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Cypress board hears stark multi‑year budget gaps and options to use Fund 40 property revenues
Summary
At a 90‑minute budget study session trustees were shown baseline and stress‑test multi‑year projections that forecast a $1.8M shortfall by 2028‑29 (baseline) and up to $5.3M under stress assumptions; staff outlined options including targeted staffing reductions, use of Fund 40 rental revenue, and deferring facilities projects.
Trustees spent the bulk of their April 9 meeting on a detailed study session about the district's fiscal condition and the role of Fund 40 (property asset) revenues.
Assistant Superintendent Larry Fchaw and county fiscal expert Greg Magnuson presented historical charts showing a decline in unrestricted reserves (from about $9.6M in 2015‑16 to roughly $1.9M most recently), explained how the LCFF three‑year averaging and declining enrollment reduce the district's realized COLA, and walked trustees through the district's staffing profile. The presentation showed a 29% growth in staff FTE since 2014‑15 while enrollment fell, amplifying structural pressure on the general fund.
The team presented two multi‑year projections: a baseline 'proforma' that rolls forward existing assumptions, and a stress test that layers in likely additional costs such as modest salary increases and organizational needs. The baseline scenario showed the district falling below its minimum reserve in 2027‑28 and a $1.8 million shortfall by 2028‑29. The stress test widened that shortfall to an estimated $5.3 million by 2028‑29.
Fund 40, the district's portfolio of apartment and leased properties acquired over the past decade, was presented as a significant local revenue source. Staff outlined the portfolio's annual net rental contributions (examples cited: Azure Apartments ~$132,000, Coast Apartments ~$720,000) and showed a multi‑year Fund 40 projection that begins with an expected ~$11M ending balance and how that balance would decline if the district funds facility projects identified in the facilities master plan. Staff suggested options including: using a sustainable portion of Fund 40 to support the general fund in the short term; deferring or scaling back master‑plan projects; pursuing additional rental‑revenue opportunities (leasing vacant space, market adjustments); and targeted staffing/service reductions.
Trustees questioned which positions are legally required (IEP‑tied aides), how one‑time COVID funds affected staffing, and whether ELOP (Expanded Learning Opportunity Program) or outside vendors cover incremental custodial and utility costs. Staff said ELOP funding and vendor fees supplement but do not fully cover additional custodial and utility expenses from after‑school use.
Board members asked staff to model concrete short‑ and long‑term packages and to return with options the board can adopt as part of the 2026‑27 budget process, including a recommendation for a sustainable Fund 40 contribution policy and a prioritized facilities master plan. County fiscal support (Greg Magnuson) will continue as the district prepares interim certifications and the June budget. Trustees framed the work as a multi‑year effort to rightsize expenditures to ongoing revenues while preserving core educational services.
What to watch: staff will present recommended short‑term savings and a plan for Fund 40 use during May and June budget meetings; trustees signaled they want to certify a positive 2026‑27 budget that addresses the near‑term shortfall while building a longer‑term fiscal stability plan.
