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Common Cents


 

Week of april 19, 2021

"What does it mean to have a qualified budget?"

A positive certification means a district can meet its financial obligations and maintain its required reserve for the current year and two additional years. A qualified budget means the district cannot meet its financial obligations for the current year or the two subsequent years. A negative certification means a district cannot meet its current year obligations or for the subsequent year. THIS presentation by the California School Board Association has a long but informative explanation. 

"What is the timeline for paying back the TRAN?"

In February, we received a tax revenue anticipation note, which is a "loan" that borrows against future tax dollars. This was required when the State of California deferred sending us the cash, in the form of tax revenue, that we receive each month. We received a $41M TRAN that must be paid back by December 2021. 

"What are we doing to prevent state takeover?"

State takeover happens when a district's budget is negative and it doesn't appear the district can 'right the ship' in the immediate future, so the State loans the district the needed funds. In return, the School Board loses its decision-making abilities and the Superintendent is removed. We continue to work to increase our budget reserve, staff within our means, and ensure we minimize any risks of fiscal insolvency. Starting in May 2021, a team from FCMAT will begin an in depth review of our finances to provide additional support, giving recommendations on best practices that, when put in place, will eliminate the risks. 

"What did the state do with Unemployment Insurance (UI)? Does it affect MDUSD?"

Unemployment rates have skyrocketed with COVID, despite the Governor's actions in Summer 2020 to prevent layoffs in school districts of certificated staff (teachers, counselors, administrators, etc), bus drivers, custodians, and food service workers. In the current school year, UI cost approximately $110,000 or about .05% on the personnel costs. In the 2021/2022 school year, that rate is increasing to 1.32%, which is an increase to approximately $2,490,000. This is a 2500% increase. 

The increase means we will have to budget more for the increase. We are optimistic that the rate will decrease in the 2022/2023 school year and beyond but this information will not be available for months, if then. 

Here is a funding cheat sheet for one-time state/federal dollars. We have not received any detailed information on ESSER II which was signed into law in December. ESSER III was just signed into law, and if it has taken months with no details on ESSER II, we don’t expect any immediate details on ESSER III.

What we have learned in the last eight months or so is that funds are signed into law, funds go to the state, the state creates a plan, plans are sent to districts, reporting templates are created that don't align to the plans, funds are allocated based on disbursement schedules (so not at once), quarterly reports must be submitted (ours have ALL been on time), the reporting process then changes again midstream, and then another amount is allocated....and we wait and wait for details.

The information below is as of March 17th, 2021. As you can see with ESSER II, the link will take you to the website of the CA Department of Education and the last update was on February 23, 2021.

Source Limitations Amount Apportionment Timeline
CARES Act (ESSER I, Governor’s Emergency Education Relief, Coronavirus Relief Fund, Governor’s Resource 7420 Fund)

Federal and state restricted funds according to rules of four different funding sources

Authorized from March - August 2020

$24,281,405

All funds have been expended and/or obligated. See CARES Act reports on Business Service page.

Still awaiting last two apportionments of ESSER I(estimated in late March and June for remaining $4,749,000)
ESSER II (Elem & Sec. Schools Emergency Relief)  signed into law on December 27, 2020 by President Trump Federal restricted funds, same focus as ESSER I with CARES Act (learning loss mitigation, mitigate layoffs, emergency relief to address pandemic) Still unknown (anticipated $17M range) - applications closed on 3/19/21  Not yet released
American Rescue Plan (ESSER III) signed into law on March 12th by President Biden

Federal restricted funds (20% to expanded learning, tied to reopening plans, must have a plan submitted within 30 days of receiving funds).

The state needs to create the plan template - a meeting to see input on creating the plan will be held on 3/19/21.

Still unknown but a plan will be required.  Not yet released

 


 

Enrollment - our October CBEDS date showed enrollment in 2020/2021 of 29,582 students. 

We are required to maintain a minimum of a 3% cash reserve, which is about $11.3M. In terms of daily operating expense, 3% is about 8 days worth of cash.  The recommended reserves for unified school districts is 16.98%. If you think of a reserve as a savings account, you can see why the recommendation is 16.98% (about 45 days) and although this is a lofty and unrealistic goal for MDUSD, moving anywhere higher than 3% is a good thing.

HERE is a link to fast facts that contains many data points for MDUSD.

