| Q: | When I was at work this weekend, like I am every weekend, a colleague of mine told me that her husband heard from another teacher's husband that we are going to be receiving IOUs for our October paycheck. Can you shed some light on this rumor? |
| A: | Absolutely not true! Superintendent Kelly Staley will be attending school staff meetings to discuss CUSD's budget situation and what administration is doing to ensure teachers and staff do not get onto this type of situation. |
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| Q: | Is it true that the District spent over $1M in legal fees? |
| A: | Over the course of 3.5 years (March 31, 2006 through October 13, 2009) the District spent $1,062,948 to a legal firm as a result of several issues including but not limited to numerous Public Record Act requests, Unfair Labor Practice Charges from both CUTA and CSEA, grievances, employee termination (both CSEA and CUTA), Special Education issues, and bargaining issues. |
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| Q: | Is it true the District sent the CUTA PRA request to lawyers for review? |
| A: | No. The CUTA Public Records Act request was processed in house. |
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| Q: | Is it true that the district caused delays in implementing the change of benefits for CUTA members from the Silver Plan to the Red Plan, and therefore lost a significant amount of the savings for this year? |
| A: | The delay in implementing the change was caused by CUTA's insistence on language unrelated to health benefits that would have been detrimental to the instructional program/students. |
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| Q: | I heard that the work done by the Fiscal Crisis and Management Assistance Team (FCMAT) was based on the District's budget assumptions, and therefore was not an independent analysis. Is that true? |
| A: | No. FCMAT's report fully explains the source of their analysis and that the purpose of their work is to "create an independent multiyear financial projection" (page 1). Pages 1, 4, 5, and 9 of the report discuss in more detail how FCMAT prepared its independent analysis and projections of CUSD's budget and cash. |
| | Click here to view FCMAT's Report |
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| Q: | What is your response to the allegation that CUSD has a history of underestimating revenues and overestimating expenditures? |
| A: | Our response is threefold: |
| | (1) Revenues from the state of California have been extremely volatile, especially in recent years, so conventional wisdom is that revenue budgets for school agencies should be conservative (see page 8 of the FCMAT report). When the state is having a fiscal crisis all school districts must brace for -- and have seen in the last couple of years -- a reduction in revenues. The only exception was the influx of federal stimulus funds, which came in at the end of 2008-09 and caused an unexpected increase in the reserves of all school agencies in California that received those funds. |
| | (2) Experience has shown that school districts that are optimistic on revenue or expenditure estimates get into financial trouble -- in fact, that is one of the main causes of CUSD's current fiscal crisis. When the 2006-07 CUSD budget was adopted in June of 2006, the assumption was that student attendance would increase, which would cause an increase in revenues -- but that did not happen. |
| | (3) Expenditures in CUSD decline from the original estimate to the final actuals at the end of the year because CUSD is being as proactive as possible in mitigating the fiscal crisis -- by freezing expenditures and vacancies and by making expenditure cuts. These actions cause expenditures to decrease from the beginning to the end of the year. |
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| Q: | Is the amount needed to solve the fiscal crisis $2.5 million or $9.5 million? |
| A: | Both figures are valid. CUSD's structural budget deficit is estimated to be $9.5 million per year. This is how much more is being spent than what the district brings in each year. Therefore, annual spending must be reduced by this amount on an ongoing basis in order to reach fiscal solvency and eliminate the oversight of the Fiscal Advisor. |
| | Because cash comes in from revenues and cash goes out for expenses at varying degrees during a given year, in some months there is not enough cash on hand to pay CUSD's bills that are due at that time. This is a cash flow issue. |
| | CUSD can borrow from its other funds or it can issue short-term debt (known as Tax and Revenue Anticipation Notes, or TRANs) in order to meet its short-term cash flow needs. But now, with CUSD's structural budget deficit, its cash balances overall are declining and unless action is taken now to reduce expenses the district will not only run out of cash but will be unable to borrow because it cannot show that the funds can be paid back. It is at that point when the state would be required to step in and take over. |
| | The FCMAT report estimates that CUSD needs to cut at least $2.5 million in expenditures in order to be able to survive on its own cash and local borrowing for one more year. In fact, the report goes on to emphasize that $2.5 million is the bare minimum since the State Budget will likely worsen. Even if CUSD does make $2.5 million in cuts right away, the cash problem will surface again the next year unless CUSD solves its $9.5 million structural deficit problem. |
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| Q: | Why is CUSD spending millions on facilities when it is supposed to be in a fiscal crisis? |
| A: | The money that is available for facilities projects can only be used for that, and cannot be used to help relieve CUSD of its fiscal crisis. Furthermore, now is a very good time to go forward with facilities projects because costs of materials and labor are relatively low in the current economy. It is prudent for CUSD to move forward as quickly as possible with its facilities projects so that they are done at a lower cost than if they were delayed. Funds saved on current projects means that there can be more funds available for future projects. |
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| Q: | Why can't CUSD use its reserves to cover the shortfall? |
| A: | Reserves are one-time money -- think of them as a savings account. You can only use the money once to pay your bills, and then you need to replenish it. CUSD is required to maintain reserves of at least 3% of total General Fund expenditures, which experts -- including FCMAT -- agree is the bare minimum. In fact, 3% is woefully inadequate when considering that it will only pay about a week's worth of CUSD's payroll. |
| | Projections by both CUSD and FCMAT show that the district will not have its required level of reserves by the end of next year unless budget cuts are made. Reserves are intended to give school agencies time to make permanent reductions in their budgets, but in CUSD's case the ongoing deficit spending of $9.5 million is so significant that the time to make reductions is now -- the reserves cannot cover the shortfall. |
