It appears that the Santa Monica-Malibu Unified School District can fund the five percent teacher salary increase proposed in its tentative agreement — and still maintain a required three percent reserve — according to the Fiscal Crisis and Management Assistance Team (FCMAT).

The team’s report, dated February 8th, states that the district will be able to maintain its required three percent reserve this year and the next two years with a five percent teachers salary increase, if the district follows the recommendations and multi-year financial projection assumptions in the report.

In November, the Fiscal Crisis and Management Assistance Team was hired by the district to perform a comprehensive independent review of the district’s finances, including the preparation of a multi-year financial projection of the district’s general fund.

This came after a tentative agreement was reached between the district and the Santa Monica-Malibu Classroom Teachers Association (SMMCTA) union that includes a five percent teacher salary increase, estimated to cost $7 million over the next three years.

Some, including members of the school district’s Financial Oversight Committee, were concerned with how the district would fund the agreement and some recommended that the district create a Financial Recovery Plan addressing how the district could afford the agreement.

Without substantial changes and budget cuts, the tentative agreement would exhaust the district’s reserves and potentially put the district into a deficit starting in three years, some believed.

But, according to Fiscal Crisis and Management Assistance Team deputy executive officer Anthony Bridges, who prepared the report, it appears that, if the district follows his recommendations, “the district will be able to maintain its required reserve.”

At the school board meeting Thursday, February 15th, Bridges presented his findings and recommendations on district finances.

Among recommendations were an inter-fund transfer of $3 million from Fund 17 to Fund 40.

Bridges also said it is very important for the district to understand the impact of decreasing student enrollment. The district’s enrollment has decreased over the past two years — partly as a result of a more restrictive district policy with the goal of reducing overcrowding in Santa Monica-Malibu schools. Enrollment is projected to continue declining.

During this same period, staffing has increased.

“The district will need to make and act on decisions regarding enrollment, inter-district transfers, staffing and available facilities if it is to sustain any financial solvency beyond this projection,” Bridges said.

School board members, in an open letter to the community on Tuesday, February 20th, said that they “are aware that declining enrollment will result in a deficit in our operating budget unless we make budget restrictions” and “will take active steps to address the projected deficit beginning with this year’s budget development process.”

Paul Silvern, chair of the district’s Financial Oversight Committee, expressed his concerns at the meeting.

“You are right on the edge,” Silvern said. “It [this agreement] leaves you with less than $900,000 in free cash above and beyond the three percent reserve.

“The district would be really well-served for you to have them roll that projection for one more year [to the 2009-2010 fiscal year]Ö because it’s going to lead to different conclusions.”

John Petz, a member of the audience, said that concerns of people on funding the tentative agreement — like those of former chief financial officer Winston Braham, who resigned in November — were “for whatever reason, ignored.”

“I’m deeply concerned about this contract,” Petz said, adding that he believes teachers should get whatever amount of money is possible. “It is irresponsible to use one-time money reserves to finance an ongoing expenditure.”

After Bridge’s presentation, district superintendent Dianne Talarico thanked him for his work, his responsiveness and his thoughtfulness, and also thanked her staff, adding that she was glad to “bring our tentative agreement forward to the board” soon.

“I cannot wait for the day we turn this page [and approve the tentative agreement],” said union president Harry Keiley, noting the patience of the 800 teachers he represents. “But I think people need to know how responsible this board of education has been over the past four years.”

School board president Kathy Wisnicki said, “None of us wanted the process to unfold the way it did,” and she thanked teachers for being “tremendously patient” while action has been delayed for months on the approval of the five percent pay increase.

“I feel very positive about this,” said board vice president Oscar de la Torre. “I think this is what public process is all about and holding public institutions accountable.”

De la Torre said that he understands there are still financial issues that need to be resolved and that “we’re not completely out of trouble here.”

“Do we have a structural deficit? Yes,” said board member Jose Escarce. “Do we have declining enrollment? Yes. They [FCMAT] answered the questions. They pointed out what we have to do and we will do it.”

The tentative agreement between the teachers union and the district is expected to be approved sometime next month.

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