CARES Act funds that have been allocated to MDUSD, including the Learning Continuity Plan funds, are: 

The funds allocated but not yet received, as of March 3, 2021, are:

In the “Ask the CBO” video on the CARES Act, aired on Friday, February 26, 2021, it was shared that the district has not received all of the funds because the funds are allocated quarterly. There is no truth to the misinformation that we didn’t apply for the funds or that funds were tied to any plans. We have received installments in the same manner as other school districts in the state. We do not report financial information to any state website and cannot correct any information that is inaccurate on those sites. 

The Federal government, under President Trump, authorized additional federal funding for school districts in December 2020. These funds are referred to as ESSER II (the Elementary & Secondary Schools Emergency Relief Fund, round II), and are intended to address learning loss, protect staff positions, and mitigate the impact of the state’s fiscal crisis. 

On Friday, February 26th, MDUSD received the invitation code to “apply” for an additional amount that is around $17M. We say “around” because the amount has changed multiple times in the last six weeks. We “applied” for the funds on March 1, 2021 and will receive word on the amount later in March. The amount will be disbursed to the district in four installments between now and June 2021. We will not receive “$17M cash” to use right away. 

Title I funds can be used for chromebooks, although we recommend sites use other budgets first. Because there is no “district fund or budget assignment” for chromebooks or teacher laptops, it is not “supplanting” to have sites that have the funds use them for chromebooks because the devices are not part of the “base” program.  

The First Interim Budget used financial assumptions from the October 2020 Dartboard, created by School Services of California. This Dartboard provides the foundation upon which school districts calculate the LCFF (local control funding formula) funds for the next school year. At the time of the First Interim presentation in December, the cost of living adjustment was 0.0% (see slide 4) and progressions of Dartboards that can be found HERE. School Services updated its Dartboard on January 15, 2021 after the Governor’s Budget Message. The Second Interim budget will continue to use the School Services of California (SSC) Dartboard data in the most current documents, which is January 15, 2021.

Two reports have been created to summarize the CARES Act funds and spending to date, one in Spanish and one in English. It is located on the right side of the Business Services page. 

 

Why do we have a Fiscal Advisor? 

When our budget moved from positive to qualified last year, after many years of letters from the Contra Costa County Office of Education (CCCOE) about deficit spending, we received support from a Fiscal Advisor. We collaboratively identified Mike Berg, a retired Superintendent and Chief Business Officer from the Central Unified School District, to serve in that capacity. In his role, he reviews the budget, proposed fiscal decisions, and provides guidance, information and support to our School Board. While he does not have decision making abilities, he is able to serve in a liaison role between MDUSD and CCCOE to ensure we are making appropriate decisions to move our budget from qualified back to positive. 

What does “receivership” mean? 

A district can go into receivership when its budget falls into the “negative certification” level, meaning it cannot maintain its financial obligations for the remainder of a year or the following school year. HERE is an article about the receivership issues in Sacramento City Unified. Districts do not want to do that because the Superintendent is removed and the School Board serves only in an advisory capacity. The County Office then appoints a Fiscal Agent who makes decisions on behalf of the School Board. Typically in a receivership, the district obtains a loan to meet its obligations. 


How does a district prevent going into receivership, or from having a negative certification? 

A district’s budget should be positive. A positive budget means that the a spending plan is in place that is within the constraints of what the district has funds to cover. In other words, a district should have more revenue than expenditures year after year, while maintaining its 3% required reserve (this is essentially a savings account but we can’t spend it). One practice that helps a district to remain solvent is to have reserves in excess of 3%. Ideally, if we could double our reserves over the next year or so, it would help us in the years where we needed a “rainy day fund” for unexpected issues. 

But didn’t MDUSD get a loan?

Yes, MDUSD did obtain a TRAN (tax revenue anticipation note) because of state deferrals. By doing this, we were able to get $41M in a temporary loan that will be paid back by December 2021 after the State of California provides us about $30M in cash it was supposed to pay us from March to June 2021. In essence, deferrals meant the State gave us an IOU and we needed to borrow money to pay our staff because we did not have enough in reserves. The TRAN also cost us more than $500,000. Had our reserves been stronger, we would have been able to use those and not need a TRAN.

What is the Third Interim?

When a district has a qualified Second Interim budget, the district must present a Third Interim Report at a Board meeting and the Board must be approved it by June 1st. It is then submitted to the Contra Costa County Office of Education. 

How many PPEs do we have (personal protective equipment)?

THIS document is updated in real time and shows the PPEs that have been purchased, donated and delivered to school sites and departments. The items listed below are those already at school sites. There are more orders currently being processed and will be stored in our warehouse where principals can order replacements once those they have on campus have been used. 

