December 12: Midyear Budget Adjustment Update

It has been a really difficult time in Oakland education, with the current budget crisis having real impacts on both students and adults. I am writing to share a quick update on immediate issues:

  1. The midyear adjustments (made via the resolution below),
  2. The FCMAT implementation report, which deals with addressing the district’s poor internal controls, and
  3. The First Interim Report, which provides an update on district’s current financial state.

1. The Midyear Adjustments:  Tomorrow, the Board of Education will consider a resolution directing Supt. Johnson-Trammell to make $9.0 million in midyear adjustments to OUSD’s budget.  (Click here for the Supt.’s presentation from last week. As of this update, a new presentation had not been posted.).

Originally $15.1 million, the resolution was changed based on updated financial information last week.  I wrote a blog with our assessment of the budget crisis earlier this week.

District leadership described the three financial challenges the adjustment is meant to address:

  1. Restore State Mandated Reserve:  $1.1 million to rebuild the reserve for economic uncertainty to the state-required level.
  2. Specified Risks:  $3.9 million to address known operating expenses identified by the Superintendent..
  3. Unspecified Risks:  $4.0 million to address possible unknown expenses or overspending due to poor internal controls.

As it currently stands, $4.2 million will come from school site budgets and $4.8 million will come from central budgets. Click here for the posted list of layoffs that would accompany the proposed adjustments.

The Resolution also contains some direction for the 2018-19 OUSD budget, calling for increased community engagement, a statement of principles to guide budget development, and the preliminary timelines to be followed.

2. The FCMAT Report:  OUSD staff will be giving an implementation report following the FCMAT study. The FCMAT study highlighted some of OUSD’s fiscal management problems earlier this year. It is a good quick way to get a handle on what is happening inside of the district. The FCMAT implementation work is trying to get to the root of the budget issues that OUSD has faced, stemming from poor internal controls and decision making.

3. The First Interim Report:  The final budget matter is the first interim report. This mandated financial report covers from the beginning of the year through October 31. It lags behind actual time reporting, and is somewhat limited in what it can tell you. This report runs parallel to the current resolution. That is why it states that the reserve will fall $1.1 million dollars below the minimum levels, and the resolution above says that we need to make a change to add $1.1 million to the reserve. It also does not contain the staff’s assessment that the current budget projections don’t actually match what they think they will have to spend for the year.

Some quick key findings (from the staff presentation) are:

  • The Reserve for Economic Uncertainty is projected to fall $1.1M below the 2% minimum threshold required by the California Department of Education.
  • The Ending Unrestricted General Fund Balance is projected to be approximately $10.1 Million.
  • The General Fund is projected to end the year with a positive cash balance of approximately $7.5 Million.
  • Based on the above, the General Fund Multiyear Projections and the financial position of all other funds, staff is recommending submittal of the 1st Interim Financial Report to the Alameda County Office of Education (ACOE) with a “Qualified” certification.

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