Las Virgenes school reserves might be too low
Budget crisis raises red flag
By Stephanie Bertholdo  bertholdo@theacorn.com

For the second time since Assembly Bill 1200 passed in 1991, the Las Virgenes Unified School District will file a "qualified" interim budget with state officials, a plan that explains why the district has had to dip into its financial reserves.

The Assembly bill was enacted to ensure that California school districts are adequately prepared to meet their financial obligations. It requires districts to maintain an emergency reserve fund totaling 3 percent of their budget. A qualified interim budget explains why the reserves are being used.

Ordinarily, a dip into the reserves is a signal to the state that district finances are not being handled correctly. But for the Las Virgenes district, and many districts in the state, the submission of a qualified budget is a direct response to Gov. Arnold Schwarzenegger's proposed $4.8-billion budget cut to education next year.

While California has had financial crises before, the cuts to education run deeper this time around, said Karen Kimmel, LVUSD chief business official.

Kimmel presented the second interim budget to the school board March 11, detailing why the district has submitted a qualified budget.

Red ahead?

The reserve projections for this year are at 4.36 percent, Kimmel said. But with budget cuts looming, Kimmel said, the reserve level will drop to less than 2 percent in the 2008-09 school year.

If the budget crisis isn't eased significantly, the district may be insolvent by the 2009-10 school year, Kimmel said. Not only would there be no reserve money left, the district will be in the red by nearly $5.3 million, showing a negative 2.3 percent reserve level.

If this occurs, schools would be bankrupt and the state would take control of the district, said LVUSD Superintendent Donald Zimring.

When the district faced a similar situation in 2004, the Legislature allowed school districts throughout the state to submit budgets with less than the required 3 percent reserve, because of the state's financial turmoil. So far, Sacramento has not offered such a cushion, but Kimmel expects the regulation will be loosened since so many of the state's districts face the same situation.

The state's budget crisis will prompt the largest number of districts in the history of the state to submit qualified or negative budgets, Kimmel said.

If the Legislature doesn't allow school districts to operate on a less than 3 percent reserve, the negative certification would result in Los Angeles County's being authorized to appoint a fiscal advisor to override school board actions.

Kimmel submitted a qualified report that included a fiscal recovery plan. Although the board has yet to approve actual cuts, the district was still required to show a list of budget cuts to the county, she said.

"This action is a direct result of the governor's $4.8-million cut," Zimring said. He said although the cuts probably won't be as draconian as the governor has suggested, the district must still plan for the worst-case scenario.

Budget ups and downs

Revenues have risen this year but haven't keep pace with expenses, Kimmel's report said. The LVUSD Physical Education Teacher Incentive Program increased revenue by $105,000, and prepayment on a cell tower lease brought in an additional $133,000.

On the expense side, however, the new increases totaled $388,000. A new physical education teacher earns $60,000 per year. The district's new technology program cost $198,000. Special education costs also rose by $130,000 due to increased nonpublic school placements, Kimmel said.

Based on potential cuts discussed by board and cabinet members, the 2008-09 budget projection includes a total of $1.8 million in cuts, revenue enhancements and reduction measures.

"We wanted to be fiscally responsible," Kimmel said of the possible cuts and revenue boosters, including the leasing of Indian Hills High School in Calabasas and changes to the Las Virgenes Community Learning Center.

Gov's glimmer of hope

Kimmel said Schwarzenegger has indicated he will consider so-called "revenue enhancements" to improve the state budget. Details of the possible new taxes have not yet been released.

The state may also close tax loopholes so cuts to school districts won't be as severe, Kimmel said.

The district's finance committee meets regularly to hone the budget, Kimmel said. Members of the committee will prioritize suggestions on the list and push to identify a total of $3.5 million in new revenue, along with reductions.

Unhappy conclusion

"As our district has maintained minimum ending reserve balances, this proposal is devastating to the LVUSD budget," Zimring said in his report to board members.

District officials will provide further budget information after the "May Revise" budget session tentatively scheduled for Wed., May 14.