Hart district embarks on budget process
Board expects lines of revenue to increase, but governor’s budget proposal looms large
The William S. Hart Union High School District hosted a budget study session Feb. 9, examined how the governor’s January budget proposal could impact the district and reviewed its proposed budget for the 2023-24 fiscal year.
In summary, the district is expected to see lines of revenue increase and total revenue, as of now, estimated at $258 million with total expenditures at $323.1 million for the 202324 budget. However, several factors affecting the economy, state finances and educational challenges pose potential risks to the district’s budget.
“We always want to have assets greater than liabilities and therefore maintain a fund balance so that we are solvent. You can see that we have, we do have a positive ending balance for the 2023-24 and 202425 years. Although, we are deficit spending,” said Bob Jensen, who represents Trustee Area No. 4 and is president of the governing board.
“The funds that we have are there to be spent for appropriate purposes such as student education, student programs, as well as salaries and benefits for our certificated and classified personnel,” Jensen continued. “We’re always striving to watch that bottom line, fund balance, to make sure that we don’t spend more than we have.”
According to district officials, the information presented is like a forecast of what is to come based on available information from the L.A. County Office of Education, school services of California Capital Advisors, the Legislative Analyst’s Office, the governor’s office and the district’s financial team.
“As we look forward to development of the budget for the 2023-24 fiscal year, and subsequent years, it’s important that we are transparent to the community and our stakeholders regarding the anticipated
path ahead of us, as projected by the governor and the California Department of Education,” said Ralph Peschek, assistant superintendent of business services.
Governor’s budget and possible implications
The governor releases a proposed budget in January and announces an adopted budget in May, which outlines the finances of the state, but specific to education, it includes how much funding educators can expect for various programs and services.
“California seemed to turn a page in the state budget development,” Peschek said. “We’re moving past COVID-19 budget measures that needed to be in place since 2020, and moving toward more the business’ usual fiscal model for the state and for school districts.”
However, Peschek noted that “business as usual” will come with a “softening” economy — business ramping up and settling to levels seen prior to the pandemic.
He also noted the governor chose not to draw from the state’s reserve accounts at the time of his announcement of the January budget proposal.
“The governor’s made modifications to other areas to try and balance the deficits that he sees right now, including clawing back $1.2 billion from schools’ grant programs that were awarded in June of 2022.”
According to district officials, the state’s revenue trends for the general fund helped them determine approximate funds from Proposition 98, which sets a minimum funding guarantee for K-12 and community college education.
The district’s estimates indicated the minimum guarantees from Prop. 98 for 2023-24 will decline. Prop. 98 funding for K-12 schools and community colleges for 2023-24 is $108.8 billion, which represents a decrease of approximately $1.5 billion relative to the 2022 Budget Act, according to the governor’s office.
As a result of the projected decline in funding from Prop. 98, new ongoing and one-time categorical programs that were once included are no longer available, according to district officials.
Peschek said the governor’s budget is prone to change due to California being predominantly funded by three major revenue streams — personal income tax, corporate taxes and sales and use taxes, all of which are projected
to be significantly lower through 2023-24.
Hart district’s projected 2023-24 budget
Peschek reviewed the district’s 2023-24 budget, which included recent settlements with bargaining units, excluding classified staff. He also noted that the budget before the governing board would be subject to change in the coming months.
He noted an 8.13% cost of living adjustment, a 2.75% increase compared to what was previously expected. The change in COLA represents an increase of about $4.7 billion in revenue for school districts statewide.
However, state officials projected lower COLA percentages in subsequent years.
In addition, there is an estimated $5.04 billion statewide funding increase from the Local Control Funding Formula. Of that money, $1.4 billion will be one-time funding. School districts can also anticipate assistance from the equity multiplier tool, though the Hart district won’t see much of those funds as it does not qualify.
Equity multiplier is used to bolster funds for schools with underperforming students, approximately 85% to 90% of free and reduced lunch student enrollment, to help them succeed.
Lastly, the district will see an increase in its categorical funding, which targets students who are lowincome, English learners and foster youth, special programs or for special purposes.
According to district officials, as of now, the district’s projected 2023-24 LCFF total revenue stands at approximately $258 million. Though the district sees several increases in revenue, district officials noted no state support for its contributions to CALSTRS and CalpERS, state retirement funds for teachers and public employees.
“We’re fortunate that CALSTRS, which is our employee retirement system for certificated, more educational staff and classroom-based staff, that is remaining constant,” Peschek said. “We contribute 19.1 cents to retirement fund for every dollar the district spends on certificated salaries.”
CALPERS contribution rates are expected to increase from 25.37% to 27% and go up in the next two years. These costs are mandated by the state, Peschek said.
The district must also comply with the state minimum wage, mandated at $15.50 per hour, whereas the district has its minimum wage at $16.78 per hour. In addition, the district faces a decline in enrollment, a statewide trend overall, the challenge of inflation, and addressing chronic absenteeism, which impacts the budget.
In January, for the governor to secure that 8.13% COLA, he had to reallocate funding from “other pots.” State officials ultimately took back a third of the money that was promised to school districts from a $3.5 billion arts and music grant.
“Luckily, it was smart because he didn’t dip into state reserve for K-12 or from the state to try and balance it in January. He gave himself some flexibility at the end if he needed to dip into those pots,” Peschek said.
According to district officials, the governor’s decision was most likely prompted by Prop. 28, additional funding for arts and music programs for local education authorities, which starts in the 2023-24 school year and continues on for the coming years.
Cherise Moore, who represents Trustee Area No. 3, questioned state officials’ commitment to the arts and music education of students after making that decision. The funds from the grant and Prop. 28 would have been beneficial, she concluded.
“It’s not a great way, to me, keeping the promise to the arts that I thought they had,” Moore said during the meeting.
Another key element of the Hart district’s budget is its base funding, which is derived from average daily attendance, commonly known as ADA — the total days of student attendance divided by the total days of instruction.
According to the district’s estimates, it would receive approximately $10,359 per junior high school student ADA and about $12,317 per high school student ADA.
“We haven’t spent in advance like some districts, which is good, but we are funded on average daily attendance and so when declining enrollment hits, our revenue is variable and most of our expenses are fixed,” Jensen said.
“So, just the importance of having kids show up to school — obviously you want them in school because they should be there from a learning standpoint, but really impacts our budget and our revenue. And I hope they come,” he continued. “Hopefully our declining enrollment will cease and be stable, better than the state of California, so that we can continue with the revenue stream to allow for the proper education.”
The Hart district will wait to see its allocation of federal funds in due time. The governing board will hold a second interim report on March 15, which will be updated to reflect information from the governor’s January budget update.