School districts make interim reports School districts make interim reports (December 15, 2000)

By Justin Scheck

As the Mountain View and Whisman School Districts enter the planning stage of their merger, the financial situations of the two districts are becoming a central factor in coordinating the move.

At separate meetings Monday night, the two districts unveiled their first interim budget reports, which detail the districts' financial situations through Oct. 31.

While the budgets are far from complete -- Mountain View's does not account for the upcoming raises the district will have to give to its classified employees, while Whisman's does not account for the 12 percent teacher salary raise agreed upon last week or the upcoming raises for other employees -- they do give some insight into the financial climate in which the merger will occur.

Both interim reports show that the districts have had to find extra money from sources outside mainstream funding to cover rising expenses and lower revenues. And while this year's budgets are balanced, both districts' multi-year projections anticipate deficits as soon as 2002-2003.

For the 2002-2003 school year, Mountain View is projecting a $361,208 deficit, while Whisman is projecting a deficit of $293,185 for the same school year.

In a 45-minute presentation Monday, Susan Spaay, the Mountain View district's chief financial officer, explained her district's interim report, showing how the district, through restructuring and a large interfund transfer, was able to avoid a budget deficit for the 2000-2001 school year.

According to trustee Rose Filicetti, the restructuring was completed last month with a series of moves that consolidated classes and shuffled over 100 students among classes nearly two months after school began. Filicetti said the restructuring was necessary due to the combination of a tight fiscal situation and the 10.2 percent raise, retroactive to Nov. 1, that the district gave teachers this year.

According to its interim report, the Mountain View district was projected to run a $123,731 budget deficit this year. However, the district was able to transfer $460,000 from the interest on the school's building fund to make up for the deficit. In addition, the interest was used to contribute $381,032 for salary increases for the classified staff, which includes all nonteaching employees.

Filicetti said that in the past, the building fund interest has been used for "deferred maintenance ... and one-time purchases of technology equipment," including classroom computers. She explained that the money in the building fund came from the district's sale of the Klein School to a developer in 1985. Building fund interest had been used to pay for building projects prior to the 1998 passage of a bond measure that currently pays for school construction.

At the meeting, trustee Carol Fisher said that nine years ago the district was granted permission by the state to transfer interest from the building fund to the general fund for a 10-year period. After next year, the district will have to find other sources of emergency revenue.

Moreover, without a projected $100,000 transfer from the building fund interest next year, Mountain View will have a projected deficit of $34,953 for the 2001-2002 school year.

In the Whisman district, a million-dollar lease agreement on the vacated Whisman School is covering the 12 percent teacher raise the district agreed to last week, as well as the 12 percent raise the district is offering its other employees. Monarch Christian School is leasing the site this year and next year at the rate of $1 million per year.

Joan Slack of the Whisman financial office said that while renewal of the lease will be up to the merged board, the Christian School has expressed interest in continuing its tenancy.

According to Rebecca Wright, Whisman's chief financial officer, when the Whisman district realized last year that it was facing a deficit, it re-evaluated its financial situation.

"As we looked at (the budget) last year, we discovered that we were projecting a deficit last January, so we made major changes which included the decision to close Whisman School (this) year," Wright said.

Wright said it is still too early to make concrete predictions about the merged district's financial situation; however, she did say that the merger could bring stability to Whisman, a small district that has seen major funding fluctuations as student enrollments have changed with the personnel changes at Moffett Field.

State funding for schools is paid on a per-student basis, so a drop in enrollment is matched by a drop in state funding.

"A decline of 100 students in a small district of 1,500 students like ourselves has a much more devastating affect than a similar decline in a district with 4,000 students, like the merged district," Wright said.

But, she added, with the merged district likely to be facing declining enrollments and deficits, contingency plans like interfund transfers and the Whisman School lease must still be considered as possible solutions.

"Any time you are looking at deficit problems, you have to look at how you are operating and if you are cost-effective," Wright said.

Filicetti agreed, saying that if the merged district continues to lose state funding and is unable to generate new revenue sources, "We would have to continually restructure, being very mindful of what our enrollment is ... Part and parcel of the merger is streamlining, in almost every facet."

Filicetti said the merged board will have to consider new possibilities for generating revenue, including a parcel tax that would assess an annual fee to Mountain View landowners (see accompanying story). Passing such a measure would require a lengthy campaign and a two-thirds majority vote in the community.

However, all agree that before such long-term measures are discussed, the financial management staffs from both districts must figure out how the current financing streams will be merged so that the new Mountain View School District will be able to function next year.

Albert Ma, Whisman's accounting manager, said that right now next year's merged funding "is all uncertainty."

Although there is a possible funding shortage, Ma said, the merged district will have nearly $1 million available from next year's payment on the Whisman School lease. This money could help in mitigating some of the merged district's financial shortcomings. But, he added, no one can paint a complete picture of how the districts will merge finances.

"We might need to hire a consultant to come in and help out. It's a long way to go," Ma concluded.