June 22, 2011

FREQUENTLY ASKED BUDGET CONCERNS & QUESTIONS

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Over the past several weeks, various e-mails and Facebook postings referenced Governing Board decisions or District inaction failing to generate additional funds and/or produce budget savings. Unfortunately, many of the comments contain erroneous or incomplete information. In an effort to fully inform the public and District staff, I am providing the following explanations and details in response to many of the comments, questions, and assertions:
1. The State requires that a District inter-fund borrow from all available District funds in an effort to avoid State takeover, so why isnt the District borrowing from other funds, such as facilities funding, to balance the budget and maintain adequate cash flow? California Education Code 42603 states that a Governing Board may approve the temporary transfer of funds from one account to another. However, it also states that the temporary transfer may occur only if the District can demonstrate the ability to pay back the fund within the same fiscal year, or the following fiscal year when borrowing occurs within the last four months of a school year. The District has interfund borrowed in the past, and in fact, initiated that action this year because the District demonstrated the ability to pay back the loan within the specified timelines. With the current budget submission required by SCOE, the District cannot demonstrate the ability to pay back funds transferred between funds in the future, therefore, it cannot inter-fund borrow.

2. Selling or leasing the Education Center would generate hundreds of thousands of dollars, but the District has not legitimately looked at selling or leasing the Education Center.

In an effort to address the ongoing allegations that the District did not seriously consider the sale or lease of the Education Center, administrative staff consulted with two legal firms and two brokerage firms regarding the possible sale or lease of the Education Center. All of those firms hold widespread, respected reputations in the Sacramento region and throughout the State. Additionally, an electrical contractor and low-voltage electrical contractor were each consulted to determine the cost of relocating the District servers and other technology support systems. Two separate

sets of cost analyses regarding the relocation of the Education Center were developed with the aid of those firms. The following facts were ascertained from those analyses: a. Relocating Education Center Staff, including all technology support equipment would cost $645,000 in one-time costs. b. The District does not currently contain enough space at any District site to house the Education Center staff; therefore the District would have to purchase or lease another site to house Education Center staff. c. The Natomas/Sacramento area currently has a 28% vacancy rate in commercial property available for lease. The possibility of selling or leasing the building is remote, at best, and obtaining a decent sale price or lease rate is even worse. Most experts agree that selling commercial property for financial gain is not a wise move at this juncture in the real estate market, as evidenced by the many organizations voicing positive comments when the Governor pulled State property off the market. The cost of moving the Education Center staff and equipment, plus the cost of leasing or buying a location to house the staff and equipment prohibits the District from generating funds from a sale or lease of the Education Center.

3. The State provides an exemption that allows districts to sell property and place the proceeds from the sale in the general fund, so why hasnt the District sold property in order to balance the budget and maintain cash flow?

A District may sell property and place the proceeds from the sale in the general fund IF the District commits to turning down all State facilities funding for 10 years. That commitment includes turning down all State funding for deferred maintenance, plus State matching funds for construction and modernization. Given the need for modernization at some of our sites, and certainly the need for additional facilities as the construction moratorium ends and the economy changes, the District would be negligent and risk inadequate space provision for students if it turned down all future facilities funding.

4. Where does the money go from the on-going lease paid by the State of California for storage space in a small portion of the Education Center?
The rent is placed in the routine restricted maintenance account to help maintain all school sites within the District. All districts struggle to maintain buildings and grounds to an acceptable level with the severe State budget cuts over the past several years. The funds from the lease currently help the routine restricted maintenance budget, but we are still far from adequate in our funding. 5. The District is losing $500,000 per year by not enforcing an interdistrict

transfer policy recommended by the Superintendent.

In an effort to maintain a semblance of parental choice, yet initiate definitive restrictions for interdistrict transfers, the Board of Trustees approved a portion of the plan recommended by the Superintendent. At this point in time, it is clearly impossible

to place a dollar value on money gained or lost due to interdistrict transfers for the upcoming school year. However, with new procedures in place, including school tours prior to approval of an interdistrict transfer, school sites report a number of parents who are pleasantly surprised by what our schools have to offer and are considering enrollment of their students in our schools.

The District spent thousands of dollars to provide mentors for administrators.

6.

The District used Title II funds, a federally funded categorical program designed to support teachers and site administrators, to provide training and mentorship for some administrators in the District. A total of $1,300 was spent in this effort. 7. The District would have saved thousands of dollars in legal fees if it had paid

attention to the lay-off criteria, which resulted in 13 teachers challenging the criteria and retaining their jobs.

