First Interim Budget Update from OUSD

Dear OUSD Staff and Community,On Dec. 11th, OUSD staff will present the first interim budget report to the Board and the public. We’d like to share some important information before that presentation as well as next steps in our budget process. The First Interim Report has Two Key Budget Updates (Click here for the first interim report materials)This year’s budget: Using financial information through October 31, the report provides an update on the 2019-20 school year budget. This year’s budget is balanced and will not require any mid-year reductions. We expect to end the year without needing to reduce our reserves below the Board standard of 3%.The Multi-Year Projection (MYP): The MYP shows the District’s projected budgets for the following two years based on currently known obligations. This lets the districts look at longer-term trends and take action if necessary. As discussed in more detail below, there is a need to make significant reductions and/or find new revenue.Need to Balance Next Year’s Budget (Click here for the updated budget resolution materials.)
In order to balance the budget for 2020-21, OUSD will have to change how it uses its resources. The MYP shows that OUSD needs to reduce expenses and/or increase revenue by at least $15.5 million for next year (2020-21). The reasons for this are many, but the primary ones are:While state funding continues to increase, the increases are modest at best and woefully insufficient given how fast our expenses are rising.The state-imposed pension costs continue to increase significantly; in fact, the State predicts that the increases in state revenue will mostly pay for the state-imposed increases in pension costs. OUSD’s projected cost increase for next year is ~$3.0 million.We have an urgent need to ensure we are offering competitive compensation packages to our employees. To this end, we have negotiated contracts with OEA and SEIU, both of which are incorporated into the MYP. These raises were long overdue.Other costs, such as special education, continue to increase. OUSD’s projected increased cost  for special education next year is ~$2.9 million. The bottom line is that funding is increasing a little, but our necessary and imposed expenses are continuing to rise faster. In order to balance the budget, will have to–like every year–prioritize how we spend our resources.Additional Expenses
It is important to note that there are also certain additional costs that are not (and should not be) in the MYP. For example, the cost of providing competitive compensation for the other five unions within OUSD, with whom negotiations have not been completed, are not included in the MYP. Additionally, the budgets required for fully staffing the new Central Kitchen as well as maintaining access to modern technology for all students and staff (e.g., chromebooks) are still being refined. We are working diligently to ensure these projections are complete and accurate.Based on current information, we estimate that these additional costs will add $5-6 million in expenses for next year. This brings to approximately $21 million our estimate of how much OUSD needs to reduce expenses and/or increase revenue for 2020-21. Please note that this is only an estimate and the actual number is likely to be different.Sending Additional Funds to School Sites
Back in June, the Board directed staff to allocate, under certain conditions, up to $3 million to schools. While this did not occur, the presentation on December 11 will show that over $4.5 million was allocated to schools for various purposes. As a result, and given the level of budget changes that are necessary to balance our budget, staff will be asking the Board to rescind the original direction from June.Up Next
Our budgeting process continues to evolve with updated numbers and assumptions. Opportunities for community engagement will also be announced soon. The next big step will be in early January when California’s Governor releases his proposed budget for the coming year. After that, staff will bring specific budget proposals to the Board of Education for discussion no later than February. The Board will vote on the reductions soon thereafter.Thank you again for your time and attention as we continue to implement our fiscal vitality plan and build first class business systems. Know that we are working every day to keep students and educators at the center of everything we do.
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