‘Dig down deep’: Napa school district predicts cuts in line with upcoming budget deficits

Napa Valley Unified School District leaders are predicting they’ll need to make budget cuts in response to California’s projected budget deficit and other financial clouds lingering on the horizon.

The California Legislative Analyst’s Office recently predicted the state is facing a $73 billion budget deficit, while the governor's office projected a $37 billion deficit.

Rabinder Mangewala, the district’s chief business official, said at a March 7 school board meeting it’s too late for the district to lay off people — the statutory deadline was March 15 — but cutting vacant positions “will just absolutely have to occur,” and the district is looking at reducing funding for programs.

“We will have to dig down deep and look really closely at positions before we refill them,” Mangewala said.

Given the state’s projected deficit and other budgetary challenges, Mangewala said the district is currently projecting deficit spending in 2024-25 — when revenues of roughly $215 million are expected to be outstripped by expenses of roughly $220 million — and in 2025-26, where expected expenses fall roughly $7 million above revenues.

He noted that the business office always attempts to adopt a balanced budget, but “given that we don’t have the ability to make cuts, because the layoff deadline has passed, it’s going to be a challenge,”

Mangewala also described a number of other budget challenges the district will need to take into account when figuring out the upcoming 2024-25 budget, many of them related to the ongoing loss of enrollment-based Average Daily Attendance funding.

One consideration is the delayed impact from COVID-19 era calculations of state funding to school districts now coming into effect. That state first preserved funding at ADA levels seen in the year prior to the pandemic — halting the financial impact of declining enrollment. Then the state transitioned to using a three-year average to calculate funding, thus slowing the financial impact down.

But Mangewala noted that the delayed impacts from declining enrollment over the past few years are now coming into effect for the district, with the loss of ADA far outstripping declines in enrollment this year and next year.

Another budgetary challenge is impacts from the Mayacamas Countywide Middle School — which was approved by the Napa County Office of Education board early this month.

The district filed a lawsuit in response to the approval — which the district has alleged violated state education code and didn’t properly take into account financial impacts — in an attempt to undo it. A Napa Superior Court Judge last week turned down an attempt from the district to stop the school from opening, though the rest of the lawsuit remains active.

But with the school still slated to open, Mangewala said the district needs to plan for a projected loss of $3 million per year, or over $12.8 million over the next five years, as that revenue shifts to the charter school. That’s an estimate based on projected charter enrollment starting at 150 students in the 2024-25 school year, and growing to 324 students by year four.

Mangewala added that the district also faced budget uncertainty this year from the currently operating Mayacamas Charter Middle School — which opened this school year and is slated to close and be replaced by the countywide school.

The financial impact was lessened because the school has had a considerably lower enrollment than the originally first projected 180 students, hovering around 70 to 75. Mayacamas leaders have attributed the loss in enrollment to a legal conflict and related uncertainty about whether the school would be allowed to stay open. (The district challenged the California State Board of Education’s effective 2022 approval of the school, and a Sacramento Superior Court Judge ruled in the district’s favor in June, though that ruling is currently being appealed by Mayacamas leaders.)

Given that there are now two ongoing lawsuits, enrollment at the charter school may continue to be lower than projected. But Mangewala said that, when planning for the budget, the district needs to assume the Mayacamas school will have full enrollment.

The district has repeatedly received criticism from community members for spending money on the Mayacamas lawsuits — a total of $368,883 over about three years, according to the district. But superintendent Rosanna Mucetti defended that choice at the meeting as being worth it to protect the district’s resources.

“Making a small, proportionally compared to that, investment in litigation in order to protect the district’s resources is an investment in our students,” Mucetti said. “I know that’s kind of difficult to wrap our minds around, but we have to protect the resources for our 16,000 students.”

Another challenge is the loss of COVID-19-related one-time funds from state and federal sources. Mangewala noted that roughly 41 positions — representing $3.3 million — are being supported by such funds, and the district may not have money to incorporate them into the general budget. The positions were largely added to support students and address COVID-19 impacts, adding on counseling services and expanded learning, for instance.

“While we had hoped to make some of these extra services permanent, this most likely will not be possible with the revenue outlook combined with the approval of the Mayacamas countywide charter school,” Mangewala said.

The district is also wary of the state’s cost of living adjustment for schools next year, which Mangewala described as “a roller coaster” of reductions. He said the current year’s budget included an 8.22% adjustment, and next year’s projected adjustment was at 3.94%, though that was recently reduced to 0.76% by the state — which could present a significant challenge, as inflation is much higher.

There’s even been talk about the state not even funding that much, Mangewala said; the COLA could potentially fall to zero.

“It’s a triple-whammy,” Mangewala said. “You have this reduction in the cost of living adjustment, you have the loss of COVID funds, and you have this enormous drop in ADA.”

At the March meeting, board member Lisa Chu said as if history was repeating with the financial issues the district was facing back in the late 2010s. She urged district staff to continuously provide their own due diligence and evaluation of finances.

“I just want to make sure that our staff is on top of it for our own sake,” Chu said.

Board member David Gracia urged the district to follow through on evaluating its programs and figuring out what to keep and what to cut. He said he hoped the “bleak financial situation” won’t endure for the long-run, but things will be difficult in the short-term. And he added that he wasn’t comfortable with the deficit the district was projecting.

“I believe we should operate as if things are going to get quite dire in the short term, and plan our budget tightening accordingly,” Gracia said.

You can reach Staff Writer Edward Booth at 707-521-5281 or edward.booth@pressdemocrat.com.