbers, so when students leave, resources can be shifted and the programs can be scaled back, redesigned or eliminated. Instead, many schools have programs that never disappear, some despite questionable success. Worse yet, these programs, and the salaries to support them, often have a way of growing slowly but steadily and becoming more established, burrowing their way into inflexible district budgets that are incapable of excising them.

In an essay published in the August 30, 2006 issue of Education Week, titled “Must Enrollment Declines Spell Financial Chaos for Districts?”, Marguerite Roza, research assistant professor at the University of Washington and a senior fellow at the Center on Reinventing Public Education, writes, “The crux of the problem is that while some revenue streams are dependent on student counts, expenditures are not.

“What is it about school districts that makes them unable to shrink when students leave and revenues decline? Obviously, there is not a critical mass of students needed for fiscally viable district operation. A scan of 14,000 districts in this country shows that they can and do operate at all different sizes, most of which are much smaller than the urban districts perpetually in fiscal trouble. It isn’t the new enrollment levels that are the problem; it is, rather, the shrinking itself that creates fiscal chaos.

“A deep dive into districts’ spending patterns points clearly to the dilemma. Big-city districts make bulky, inflexible and sometimes irreversible expenditure commitments that aren’t dependent on revenues and aren’t tied in any meaningful way to enrollment.”

New Money Provides Relief

As many districts grapple with the long-term problems of no-growth or declining enrollment, the governor’s new education budget for 2006-2007 gives educators breathing room. “This buys them time,” Duzyk said.

Duzyk called the 5.92 percent cost of living allowance, which is $1.9 billion statewide, “wonderful.” She said San Diego County, with about 490,000 students in grades kindergarten through 12th, represents about 7 percent of the state’s enrollment, so the total for COLA coming to local districts is about $133 million.

Other major statewide funding that is expected to be ongoing includes: $308 million for deficit reduction which will eliminate the revenue limit deficit, $350 million for economic impact aid which provides supplemental funds for low-income students and English language learners, and $350 million for equalization.

Equalization is the term used to bring all school districts throughout the state to within the 90th percentile of those districts receiving the most money. “The concept is to get school districts within a band,” Duzyk said.

“This erases two-thirds of the disparity in school district revenue limit funding,” said Alan Bersin, California’s education secretary.

Using a complex funding formula, Duzyk said most districts in the county will receive equalization money, which is unrestricted and can be used for any purpose districts and sites agree upon.

Leighton said SDUSD will be receiving equalization money. “Our amount per student was always a little lower” than other districts throughout the state, he said.

Leighton said SDUSD is expecting about $7.6 million for equalization, $6.6 million for deficit reduction and $32 million for COLA.

Bersin called the state’s ongoing money for COLA, deficit reduction and equalization “historic outlays.” He included in this category one-time funding of $533.5 million in discretionary block grants and $957 million to pay for unfunded, mandated expenses that have accumulated over the years.

“We are getting quite a bit of mandated money,” Duzyk said. “This money pretty much wipes the slate clean.” But this funding is one-time, not ongoing, she said with some disappointment.

Duzyk said there are 50 to 80 mandated programs that the state requires districts to offer. “The state says, ‘Thou shalt do this,’” she said.

Many of these programs are not funded though, forcing school districts to comply with state law by offering the programs and providing the services, without the funds to do so. Claims filed each year with the state that act like I.O.U.s have been piling up.

For example, school districts are required by the state to engage in collective bargaining with their unions over salaries and benefits. The cost to do this is primarily the time involved for district staff to spend at the negotiating table, which Duzyk said “is huge.”

“Collective bargaining has not been funded in four to five years,” she said.

The annual Standardized Testing and Reporting assessments, known as STAR, that the state also mandates of districts “is another biggie,” Duzyk said.

The $533.5 million in discretionary funds will be distributed to districts on a per-pupil basis, and provides school sites with 75 percent ($400.1 million) and district offices with 25 percent ($133.4 million). This translates into about $37 million for San Diego County.

SDUSD will receive about $8.5 million in this discretionary funding, according to Leighton, $6.5 million of which will go directly to sites for programs to be approved by each school’s site council.

Bersin said the site grants may be used for any one-time purpose, including instructional materials, lab supplies, music and art equipment, library materials, technology or deferred maintenance. He said the district money could be used for home-to-school transportation or any other one-time fiscal obligation.

Money for Art and Music

Other annual, ongoing financing from the state includes $105 million for art and music in grades K-12 and $40 million for physical education for grades K-8 – plus a one-time allocation of $500 million for K-12 art, music and P.E. to be used for equipment and supplies.

There is also significant money set aside to fund preschool, after-school programs, career and vocational programs, teacher recruitment and retention, and high-priority schools whose academic performance has placed them in the bottom 30 percent of all schools statewide. There is also one-time funding of over $80 million to support students who need more help passing the California High School Exit Exam.

For SDUSD, Leighton is expecting about $9.2 million for art, music and P.E., and about $1.9 million for teacher recruitment and retention for low-performing schools.

In addition to the money passed by the state legislature in June, there is another $3 billion just announced last week that will be made available to 600 struggling schools scoring in the bottom 20 percent of all schools statewide.

“We definitely have deciles 1 and 2 schools,” said Leighton. “But 1,600 schools are eligible for this money, and there are so many restrictions. We have to determine if we can meet the qualifications, and we have to apply for the money.”

A popular program in the budget this year authorizes $200 million in ongoing funds to hire more guidance counselors in middle and high schools. The intent is to reduce the counselor-student ratio in middle schools from a statewide average of 665-to-1 down to 500-to-1, and to reduce the high school average from 486-to-1 down to 300-to-1.

Leighton said SDUSD is hiring new counselors now and “is working on that premise” that they will have ongoing money in future years to sustain the new counselors. “I feel fairly comfortable with that, although we don’t anticipate as nice a year next year,” he said.

“Do you trust the money will continue to come?” Duzyk said. “That’s always what we work under. You work under what they tell you. But a few years ago, they promised money, and then later in the school year they turned around and took it back.”

Working under fiscal promises that can be easily broken by newly elected politicians, school board members and changing priorities can create major headaches for school finance departments trying to provide security in a fluctuating economic climate.

Deciphering California’s complicated funding formulas presents additional challenges.

Duzyk compared California school finance laws to the tangled, obscure U.S. tax code, which has heaped upon it layer upon layer of regulations that make the total package impossible to comprehend for all but the most intellectually astute.

“School finance is now so complex and convoluted,” Duzyk said. Terms limits, she said, contribute to the problem, because “by the time [legislators] understand some of it, they’re out of office.”

How can the murky, intricate world of school finance be simplified and stabilized? And how can future funding be tied more directly to actual student enrollment?

“There probably is a better model, but the first question is adequacy,” Duzyk said. “What does it really cost to educate a child?” Studies are currently underway in the state to determine that magic number.

“But one thing’s for sure,” she said, about the money. “We all know there’s never enough.”

Marsha Sutton writes about education and children’s issues. Send a letter to the editor here.

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