I began publishing enrollment and budget updates last year to try to keep you informed regarding our financial situation. This is the first of the updates for this year, and while there is important information to share regarding enrollment, this message will focus on the overall budget picture, especially as related to the impact of the pandemic on our budget. I’ll include enrollment information in the next update.
It is important to begin by establishing one overriding fact; Just as it has turned everything else upside-down, the COVID-19 pandemic has created a large, negative impact on school funding. The next several years are projected to be as difficult - if not more so - than any previous period that we have gone through, including the Great Recession. The exact impacts remain to be seen, of course, but there is a uniform, high level of concern within the education community and its supporters across the state.
The largest factor in the looming fiscal crisis is a huge decrease in revenue. The closing of the economy, the extended period of the slow reopening of it, and the anticipation that some sectors will not recover any time soon if ever, lead to projections of significantly lower tax revenues over the next several years. Large declines in tax revenues translate into large declines in revenues to all school districts. To bring it closer to home, we will receive less state funding because the state will not have the tax revenues to distribute to us.
We have to face other issues in addition to the revenue reductions. Our operational costs increase every year, and will continue to do so despite the weakened economy. Our contributions to employee retirement funds through STRS and PERS will be increasing. Health benefits for our staff are expected to increase significantly. Even when we do not grant employees a raise, the cost of salaries increases due to longevity and education levels. Costs for specialized programs, like Special Education in particular, are growing at very fast rates. These examples are just some of what we will spend more on, and don’t include anything directly related to COVID.
Whether it is in our personal lives or the finances of Dixon Unified, when our income is reduced, and our expenditures increase, we have to make adjustments. If Dixon Unified (or any district) did not reduce what we spend to the level of what we receive (or less), we would become insolvent and be taken over by the state, incurring long-term loans in the process. This has happened in the past in nearby districts like Vallejo, Oakland, and Richmond as well as others across the state. It has a long-lasting and devastating impact on any district that goes through it.
Like all districts in the county, our finances are monitored by the Solano County Office of Education (SCOE). Because we have a Qualified rather than Positive Budget Certification from SCOE, and in light of the bleak outlook with regard to revenue and expenditures in the next several years, SCOE has heightened concerns over our fiscal health. In response to this, we have presented and the Governing Board has passed resolutions committing us to take the steps necessary to meet our financial obligations over the next several years. We must follow up on these commitments with Board-approved actions included in our budget adoptions, interim reports, and other required steps in the budget cycle.
One requirement that we have begun the work to meet is the development of a Budget Stabilization Plan. This plan will be completed in November and must address this current budget year, as well as 2021-22 and 2022-23. The First Interim Budget Report, which the Board must approve in December, will reflect the steps identified in the Stabilization Plan to reduce our expenditures to match our revenues for this three year period. So, the reductions that we need to undertake to stay fiscally solvent will be identified within the next two months and authorized by the Board in December.
The types and sizes of reductions that will be recommended to the Board will come from an extensive process that will include the resumption of the Budget Advisory Committee (BAC). The BAC is an advisory group that has representatives from SEIU and DTA, parents, two Board Members, and administrative staff. The BAC will have its first meeting next week, and will be asked to help to establish the priority areas for the District moving forward through the budget reduction process. The BAC is not a decision-making body. All decisions regarding the budget will, as always, be made by the Governing Board at public meetings.
You will begin to see more frequent budget discussions at our regular meetings and we are holding a special Workshop Meeting with the Board for Monday of next week, the 21st. The purpose of that meeting will be to present a clear, current explanation of our budget situation, discuss the process and key elements of the work involved in the creation of the Stabilization Plan, and have the Board establish some general direction as we begin to do the difficult work ahead.
I would be remiss if I did not provide you with at least a general sense of the kind of financial challenges that we are facing. At the time that we adopted our revised District budget on August 6th, we stated that our revenue for 2020-21 was $38,166,610. At the same time, we projected that our revenue for 2021-22 is $34,380,241. That difference - the projected drop in revenue from the current budget year to the next budget year - is $3,786,369. Much of this drop in revenue for 2021-22 is tied to what we call one-time funding and in this case, is additional funding to address COVID-related costs. While there will be less revenue, there should also be a decreased need for expenditures related to the virus. The rest of the drop in revenue is due to the decrease in state funding.
When all is said and done, our projections show that we will need to make in excess of $3,000,000 in adjustments over this year and the next two. Much of this will have to come in reducing costs, but we will also be looking at ways that we can increase our revenues. This is a staggering figure when you consider our overall budget is approximately $38,000,000 this year, but must be addressed if we are going to remain solvent.
Again, we are holding a Special Meeting on Monday the 21st at 6:00 P.M. to conduct a workshop on our budget. As usual, it will be held via Zoom through our regular meeting room, etc. The agenda for that meeting will be posted on Friday afternoon with the log-in information.
We are committed to completing this upcoming budget work as openly and with as much chance for input as possible. Please be sure to read these updates, try to attend Board Meetings for information, and look for the other chances to become educated around the issues and contribute to the dialogue that will be available.