Pacific Grove Unified board certifies second interim budget despite $1.6 million projected deficit

The Pacific Grove Unified School District Board of Education voted unanimously on March 5 to approve the district's second interim financial report, a fiscal update staff said shows a projected $1.6 million gross operating deficit for 2025-26 but continues to meet the state's low bar for a "positive" certification.

Assistant Superintendent Jorn, who presented the report, told trustees the combined general fund revenue projection for 2025-26 is $49.1 million with total expenditures just under $51 million, resulting in the roughly $1.6 million deficit. He said the district projects an ending combined fund balance of about $5.6 million and a reserve of about 8.5%, well above the state's 3.33% minimum used for the certification.

"This report shows that PGUSD can meet its financial obligations this year and two subsequent fiscal years," Jorn said, explaining that the positive certification is based on the district's current projections and existing reserve policy. He walked trustees through the revenue mix, noting that as a basic aid district more than 87% of Local Control Funding Formula (LCFF) revenue is tied to local property taxes (about $41.7 million).

Jorn flagged several fund-level concerns trustees asked about in follow-up. The child development fund (Fund 12) shows a projected deficit this year of about $146,000 and a very low ending balance, prompting staff to note the district will either need increased tuition, new revenue sources, or an increased general fund contribution to stabilize the program. Jorn said the district historically supported Fund 12 with general fund transfers and is reviewing options to avoid placing an undue burden on families.

Trustees also asked about a typographical error on the developer fees line in the packet; Jorn acknowledged the typo and clarified the correct ending balance would be approximately $359,000 (the packet omitted a leading digit). He also explained that the cafeteria (Fund 13) growth has required staffing alignment and that Universal Meals remains the primary revenue source for that fund.

Board members pressed staff on the lag in property tax receipts and whether the district's projection (5% above prior year) remains realistic after recent receipt patterns. Jorn described his dual method for projecting property-tax growth (county assessor certified growth and a parcel-level assessment he runs himself) and said receipts typically catch up in March and April.

Trustee Hazen moved to approve the second interim report and trustee Shamas seconded. The student trustee indicated support and the board voted 5-0 in favor. Following the approval, staff will file the district's positive certification with the County Office of Education.

The board's approval does not change the district's longer-term challenge: the multiyear projections still show a continuing structural imbalance in later years unless revenue increases or additional expenditure reductions are implemented. Assistant Superintendent Jorn said staff will continue to refine multiyear projections as upcoming property-tax receipts and other revenue changes become clear.