The Santa Monica-Malibu Unified School District school board met with the district’s Financial Oversight Committee (FOC) for a special joint meeting earlier this month.
Committee chair Paul Silvern presented a report to the board on behalf of the committee, addressing the committee’s activities during the 2006-07 fiscal year and its views on the district’s 2007-08 budget, which must be approved this month.
Silvern started by noting how ironic it was that, during a year in which questions have been raised about the “transparency” of the district’s budget and financial practices, “there has probably been more public information about, and press attention to, the district’s finances than at any time that the FOC has been in operation.”
Last year, the district’s finances were called into question with the resignation of district chief financial officer (CFO) Winston Braham and after a tentative agreement was reached between the district and Santa Monica-Malibu Classroom Teachers Association (SMMCTA) teachers union that included a five percent teacher salary increase, estimated to cost $7 million over the next three fiscal years.
Some, including members of the Financial Oversight Committee, were concerned with how the district would fund the salaries and still maintain the district’s required three percent reserve.
Without substantial changes and budget cuts, the agreement would exhaust the district’s reserves and potentially put the district into a deficit starting in three years.
In response to these “serious concerns,” the Fiscal Crisis and Management Assistance Team (FCMAT) was hired by the district in November to perform a comprehensive independent review of the district’s finances, which Silvern and the committee called a “bold and commendable step.”
In February, the Fiscal Crisis and Management Assistance Team determined that the district would 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 followed the recommendations and multi-year financial projection assumptions in their report.
The five percent teacher salary increase was then approved by the board.
“While the FOC has not always agreed with the board’s decisions this year on certain financial matters, those decisions and the professional staff and independent analysis on which the board relied have all been consideredÖ” Silvern said.
At the special joint meeting, the committee made several suggestions to the board.
Silvern, on behalf of the Financial Oversight Committee, expressed the importance of the district communicating its budget in a way that is understandable to the public.
The budget structure could be explained more clearly, for example, by using graphics, he said.
“School district finance in California is particularly complicated and difficult for the average citizen to grasp,” Silvern said.
He said that, especially with a possible renewal of the parcel tax next year, “we should be using every opportunity to educate voters and the public in general about the condition of district finances.”
Silvern also suggested that the district show the public all information on all funds, not just the Unrestricted General Fund, the district’s primary operating account, because “we believe the board and public should see a more complete picture of the district’s total budget.”
Silvern said the committee agrees that there should be a minimum level of analysis required for future labor negotiations.
At a minimum, the Financial Oversight Committee thinks the board should require staff and other experts to prepare multi-year financial projections for a range of settlement scenarios, to project financial impacts before reaching a tentative agreement.
Also, the committee says the district should plan to eliminate its operating deficit within five years, difficult as that might be.
The committee is concerned about the “projected scale and growth of the deficit.”
“Although the scale of the deficit is significantly less than in previous drafts of the budget, it is still unacceptably large,” Silvern said.
Silvern also stressed the importance of finding the highest qualified CFO candidate possible, something the district is working on.
Stephen Hodgson — hired in January to replace Braham after his resignation in November — is currently serving as the interim CFO.
“It is clear from Dr. Hodgson’s outstanding performance this year under very difficult circumstances, how critical it is to have a high-quality professional in that position,” Silvern said.
Hodgson was originally scheduled to serve through this month, when a permanent CFO would come on board, but a suitable replacement has not yet been found, said deputy superintendent Tim Walker.
Hodgson has agreed to remain with the district through September while the search for a permanent CFO continues.