Pasadena School Board Plans to Double Cash Reserves Required by State Before Restoring Cuts

School Board reviews a stronger, revised budget, moves to increase reserve accounts over the state requirements

Published : Wednesday, August 29, 2018 | 4:51 AM

On the heels of a harrowing fiscal year that saw the Pasadena Unified School District cut expenses continuously to stay afloat, the School Board now plans to store up double the amount of cash reserves required by the State.

School Board members at last week’s meeting heard a dramatically improved financial situation for the District resulting from new State funding which greatly reduces, but doesn’t wipe out, projected deficits.

The $12 million shortfall predicted for the 2020-2021 year has been reduced to just over $4 million. Better still, the District is now projected to end the 2019-20 school year at $2.6 million above the state-mandated 3% reserve.

The Board reacted with a “rainy day” savings strategy before making any commitments to restore previous department cuts.

“We’ve dramatically changed our outlook for 2019, 2020 and 2021,” Pasadena Unified Board Member Scott Phelps told Pasadena Now.

Board Member Kimberly Kenne explained how the state’s budgeting calendar affects the District’s budgeting results.

“The 2018-2019 revisions that we looked at [during] the board meeting were what has happened since we adopted the budget. That was in June. And the State Budget had not yet been adopted in June.”

Said Kenne, “We adopted our budget in June, but in order for us to put it out to the public and then approve it, staff creates it almost at the beginning of June. And the state budget wasn’t adopted in the beginning of June. The state budget changed some of our revenue numbers.

“What we saw at the board meeting [last week] was the ripple effect of those changes, both revenue and changes to expenditures for 19-20 and 20-21,” Kenne said.

According to Kenne, the Board is always looking at those ‘ripple effects” in budgeting when doing multi-year projections.

Going deeper into her budget explanation, Kenne said, “Only when we post the actuals, do we know when our ending balance is, which becomes the ending balance for 2017-2018 becomes the beginning balance of 2018-2019. So that was also one of the revisions for 2018-2019, but it’s a result of the actuals from 2017-2018.

“While they were two separate items,” she explained, “they’re linked inextricably that way. And so our ending balance is a bucket of money that we’re not spending. It’s money we have put aside.”

Based on the new figures, said Board Member Scott Phelps, the consensus of the board was “to target for a budget going forward…to have a 6% reserve other than just the state required 3%.”

Added Phelps, “It was [our] clear direction to the staff to bring to the finance committee in the next month or so, and then to the board, a significant amount of reduction to get that reserve for the 2019-2020 backup and therefore, a 2020-2021 backup to 6% or above.”

As Phelps explained, “What we had last night to review is what’s called the ‘unaudited actuals.’ We closed out the books for 2017-2018, that’s what happens in the summertime. They close out–they take all the bills, pay them, count all the revenue.

“So,” Phelps continued, “when [Lueck] did that, the good news was that it increased our beginning balance for this year, 2018-2019 by $3.6 million dollars when she did that. That was about mostly savings and special ed.

Essentially, said Phelps, the board reviewed what was suddenly a much stronger budget, and then voted to aim for more money in the District’s reserve accounts, more than the County demands.

“When you increase the beginning balance by 3.6 million dollars, that has an effect on this year’s budget, next year’s and the third year,” said Phelps, echoing Kenne’s comments.

While relieved at adding more numbers to the district budget, Phelps and the board also voiced concerns over the district’s ability to hire new teachers.

“It’s nationwide,” he said. “We have a teacher shortage, we don’t pay the level that would attract more people into profession. So, we were discussing the amount of substitutes that we have starting the year. Obviously we want everybody hired to be full- time, highly qualified teachers.

“So,” Phelps explained, “there was the discussion of getting some information from our chief of HR about how many classrooms right now don’t have the full-time person that we hired yet,” because of various delays.

“So there’s angst out there, he continued. “Parents are upset because you have kids as subs and we agree. It’s a problem. Fundamentally, it’s a nationwide problem. It’s about salary and teacher shortage. Because if you had higher salaries and more applicants, they would’ve been already hired.”

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