Palo Alto Unified Board of Education members said they wanted fresh eyes on the budget when they hired Jim Novak to be the district's first new chief business officer in a decade.
He delivered on that at a budget study session last Thursday, providing a clear breakdown of inefficiencies that are costing the district unnecessarily and growing financial pressures that the board must prepare for. He recommended a "judicious" approach to spending on new programs in the coming year.
"If we do nothing different than what we have currently budgeted we will be — and I put that in quotes — 'fine,'" Novak told the board. "That means no salary increases. That means no new programs. That means no new nothing. That's not acceptable."
Novak, who was hired last summer from a Southern California district to replace longtime chief business officer Cathy Mak, suggested that the board "designate next year as a year to tighten the budget up."
Given salaries and benefits make up 86 percent of the district's $251 million budget, Novak suggested looking more critically at staffing ratios, including combining classes with low enrollment and adjusting staffing to match enrollment levels, to cut down on overstaffing. At the elementary schools, for example, uneven grade-level staffing ratios — classes ranging in size from 20 to 27 — have resulted in two to four additional full-time teachers, he said. He estimates there are approximately 20 full-time teachers over contractual and stated ratios at the middle schools and about 15 at the high schools.
A district practice of only adding and never subtracting teachers after the initial "14th day" enrollment reports that come in at the start of a new school year also contributes to overstaffing, Novak said. The district could have collapsed three to four classes at that point this fall, he said, which would have resulted in about $400,000 to $500,000 in savings.
Palo Alto Unified's average per-pupil ratio (the number of students per full-time teacher) is much lower than the Santa Clara County average: 14.9 compared to the county's 21.2 in 2016-17, the most recent year data is available.
Novak suggested phasing in a new approach to staffing over two years and to work towards negotiating with the teachers union having the same class sizes averages within levels, rather than the current contractual ratios that differ for grades and subject levels.
He warned that stricter staffing ratios, however, will result in larger class sizes. Controlling class size, particularly at the high schools, has become a priority at the board level in recent years.
Board members discussed the value and cost of providing a wide variety of classes to students.
"I would certainly benefit from a clear framework about how to understand these tradeoffs," said board member Ken Dauber. "Variety is something we should talk about. I think we are paying for that and we don't know how much we're paying so we're sort of treating it as free."
Board member Melissa Baten Caswell stressed that "variety and enrichment" is what draws families to Palo Alto Unified.
"I don't want to kill that," she said. "We should understand the cost of it but we should also understand the value it's providing to our community."
The district is also facing pressure from increased costs in special education, professional services and pensions, Novak said. The district has budgeted $43.1 million for special education this year, up 11.6 percent from four years ago. Assistant Superintendent of Strategic Initiatives and Operations Lana Conaway, who oversees special education, said she believes the department should have a dedicated budget person to aid in planning and overall financial management. Novak also suggested the district "tighten" procedures for assigning special-education aides and look at increasing the special-education services Palo Alto Unified provides to cut down on the number of out-of-district placements the district is paying for.
In a letter on behalf of the Palo Alto Council of PTAs and Palo Alto CAC for Special Education, a group of parents criticized the budget presentation as "incomplete" as it relates to the district and board's stated intent to reform and invest in special education.
"We find that this budget study fails to consider the needs of special education students, and points only to their costs. Ours, is not an 'ill-guided' 'stakeholder approach,'" reads the letter, quoting from Novak's presentation, "this is the law -- a Free and Appropriate Education. We have seen that, historically, the district will be spending the money for FAPE regardless of whether it is part of the budget and systemic reform, or otherwise expended through unbudgeted legal fees."
To address growing pension costs, Novak recommended waiting several years to set aside funds "as our budget situation improves." For this year, the district has budgeted $25.3 million for CalSTRS (California State Teachers' Retirement System) and $6.7 million for CalPERS (California Public Employees' Retirement System), both of which are expected to rise in coming years.
At least one board member, however, disagreed, advising a more prudent approach.
"When a pension reckoning comes, those who have put themselves in a better position will suffer less," said Vice President Todd Collins.
Novak also advised halting a practice of using one-time funds for items in the district's operating budget, which he described as "kicking the can down the road." Though changing this practice would create "short-term pain," it will benefit the district long term, he said.
"I believe there are so many practices that we can do better in this district and free up money," Novak said.