In summary, the following have been delivered to school sites and departments:

  • 700+ touchless thermometers
  • 10,000+ hand sanitizer bottles + 1700 one-gallon refills
  • 20,000+ face shields
  • 315,000+ face masks (adult/child and cloth/disposable; another 265,000 available in the warehouse when sites/departments need more and 250,000 more on order)
  • 2400+ gowns (another 11,000 on order)
  • 2,200+ KN95 masks (another 10,000 on order)
  • 600+ gloves for staff members whose roles require them, not including those sent to sites as part of ongoing custodial orders; another 10,000 on order)

What is the cost of a special election for a recall?

After consultation with staff from the Contra Costa County Elections Division, the cost of a Special Election is as follows:

$8-12/registered voter

The breakdown for registered voters by area:

  • Area 1 - 30,611
  • Area 2 - 37,040
  • Area 3 - 22,526
  • Area 4 - 38,765
  • Area 5 - 35,148

Assuming the election is in each area of the district, a Special Election with 164,090 voters would be somewhere between $1.31M and $1.97M. The district is required to pay for the Special Election. As a point of reference, this would equate to 4,679 - 7,035 new chromebooks  or 1,488 - 2,238 laptops for teachers or all new Spanish, French, and German textbooks for all classes in the school district. 

Why is there a deficit?

Our expenditures are exceeding our revenue due to

  • ∙ Cost of living adjustments (COLA) do not cover the cost of living increases
  • ∙ Increasing CalSTRS and CalPERS contributions (retirement costs)
  • ∙ Year over year deficit spending
  • ∙ Declining enrollment that results in fewer dollars coming into the district
  • ∙ Tentative agreements with our bargaining groups
  •  

Where do the funds come from for our district?

We are funded by the percentage of students we have that attend school on a daily basis. For example, let’s assume in very simplistic terms:

  • 10,000 students $10,000 from state per allocation per students
  • Attendance is 94%

If the 10,000 students attended each of the 180 days of the year, the district would receive $100M. 

If the 10,000 students attended 94% of the time, the district would receive $940,000 (and miss out on the $60,000). 

How do we anticipate the amount that the state will fund us each year? 

School Services of California creates a “Dartboard” that is updated many times a year with the most recent information from a number of sources, including the Department of Finance and Legislative Analyst’s Office. We use their Dartboard to enter the number of students in different grade bands, including those who are part of specific groups that receive certain earmarked funding, and we come up with a number that we use for planning and in our budget. It is formula driven and is predicated on our assumptions which are always part of our budget, such as enrollment, cost of living, average daily attendance percentages, staff costs, staff benefits, and more.

 “I’ve heard we had a large rainy day fund but spent it all over the years. Is that true?”

Over the last few years, the Board approved budgets and staffing actions that restored many valuable, student-centered programs and services since the Great Recession of 2008-2010. However, many are ongoing in nature, such as positions. As the district continued to lose students, staffing adjustments would have helped keep pace with the deficit spending. Here are some examples:

  • Provided raises to staff salaries to be competitive with other districts

  • Restored elementary counselors

  • Purchased technology for students for state testing

  • Restored district support for middle and high school sports programs

  • Added coaches to support beginning teachers and staff in Title I schools

  • Added hours to classified roles, increased student support aides

  • Restored elementary music programs

  • Put magnet schools in place

  • Added elementary library programs

  • Added and expanded programs and services for more students

  • Implemented online learning assessment tools

  • Invested in school sites and campuses

  • Increased employee medical benefits

  • Reinstated previously eliminated management positions

Does district staff engage with legislators to try to get more funding? 

As a matter of fact, yes we do! From the management/leadership perspective, many of us are members of professional organizations that have lobbyists who work to increase school funding. The same goes for our Teamsters, AFSCME, CSEA and teachers with CTA. We have groups that do a lot of that high level work for us. Then those of us here in districts build relationships with elected officials so we have open lines of communication when they are looking at making decisions on legislation that will affect schools, including funding parameters. By building relationships and telling our stories, it is easier for us to try to impact legislation where we can. 

Our Governing Board members are always very active in the California School Board Association and participate in legislative advocacy work much the same way. Finally, many schools have PTA’s that also have a very reputable lobbying arm in Sacramento. Even if you are not a PTA member, you can keep up with current advocacy efforts on THIS page.


 

ask the cbo

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cares act funds

 

title i funds