West Contra Costa Unified, which faced a debilitating $48 million projected deficit for the 2020-2021 school year, is now estimating a small surplus, said Superintendent Matthew Duffy. But the turnaround has not been without pain.
The district cut around $30 million in ongoing expenditures from its 2020-2021 budget. About $22 million of the cuts came from eliminating positions. It essentially pushed the remaining debt to later years by borrowing from its reserves and post-employment benefits trust, hoping additional state and federal funding would come through.
“I’m sorry we had to go through it,” said Duffy. “I’m really sorry for the energy and stress it took on our community, our teachers and our students. I feel ready now to get back to the work we wanted to do, that we started. In my first two years, we opened new dual immersion schools, international academies for newcomers, expanded a number of schools to K-8.”
The cuts resulted in larger class sizes, as well as losing support staff, such as transitional kindergarten aides and some manager positions. It also meant ending contracts, such as certain software for teachers, and trimming school site discretionary budgets.
“Every time you’re going to make a reduction, you’re going to lose something that affects the district,” Duffy said.
Though district officials don’t foresee having to make more cuts this school year or the next, the district may risk running a deficit again in the 2022-2023 school year if state funding continues to drop due to the pandemic recession.
Contra Costa Superintendent of Schools Lynn Mackey, in a letter to the West Contra Costa Unified school board Wednesday, said the district’s efforts to address the budget crisis are “commendable.”
“West Contra Costa Unified School District, like most other school districts in the state, has experienced significant fiscal pressure over the last two years,” Mackey said. “The district has taken major and important steps to reduce ongoing spending and increase its reserve, which has improved its chances to weather the current budget crisis.”
West Contra Costa Unified wasn’t the only district faced with a budget crisis last school year. A survey conducted by the California School Boards Association in February — prior to the pandemic — found that 77% of districts were at risk of deficit spending in the 2019-2020 school year. The survey also found that 40% of districts experienced a drop in revenue and 38% were weighing whether to lay off teachers and staff.
Duffy and chief business officer Tony Wold presented the district’s “unaudited actuals” — the unaudited report on how much the district received and spent last school year — at a school board meeting Wednesday evening.
According to the report, the district just about broke even last year — the first time since 2015-2016 — with about a $372,000 surplus. The district currently projects that it will break even this year too, with the help of federal CARES Act money and dipping again into its post-employment benefits trust. Without the approximately $34 million it received from the CARES Act, the district said it would have had to lay off even more staff as well as reduce salaries and services.
School board members at Wednesday’s meeting touted the collaboration between the district, its labor unions and community stakeholders as the reason the district was able to dig out of the budget crisis of the last few years.
“Even in times when people said ‘no I disagree,’ collectively, there were enough people who said ‘no we’re going to find a way’ to at least put us on some level footing,” said school board member Valerie Cuevas. “ That’s the community, it has nothing to do with this board.”
“It’s great to see that we actually have a small surplus this year and next year,” said school board member Tom Panas. “Obviously the cuts that we made now will help us in the out years, but as (Wold) said, there’s still work to do out there.”
The district still has to deal with the remaining $18 million in debt that it was able to push forward to next year. But for the first time in years, the district has enough in its state-mandated reserves that it can borrow from to continue pushing the deficit forward in the hopes of a surge in funding.
Since the $48 million deficit was announced mid-2019, Duffy has received criticism from parents and community members at school board meetings. Duffy scored an “intermediate” at his most recent performance review in June, meaning his contract was not automatically extended, though it could be at a later date. It’s unclear, however, if his handling of the budget crisis had an impact on his score.
“I’m the leader of the district, I have responsibility and ownership for our budget. In ’17-’18 I saw a problem, and it was definitely on me because it occurred during my watch,” Duffy said. “I feel like we did what we needed to do: we focused on the budget, and focused on our systems, hired a new chief business officer and got ourselves in a much better place — equal to or better than other districts.”
District officials are banking on Prop. 15 — the Schools and Communities First Initiative on the November ballot — to pass. It would alter Prop. 13 to raise taxes on most commercial property and is estimated to raise $12 billion annually. They are also hoping for additional funding under the federal HEROES Act — a $3 trillion federal stimulus bill for states, cities and counties. The bill passed in the House but faces dim prospects in the Republican-controlled Senate.
With no additional funding, the $18 million shortfall will swell with further drops in state revenue due to Covid-19. Under the “worst case scenario,” the district projects a deficit of $23 million to $25 million in the 2022-2023 school year, Wold said, and would need to make more cuts.
Both Wold and Duffy said it’s too soon to take any action on that projected shortfall until after the November election.
“We don’t want to create a panic when no panic is necessary,” Wold said. “At the same time, we don’t want to sit here and say the world is fine when we know the state budget situation is not resolved in any way, so we’re planning for the worst.”
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