State budget better than expected, but Sonoma County school districts still struggle with declining enrollment, expiring COVID-19 funds

When Gov. Gavin Newsom presented his budget to the California Legislature, it confirmed what school districts were already bracing for: Funding is tight and districts will have to be smart with their finances for the 2024-25 school year.

The first portion of the governor’s report, which offers solutions to the state deficit, showed a few factors that will be affecting school budgets in the next fiscal year:

• State revenues are down. Newsom reported an improvement to the deficit, estimating it to be $38 billion — much less than the independent Legislative Analyst Office’s estimate of $68 billion in December.

• The cost of living adjustment (COLA) — additional money given to schools that takes yearly inflation into account — is a lot lower than expected at 0.76%. Districts expected the governor’s first estimate to hover around 1.5%.

• One-time funds totaling $128 billion, given to schools for COVID-19 pandemic relief, are running out.

At least three districts in Sonoma County are already seeing these factors affect their finances and are facing deficits that may hinder their ability to finance one or more school years.

But the state’s estimate is not final, given that tax revenue isn’t calculated until April. So, the outlook could improve.

Contributing factors

Concerns about the deficit year were alleviated slightly when Newsom’s initial deficit projection came in $30 billion lower than originally predicted.

The smaller the state’s deficit number is, the better for schools, said Sarah Lampenfeld, the Sonoma County Office of Education’s director of external fiscal services.

“We took a sigh of relief,” she said. “Oh good, we didn’t see deferrals. We didn’t see cuts. OK, but declining enrollment and the smaller COLA does mean cuts, right? That is the reality.”

The COLA percentage changes yearly, depending on inflation rates. The adjustment is added into the formula districts use to calculate per-pupil revenue, also known as the Local Control Funding Formula.

Last year, the COLA was 8.22%, which is atypical, Lampenfeld said. Historically, the COLA is between 2% and 3%. Districts were expecting the first COLA estimate to be closer to 4%.

Luckily for districts, the percentage is not set in stone just yet, Lampenfeld said, because the adjustment still needs to take into account the fourth-quarter state revenues from 2023 and the first-quarter revenues from 2024.

It’s likely the number will rise, but it’s not clear by how much.

However, the bad news is that enrollment continues to decline while one-time federal funds to offset the impact of the COVID-19 pandemic are quickly running out, Lampenfeld said.

In March, 2021, Congress approved $128 billion to address learning loss. Many school districts already have spent that money on summer school, tutoring programs and teacher bonuses to improve staff shortages. Those with leftovers likely will use the rest to address deficits.

State and federal COVID-19 relief grants have provided county districts with a combined $231.4 million, according to Sonoma County Office of Education data. That excludes individual grants and special-education dollars.

But, $89.2 million of that money already has expired, and $68 million is set to expire in September.

With these factors at play, all 40 districts in Sonoma County can expect to see significant cuts next year.

The Sonoma County Office of Education, which provides support and advice to districts, is recommending school districts examine all of their programs and reduce costs wherever necessary.

“Look at all of your programs and build up your reserves so that you don't have to make reductions,” Lampenfeld said.

Districts are required to submit interim reports to the Office of Education to make sure they’re meeting state minimum budget requirements. When districts are off track and showing a higher level of financial distress, they’re considered “qualified.”

Three struggling districts

Three districts — Oak Grove Union Elementary, Santa Rosa City Schools and Sonoma Valley Unified — are going into next year’s fiscal planning with a qualified status and will need to make more cuts than most other districts.

“We had several districts that were showing that they have huge deficit spending and they would need to either make reductions or find the funds,” Lampenfeld said. “They already were showing that they need to make reductions absent of this COLA.”

Some of the districts are struggling to continue funding programs and staff that were added with the COVID relief funds.

In Oak Grove Union School District, both cases are true.

The small, two-elementary school district is facing cuts from every angle.

