How to resolve AdBlock issue? The board came into the four-hour meeting equipped with a report from Business Manager Jacque Eischens that warned of the district’s inability to meet its reserve and other budgetary requirements over the coming three years, which could trigger a disapproval by the Lake County Office of Education and action by the state.
The budget totals $18,982,792 in expenditures and $17,530,386 in revenue.
Eischens, a former Lake County Office of Education staffer who interim Superintendent Patrick Iaccino hired earlier this year, told the board that she wasn’t suggesting cuts. “I don’t make those final decisions,” she said, adding that she wanted to give the district, community and board sound numbers.
The board approved the new budget, which is required to be in place by July 1.
Lake County Superintendent of Schools Brock Falkenberg and members of his staff were at the Wednesday night meeting, during which a letter he wrote to the district on June 3 about the acceptance of its second amended budget for the 2018-19 was mentioned.
He told Lake County News in a Thursday interview that, as of Jan. 31, the district had looked OK based on its average daily attendance, although his June letter noted concerns with the district’s ADA and enrollment projections.
However, changes to expenses and revenue Eischens noted during the Wednesday night meeting have become the problem, Falkenberg said.
During the meeting and in a subsequent Thursday interview with Lake County News, Eischens explained that a combination of factors – primarily, drops in attendance, expenditure increases and the end of one-time funds from state and federal sources – have led to a $400,000 deficit.
Referring to Falkenberg’s letter about the budget situation earlier this year, Eischens noted, “At that time, everything looked fine.”
At that point, the district board also hadn’t granted a 5.25 percent two-year pay increase for district employees – 2.75 percent retroactive for 2018-19 and an additional 2.75 for 2019-20, Eischens said.
Over the last few years, there have been significant amounts of one-time funds from state and federal governments for the district, but Eischens said there is no indication there will be more, which accounts for the large decrease in revenue.
“The majority of it is is our enrollment and attendance,” which affect many funding sources, she said.
Falkenberg explained that over a six-year period, the state has been generous in restoring districts’ funding following state cuts. That gave schools a lot more resources.
Now that schools are fully funded, they’re only seeing a 3.26-percent cost of living increase for the new year, at the same time as both state and teacher pensions are expected to be rising by 3 percent in future years; pensions are lower in the near term due to a government payout, he said.
A drop in attendance, all by itself, is a “huge chunk” of the problem, Eischens told Lake County News.
A large source of revenue for school districts is “average daily attendance,” or ADA, an enrollment-based calculation which can fall or rise depending on student population.
Lakeport Unified’s 2015-16 enrollment increased by two students, or 19.95 ADA. That has been followed by three straight years of decline, according to Eischens:
– 2016-17, enrollment decrease of 24, ADA decrease of 21.19;
– 2017-18, enrollment decrease of 25, ADA decrease of 30.35;
– 2018-19, enrollment decrease of 37, ADA decrease of 44.
Despite the downward trend in enrollment, Eischens said Lakeport Unified previously had an actuarial study that determined district enrollment was going to increase significantly, and their budget assumptions were based on that study.
Now, with enrollment being less than anticipated, the district is having to adjust its budget accordingly. Eischens said ADA averages about $11,000 per student, and is dependent on a number of factors, from grade level to the school’s free and reduced lunch program. Total budgeted ADA for the new fiscal year is 1,380.
Another factor is that schools only receive payment for as much of the time as children are present. They don’t receive credit for excused absences, and if a child is only there a certain percentage of the time, that’s how much reimbursement the district receives, Eischens said.
“Once they’re here, we have to keep them coming,” she said.
Eischens said she doesn’t know the reason for the drop in enrollment, and other district officials and staff on Wednesday night discussed ways of reaching out to families who have left.
Whatever the reason, it appears unique to Lakeport.
“We’re seeing all of our other districts increase enrollment,” with Konocti Unified showing the most rapid growth, Falkenberg told Lake County News in the Thursday interview.
“Lakeport is the only one that hasn’t shown some growth,” Falkenberg said.
At a recent Kelseyville Unified School District Board meeting, Superintendent Dave McQueen noted an enrollment increase for his district this past year.
Falkenberg’s letter to the Lakeport Unified School District for its second amended 2018-19 budget had noted his agency’s concerns over enrollment numbers.
“We’ve warned the district for the last several years that their enrollment and ADA projects have been high,” said Falkdenbeg.
He commended Eischens, Iaccino and the Lakeport Unified Board for now putting up realistic enrollment numbers.
Falling short on reserves
One of the sections of the school district’s budget that shows where the shortfall is building is the reserve for economic uncertainty, an emergency emergency savings account the district is required to have.
The 3-percent state required reserve for 2019-20 is $568,000, while the district wants a 5-percent reserve, totaling $948,140, which would cover payroll for one month. Eischens said the district can cover that in the new budget.
The district is ending 2018-19 with a healthy ending fund balance of $3.3 million, but Eischens said that starts to change in 2019-20, with revenues down by $991,820 and expenditures up by $603,000.
By the start of 2020-21, the ending fund balance is forecast to drop to $1.9 million and to $703,000 at the start of 2021-22, ending that year with a deficit of $459,729. If no changes are made Eischens said the district would not be able to meet the required 3-percent economic uncertainty reserves for 2020-21 and 2021-22, with a possible deficit of $2.6 million by the end of the latter year.
Eischens said there are three full-time positions being added in the new school year – one each for administrator, certificated and pupil services – with another previously grant-funded position being dropped. There also will be annual increases for retirement – 0.82 percent for the California State Teachers' Retirement System and 2.67 percent for the California Public Employees' Retirement System.
She said the district either needs to cut its costs or raise its revenue by $400,000 to meet its 5-percent reserve. If it does that, it can avoid a deficit in its unassigned fund balance by the end of 2021-22.
Eischens also told the board on Wednesday that it’s just short of the state requirement that classroom compensation must equal or exceed 55 percent of the total costs of education. The district is at 53.57 percent now and is in a “warning phase,” and has this next year to meet the 55 percent mark otherwise it could face a $251,899 penalty.
Eischens now will send the budget to the Lake County Office of Education; Falkenberg said she has five days from its approval or July 1, whichever comes first, to submit it.
Together, the district and the Office of Education will work on solutions to get the Lakeport Unified budget to meet its requirements. “They’re going to provide us guidance. They’re going to provide us the help we need,” Eischens said, noting the Lake County Office of Education has been very supportive, and that it has been hard to get the necessary decisions made with a new superintendent and business manager.
Falkenberg said he has until Sept. 15 to approve, conditionally approve or disapprove Lakeport Unified’s budget, based on state education code.
“At that point, it kicks off some official timelines for them to correct them budget” and call in other agencies to help support them. Falkenberg also would have to notify the state superintendent that “we have a district that may be of concern.”
However, Falkenberg said his office plans to work with Lakeport Unified to have a budget that can be approved by that September deadline.
While the Lake County Office of Education hasn’t received the final budgets for all of the county’s districts, “We’re not aware of any other districts in this situation,” Falkenberg said.
“During the fiscal downtown it was more common to see this,” he said.
Now, however, on a statewide basis, he said it’s becoming more common to see districts falling into fiscally unstable situations because of the reduction in funding from the state government.
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