GO’s analysis of OUSD’s 2nd interim budget update

Two observations and two questions

Interim reports are a “snap-shot” in time that give a pulse check on the district’s fiscal picture. Below you will find GO’s observations and questions from OUSD’s 18-19 2nd interim.

Observations

Our Observation: The reserve is growing towards the 3% goal (moving from a projection of 2.56% to a current actual of 2.75%)

Why is this important: The reserve is the last line of defense against worst-case scenarios, like mid-year budget cuts to school sites or a district going into state receivership. Investing in the reserve is never the popular thing to do, but it is the responsible thing to do. OUSD’s choice to prioritize building its reserve – and its ability to do so – is a sign of improved fiscal practices.

Our Observation: OUSD’s budget is stabilizing, but it appears there will be more budget cuts in the future

Why is this important: Budget cuts are hard and planning for them well in advance is critical. At this time, the district projects a surplus for 2019-20, but will spend more than it brings in again in 2020-21. The board presentation highlights “budget pressures” beginning in 2021-22 and the possibility of cuts in 2022-23. Next year, district leadership and the board need to make important decisions about building their reserve and potential future cuts necessary to balance the budget.

Questions

Are all components of the contract negotiations included in the budget update and multi-year projections?

Why we care: Settling a contract that includes salary increases and class size reductions increases the district’s costs. Budgeting in new obligations is critical to the accuracy of the district’s projections and in previous years has not been properly considered. Without having these specific expenses called out individually, it is hard to tell where or how they are accounted for in the district’s budget projections.

  • What will the cost be of decreasing class sizes by 1-2 students?
  • Historically when teachers have settled a contract all unions have received that raise amount – is that true for this bargaining cycle?

What does all this mean for state relief funding?

Why we care: A provision in last year’s state budget (AB1840) allowed for the state to pay up to 75% of OUSD’s structural deficit in relief funding if the district made difficult long-term fiscal decisions. But it seems that OUSD’s recent budget cuts may have eliminated their current structural deficit, and it is unclear what numbers will be used to determine the district’s structural deficit.

PRIVACY POLICY site design by twiststudio