SMFC Board Forced to Borrow Money to Pay Staff

The impact of the state Legislature's inability to pass a budget has hit the San Mateo-Foster City School District hard, as board members on Thursday night were forced to approve borrowing money in order to pay staff salaries.

The board unanimously approved a resolution to instruct district staff members to find available short-term loans that could be taken out to fill a budget gap left by dwindling or delayed payments from the state.

"Because the state has little or no credit, they are pushing that burden down and now forcing us to borrow," said board chairman Mark Hudak.

Gov. Jerry Brown has been unable to garner the necessary support from conservative lawmakers in order to pass along a tax extension proposal to voters. Brown has attempted to close the state's $30 billion deficit by splitting the burden between service cuts and revenue from the tax extensions.

And although he has approved nearly $15 billion in cuts, gaining support for the other half of his proposed plan to fill the budget hole has proved to be an insurmountable challenge. In light of the crisis, the state has been unable to fulfill its financial obligations to public schools.

The Legislature has issued up to $2 billion worth of payment deferrals to districts like SMFC, according to a district report. And yet the district must pay its employees, without a contribution from the state.

Also, the district's increased payroll obligation comes at a time when board members are attempting to shave almost $8 million from the budget over the next two years.

"We need to take loans to be able to pay our payroll," said Hudak.

The board members did not identify on Thursday how much money staff should look to borrow, but Hudak did request that a low interest rate be attached to the loan.

District staff also identified $8.5 million worth of budget reductions and revenue savings that could be implemented to close its deficit over the next two years. But not all budget measures will be implemented, as the board is attempting to fill $7.7 million of its financial hole this year, and pass the rest of the budget action onto the 2012-13 fiscal year.

Flexible Funds

A significant source of revenue factored into the district's upcoming budget comes from taking advantage of allowed flexibility with funds offered by the state that are intended to be used to reduce class sizes in kindergarten through third grade.

The Class Size Reduction Act provides money to districts that is supposed to be spent to ensure class sizes do not grow to more than 20 students per teacher. But as state and local agencies have been forced to cope with the repercussions of a downtrodden economy, restrictions have been loosened on how school boards may use the funding.

And like many other school districts that are strapped for cash, the SMFC administrative business officers have recommended that the board of trustees approve using the class size reduction funds to balance the budget.

Even though the district's class sizes are growing, they are still smaller than many other local districts that are comparable in size, such Redwood City School District, which is facing 30 students per teacher, according to Chief Business Officer Micaela Ochoa.

Members of the board of trustees and administration will continue to work on resolving the deficit the through the coming weeks. They intend to approve the next fiscal year's budget at the June 16 board meeting.

Bond Measure

In other business, the board approved to move forward with laying the groundwork for floating a bond measure to voters in Foster City in order to build a fourth elementary school in Foster City.

Ochoa said the bond, which is expected to go on the November ballot, would tax Foster City residents $19 per each $100,000 of their appraised home value. If approved by voters, the bond could generate $25 million for the new school's construction.

In topics unrelated to district finances, the board voted 3-2 in favor of at in San Mateo, despite concerns from board members Hudak and Ellen Mallory Ulrich, who dissented due to fears that a dress code would stifle the students' freedom of expression.