Coronavirus Aid Obscures San Diego Unified’s Budget Deficit

“One-time monies from (the) CARES Act make this budget look better than it really is,” read a comment card from local resident and longtime San Diego Unified critic Sally Smith at the district’s June 30 school board meeting.

District officials never addressed the comment – but Smith’s assessment hit the nail on the head. In fact, barring any major changes, when the COVID-19 aid runs dry a budget crisis bigger than anything experienced by the district in recent history awaits. To understand the district’s precarious financial situation, we need to rewind.

Well before the coronavirus pandemic, San Diego Unified’s operating finances were once again on the ropes.

The district was looking at layoffs to help close a budget deficit that had ballooned to $84 million earlier this year. Over the years, as state funding rose, so did district spending, primarily on employees via across-the-board salary raises, pension costs and health care.

School district officials were pleading for California’s leaders to unlock rainy day funds to send more cash their way.

Then came the virus, and resulting school and business closures, which sent taxes that supply funding to the California government and its public schools spiraling down.

And yet, the district now has a rosier financial picture for the coming school year. There will be no layoffs, and the $1.5 billion general fund budget for 2020-21 is balanced, declared Superintendent Cindy Marten during a board meeting last week.

School board President John Evans echoed that message at the June 30 meeting.

“We cannot print money. We cannot run a deficit, so we want to make it very clear to the public and everybody that we are balancing this budget,” Evans said. “We will always live within our means.”

It’s true: The coming school year is actually going to have better funding than last year. But district budget documents belie the narrative of fiscal prudence.

The budget is only “balanced” insofar as one-time coronavirus aid is plugging the gap between revenues and expenditures. More than $122 million in coronavirus aid will prop up the district’s budget for next year. It includes $30.5 million in CARES Act emergency relief money for schools, and another $91.8 million in so-called learning loss money allocated by the state using federal coronavirus funds and state funding.

The new aid follows a much smaller $1.7 million coronavirus check from the state that went into the 2020 budget for cleaning and personal protective equipment.

Those new COVID-19 dollars are being sent with the intent of augmenting education to address time lost to the pandemic and to pay for new virus-combating efforts like cleaning, barriers and protective gear, not regular schooling costs. But the rules on spending give school districts wide latitude.

San Diego Unified spokeswoman Maureen Magee said in an email the district budget includes funding for new COVID-19 needs, but reiterated a message delivered by district leaders throughout the crisis: “The district needs additional funding for the 2020-21 year.”

District leaders had threatened to keep school campuses closed without more money, and continue with only online learning options. Some $122 million in COVID-19 aid has now materialized for next year, but that’s not enough, officials say.

San Diego Unified parents were told they get to choose between purely online or in-person schooling for their children for the coming year, but now district leaders are threatening to close campuses midway through the year – unless the federal government sends more money. Resident Tamara Hurley asked the school board in a comment card June 30 whether the new budget includes the entire school year.

“That is still to be determined,” said Evans. “We are going to operate the schools with the students in school as long as we can with those funds, and the only thing, the only thing, that will stop us from having a complete full year of students in the classroom is if the federal government does not come up with the needed funds, and already we are hearing some encouraging talk about that.”

A $3 trillion federal stimulus bill known as the HEROES Act that included aid for schools and others has stalled in Congress, while a newly proposed bill known as the Coronavirus Child Care and Education Relief Act would send $430 billion to the nation’s schools.

It’s unclear how much California or San Diego Unified would get if that stimulus proposal is approved.

For now, the district’s plan to forgo layoffs and use coronavirus aid to help close an existing budget hole means less money is available for, well … coronavirus aid.

The other problem: The money won’t last, and the deficit is still there. If the district doesn’t get more money, the following years are poised to be tough ones.

According to the new budget approved by board trustees last week, total general fund revenues are expected to drop from $1.5 billion in 2020-21 to $1.33 billion the next year, for a loss of $177 million. In response, the district is looking at cuts of at least $169 million next spring and nearly $208 million the year after, district records show.

The cuts planned equate to a loss of $1,700 for each of the district’s 97,000 students.

Even with declining enrollment factored in, the lost revenues will mean per pupil funding out of the general fund will drop from about $15,500 in the coming year to just under $14,000 the next year, according to district budget documents.

Cutting $169 million next year would exceed the cuts eyed during the 2017 budget crisis, which sent more than a thousand  layoff notices swirling around the district. When layoffs happen, schools with high poverty rates are usually the most impacted thanks to last-in, first-out teacher tenure rules.

If 2017 is any indication, once the COVID-19 aid dries up, San Diego Unified will have a larger-than-ever human resources and school upheaval nightmare on its hands, on top of the challenges posed by the COVID-19 pandemic.

Evans, the board president, downplayed the district’s future projections at the meeting.

“We have to calculate what our ongoing expenses will be with very conservative projections of what the state will give us … we don’t have a clear picture on what the state will give us each year. So, by rule, we have to make these very conservative estimates,” Evans said.