The Sonoma Valley Unified School District just came home with a bad report card.
And it’s been told in no uncertain terms by the Sonoma County Office of Education: You’re grounded.
That was the essence of Index-Tribune writer Kate Williams’ story (“School District ‘at Risk of Insolvency,’” Oct. 27) about a budget-analysis report from the Sonoma County Office of Education, which asserted its doubts about the school district’s ability to “meet its current and future obligations.”
And just in case it wasn’t entirely clear what they were hinting at, SCOE officials added that they have “very serious concerns that the District is at risk of insolvency.”
County education officials are sounding the alarm after the Sonoma Valley school district reported about $2 million more in expenditures last year than it took in revenue – which, when all was said and done, meant they’d spent about $52 million, while bringing in $50 million. To cover the difference, the district drew from its General Fund savings – or surplus, as they call it – which now stands at $3 million, a practice it has done for multiple years now to help balance the books.
Deficit spending isn’t unique to Sonoma Valley Unified, of course. But if SVUSD stays on such a trajectory, warn SCOE officials and others, it would blow past its savings by $1 million within two years – which is enough to qualify it to receive the ominous “negative certification of the Second Interim Report.”
“Negative certification of the Second Interim Report” may sound like some Orwellian decree from the fictional Ministry of Truth but, according to the decidedly non-Orwellian California School Boards Association, it’s simply a designation a district receives from a County Superintendent (in this case Steve Herrington from SCOE) if a district is projected to be on the road to insolvency within two years.
It’s a designation school districts should make pains to avoid.
A negative certification allows the county office of education to essentially take over the operations of the district’s budget, including budgetary decisions by its school board.
To put that into context, consider this: last year only two school districts in the entire state – San Miguel Joint Union and San Bruno Park Elementary – received a negative certification at their second interim report. That’s at once reassuring in that few districts actually fall to that designation – and yet quite concerning that it’s even in the SVUSD conversation. Sonoma Valley is hardly alone – two other districts in Sonoma County received a similar letter this year, according to SCOE officials.
To avoid being downgraded from its positive certification, the Office of Education is mandating SVUSD adopt an immediate spending freeze and establish a team to conduct a thorough budget review and propose budget reductions of at least $2 million by Jan. 17. Additionally, district officials must devise an updated staffing plan to better align with district’s declining enrollment.
To be clear, SCOE only issued a warning; in fact, it’s still giving SVUSD’s budget a “positive certification,” which means it still expects the district to be able to meet its financial obligations three years out.
However, the Office of Education isn’t the only financial auditor skeptical of SVUSD’s finances.
Last year the district hired the firm Total School Solutions to review its budget. Among TSS’s observations was that the district was in danger of not meeting its state-required minimum reserve of 3 percent, and that “the district should not permit the level of deficit spending that will drain” that reserve.
The full report from TSS, issued in June, hasn’t been presented at a public school board meeting, however, because, according to SVUSD Superintendent Chuck Young, district officials were disappointed with the work submitted by the firm, though district officials heeded advice where they thought warranted.
The Sonoma Valley Unified School District can do as they wish with their own internally contracted audits, but there’s no ignoring the SCOE recommendations.
And it is imperative district officials fully grasp the seriousness of the situation.
For several months, SCOE has been hinting that Sonoma Valley needs to get its budget under control. In January of this year, the Office of Education’s budget letter stressed the need for the district to “minimize or eliminate deficit spending in future years and to stabilize reserve levels” in order to avoid exposing “the district to financial turmoil.”
In April, SCOE approved the district’s positive certification “with concern” and again encouraged SVUSD to stop deficit spending.
Yet, as recently as the last school board meeting on Sept. 12, when an Office of Education auditor presented the school board with its final financial numbers of the past school year – in which the district deficit spent by $2 million and drew down its reserves to $3 million – there was still talk from trustees about how SVUSD doesn’t overspend and was being quite fiscally responsible.
One of the few hints at the meeting that district officials are aware they need to adjust their budgetary ways came from trustee John Kelly, who acknowledged that, “We are continuing a plan to deficit spend this year… and we are continuing on a path to run out of money at some point in the near future.”
Hopefully, this most recent message from SCOE will further drive home the point:
If you don’t cut your $2 million budget deficit – we will.
Email Jason at firstname.lastname@example.org.