2020 budget: Tough choices, mostly booted
Except for that $3 million Transportation/ Start Times item
Part two on the SFUSD budget. Why those $3 million transportation cuts were needed.
New CFO shares the bad news
“Thank you, Miss (Meghan) Wallace, for this cheery update to what we heard, “ deadpanned 12th-year San Francisco Board of Education (SFBoE) Commissioner Rachel Norton after listening to the new Chief Financial Officer’s (CFO’s) January 8, 2020 Budget and Business Services Committee presentation. Indeed, slide 4 of the 26 slide slidedeck described the current school year’s less than cheery $31.8 million shortfall, likely turning the rainy day fund into a multimillion deficit in a few months.
Figure 1. Slide from CFO Wallace’s slidedeck to Budget and Business Services Committee meeting, January 8, 2020. 2019, the current year, showed a $31.8 million shortfall, leading to a potential negative rainy day balance for 2020 budget.
Chief Wallace had only been in this job for a few months when she shared the needed work ahead with the Budget Committee of Commissioner Norton, Commissioner Faauuga Moliga, and Chair Alison Collins, as well as Commissioners Jenny Lam and Mark Sanchez. Wallace’s neutral, matter-of-fact, speaking style likely reflected her prior experience in working through the budget deficits with the Mayor of San Francisco in the years after the 2008 recession. But this job could have started better than having to report an extra $18 million in unexpected spending from book balancing the prior year’s 2018 numbers.
Finding potential cuts of millions in less than a year was a tough challenge, addressing a $60 million or more budget gap every year would be a whole different animal. Such was the scenario depicted in a subsequent slide. For 2021 and subsequent years, with projected revenues flat, expenditures increasing, and no available rainy day reserve, the gap of about 10% of the Unrestricted General Fund budget loomed. Such is the scenario of a “structural deficit.”
Figure 2. Slide from same slidedeck as Figure 1. The slide was the first graphical depiction of the upcoming expected $60.5 million and $55.6 million budget shortfalls- a structural budget deficit.
The Average Daily Attendance, or ADA, including charter schools, had held steady over the past 12 years. As this number drove the majority of the revenues, other fund sources were put forth and approved by City voters: PEEF, the Public Education Enrichment Fund, 2004 & 2014, parcel tax propositions QTEA, Quality Teacher & Education Act, Proposition A, June 2008 and LWEA, Living Wage for Educators Act, Proposition G, June 2018.
On the expense side, personnel costs were on a trend of outpacing ADA growth by fourfold. Unanticipated Special Education related costs were projected to add $25.4 million to the current year 2019 budget. Thus district leadership put forth the plan to reduce the 2019 gap by 1) tapping the rainy day fund for another $10 million, 2) seeking additional millions from the PEEF budget, and 3) implementing millions in budget cuts. Regarding the rainy day fund, Wallace mentioned a recent bond rating negative forecast, likely making more expensive the upcoming debt request of several hundred million dollars.
Who makes the decisions?
Norton keyed in on potential concerns of large dollar changes in PEEF: “… I'm wondering what authority if any, you need to be able to do that. Have we done wider engagement with the PEEF CAC because that seems like something they would have a lot of opinions about? And just, you know, I think we have, you know, we have to do what we have to do. But I just want to make sure that we're doing the right kind of engagement and, and talking to people so that everybody understands kind of what we're looking at and what decisions we're already making.”
Figure 3. Screenshot of video of CFO Meghan Wallace presenting at the Augmented Budget and Business Services Meeting, January 22, 2021 (source: https://www.youtube.com)
Wallace replied that the PEEF funding was a question of supplementing or supplanting other funds, an important distinction. She admitted that such a question was above her pay grade:
“But this is an opportunity for this body to weigh in and say, discuss, are you comfortable with that flexible a definition of supplanting? Or do you deem supplanting something closer to if it's if it's something that we previously paid for within the school district's budget, then you cannot use PEEF. But those are some tight handcuffs when it comes to somebody in my position trying to find flexible ways to navigate around fiscal times like these. So I would love some thoughts and feedback on that.”
The response from the 5 present Commissioners? Nothing. They booted.
Sanchez, Board President, prior Board President 2007-2009, Commissioner 2001-2009 and 2016-present, did have an important comment:
“So just a comment, I guess. We have been struggling in general understanding what's happening right now with this mid year budget shortfall. We knew that we were going to be going into the red at some point me over time. But we have failed I think as a board and a district to figure out how we can gain more revenue to avoid this huge budget deficit that's looming for us. And we need to put our heads together and figure out where that's going to come from.
…So we really need to start putting our heads together and figuring out how we're going to get this revenue. Since the state of California is between 41st and 49th, in the nation, and per pupil spending in San Francisco is the highest cost of living area of the state, we can rest assured knowing that if we were a state ourselves, we'd be dead last in per pupil spending. And when we’re the richest city with a $13 billion city budget.
So we have to figure out how we're going to get these revenues challenged, but we have to be bold, I think and figure it out. Before it's too late. And so just something to think about.”
Nobody in the meeting followed with comments or actions on those weighty observations. Hopefully they were thinking about it.