Most of the cuts are being made to staff. Teachers’ hours are being cut, as are five classroom aides, a bilingual liaison and one part-time academic intervention specialist, to name a few.

A longtime Oak Grove Elementary School teacher, who asked to stay anonymous for fear of retaliation from the district, said she felt the removal of both staff and programs were going to negatively affect her students.

Losing the part-time intervention specialist, who was hired using the one-time COVID funds, takes away crucial support for students who need it the most, she said.

“When we have our aides, we can do so much more,” she said. “When we have our (intervention) support, we can target the needs of those kids and really, truly differentiate and give them exactly what they need.”

The district attributes much of the cuts to declining enrollment.

“Our revenue coming in is not enough to cover our outgoing expenses,” said Oak Grove Superintendent Amber Stringfellow. “So, not unlike many districts and what we're seeing in the county … several factors in our funding are contributing to really evaluating our budget and looking at where we can maximize our revenue.”

But cutting the programs and services that make the destination district desirable — it has long attracted out-of-district students because of its robust arts program — may only accelerate the enrollment problem, teachers feel.

“The reason I heard at the board meeting that (the bilingual liaison) is being cut is because our Hispanic population declined,” said the teacher, who spoke on the condition of anonymity. “If our Hispanic population is declining, why aren’t we trying to do things to bring them back or figure out what's going on instead of cutting the very person that could actually help us grow that population?”

Stringfellow did say that reducing the liaison’s hours is “reflective of the general, overall decline in numbers of Spanish-speaking families” in the district, and that other classified staff have been able to provide translation, alongside accessible translation in the school’s Parent Square software.

The teacher is also worried about program cuts being made to arts education.

A specialized music and ceramics program now will only have half-day instruction, and the other half will be moved to before and after school programs, using the district’s leftover expanded learning funding, which was doled out as a post-pandemic measure in 2022.

Cutting the ceramics program’s hours was a last resort, Stringfellow said, but she ensured that the current full-time general arts teacher is well versed in ceramics and will add the course into her annual curriculum.

The cuts will put additional stress on arts education teachers, many of whom are already overwhelmed, said Oak Grove Union President Cari Cardle.

“They talk about fully using that full-time art teacher — well, she is being fully used, and she's losing her lunch to drive from one school to the other,” Cardle said. “And the other thing is that’s the teacher’s prep. So where are they going to get that prep time?”

Stringfellow said the decision to make the significant cuts were done strategically.

The cuts are necessary, she said, to ensure that Prop 28 money — funding specifically for new arts programs and teachers — can be used to supplement the instruction hours that are lost.

The funding has stringent rules that say the money can only be used to support new programs. And while 80% of the funding is set aside for staff, it can only be used for incoming staff who are supporting those new programs.

In a survey Oak Grove district leaders sent out before making cuts, parents, students and teachers overwhelmingly asked for more theater and dance opportunities. The money will support a new program for either.

“What we kept in the forefront is things like: ‘How do we maintain the exceptional program we have and maximize all of the various funds that we get,’” Stringfellow said.

Pain in the largest district

The county’s biggest district, Santa Rosa City Schools, is also qualified and has been in and out of the category for many years now, mostly because of declining enrollment.

Lisa Cavin, the district’s chief business officer, said this year’s status is due to a “perfect storm” of factors composed of the expiring one-time funds, the COLA projections and the end of the state’s “hold harmless” provision.

During pandemic years that spurred a chronic absenteeism crisis, districts were spared major funding cuts because they were “held harmless” for drops in daily attendance. Instead they were funded based on their enrollment and attendance numbers for the 2019-20 school year or the rolling average of the previous three years; Santa Rosa City used the latter. Next year this policy will fall off.

The governor’s low COLA adjustment also means they will receive about $3 million less than what they had projected, Cavin said.

