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School district projects about $19 million deficit as state May revise trims Prop 98
Summary
A district presenter told attendees the district expects a roughly $19 million deficit this year, a $29 million ending balance largely tied up in restricted funds, and uncertainty over an estimated $1.3 billion in Prop 98 funding the governor left unallocated in the May revise.
The district presented a second‑interim budget update showing an expected deficit of about $19 million for the current year and a projected ending fund balance of roughly $29 million, of which “about $22 million” is restricted, the presenter said during a public briefing.
The presentation laid out a three‑year solvency outlook the district must maintain. The presenter said the district is required to hold a 3% reserve — roughly $5 million given current expenditures near $160 million — and that unrestricted, unassigned funds are modest (about $1.5 million). “We will have a deficit this year of about 19 million, just north of 19 million,” the presenter said.
Why it matters: the district’s revenue outlook depends on the state budget. The governor’s May revise reduced the Prop 98 minimum guarantee for 2025–26 by $4.4 billion from the January proposal, lowering the state’s recommended education funding from about $119 billion in January and introducing uncertainty for local planning. The presenter warned the legislature may alter the governor’s proposals and whether any additional funds would be ongoing or one‑time, and the district has not counted non‑enacted proposals in its multi‑year projections.
Key fiscal details cited by the presenter include a planned transfer of just over $3 million from other accounts into the general fund this year, typical year‑end positive variances from unused encumbrances of roughly $500,000–$1 million, and that the district budgets growth on a per‑student COLA so declining enrollment reduces total revenue growth even when COLA is positive.
The presenter said the district is using a cautious risk posture: it will include the statutory 2.3% COLA for 2025–26 and modestly budget likely one‑time reimbursements such as the learning recovery emergency block grant, but will not assume higher‑risk discretionary block grants. The presenter added the district assumed only a partial TK add‑on in its baseline (the governor proposed an increase in TK add‑on funding in January that was reduced in May), so the budget is not reliant on the higher‑risk proposal.
How the district plans to close the gap: the presenter listed expense‑side measures under consideration, including retirement incentives, reducing contracted services, optimizing restricted resources when allowable, route‑efficiency improvements for transportation, and operational steps to improve attendance and mainstreaming of special‑education students. The presenter emphasized that many of these are one‑time or limited‑term measures and do not solve a structural shortfall.
Next steps: the budget and Local Control and Accountability Plan (LCAP) will be presented to the board for a public hearing on June 12; the presenter said the district must adopt the budget and LCAP by June 30 (the district’s second meeting to adopt is scheduled for June 26).
