OUSD Budget Update: Second Interim Financial Report

Last night, the Oakland Unified Board of Education heard a series of reports on the district’s finances. Overall, the district’s finances have moved in the right direction, but are still far from being on solid footing.

The midyear cuts that the board approved in December have provided some stability to OUSD’s financial position. The district is currently projected to end the year above the state-mandated 2% reserve for economic uncertainty; however, district staff stated that this number is likely to fluctuate between now and the end of the school year. That period of the fiscal year has historically been challenging for OUSD leaders to manage as contracts get submitted or extended, and the picture of total expenses for the school year compared to planned expenses becomes more clear. The district must continue to exercise caution and take action to stay fiscally stable.

Among areas for continued concern are the district’s progress toward enacting their planned midyear cuts. Last fall, OUSD leaders estimated that the district might need to cut as much as $15.1 million from the current 2017-18 budget to remain solvent. In December, the school board approved making $9.0 million in midyear cuts, but OUSD has only realized $6.5 million of that to date. The majority of this gap comes from the district’s efforts to restructure programs to maximize the use of restricted revenue sources: the district planned to reclaim $1.6 million in this area, but has only realized $0.1 million in savings. These gaps come as the district is continuing to realize unplanned costs, including $550,000 in nutritional services and, as mentioned by district staff at last night’s meeting, an increase in transportation costs. School board and district leaders must continue to make fiscal solvency their top priority and take all necessary actions to protect against further unforeseen overspending.

At least as important as the district’s short-term fiscal standing are the necessary long-term changes to OUSD’s financial systems and practices. OUSD leaders shared some promising developments in this area. The board heard a presentation on the district’s Fiscal Vitality Implementation Plan, which details how the OUSD is responding to each of the risk factors identified by the Fiscal Crisis and Management Assistance Team (FCMAT). Among actions taken in twenty-three different areas, the district has conducted zero-based budgeting sessions, made progress toward hiring a Chief Financial Officer, and clarified the role of central office staff with the eventual goal of a realigned organizational chart. These were actions that GO encouraged the district to take in December and we call on board members and district staff to continue to prioritize these essential projects to put OUSD back on a path to fiscal stability.

Ultimately, school communities deserve a 2018-19 school year and all those following without midyear cuts. This will only happen if the district and school board continue to exercise caution and act to change the district’s fiscal practices. At their next meeting, the Oakland school board will review a resolution put forth by the Budget and Finance Committee to direct OUSD leadership to adopt financial best practices developed by the Government Finance Officers Association. This framework includes national best practices in district level budgeting, including long-term financial planning, building structurally-balanced budgets, maintaining a healthy reserve, and ensuring financial transparency with community and key stakeholders. As we look to flat state funding and rapidly increasing benefits costs in the next two school years, the board’s adoption of this framework to guide the tough decisions ahead will be an important next step in OUSD’s progress toward long-term financial sustainability.

 

DOWNLOAD: FREQUENTLY ASKED QUESTIONS ON THE SECOND INTERIM BUDGET

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