The Education Code requires that a district establish competency criteria in order to implement lay-off procedures for certificated staff. The Board of Trustees adopted the same competency criteria successfully used and upheld in the 2009 and 2010 hearings before an Administrative Law Judge. Moreover, the competency criteria used in the 2011 lay-off procedures has been successfully used by other districts in their lay-off hearings. Given those facts, the District had no reason to believe that the competency criteria would not be acceptable in this years hearings. 8. The District wastes money on consultants, legal fees, cell phones for

administrators, mileage allowances, and a data management system for achievement scores. The following is a response to each of those areas:
a. Consultants: The vast majority of consultant costs in this District relate to direct services provided to special education students, particularly the payment for those students who require specialized care in non-public schools. Natomas Unified School District, like any school district, cannot maintain all the highly specialized staff needed to fully meet the requirements of all students Individualized Education Plans (IEP). In fact, fiscal conservancy warrants that we pay consultants fees, as often the District saves money by hiring a consultant for a small amount of time specified by the IEP, rather than maintaining a full- or part-time employee. Additional costs for consultants include services such as core curriculum training for teachers requiring a contract with State approved trainers, as mandated by the State, or an energy expert who helped the District identify ways to save thousands of dollars in energy savings, thus covering the cost of the consultant. The notion that consultants perform duties that could be or should be performed by regular employees, or the District could avert consultant fees because they are wasteful costs, is simply not true.

b. Legal fees: District administration has a professional duty and fiduciary responsibility to protect the interests of the District. For the 2010-11 year, a large portion of legal fees were expended due to long and protracted labor negotiations. Other costs for legal consultation range from investigating employee or public complaints lodged against employees to the review of contracts initiated or renewed with vendors serving the District. The decision to consult with legal counsel is never taken lightly. All of the above mentioned examples require legal counsel if the District plans to avoid multi-million dollar lawsuits. c. Cell phones for administrators: This year the Superintendents Office vigorously pursued the reduction of the cell phone service plan and the elimination of cell phone distribution to some employees. Moreover, all cell phones previously not accounted for have been recaptured and retained by the District. In the absence of a radio system, which is costly and not effective in a District of this size, cell phones are used as the emergency alert system, and have proven valuable time and time again in the midst of school site crisis situations and emergencies. By providing a cell phone to key personnel, we eliminate the cost of an ineffective radio system, and ensure communication in times of crisis, emergency, or natural disaster. Finally, the federal E-rate program reduces a portion of the Districts cell phone costs. d. Mileage allowances: As part of their job-related duties, specific District personnel are required to attend meetings within and outside of the Sacramento region, and travel to various school sites and other locations within the District on a regular basis. The mileage allowance is in lieu of a monthly mileage sheet, and is standard practice for most school districts. Moreover, given the extremely low pay scale for all administrators in this District, when compared to other districts in this region, the elimination of the mileage stipend would only add to the difficulty of attracting quality individuals to administrative vacancies. e. Data management system: The federal government requires all Program Improvement districts to submit a Local Education Agency (LEA) Plan for the purpose of delineating actions to increase student achievement and earmarking federal and State categorical funds for those actions. The District formed the required District School Liaison Team (DSLT) to analyze student achievement data and discuss appropriate actions or next steps for NUSDs LEA Plan. Parents, classified staff, administrators, and teachers, including representation from the Natomas Teachers Association, comprised the DSLT. In short, a group of all stakeholders determined that a data management system, a system intended to support teachers as they design instruction for students, was a necessary ingredient for moving the District forward in the quest for higher student achievement. It is important to note that a) research clearly demonstrates that an efficient and user-friendly data management system is

critical for teachers to implement instruction, b) NUSD is one of the few school districts lacking a data management system, and c) categorical funds --- which cannot be used to supplant employee salaries --- as opposed to the general fund, will be used to purchase the system.

9. The Board of Trustees continues to make poor decisions that cost the District money while some employees lost 100% of their salary --- their job.

Upon analysis of the multi-year budget projections, the Board of Trustees authorized the District to negotiate the necessary reductions in employee compensation in order to balance the budget, maintain cash flow, and avert a State takeover. In its initial proposals, the District Negotiations Team presented a 7.9% reduction in total compensation to all employee groups. The District did not include increased class size --- the reduction of certificated employees --- as a means to achieve the 7.9% reduction in total compensation of certificated bargaining unit members. However, the increased class size, and reduction of certificated employees, was the agreement reached upon negotiations with NTA. By providing the detailed information as described above, and with a brighter outlook for education in the Governors May Revision of the Budget, I hope we can put to rest some of the misinformation and misunderstandings regarding the budget, and focus on what is most important: instruction and the increased achievement for all students. Respectfully, Bobbie Plough, Superintendent