Early this month, Gov. Gavin Newsom warned that the state could face a $18 billion shortfall in K-12 education funding while the COVID-19 pandemic impacts California’s economy this spring.
On May 14, he announced his May Revise to the state’s 2020-21 budget. The Elk Grove Unified School District now faces a challenging road ahead for the next two years.
District officials are projecting a potential $53 million deficit for Elk Grove’s 2020-21 school year budget. They also estimated that the district could have a $61.2 million deficit in the following year.
“Those are huge numbers, that is not something that our (budget) reserve can cover,” the district’s chief financial officer, Shannon Hayes told the Elk Grove school board about the deficits.
This board reviewed the grim outlook on May 19 when the staff presented a budget update that was based on the governor’s May Revise. They also looked at potential one-time, federal relief funding that could help offset the 2020-21 year’s deficit.
“This is the saddest report since I’ve served on the school board,” Trustee Bobbie Singh-Allen said about the budget update. “It’s very humbling and depressing, there’s no way to sugarcoat this.”
The district’s planning staff is now awaiting the state legislature’s response to the May Revise, and what the state’s final budget plan for the 2020-21 fiscal year will be. A detailed budget plan for Elk Grove Unified’s 2020-21 school year will be presented in June.
Superintendent Christopher Hoffman imagined what the mood of the legislative discussion will be in June when they piece together the state’s budget plan.
“It’s going to be deep and it’s going to be heated,” he told the school board.
Elk Grove Unified’s original 2020-21 budget plan was optimistic after Newsom announced his state budget proposal in January. Rob Pierce, the district’s deputy superintendent of business services and facilities, said the state started 2020 with a $6 billion budget surplus and an unemployment rate of less than 4%.
After Newsom’s January budget proposal, Elk Grove Unified’s planning staff projected a $462,000 surplus for their district’s 2020-21 budget, followed by a $6.4 million surplus in 2021-22.
Pierce detailed how the COVID-19 situation altered California’s economy within two months. He said that unemployment rose to 18%, which is higher than the late 2000s recession. Pierce said that the state’s Proposition 98 education spending could drop by $14 billion, which would push back funding to its level in 2015.
In early March, Elk Grove school district officials closed all of their 67 campuses after relatives of a few students tested positive for COVID-19. Pierce told the school board that this move did not affect the state’s funding that’s based on student attendance. However, he noted that his staff expects the state to delay funding for their district in June. Those deferrals could cause the district’s cash to decline, and prompt the district to borrow funds from itself to begin the new school year.
Pierce and Hayes warned that the state could slash $45.1 million in Local Control Funding Formula dollars for their school district, as well as reduce funding for the district’s categorical programs.
This April, the district quickly made budget cuts in order to build up their budget reserves before the governor announced his May Revise. Measures included freezing spending on non-critical purchases, and cutting spending on staff development and upcoming instructional material.
On May 19, Pierce and Hayes told the school board about potential federal relief funds that could reduce their district’s projected $53 million deficit in the 2020-21 budget.
In late March, Congress and President Donald Trump passed the $2.2 trillion stimulus package, the Coronavirus Aid, Relief, and Economic Security (CARES) Act. That package includes funds designed to benefit school districts such as the Elementary and Secondary Emergency Relief (ESSER) fund and the Governor’s Emergency Relief Fund (GEER).
California’s school districts can receive ESSER funding if it’s authorized in the state’s 2020-21 budget act. District must also apply and submit their spending plans in order to receive that relief.
Hayes told the school board that if Elk Grove Unified is approved for ESSER and GEER funds then they could respectively provide $12.9 million and $60 million to the district. Those one-time funds would then offset the district’s $53 million deficit in the 2020-21 fiscal year and lead to a $18.9 million surplus.
However, Hayes noted that Elk Grove Unified still faces a $61 million deficit in the 2021-22 school year.
“There is a huge distance between $18.9 million and the $61.2 million,” she said.
The district’s planning staff is waiting to see if Trump will sign the HEROES Act, a proposed $3 trillion federal stimulus package that was approved by the House this month. Newsom announced in a press conference that the president could help eliminate California’s $18 billion shortfall in education spending if he approves the HEROES Act.
“We’re just going to have to sit tight,” Pierce said about the HEROES Act.
During her board comments, Singh-Allen said she was concerned about school districts being dependent on federal relief during politically divided times.
“Just the idea that a part of our relief is going to be rested with what the federal government does – that really scares me,” she said.
Singh-Allen later said, “This is the time to come together as Americans for the best interest of our people, our families. They are hurting.”