In a departure for a school district with usually conservative budget projections, Chief Budget Officer Cathy Mak presented to the Palo Alto school board Tuesday night two forecasts of district finances, using slightly higher 3 percent and 5 percent property-tax increases.
Mak typically uses a more conservative 2 percent property-tax increase as her base, though the actual percentage of revenues often turns out to be higher. She presented Tuesday night two scenarios for district revenue and expenditures over the next five years: 3 percent growth for all five years and 5.24 percent to 5.46 percent for each year, with the latter being the rate the City of Palo Alto uses in its projections, she said.
Property taxes also make up the majority of district revenue at this point in 2014-15, it accounts for 71.5 percent of revenue, Mak reported.
Board Vice President Heidi Emberling, noting that this was the first time that Mak presented the board with two property tax scenarios, asked if she intended for the board to adopt one or the other or what discussion she was hoping the board would have around the change.
"We're providing this range so you can get a feel," Mak said, adding that she won't use the minimal 3 percent increase for the 2015-16 budget because it's not enough to cover increased costs.
"I feel comfortable using a growth number that's higher than 3 percent for next year," she said. "As for the out years, in our projection, we will continue to provide the two scenarios."
Board member Terry Godfrey said she appreciated having multiple projections so the board can have more informed discussions about different budget scenarios.
"I really like the scenarios very much," Godfrey said. "I hope that when we come to the spring and we're doing this again we do still have multiple scenarios one of these, the worst-case scenario, whatever that is, and one a little more realistic, optimistic scenario so that we can have some discussion around if the worst-case happens, what has to go."
Board President Melissa Baten Caswell warned that the board should stay conservative even the lower 3 percent is not the worst-case scenario, she said.
"Worst-case scenario is that we either have no property-tax growth or we go backward. ... That's not going to happen in the next year, but a lot of economists are saying that we're in the top of the cycle right now and you can only expect an up-cycle to last for so long," she said. "I think it's just really important that every year we re-check in. We don't want to be in a situation where we projected we're going to have 5 percent growth and we have -1 percent."
Baten Caswell also said despite the rosy-looking financial picture for California education the district is slated to receive additional funding from the state's proposed 2015-16 budget for Common Core State Standards implementation, adult education and the Local Control Funding Formula (LCFF) there's not much cause to celebrate in Palo Alto Unified, where per-student funding has failed to keep up with inflation as enrollment continues to rise.
Though total revenue is up 20 percent since 2008, funding per student has only increased by 10 percent, according to district figures.
As federal and state funding decreases and stays flat, the district continues to lean on local sources of funding, primarily property tax revenues, the existing parcel tax, which voters will be asked in May to renew and increase, Partners in Education (PiE) fundraising and money from the district's leases.
Mak also reported Tuesday that a projected $4.9 million surplus this year has been reserved for employee compensation and new or enhanced programming for school sites. Several board members expressed concern about the timeline for allocating this money, as the employee compensation chunk of this surplus is for this year and retroactive once a union contract is ratified, while program additions are for next year.
The surplus also comes at a time when the district has many moving pieces on the horizon, from recommendations coming this May from the superintendent's minority achievement and talent development committee to a new enrollment committee who could suggest the board look at opening a 13th elementary school or fourth middle school.
"I just don't want to be in a position where I'm making decisions to spend money when we don't have all the options on the table because I don't want to spend money on 'X,' 'Y,' 'Z,' thing when (the committee's) recommendations might be so great that we need to take all of them," Godfrey said.
Board member Ken Dauber suggested that the board hold a study session to design a more thoughtful, conscious budgeting process to avoid being in a position where "big-ticket" items that the board is interested in investing in don't lose out on funding due to timing.
Mak will return to the board in May with updates on the state budget and property tax, and the board is set to vote on the 2015-16 budget in June.
In other business Tuesday, the board unanimously approved a pilot Mandarin-immersion program for Jordan Middle School, an incremental victory for district families hoping to fill the gap in Chinese language instruction between elementary and high schools.
The program is slated to begin this fall with one section for sixth-graders. Director of Secondary Education Katherine Baker clarified that the program will only launch if there are enough students to create a class. The standard number is 24 students, though the class could start with 20 students or even fewer, Baker said. She will return to the board in June with exact figures on enrollment, curriculum, teachers and textbooks.