The school district's Chief Business Officer Cathy Mak proposed a spending budget for next year of $184.56 million, up just over 1 percent from last year.
The budget — 85 percent of which goes to salary and benefits — includes 17 new full-time-equivalent teaching positions. The cost of those are offset by savings to be achieved next year by not paying a 2 percent bonus that was paid to all staff in 2013.
Mak projects revenues of $184.46 million — 71 percent of which come from local property taxes. She admits the revenue projection is "conservative," based on her assumption that property tax revenues will grow by 3 percent over last year. The most recent growth estimate from Santa Clara County — 7.19 percent — is more than double that.
The Board of Education is set to vote on the 2014-15 budget Tuesday, June 17.
Mak highlighted proposals by Gov. Jerry Brown that local districts step up payments to meet an estimated $74 billion unfunded liability in California's State Teachers' Retirement System (CalSTRS) and Public Employees' Retirement System (CalPERS).
Under that plan, the Palo Alto district's pension costs would roughly double over the next six years, from about $11.6 million (just over 6 percent of today's budget) to more than $20 million.
Though they're still just proposals, Mak said she budgeted for the increased pension costs for next year as well as in her five-year projections.
"Because of the STRS increases, we project deficits for five years," Mak told the school board June 3. "The deficit is mainly from increased pension cost and our conservative budgeting in property-tax growth."
Brown wants to increase local districts' CalSTRS contribution rate from 8.25 percent of salary to 19.1 percent of salary between now and 2021 and the district's CalPERS contribution rate from the current 11.4 percent of salary to 20.4 percent in the same period.
The district's CalSTRS contribution will go from $7.4 million in 2013-14 to $8.4 million next year, and the CalPERS expenditure will go from $3 million to $3.18 million in the same period.
Besides pensions and the new teachers, other increased spending next year will go toward a pay hike for substitutes, "traveling team" teachers for elementary physical education, information technology support in school, additional support in the district office for payroll and attendance and legal fees.
On the revenue side, Mak said her budget assumes a continuation of an annual $7.4 million from the city of Palo Alto for lease of the Cubberley Community Center; $12.4 million in revenue from the district's $638 per-parcel tax; and $5 million in donations from the independent foundation Palo Alto Partners in Education, which raises funds for Palo Alto public schools.