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Carlsbad Unified School District
Savings over the past three months due to school closures came from reductions in utilities, travel and special education costs. Courtesy photo
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Carlsbad schools break even, but face fiscal uncertainty

CARLSBAD — School closures due to COVID-19 enabled the Carlsbad Unified School District to reduce spending, close a $3.6 million budget gap, and hold onto reserves for looming rainy days.

The schools may need those reserves to cover future deficits, especially if a pandemic induced recession deepens, district staff told the school board at its June 10 meeting.

“I can’t believe that we are in the black. But … if we stop schools three months short, then we have enough resources to pay for school, which is a shame,” said School Board Trustee Claudine Jones.

“Not many good things [have come of] the pandemic, but saving money might be the only one, [and so] we took advantage,” said Assistant Superintendent Chris Wright. Covering future deficits could require “a combination of reductions and strategically dipping into the reserve … until the economy starts to rebound.”

The schools’ adopted budget for FY 2019-2020, which ends June 30, initially put expenses at $123.1 million, but revenues at only $119.5 million, according to Wright’s June 10 briefing. The district would’ve plugged the hole by dipping into its fund balance, or the positive balance maintained in its primary financial account, which comprises its cash reserves.

Instead, due to reduced expenditures since closing schools in mid-March, the district now anticipates finishing the fiscal year just a bit above breaking even.

Savings over the past three months due to school closures came in myriad forms, including reductions in utilities ($175,000), travel ($105,000) and special education costs ($865,000).

“We were only paying for services rendered [for special education], both in terms of transportation, and then actual instructional services. … That was instrumental in making sure that we could close that budget gap,” Wright said June 10.

Specifics about future deficits and how best to close them remain unknown. While California’s schools hugely depend on state dollars, the governor and state legislature didn’t agree on a state budget until June 22.

The state won’t slash school funding, as the governor initially proposed in May. But the late agreement didn’t leave Carlsbad’s school board enough time to revise its financial assumptions before unanimously adopting its budget on June 24.

Based on information available during the drafting of its budget, the school board assumed it would need to draw down $4.7 million of reserves in FY 2020-2021 and further reduce FY 2021-2022 expenditures by $5.5 million.

That’s even after allowing for no-frills.

“Spending is only allowed for ‘critical and essential’ items. If it’s ‘nice to have,’ we’re not doing it,” Wright said.

After evaluating the implications of the state’s budget, the district will revise its plan in August, zeroing in as necessary on specific cuts, deferrals and potential short-term borrowing options.

“It’ll be a little bit of a bumpy ride, probably through the fall. We’ll see where things land,” said Wright June 24.

“It puts us in a very uncomfortable position to be approving something [in June] where we know that it’s going to look different in a very short time,” School Board Trustee Elisa Williamson said June 10.

Even without draconian reductions from the state, the school district still faces uncertainty and structural underfunding.

“If federal money [assumed in the state’s budget] doesn’t come, [resultant deferrals of state funding] could trigger some cashflow problems for us,” Wright said.

Several trustees voiced concern that students might move out of the district, to charters or elsewhere, reducing the district’s allocation of attendance-dependent state funding.

While the district hasn’t yet seen an uptick of student disenrollment, it won’t know for sure until just before the next school year, said Assistant Superintendent Rob Nye June 10.

Notwithstanding COVID-19, “our expenditures were beginning to [outpace] our revenues anyway, just because natural expenses grow at 3 to 4 percent,” Wright said. “There would probably still be deficits,” just not “revenue reduction induced.”

Asked to sum up the reasons for structural shortfalls, Wright said in a June 22 email: “California, in general, underfunds education and is usually towards the bottom nationwide when it comes to per-pupil funding.

“And although LCFF [the Local Control Funding Formula, by which the state apportions school funding] has put billions back into education …, it only restored districts to the purchasing power they had just before the Great Recession began.

“Further, special education and pension obligations are two large cost drivers which put a strain on all districts.”

School board trustees didn’t respond to a request for additional comment.