Back to Basic Aid
Cabrillo Unified School District expects to finish the fiscal year in the black, but the budget picture going forward is complicated. Review file photo

Cabrillo Unified School District will come out of this school year in the black, unexpectedly, after its second interim budget report revealed an extra $2.5 million in revenue.

District Chief Business Officer Jesús Contreras presented the numbers at this month’s school board meeting, explaining that the unexpected $2.5 million comes from a supplemental property tax generated from countywide property sales and will result in around $800,000 in surplus for the year.

But the additional revenue is a one-time funding source, Contreras and San Mateo County Office of Education’s Deputy Superintendent of Business Services Denise Porterfield said. It comes whenever the district changes from being funded by the state’s Local Control Funding Formula — meaning the state provides money to make up for what local property taxes can’t produce — to wholly community funded, or a “Basic Aid” district, when local property taxes can cover funding entirely. In the 2019-2020 school year, Cabrillo made that shift, qualifying for additional revenue from the supplemental tax, which is shared among Basic Aid districts in the county.

“It’s a bittersweet reality,” Contreras said.

Because the district is operating under such tight margins, that $2.5 million is the difference between solvency and insolvency for the 2019-2020 school year. Next school year, the district won’t receive the supplemental tax, so it is projected to be deficit spending. That means the district will require state funding to fill the gap, shifting it back into the LCFF funding model, and the process repeats for the next two years.

Contreras calls this the “rollercoaster effect” — when a district shifts from LCFF to Basic Aid year by year. Each time the district becomes Basic Aid, it gets a portion of the supplemental tax, but only for that first year.

Board Chair Kimberly Hines said flipping back and forth isn’t sustainable. While LCFF districts receive funding every month, Basic Aid districts only get money a couple times per year. And when a district flips between the two, there is a delay in funding, forcing the district to take a loan to pay its regular bills. Hines said managing the switch takes significant time and resources from the board, and Contreras and Superintendent Sean McPhetridge agreed.

“The implication is that our funding will be unstable,” Contreras said. “In order to get some stability, we will need to be very mindful of the reductions that we make so that we can be monitoring what our fiscal status will be and balancing those things.”

The report also revealed that the district only keeps 3 percent of its expenditures in reserve, while, according to Contreras, the California Department of Education suggests keeping 10 to 17 percent as a best practice.

McPhetridge said, because Cabrillo is operating right at the margins, making significant cuts to the district’s spending is still a priority.

“We are stabilizing, but we are still deficit spending,” McPhetridge said at the meeting. “We still need to make cuts if we want to take care of our employees. … What’s positive is the wolves aren’t at the door, but we still have to make cuts.”

At the meeting, school board member Sophia Layne called attention to the COVID-19 pandemic, calling it “the elephant in the room” that could create an economic downturn and change all of the projections. McPhetridge said he is watching closely how the governor will react to a recession, and said it could result in losses of state funding for school programs, as it did in 2008.

“It will remain to be seen what level of commitment the governor and legislators will show us in months and years ahead, with or without a recession,” McPhetridge wrote in an email to the Review.

Hines said she is working to schedule a study session with Contreras and the board to dig deeper into the numbers. As a result of the positive certification from the board, the district has sent its budget report to the San Mateo County Office of Education and will make revisions based on updated funding numbers from the state in May and resubmit the budget for approval in June.

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