Budget Deficit - Aug 11 Board Retreat

On August 11, at its annual retreat, the Board spent 2 hours talking about how to handle the surprise $3.3 million budget deficit.   You can read the Palo Alto Weekly's article here.  I delivered these comments at the meeting:

I'm very concerned.  I'm concerned that we are still not framing the issue correctly, and still not squarely facing the unpleasant fact that we have quickly gone from a record surplus to a multi-year deficit. I respectfully disagree with Ms. Mak that we’re not sure if we have a structural deficit. 

Under almost all plausible scenarios, which I will pass around, in a few years we could run deficits of $10M a year, and cumulative deficits of $40M or more - far more than our reserves - which would result in drastic cuts and ballooning class sizes.  Ms. Mak’s scenarios assume no staff raises for 5 years.  This is just unrealistic, and would in fact be counter to our core values.

I'm concerned that the Board is not insisting on getting concrete alternatives, which is what it needs to do its job.  So far, only one option has been presented, which calls almost exclusively for borrowing money and spending down reserves.  In fact, the only proposed “cut” of $375,000 comes from not hiring as many teachers as the budget allows.  In my mind, this is not acceptable.

To do its job, the Board needs to insist on understanding the options. What expenses can we cut?  How quickly can we cut them?  What will the recurring impact be?

To avoid being put in a corner with a list of unpalatable options, the Board needs to insist on options that meet very clear requirements:

  1. no use of borrowing (using bond funds=borrowing)

  2. no spending down of reserves (designated or otherwise)

  3. making the top priority to avoid cuts to classrooms or other school site personnel

Because literally time here is money, I would insist on getting these options in the next 30 to 60 days. There needs to be a sense of urgency - this is not business as usual. Further, I would insist that the plan indicate how quickly cuts could be made - immediately, within 1 quarter, 2 quarters, etc., - and the impact both this year and on a recurring basis.  Hard experience teaches us that cuts to be named later usually fall short or just never happen.

Armed with these options, the Board would be able to meet its responsibility to the community.  Without it, I'm not sure how the Board can do its job.  In the worst case, if it simply rubber stamps something like the current proposal, in my mind the Board will have fallen down in providing fiscal oversight, its single most important function.

This situation reminds me very much of the bond issues the Board faced in 2012.  Then, as now, we were headed down a bad and very expensive path, and we didn't even realize it.  The District was trying to kick the can down the road, and hope that things turned out ok.  In my experience, that's almost always a mistake - in the case of the bonds, I think we all agree it would have been a disaster.  We need to face the hard choices and discuss them openly, not just kick the can down the road.  

As I did then, I would be happy to contribute however I can.  In my day job I have faced this situation many times over the years, as I'm sure some of you have, as well as others in our community. If the District needs help, it should get it.  There's an approach that works, but it requires urgency and commitment to make it happen.  I'm sure we can get there, and I would be happy to help.

Todd Image

Father of three, alumni of Briones, Barron Park, Terman, Gunn, and Morgan Autism Center

Career: 25+ years in technology, management consulting, growth investing

PAUSD: PTA officer; Bond Oversight chair; Enrollment Committee elementary chair; Bond Tax Rate Committee founder and spokesperson

Education: BA, Harvard College, MBA Harvard Business School

Feel free to contact Todd directly at 650-403-2084 or todd@toddcollins.org.

Paid for by Todd Collins for School Board 2016  (FPPC ID 1384953) | Photos courtesy Felipe Munera Savino (except as noted)

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