Pajaro Valley USD certifies first interim budget, warns of multi-year structural shortfall

Pajaro Valley Unified's Chief Business Officer presented the district's first interim budget Dec. 11, laying out how declining enrollment, sunsetting pandemic funds and growing retirement and health-care costs are pushing the district toward multi-year deficit spending unless reductions or new revenues are identified.

Jenny told the board the district has lost about 18% of enrollment since 2013—14 (roughly 3,378 students) and that state-level accounting changes after an unexpected revenue shortfall have produced a multi-year ‘‘maintenance-factor’’ recognition that affects Prop 98 funding. The district's realized LCFF revenue was materially lower than prior years, and ESSER pandemic funds largely expired Sept. 2024; restricted-grant carryover caused a large restricted balance movement into the current year.

Key numbers and drivers: the presentation showed (unaudited) carryover and restricted grants increasing restricted fund totals by about $40 million at first interim (largely because of carryovers and ESSER-tied construction funds), while unrestricted revenues were under pressure from lower funded ADA. Jenny said rising employer retirement rates (CalSTRS and CalPERS) and an elevated health-and-welfare trend add to structural cost pressures.

Trustee and public reaction: Trustees thanked staff for the detail and for convening a Sustainable Budget Team (seven meetings to date) that recommended a phased approach: phase 1 (attrition and cost containment) is largely implemented, phase 2 (stakeholder recommendations) is underway and will return to the board in January, and phase 3 (further reductions) may be needed for 2026—27. Public commenters — including PBFT representatives and teachers — pressed the board not to eliminate mental-health clinicians and intervention positions and asked for transparency on legal expenses tied to prior controversies.

Board action and next steps: After deliberation and public comment the board certified the first interim budget with a positive certification, acknowledging the need for further work by the Sustainable Budget Team and a study session scheduled for Dec. 19. Staff will return to the board with the team's recommendations in January and with updated projections once the governor's January budget is released.

Why it matters: The budget frames imminent choices about personnel and programs; trustees and unions signaled strong concern about cuts to student-facing services while the board expressed intent to prioritize academic and student-support programs in recommendations from the stakeholder team.