Simi Valley School District Financial Crisis

It’s been easy to gather information related to the financial concerns of the Simi Valley Unified School District because quite a bit of it is available online. For material that isn’t online, simply asking for it seems to do the trick. There is quite a bit of data to wade through to fully understand what is inspiring the proposed Simi Valley school board recall, and I feel like I’m just scratching the surface.

To get a full understanding of the financial concerns, reviewing some of the documented materials is critical. Click here to read a letter from the Ventura County Office of Education to the School District dated April 11th, 2013. Some critical text on the first page (last paragraph) is important:

In January of 2013, the district board of education approved and submitted a qualified 1st Interim report. The report projected deficit spending in the current and subsequent years and projected a negative ending fund balance (insolvency) in fiscal year 2014-2015. After meeting with the representatives from the district governing board and administration, it became clear that the projections used in the 1st Interim report included expenditure reductions in the subsequent fiscal years that could not be unilaterally implemented. In addition, the report was prepared prior to the release of the Governor’s Local Control Funding Formula proposal and therefore included revenue assumptions that did not align with how the proposal would specifically affect the district. When these factors were taken into account with the high level of deficit spending projected for the current year, the financial outlook for the first subsequent fiscal year (2013-2014) changed dramatically.

Depending on your own experience and background, you might interpret that in a number of ways. When I read this, it sounds like the VCOE is telling the district that they are ending each year in the red exponentially and their list or proposed plan to get back in the black is impossible to implement. In short, you’re running out of money and not doing anything about it.

In this memo that you can view by clicking here, Michael Clear, Assistant Superintendent, informs Superintendent Scroggin about the meeting January meeting referenced in the text snippet above. The memo is dated January 18, 2013. He recaps the subject matter and attendees, among other details, concluding with:

Based on this information the County stated that the District must make significant cuts to be able to sustain financial solvency. If the District does not act soon, the State will need to get involved and make cuts they determine are necessary.

There will be a discussion with the Board regarding budget in the near future.

Now, jump forward to August 15, 2013, when the VCOE follows up with the letter I referenced yesterday. Again, click here to view this letter in its entirety. Noteworthy points in the letter are as follows:

  • “The level of deficit spending is not sustainable and as a result, we are concerned that the district’s fiscal solvency is at risk.”
  • “The district has been experiencing declining enrollment for over a decade. Future years’ enrollment projections as shown in the 2013-14 adopted budget, indicate this trend is continuing. Declining enrollment results in less revenue. Expenditures must be reduced proportionate to the lower level of expected revenues.”
  • “The district must continue to reduce expenditures proportionate to its lost revenues due to continuous declining enrollment, and closely monitor its fiscal activity in order to maintain fiscal solvency. Absent these measures, prolonged deficit spending will lead to insolvency.”
  • “Within the Adopted Budget, the district projected a negative ending fund balance in fiscal years 2013-14 and 2014-15.”
  • “It is imperative the district reduces its expenditures proportionate to declines in enrollment.”

The VCOE is essentially saying, “Hey! You under-reported expenses by $14 million in your 1st Interim budget, and you’re running out of money and not doing anything about it. Fix it!”

The most interesting part comes with no documentation, unfortunately. The Superintendent’s office submitted a budget in December of 2012 that assumed concessions from the unions. These concessions were never discussed with either the unions or the School Board, and included:

  • 10 furlough days
  • Increased class sizes (from 24 to 30 per class)
  • 6% reduction in salaries for 2013-2014

The 1st Interim budget given to the School Board to review in December did not include these concessions. Why is the Superintendent’s office providing different versions of the facts to different parties? Again, depending on your background and understanding of these issues, you may interpret things differently. But I see a severe problem, mismanagement of the facts, and a complete failure to act on severely urgent matters. There is no way the district can continue to operate this way. This is a serious problem for Simi Valley schools.

I have a lot more material to get through and I intend to document it all here. If you’re following along and you feel I’m getting something wrong or I’m missing something, please feel free to let me know.

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