6 Things to Know about OUSD’s New Budget

At the last school board meeting of the year in late June, OUSD adopted a budget for the 2018-19 school year, as well as a resolution that commits the district to making significant cuts in starting in 2019-20. This comes at the end of a difficult fiscal year and in the wake of two independent reports – from the Fiscal Control and Management Assistance Team (FCMAT) (top 5 concerning quotes here) and an Alameda County Grand Jury (our one-page summary here) – highlighting OUSD’s ongoing fiscal challenges and the difficult work ahead.

We developed these Frequently Asked Questions to help the Oakland community understand OUSD’s 18-19 school year budget and the findings of the recently released reports.

How does OUSD’s 2018-19 budget compare to last year’s?

In the 2018-19 school year, OUSD expects to receive $437M in unrestricted funding and plans to spend $428M. In the 2017-18 fiscal year that just finished, the district received $412M in unrestricted funding and spent about $410M. Most of the district’s new revenue will come from increased state funding from California’s Local Control Funding Formula. The increased expenditures are significantly driven by employee benefits, which will require nearly $12M in additional funding over last year. This is not unique to Oakland – this increase is due to required increases in school districts’ contributions to their employees’ pensions, as well as general increases in healthcare costs.

What does the budget tell us about OUSD’s reserve?

The district projects to end the 2018-19 school year with a 2.6% reserve. While this would put the district above the state-mandated 2% minimum, OUSD has a history of underestimating their costs and ending with a reserve that’s lower than expected. For instance, the 2017-18 budget planned for the district to end the year with a reserve of over 3%, but they are now projected to end with a 1% reserve. The planned 2.6% reserve is already below the board’s policy of maintaining a 3% reserve; any unforeseen costs could quickly move OUSD below the state minimum for the third straight year.

What did we learn about the 2019-20 and 2020-21 school years?

The district’s projections for the 2019-20 and 2020-21 school years are dire; OUSD will need to continue to make difficult financial choices. The district expects their costs to increase dramatically over this time period, while revenues will stay essentially flat. Without intervention, this would likely push the district into insolvency and state receivership. In response to these projections, the Board passed a resolution on Wednesday recommitting the district to fiscal solvency. The resolution calls for $27M in cuts beginning in the 2019-20 school year, which is the amount recommended by district staff.  

When will we get our next updates on OUSD’s budget?

We will receive a number of updates on OUSD’s fiscal status in the fall. The first of these will likely be the “close of books” (see our 2017 explainer), the final update on the district’s actual revenue and expenses for the 2017-18 school year. Even though the school year ends in June, the district still has unresolved expenses until they are able to close their books. If OUSD ends up spending more money than it planned on, then it might have to adjust the 2018-19 budget.

We’ll get our first update on the 2018-19 budget in December, when the district produces its first interim budget report. If the district’s actual expenditures are close to or below their budgeted expenses, it could indicate that OUSD’s new internal controls are working. Conversely, if expenditures are higher than expected, OUSD may need to make midyear cuts.

Finally, we hope to see the district begin to publicly discuss the required 2019-20 cuts early in the next school year. Making $27M in ongoing cuts will be disruptive to schools and students; determining the best places to make those cuts should include both community input and central office analysis related to program impact.

What is FCMAT? What did their report reveal about OUSD’s finances?

The Fiscal Crisis and Management Assistance Team, or FCMAT, is an organization that provides support to local educational agencies on fiscal or business-related matters. Among other services, FCMAT provides management studies to school districts. In this vein, FCMAT released a report related to OUSD’s financial state on May 31st, 2018.

There were two key takeaways from the FCMAT report. The first is that while OUSD’s current financial system struggling, there is also a real question of past district leadership’s complicancy in covering up the depth of the problems. Further, as FCMAT was attempting to analyze and assess the district’s current financial practices during this school year, there were significant levels of uncooperative behavior from the district. The report is unclear whether it was due to the lack of internal capacity, intent to obstruct, or some combination of the two. But the silver lining is that all signs point to OUSD’s new Superintendent, Kyla Johnson-Trammell, taking the right steps to improve OUSD’s finances.

For more highlights, see our blog on the FCMAT report: “Top 5 Concerning Quotes from New Study of OUSD’s Finances”.

What is the Alameda County Grand Jury Report? What did that report reveal about OUSD’s finances?

From the Alameda County website, “the civil grand jury acts as a ‘watch-dog’ by investigating the workings and efficiencies of county and local governments”. The proceedings of grand juries are conducted in secret, in part to protect the identities of whistle-blowers and witnesses. The Alameda County Grand Jury has produced a number of reports on the financial state of OUSD in recent years, including their most recent report on June 26th, 2018.

The Alameda County Grand Jury found “system-wide failures” on the part of Oakland Unified, including:

  • “Hiring and program spending that is made outside of budgetary control”
  • “Operating nearly double the number of schools than can be justified by the enrollment numbers”
  • “No accountability, lack of trust, and high teacher and administration turnover”

The report enumerates seven key findings and eight recommendations, including that the district “develop a transparent budget platform”, “expand collaboration between district-run and charter schools” to improve student outcomes, and that “school occupancy must be assessed and painful decisions made regarding closure and consolidation as soon as possible”.

Click here to read the full report.

Stay Updated and Take Action on OUSD’s Budget

To stay updated about what’s happening with OUSD’s Budget, sign up here for our Budget News email list. If you are interested in participating in a Community Budget Working Group in the coming year with GO, let me know and we’ll send more information when it’s ready.

 

Best,

Jessica Stewart

Executive Director

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