Sonoma Valley school district faces major budget challenges

Sonoma Valley Unified School District’s 2023-24 expenditures are now expected to be some $3.2 million more than originally projected while revenues will be about $2.6 million less than originally projected, creating major challenges.

“This first interim budget report is in stark contrast to the budget that was approved by the board last June,” said Troy Knox, president of the board. “While it was understood in June that we were deficit spending to pay for our expenses, our ending fund balance when presented at the time was much higher than it currently stands now.”

The explanation provided by the district in the packet for the board meeting Thursday, Dec. 14 — when Rena Seifts, the district’s associate superintendent of business services, presented the interim budget — states, “Expenditures were not budgeted accurately during budget development and are being corrected at First Interim.”

“That is an understated explanation for a budget that was riddled with errors when presented,” said Trustee John Kelly after the meeting. “The trustees must demand balanced budgets, as the lack of rigor in the Sonoma Valley Unified School District budgeting process continues to plague the district.”

Kelly said that the errors have undermined the district’s reporting of its financial situation to the public.

The original budget projected more than $69,855,334 in revenues, while the first interim report shows that the revenue is now projected to be $67,256,771, a decrease of $2,598,563.

Increases were partly due to a reduction of $1,305,088 in state revenue for the transportation plan because the district did not file its transportation plan requests by the April 1, 2023, deadline required by the California Education Code.

Because the district failed to comply with the deadline, it must return $654,207 from 2022-23 to the state.

“The school district will also lose access to a similar — probably larger — number for 2023-24,” Kelly said. “In general, we have analyzed the hit as a $1.4 million loss, although the presentation to the public presumed the amount would be exactly the same in both years, summing to $1,305,088.”

Federal COVID-19 funds also were included in the original, adopted budget, but all funds were spent the previous year. This resulted in a reduction of $1,288,016 from the original budget.

Sonoma Valley Unified School District’s original budget also listed nearly $1 million of revenue items that were actually expenditures.

Expenditures originally were estimated to be $72,120,393, but are now projected to be $75,369,248, a jump of $3,248,855. This is largely due to an additional $4,063,696 being contracted for special education services.

The school district’s reserves in its unrestricted general fund are now projected to be $2.71% in 2023-24, 0.28% in 2024-25 and 0.05% in 2025-26. The California Department of Education expects a district the size of Sonoma Valley to have at least 3% in its reserves to prepare for economic uncertainty, but since it is a basic aid district, it is not required to maintain that level.

Local educational agencies are required to file two interim reports to Sonoma County Office of Education during a fiscal year that indicate the status of their financial health. Sonoma Valley Unified School District has indicated that given its current reserves estimates, it will be in “qualified” status during the next three academic years. This means that it might not meet its financial obligations during those three years.

“Our task is to do the hard work to fix this and to take steps moving forward to move the district out of qualified status and return to positive status,” said Celeste Winders, a member of the district’s board of trustees. “This is not a quick fix; this is not a painless fix.”

The district also was in qualified status last year, prompting the Sonoma County Office of Education to recommend that it form a budget advisory committee as part of a plan to reduce expenditures and eliminate deficit spending.

“For quite a while, the budget has been opaque at best, and it was just not aligning,” Winders said. “In particular, I continued to have questions about the true state of the budget’s reserves — and it is why I did not support approving the budget as it was presented to us by Mr. (Josh) Braff (Seifts’ predecessor) in June.

“Fast forward to now, and we have the clearest picture of the budget that this district has had in a long time. Superintendent (Jeanette) Chien and Associate Superintendent Seifts have reviewed and audited every corner of the district’s finances and have found some significant errors and have taken steps to correct those errors.”

Knox said he also feels that the district is heading in the right direction to address its budget problems.

“We are grateful for our new associate superintendent of business services and her team for presenting an accurate budget that provides the board direction for implementing immediate next steps, including convening a special board meeting or potentially a budget action committee to more closely examine our current financial picture,” he said.

Winders said that the district will need to create a multilayered approach that identifies short-term and long-term plans.

“Not only are we going to need to right the ship and overcome these errors: We have to ensure we have the ability to also weather the storm that all districts and schools across the nation are facing now with the end of COVID funds and the significant increase in needs for students — because that is who is at the very center of everything we do in education. The students are the only ones who matter,” she said.

Reach the reporter, Dan Johnson, at daniel.johnson@sonomanews.com.