San Diego Unified officials are pondering how to cut their budget to close a projected $70 million deficit in the school district’s general unrestricted fund for next school year, as public schools across California grapple with the double whammy of a major state budget shortfall and expiring pandemic recovery money.
But San Diego Unified’s projected deficit may actually be higher — more to the tune of $100 million — once the district factors in experts’ updated projections of lower state school funding, according to officials’ discussions during a district budget workshop Thursday.
The district’s budget projections are preliminary and may change as the state budget process unfolds through the summer. Districts will learn more next week when Gov. Gavin Newsom unveils his budget proposal.
But staffing will inevitably be impacted by any cuts, considering that 95 percent of San Diego Unified’s unrestricted spending goes toward salaries and benefits, district officials said.
District officials said they want to prioritize attrition rather than layoffs to reduce staffing costs, and they are offering a $1,000 incentive for staff who declare early, by Jan. 15, their intent to retire.
Administrators also discussed their plans to eliminate or reduce services that have been funded with pandemic relief money but that they say are no longer as greatly needed, such as substitute teachers dedicated to certain schools and family support staff tasked with reducing chronic absenteeism.
“It’s going to be a very lean year compared to every year you’ve had leading up to this,” John Gray, the CEO of consulting firm School Services of California, told San Diego Unified leaders during Thursday’s budget workshop. “I would say fasten your seat belts, this will be an interesting time.”
Public schools are about to enter the largest fiscal crisis they’ve faced this decade, school officials say, although it is not expected to hit schools as suddenly as the Great Recession did.
After a few years’ bounty of one-time pandemic recovery aid, California schools will face a funding cliff later this year as the last of that money is set to expire. San Diego Unified is in the midst of spending $150 million of pandemic funds that will disappear by the end of the year, said district Chief Operations Officer Drew Rowlands at Thursday’s meeting.
Now in addition, schools learned last month that the state is facing a $68 billion deficit, which the Legislative Analyst’s Office attributed to what it described as an economic downturn spurred by higher federal interest rates meant to curb inflation.
One way the state could close its deficit is by reducing school funding levels to the minimum required by state law, a move that could lower school funding by up to $16.7 billion, the Legislative Analyst’s Office said. The state could do this by using up to $7.7 billion of its school funding reserve, cutting funding allocations that had been promised to schools but have not yet been spent or simply reducing funding to schools.
On top of that, many districts including San Diego Unified have already been seeing enrollment drop every year, which means less money from the state because school funding is doled out based on how many students are attending.
“Your reality is you’re probably going to be reducing your budget every year to respond to what state funding’s providing you and what’s happening with your enrollment,” Gray told district officials.
He cautioned San Diego Unified officials to watch out for the district’s reserves, which are significantly lower than those of California’s other large school districts.
San Diego Unified‘s reserves equal 7 percent of the district’s total budget, compared to an average reserve of 22 percent for all California unified school districts and 31 percent for Los Angeles Unified, according to School Services of California.
Gray urged all school districts to hold budget meetings like Thursday’s workshop now, because earlier planning can help ease the severity of budget cuts. But not all districts are, he said.
“Now, it’s not happening in every district, but it’s a good thing it’s happening here in San Diego,” Gray said.
San Diego Unified finance officials outlined Thursday three of the five ways they expect to close the district’s budget shortfall: employee attrition, moving expenditures around to be paid by restricted pots of funding and letting go of programs that have been funded by pandemic recovery money that are less needed or successful.
Officials said they will prioritize attrition over layoffs, meaning the district will no longer fill staffing vacancies unless necessary, such as if a principal leaves. That could also mean that rather than hire a new person to fill a necessary position, the district may move an existing staff member into it.
But the attrition model may not always work, because it won’t align exactly with the staff configurations that are best for students, San Diego School Board Trustee Shana Hazan said.
Officials also hinted repeatedly that they are incorporating March 15 into their budget planning — the state’s deadline for issuing notices of potential layoffs or reassignments to teachers, administrators and other school employees.
“Decisions are difficult. Conversations are very difficult. And when we’re impacting individual lives, that’s difficult,” Superintendent Lamont Jackson said during Thursday’s meeting. “What I really appreciate is the board’s support around the attrition model so that we can make that less of an impact to our families and our communities.”
The district will detail its other two budget reduction methods — generating new revenue and “prioritizing school sites” — at a second budget workshop next month, Rowlands said.