This year, the district will look for solutions with help from their budget advisory committee and Local Control Accountability Plan (LCAP) committee. These committees are made up of staff, labor partners, parents, administrators and community members to make recommendations on which programs to fund and cut based on the budget.

Cavin’s business team then collects the recommendations and includes them in proposals to the board, who would then take a vote on them.

The district already has hired a custodial manager to standardize custodial procedures, which will save millions of dollars in the long term.

The district will likely still need to look at cutting staff positions in order to match the number of students enrolled.

And while the district made plans to cut 50 full-time positions during a deficit year in 2019, they have not revisited the plan.

Santa Rosa Teachers Association President Kathryn Howell said it’s likely the district will not lay off employees if this deal reemerges, but that it will eliminate unfilled positions.

“SRTA recognizes that the Santa Rosa City Schools’ money situation is not great, and that fewer students means fewer teachers,” Howell said. “But our students deserve high-quality educators, and we won’t be able to attract new educators to Santa Rosa without competitive compensation.

“Santa Rosa City Schools needs to adjust their budget and their budget priorities to ensure our students get the education they deserve,” she added.

Additionally, countywide protests for school safety after the March 1 fatal stabbing of a 16-year-old Montgomery High School student called for increased mental health support and staffing to support campus supervision.

Support, coupled with calls for the return of school resource officers would be costly for the district.

And the district can’t afford everything.

“We can do anything, but we can’t do everything,” Cavin said. “It's about prioritizing. Anything that we add has to be taken away from somewhere else. That's really what it comes down to, is looking at everything to determine what's going to be most impactful for students.”

A unique situation

Sonoma Valley Unified, the third qualifying district, has a unique situation that led to that status.

A missed deadline to notify the state that the district had been using its Home-to-School Transportation grant cost the district $1.2 million. The grant would have reimbursed the school district for half its transportation costs for students busing to and from school.

“The letter of the law is that you're supposed to (adopt) it by the first of the month to get the funding, and the first year covers two years. So, unfortunately, they lost $600,000 per year,” Lampenfeld said.

The deadline for the district to adopt its grant proposal was April 1, 2023, but the proposal was not presented to the Sonoma Valley school board until its meeting on April 20.

The district may have the opportunity to submit a waiver to cancel out the deficit from the grant, but it's up to the state to approve it, Lampenfeld said.

The transportation grant isn’t the only problem Rena Seifts saw in the budget when she took her position in August as the district’s associate superintendent of business services.

She found various budget line errors costing the district nearly $2.7 million — most were underestimates for maintenance costs and staff raises offered the previous year that the district may no longer be able to provide.

Sonoma Valley’s qualified position boils down to “mistakes in budget preparation,” Seifts said.

Now, the district, which uses a “basic aid” funding formula, needs to make just over $3 million in cuts, and has dipped far below its required 3% of reserves. To meet the 3% threshold, the district would need to have around $2.3 million in that pot; they currently have $52,000.

The impact of the deficit already is being felt.

During an emotion-packed board meeting Thursday night, the board of trustees voted unanimously to eliminate 35 positions in the 2024-25 school year. Those jobs included seven full-time secondary school teachers and six full-time elementary school teachers, as well as 14 classified positions.

Salary and staff costs take between 80-90% of the district’s total funding costs, Seifts said. The district will be offering retirement incentives to any certified, classified or management employees willing to leave the district.

“It depends on how many employees take it to see how much we would save over a five-year period,” Seifts said.

Upper-level employees whose positions do not need to be replaced will save the district most money, but the projected number of revenue is hard to determine because of the various levels and salaries of district employees, Seifts said.

Of the 144 employees eligible for the offer, the district has estimated around 16% will take it.

Seifts said the district has no plans to cut programs or make changes that will directly affect students. Besides the retirement incentives, the district has only made other cuts to software used at the district level.

But it's unclear just yet whether the incentives and software removals will be enough to push the district back into the green.

“We’re trying to make cuts everywhere we can,” Seifts said.