| Financial Challenges for the Los Altos School District |
| Sunday, 30 January 2011 12:37 |
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The Los Altos School District is not alone...It is no secret that California Schools are underfunded and have been for many years. So, LANN invited two knowledgeable Los Altans, residents Curtis Cole and Matt Cuson, to discuss why, when we have a top rated school district and a very generous community, do we still suffer financial challenges with our schools? There are no easy answers. Please read on...  California state funding for education has been under pressure from reduced revenues and competition with other state programs for many years. The Great Recession has cut funding even lower, though with hope of some recovery when state tax revenues rebound. School districts across the state are struggling to cope by cutting salaries and compensation, reducing teaching hours, cutting staff, and increasing local taxes. The result of these actions usually means that most districts end up with fewer teachers spending less time per pupil per year. Los Altos School District, LASD, must choose how we will reshape our district to educate our students and pay our teachers.LASD is typical in that 83% of our budget goes to salaries & benefits, not including other contract services. There are no significant dollars in the budget that don't affect classroom education. While citizens and legislators passed propositions and laws designed to provide some priority and stability to education funding in California, those efforts have not succeeded. The situation is unlikely to improve in the short term, though Governor Brown is trying to prevent further cuts. Here in our district we have more students each year as young families seek our excellent schools. LASD is a basic aid district – that means we keep our property taxes in excess of the state's minimum funding per pupil and receive only a small basic aid amount from the state. So we receive more money per student than many other districts, but that amount doesn't increase much with each new student. The district budget (in fact just about any and all government run agencies) has built into it "structural" expense items that tend to grow faster than revenues. For the district, those elements include salaries, benefits and retirement funds. Notice that the line items that are out of control are just about always employee costs. There are reasons for this. Salaries: Across the state, union contracts between districts and educators provide for annual increases in most salaries and benefits. Salary growth is driven by a teacher’s length of service (more years mean higher pay) and education (more degrees, special classes earn bonus payments). What this means is that year after year, total salary payments go up for the same teachers even when there is no "raise". What happens is that teachers move into the next pay category based on experience or coursework and the district ends up paying more. It's part of the contract. It's part of the salary table. The district cannot directly control the amount of the increase year to year but it always happens. In the LASD case, we actually have a number of teachers who are maxed out in both experience and classes so they only get increase through a raise. Raises are increases that apply to the whole salary table. Compared to other district averages, LASD has a disproportionate number of maxed out teachers so the expense hit is relatively small. This source of year to year growth isn't the biggest problem contributing to growth but it does contribute to the overall size of payroll each year. Benefits: Health premiums are growing in excess of 10% per year in spite of a down economy. In order to limit expense growth, the district must reduce the scope of the benefits package, negotiate for better prices (change providers), or reduce the share it pays of the premium. By contract, the district currently pays 95% of the premium. Any significant reduction requires a change to the teacher contract. Retirement: Defined benefit retirement programs demand increasing dollars from both current and future budgets. The district makes pension contributions into a California government worker fund (CALPERS and CALSTRS) based on what the fund “thinks” it needs to cover the payments out. In recent years, the CALSTRS and other pension funds have lost a significant amount of capital and run the risk of not being able to cover all their current payments and still have enough in the fund to be able to cover future payments. As such, the contract with CALSTRS states that CALSTRS can arbitrarily ask districts to contribute above the target amount to cover any shortfall. Again, the district is not in any position to plan for such requests and has no control over the amounts that get paid. To create a long term balanced budget, our district must either increase revenues to match expense growth or decrease expense growth to match revenue or a combination of both. Increased revenue can only come from local sources either through a parcel tax increase or more voluntary giving through the LASD Foundation and PTAs. Decreased expenses either involve less teaching through furlough days, fewer teachers through layoffs resulting in larger classes, or negotiated contract changes resulting in lower compensation growth or benefit cost sharing. Most of those changes and others such as closing a school, or incentives for early-retirement that result in hiring younger teachers, provide a short term benefit but do not address the mismatch between growth in revenue and expenses.
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