Modesto City Schools dip into reserve

It will lay off employees, cut salaries, reduce school days, increase class sizes and close a campus, but all that still isn't enough.

That's why Modesto City Schools intends to deficit spend next year, draining more than $13.3 million from its reserves, according to the 2010-11 budget proposal made public Wednesday.

This isn't the first time the district has dipped into savings. It spent nearly $26 million more than it received this fiscal year, which ends June 30.

Fortunately, it has had reserves available, but that financial cushion is shrinking fast.

Last July, the district started the year with nearly $62.9 million in savings from previous years. That's down to less than $36.9 million now. And in a year, it is projected to drop to $23.5 million. That's nearly a 63 percent slide.

"Nobody likes deficit spending," agreed school board President Kim Spina. "It's not a prudent way to run a business. But under the circumstances, considering all the factors converging at one time, our options are limited."

Spina said the bad economy, declining student enrollment and falling state revenues have combined to force very difficult fiscal decisions.

"We cut as severely as we can. First we cut the fat. Now we're cutting into muscle. But that's where we are now: Draconian cutting in school districts across California," Spina said. "We've been criticized over the years for being conservative with our reserves. In this current crisis, our reserves can't be large enough."

In business service director Julie Chapin's budget recommendation to Modesto's school board — which will vote on the spending plan Monday — she assured the budget "is in balance with sufficient reserves for economic uncertainties."

But more tough times are expected, Chapin warned. She noted it is the school board's "fiduciary responsibility to maintain fiscal solvency for the current and subsequent two fiscal years."

What's to come isn't expected to be pretty.

"If the governor's May 2010 (state budget) revision is enacted as proposed, the district will implement $13 million in ongoing budget reductions in 2011-12 and an additional $11.5 million budget reductions in 2012-13 to maintain fiscal solvency," Chapin explained.

How the district will do that has yet to be determined.

"The statewide financial crisis is causing all school districts to consider other ways of meeting our obligations, perhaps including spending from reserves," said Trustee Ruben Villalobos. "The rainy day is here. Also, next year, the prognosis looks bad, and all of our stakeholders will have to take more cuts."

Modesto schools already has found ways to slice more than $33.4 million from next year's budget. Those cuts are reflected in the proposed budget, which calls for spending just $238.6 million. That's 12.3 percent less than the district spent this year.

Modesto schools expects to receive $225.5 million in funding next year, which is 8.5 percent less than it got this year. That's a more than $21 million drop in revenue, primarily because of California education funding cuts.

But Modesto schools are being hit particularly hard because its student enrollment is dropping. Enrollment is key because the state funds schools based on the number of students.

During each of the next three years, the district expects to lose 237 kindergarten-through-eighth grade students and 90 high school students. Such student declines would require the teacher ranks be reduced by 12 each year.

A lot more teachers than that lost their jobs this year. The proposed budget details how the district will have 121 fewer educators next year than it did this year. That's mostly because the district will be placing more students in every class, thus reducing the need for as many teachers.

The district also will operate with about eight fewer managers and about 19 fewer nonteaching staff members.

All remaining employees will have their annual salaries reduced, and everyone will work fewer days.

Children also will receive five fewer days of education next year to save money.

Additional cuts include not replacing district vehicles and equipment as planned and not buying a new series of English textbooks.

The district will close Pearson Elementary, which had only kindergarten and first-grade children and was among the district's smallest schools.

But the new Gregori High School, nonetheless, will open in August. The district plans a ribbon-cutting ceremony for that $140.7 million campus Aug. 10.

The Modesto City Schools board meets Monday at 6 p.m., 425 Locust St.

Bee staff writer J.N. Sbranti can be reached at or 578-2196.

Related stories from Merced Sun-Star