So the January 2020 Budget Committee meeting ended with the plan put forth by the Budget staff to address the current 2019 imbalance. The Commissioners had questions and comments but declined to put forth anything different. Perhaps the dynamic would be different at the February 4 meeting dedicated to the upcoming 2020 budget.
Initial 2020 plan: vague on revenue ideas, tough decisions on expenditures
If Wallace had a tough January Budget Committee presentation, her February presentation of initial 2020 budget balancing ideas to the Committee of the Whole would prove to be even less pleasant. She outlined the District’s 2020 plan to cut $60 million from the $675 million expected expenditures…
$16 million cut to Central Office
$16 million cut to school sites
$28 million district-wide shift to less-restricted sources.
Figure 3. Slide from CFO Wallace’s slidedeck to Committee of the Whole meeting, February 4, 2020. The actual 2019 numbers, the current year, showed a $31.8 million shortfall, leading to a potential negative rainy day balance for 2020 budget. Thus the need for cuts, as the staff put forth as a recommendation.
At this meeting, Sanchez made clear his specific recommendation: “So I would advocate that we zero out the $16 million through school sites… I don't want to cut from the site at all. I don't want to cut from anybody who actually works with students.” Commissioner Stevon Cook, after venting some frustration, advocated for putting equal time into looking into revenues as for seeking cuts. Lam echoed Cook’s call for more specific information on proposed cuts and advocated for efforts to seek revenue from Sacramento and from philanthropists. In response, Superintendent Vincent Matthews gave vague assurances that they were seeking additonal revenues.
The rest of the meeting involved detailed discussions of Weighted Student Formula (WSF) and Multi-Tiered System of Supports (MTSS). These topics would have a large affect on how each school site would get funding.
Matthews memo engenders teacher rallies
Is there ever a good way to share that a layoff may be forthcoming? Matthews had to handle that question with the extra complication of little support from the SFBoE Commissioners. Balancing all the scheduling, financial, and other concerns, he did send out an email late in the day on February 19, 2020. For all his careful wording, the teachers and their union were not pleased to hear of the potential for $10 million in cuts to school sites (reduced from $16 million). Layoffs notices, last given out in 2010, would possibly commence in a month.
Figure 4. Screenshot of a video of the SFUSD Boardroom, February 25, 2020. While the SFBoE met in closed session, UESF teacher union members stood at the desks and joined in several rallying chants against the potential layoffs. (Source: https://www.twitter.com, Ida Mojadad feed)
The following week, at the subsequent February 25 Board Meeting, roughly 500 parents, students, teachers and support staff rallied against the cuts. As the Board met in closed session, a chanting crowd took over the meeting room for about an hour. Unions in attendance showing their disapproval included United Educators of San Francisco (UESF), SEIU 1021, IFPTE Local 21, and United Administrators Of San Francisco Local 3.
Figure 5. Union members, members of the public, and Commissioner Mark Sanchez at a rally against layoff outside the SFUSD building, February 25, 2020. (Source: https://www.twitter.com, Ida Mojadad feed)
Sanchez joined the pre-meeting rally against the planned cuts. At the following rally on March 5, outside City Hall, Collins spoke while Moliga and López looked on. The crux of the argument: find more money and do the cuts from central office instead. On that same day, Cook appealed directly to the public with a Community Contribution to a City newspaper. Attacking the District office on several items, he wrote, “… we have a budgeting process that doesn’t work.”
Figure 6. Commissioners Alison Collins (speaking), Faauuga Moliga, Gabriela López, UESF President Susan Solomon, members of the teachers union, and members of the public at a rally against potential layoffs outside City Hall, March 5, 2020. (Source: https://www.sfusd.edu/https%3A//www.sfusd.edu/school/abraham-lincoln-high-school/students/lincoln-log/april-2020-issue-news)
The disagreement was now completely in the public. Matthews, needing to submit a balanced budget, made his best case for $10 million in site cuts. The SFBoE Commissioners second guessed and criticized that plan on a number of fronts. Precious weeks were lost. Would the sides come to agreement for the year and for future years of deficits?
7 kicks on the can
The rest of the school year was a blur of bad news: COVID-19 lockdown, remote schooling, George Floyd killing. In spite of all that, the SFBoE agreed to a revised budget 7-0 on July 1, 2020. How was that done? More state revenues, some tough cuts, and plans for $22.3 million more cuts to be decided in the next month. One of those cuts was to transportation costs, which would affect school start times in 2021. But there would be no cuts to school site budgets.
Figure 7. Slide from CFO Wallace’s slidedeck to the Board meeting, July 1, 2020. The $22.3 million deficit for 2020 would need addressing with a plan in the subsequent month.
The next month, the last parts of the 2020 budget were decided. The mayor provided $15 million from the City budget. All of the planned $22.3 million cuts in labor costs were cancelled and most of those needed funds would be drawn from the rainy day fund.
That structural deficit? Kicked down the road to the subsequent year.
And, like in the prior year, parent advisory committee volunteers wrote their frustration of having their feedback go to a black hole yet again. Their September report stated, “Parent leaders also expressed frustration and anger at being asked to, once again, provide feedback on something for the District, when it seems that much of their previous input, on a variety of items, is either not taken into account, or is not acknowledged or responded to by the appropriate body.”