SJCOE Response Letter to the 2022-2023 Second Interim Budget Report

Background Information on the Second Interim Budget Report

On the March 7th, 2023 Regular Board Meeting, the SUSD Board approved the 2022-2023 Second Interim Financial Report. We will discuss the SUSD Budget process in greater detail in a different post, but the Second Interim Report provides an update on the District’s financial status and projections based on actual revenues and expenditures through January 31st. It is used to make any necessary adjustments to the budget based on the actual financal data during the first half of the fiscal year.

The County Office of Education (COE) will respond to SUSD’s report based on their own analysis. The County’s job is to review and assess the District’s financial status, provide guidance and support, monitor discal solvency, ensure transparency and accountability, and confirm the budget status (positive, qualified, or negative). A positive certification indicates that the disctrict is expected to meet its financial obligations for the current and two subsequent fiscal eyars, while a qualified or negative certification signifies potential financial concern.

Last week I sent the following email to all the SUSD trustees requesting the County’s response to the SUSD Second Interim Budget Report. The County nor the District usually make this document public. However, we believe the public should be able to see the County’s response letter as it is the only other expert review of our CBO’s work.

I hope this message finds you well. I am writing to you on behalf of FixSUSD. We kindly request a copy of the letter from Mr. Troy Brown of the San Joaquin County Office of Education addressed to SUSD and its Board of Trustees pertaining to the County Office’s review of the 2022-2023 Second Interim Budget.

We firmly believe that making this document available to the public is essential in maintaining a transparent relationship between the SUSD leadership and the community it serves. While we have already submitted a California Public Records Act (CPRA) request, our intention is to provide the public with ample time to examine the document before the upcoming Board Meeting.

If you prefer not to share the letter directly with us, we kindly ask that you consider including it as an agenda item during the next board meeting. Furthermore, we would greatly appreciate it if the Board could invite representatives from the County Office of Education to attend the meeting and present the information contained in the letter in layman’s terms. This will help ensure that the details are accessible to non-budget staff members and the general public alike.

We understand the importance of a collaborative and transparent relationship between the SUSD Board of Trustees, school district staff, and the community. Your assistance in providing access to this crucial document will undoubtedly contribute to fostering trust and open communication.

Thank you for your attention to this matter, and we look forward to your prompt response.

I want to thank Trustee Raymond Zulueta for being the first Trustee to respond and the first one to send us to the document. I also want to thank Trustee AngelAnn Flores for also sending us a copy of the SJCOE response letter.

I will be asking the Board to still consider bringing a representative from the County to present their letter to the public at a future Board meeting.

I attached the documents below and will explain them, to be the best of my ability, in more detail in the post below.
Stockton 22-23 Second Interim.pdf (988.4 KB)
SUSD adjustment comments to district.pdf (186.3 KB)

What happened?
The San Joaquin County Office of Education (SJCOE) reviewed the 2nd Interim Budget Report that was approved on the March 7th, 2023 Regular Board Meeting. They found numerous mistakes in the report. For example:

  • The $6.7M for the IAQ contract reported by FMCAT will have to be paid back into the ESSER funds from the Unrestricted Fund. The District did not account for that.
  • $3M that was supposed to go to the Child Development Fund were allocated to the Unrestricted Fund. The County moved them back.
  • The District is budgeting its additional TK teachers at a lower step than it historically hires at. The average teacher salary is $24k higher than what is budgeted.
  • “The information does not show that the District has taken a comprehensive look at all of its available one-time resources to determine how it will use those resources on programs for students.”
  • “There is no information regarding how the District will spend its remaining $7 million in Educator Effectiveness Funds, its almost $58M entitlement from Learning Recovery Block Grant, or its $67M Arts and Music Instructional Materials Discretionary Block Grant.”
  • At present, the District has access to an unprecedented amount of resources that it can use to provide services. It needs to figure out a way to build sustainable programs over multiple years using the different sources of one-time funds as well as its unrestricted resources. We are concerned that the District is behind and will find itself unable to use the resources in the time allowed, to the detriment of its students.

What is the Unrestricted Fund?
The Unrestricted fund is a pool of money that the District can use for any purpose. It gives the District the flexibility to allocate funds according to the students’/staff’s needs and priorities, such as staff salaries, supplies, and building maintenance.

Having a surplus means that the District is expecting to have more money coming in than it plans to spend. A surplus can be used to make long-term investments, such as improving union pay and working conditions, hiring additional support inside classrooms for students, or bringing on additional programs.

Having a deficit means that the District is planning on spending more money than it actually has. Sometimes a school District can have a planned deficit, where they are willing to make a long-term investment by spending extra one year, knowing they will make up the difference in subsequent years. But considering the deficits are being reported by the county and not the SUSD CBO, we do not believe these deficits were planned.

Is SUSD going to go bankrupt?
NO. And this is important. To see why we are not immediately going to go bankrupt, let’s take a look at the Unrestricted Reserves.

The yearly Unrestricted Surplus/Deficit is like your annual budget. It only looks at the District’s Income and Expenses during a school year. The Unrestricted Reserves, on the other hand, are like your personal long-term savings. You don’t want to dip into them, but during the years that expenses are greater than income, you can fall back on your savings. It’s not an issue if it happens once or twice, or if you decide to spend a little extra to invest in the future. But it becomes an issue if you think your expenses are always going to be higher than your income. Eventually, your savings will run out.

The possibility that the District may have to use the Unrestricted Reserves multiple times in the future is concerning. However, the budgets for 2023-24 and 2024-25 are a projection. We still have the ability to change what the District is spending money on, to save on unnecessary consultants, for example.

Who is responsible?
The Chief Business Officer (CBO) and the Superintendent both play crucial roles in managing and communicating the school budget to the Board of Trustees. The CBO is responsible for overseeing the financial operations of the District. They work closely with the Superintendent to develop and implement the District’s financial strategy so it aligns with the goals and objectives set forth by the Board of Trustees.

Both the CBO and the Superintendent have a responsibility to explain the budget’s status to the Board of Trustees. The Trustees are not financial experts. Without full transparency, honesty, and competency from the CBO and Superintendent, the Board of Trustees cannot make informed decisions. This goes double for the public, who only has the CBO’s presentation to rely on when determining how well their school district is doing financially.

Ultimately, however, the Board of Trustees is responsible for who they surround themselves with. Both the (now former) Interim CBO, Joann Juarez, and Interim Superintendent Traci Miller were placed into their positions by the former Board leadership. Clearly, they are not fit to manage SUSD’s budget and get this District back on track. We have additional concerns about the people that have been hired by the interim CBO and Superintendent. People who do not know their own jobs are not capable of knowing if the people they are hiring know how to do theirs either.

We support Trustee AngelAnn Flores in her attempts to ask Superintendent Miller and former CBO Juarez to do their jobs and give the Trustees, the Unions, and the public the information we need to understand where SUSD stands financially and the opportunities that are available for our students. We also want to thank Trustee Zulueta for also providing us with these documents and also sharing his concerns about the SUSD Budget. We ask all trustees to join Flores and Zulueta in expressing alarm about SUSD’s current financial trajectory, as well as the potential loss of funds to support students and any negative impact the budget projections may have on our union sisters and brothers.

We understand the fight is very political. But keeping your hands clean, avoiding controversy in the public, and avoiding making hard decisions means you are setting up our students to fail.