Oct 30 2012

Part 4: A PUSD Deficit: $1 million – or potentially $3.5 million

Part 4:   A Close-Up Look at Piedmont School Finances

In March 2012, Superintendent Constance Hubbard brought a 3-year budget plan before the School Board with a $2 million structural deficit: $1 million ongoing shortfall faced as of 2013-14 and $1 million in reserves will be exhausted by June 2013.  As this structural deficit manifests itself in 2013, residents will be voting on the renewal of a school parcel tax(es) in March.

Revenues Threatened

In addition to this initial deficit, a potential revenue issue has also arisen.  The School District budget being developed in early 2012 included $1.5 million in revenues from the State that were threatened with elimination.  State revenues allocated to Piedmont of $1.5 million will be cut automatically from the Piedmont budget if Proposition 30 fails.  (Although some replacement may come from the passage of Proposition 38 or the legislature acting to  restore funds).

Passage of Proposition 30 does not result in any “new funds” for the Piedmont School District because the threatened funds were already included in budget projections.

$2 million expense growth  +  $1.5 million revenue threat = $3.5 million problem

If passage of Proposition 30 or 38 preserve existing PUSD revenue, Piedmont schools must still address the district an unresolved $2 million in personnel expense growth that exceeds existing revenue.

In March 2012, when explaining the Board’s intention to approve a budget that included an ongoing $2 million structural deficit, some Board Members expressed the opinion that this “deficit budget” approach would create less turmoil than making cuts and later restoring them when new revenues (not in the budget) materialized – i.e. increased state or local revenues above existing projections.  The comparative impact of early adjustments if new or existing revenues did not materialize was not discussed at the March meeting. 

In September, at the first 2012 Budget Advisory Committee meeting, Superintendent Hubbard explained that, when developing PUSD budget projections in early 2012, staff had viewed the State threats to reduce existing funding as a political tactic intended to “frighten taxpayers.”  She further noted that, in her experience, contingency plans create discord and injured feelings when discussed before it is certain that adjustments will be required, even if funding is later restored and actual cuts do not occur.

According to Superintendent Hubbard, employee contract negotiations will be re-opened the day after the vote on Proposition 30 and 38 to resolve the District’s $2 million structural deficit –  and a potential total $3.5 million shortfall.  Potential cost reduction options totaling ~$4 million were identified during 2011 contract negotiations to address the district’s structural deficit, but not yet implemented.   And, if Proposition 30 and 38 both fail, the State could take affirmative action to restore state funding before actual revenue losses occur.

During the March 2012 budget discussion, Board Members did not discuss implementing $4 million in remaining potential cost reduction options identified during 2011 contract negotiations to address the district’s structural deficit.  (Action had previously been taken in 2011 to slow the projected growth of expenses by $3 million and raise parcel tax revenues by $1.2 million; additional potential cost reductions of $4 million were not implemented; as a result, a $1 million deficit was not resolved and $1 million of reserves not maintained.) 

The local school parcel tax was raised as an issue,  including the possibility of placing a new parcel tax structure before the voters for approval.  (See PCA article on Board new tax proposals for a permanent parcel tax and an extra “emergency” tax.)   Recently, the Board has asked for public input on a new parcel tax and a possible emergency tax.  changes that could include:

  • A permanent tax or a 6-8-10 term
  • Flat tax with no escalator (not more than $2,088-$3,547 level)
  • Possible escalators (2-3% cap or an inflation index)
  • 2-part tax (a permanent baseline flat base tax and a supplemental tax)
  • “large” supplement if state tax measures fail (on the scale of $3 million Measure E)
  • Exemptions based on age or income
  • Legal restrictions on parcel size-based tax
  • Continuation of Citizens Advisory Committee
  • 4-year renewal

The past 2 Measure B parcel tax measures were structured (for 2006 and 2009) authorized interim annual tax increases by the School Board of up to 5% per year.  Pursuant to this authorization, the Piedmont School Board levied the maximum 5% tax increases 5 times – each year it was permitted to do so – between June 2007 and June 2013.   These annual increases did not require annual written notification mailed to taxpayers.  The Board complied with legal notice requirements by placing the item “parcel tax levy” on its agenda twice prior to an increase:  first to allow discussion and then to vote. The opportunity to increase accountability for annual increases through polls, surveys or an annual public meeting was raised at the October 3, 2012 School Board meeting.

Temporary Emergency Tax Replaced with Ongoing Taxes 

As of 2001 Piedmont school parcel taxes generated $2.5 million or 12% of the budget.  The levy has since tripled and now generates $8.5 million, or about 33% of the school budget.

The current 33% level of support will continue despite the expiration of the emergency Measure E tax.  While the temporary $1 million Measure E levy expired as of June 2012, new Measure B annual 5%  increases are now generating $800,000 more each year.  If a third potential increase is imposed in June 2013, it will bring the total new Measure B funding to over $1.2 million per year.  These funds replace the lost Measure E funding.

Piedmont School Bond assessments (a separate levy) have been growing due to recent School construction and renovation work, and will continue to do so.  (For more details on future bond assessment increases, see How do School Bond assessments fit into the picture.)

Discussions on the amount and structure of the 2013 parcel tax will be occurring at the upcoming School Board meeting on November 14, and the  School District urges public input before or at this meeting.  A decision by the Board is planned for November 28 to place the new school tax measure on the ballot March 5, 2013.  Piedmont residents wishing to provide input on the tax may contact School Board Members by email (below).

The public is also welcomed at District Budget Advisory Committee (BAC) meetings, where discussions on the parcel tax are also anticipated.  (See schedule of BAC meetings.)

Click here to send email all School Board Members