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BUSD Balances Budget as State Funding Plummets

The Burbank Unified School District has balanced its budget, but that’s not stopping the storm clouds from gathering, said district staff, as the state’s developing deficit crisis signals deep cuts in funding for California schools.

Against a backdrop of budget panic in Sacramento, where state legislative analysts project a $73 billion deficit overall, BUSD faced an unwieldy three-year balance projection. Decisions approved by the Board of Education to potentially cut staff next year have created projected savings that will allow the district to meet its financial obligations over the next three years, said administrators.

It will just be enough to maintain a positive ending budget balance in the coming years. Good news to be sure, according to Andrew Cantwell, assistant superintendent of administrative services, but it could come at the cost of laying off teachers if the district does not secure new revenues.

During the most recent Board of Education meeting, Cantwell expressed caution on the district’s financial projections at the second interim report for the 2023-24 fiscal year.

“The key takeaway from this budget revision is that the district’s finances are largely stable when compared to the first interim reports. We’re able to maintain a balanced budget; however, we were only able to accomplish that through the staffing reductions both this year and next year,” said Cantwell.

At the first interim, the district was reporting steep deficit spending, trending toward a negative reserve balance within three years. Now, budget estimates forecast the district will end the 2023-24 fiscal year with a $47.05 million balance surplus. By June 2025, that figure is estimated to drop to $20.9 million, and then continue downward to $5.5 million by June 2026, not accounting for new revenue sources such as a potential local bond measure, which is being considered for the November ballot.

“We continue to have a structural deficit that requires additional revenue or further expenditure reduction in the future, but we will maintain the reserve for economic uncertainties and meet all financial obligations through the 2025-26 school year based on our current projections,” Cantwell told the Leader.

School districts define a balanced budget based on their ability to pay their obligations through a three-year period. This differs from other institutions, which define balanced budgets based on spending fewer dollars than are made in revenue.

In October, the Los Angeles County Office of Education expressed concern over the district’s ability to push forward the healthy reserve into the next three years, and required district administrators to create a plan to make up for the shortfall.

District staff called the process of fiscal stabilization “painful,” Cantwell said. It means the district may have to lay off teachers and cut hours from other staff should new revenue streams not solidify, a measure approved at the March 7 Board of Education meeting.

The staffing reductions would account for savings of $5.2 million just next year.

The proposed cuts to teaching staff would come largely from elementary physical education teachers. Assistant principals at the elementary level could also be laid off in the 2025-26 fiscal year.

And despite the district’s budget controversy last year, where it undercounted the budget balance by $11 million and led to delayed raises for teachers, BUSD can attribute most of the red ink to ongoing issues on the state level and declining enrollment statewide.

“It does not look good, and that’s hard for me to say. … What was articulated in January as the budget deficit for the state was understated, and it looks like a much bigger number and a much bigger deficit,” Superintendent John Paramo said.

The state could slash up to $21 billion in funding from schools in FY 2024-25. Education is the state’s most significant expenditure by far — BUSD receives about 81% of its revenues from state funding.

BUSD financial staff used conservative estimates to anticipate state revenues in the second interim budget projections, as the district expects to lose millions from changes to California’s education funding formula, specifically through reductions to the cost of living adjustment portion, which provides additional dollars for cities with higher costs of living.

“Right now the weather clouds are certainly gathering. It appears the storm is coming,” said Cantwell.

Declining enrollment is the main driver that determines incoming state dollars, and BUSD estimates an 18% decline in enrollment over the next 10 years.

Enrollment doesn’t just weigh down the state funding, but it also means the district will see increased pension costs. Because there will be fewer students enrolled in school, there will be fewer teachers and staff members to support the district’s retired staff.

“The main way we are currently funding pensions is not by market returns, but by current contributions, kind of like Social Security. We are taking contributions from employees and then paying out past promises. At the same time that we have fewer people who will be able to pay into that system, we have people who are living longer,” said Cantwell.

This means that, as declining enrollment continues throughout the state, there will be fewer teachers paying pension obligations, and the district will have to foot the bill unless the state intervenes.

Funding shortfalls make layoffs at BUSD more of a possibility in coming years. To sidestep this, district leaders and teachers are rallying behind a plan to bolster revenues while keeping existing teachers paid and school doors open.

That plan centers around the extension of existing bond revenues, keeping taxes at the current rate. The measure could land on ballots this November, and School Board members, teachers and district officials alike say it’s necessary to fund nearly $1.13 billion in necessary repairs for aging facilities, freeing up budget dollars for education programs and teacher payroll.

If approved, a parcel tax could follow in a future election cycle, according to the Board.

First published in the March 23 print issue of the Burbank Leader.

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