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Faced with stagnating property tax revenue and rising costs, the Mountain View Whisman School District is looking to cut costs by at least $9 million annually, starting next school year.
At a meeting on Thursday, Nov. 20, administrators presented the school board with updated information about the district’s financial outlook and recommended cutting ongoing expenditures by $9 million. Board members were supportive of that plan, although some argued that even deeper cuts may be needed.
“If we think we need nine [million], an additional buffer for us as we discuss the programs would be useful so that we can discuss prioritization,” board member Charles DiFazio said.
Last month, the district hired an outside firm to evaluate its programs and propose potential cuts. District officials plan to bring those recommendations to the board in January. For the time being, administrators have only floated theoretical examples of how to reduce expenses, ranging from cutting district office staff and counselors to closing entire schools. However, Superintendent Jeff Baier stressed that these were simply illustrations of the severity of the issue and not recommendations.
“These were put forward to really understand the magnitude of what $9 million will require,” Baier told the board.
The plans for budget cuts come at a time when Mountain View Whisman is seeing substantially slower growth in its main funding source – local property tax revenue, which is calculated based on assessed values of properties within the school district’s boundaries.
Over the last six years, assessed values in the district have grown an average of 8.79% annually, but they increased just 2.34% for the current school year, Chief Business Officer Rebecca Westover told the Voice last month. The county assessor has indicated that the slow growth is expected to continue, if not worsen, for the next few years, Westover reported to the board on Thursday.
The sluggish real estate market conditions are leading to significant projected deficit spending over the next few years. The district is projecting $3.7 million in deficit spending this school year, with reserves sitting at 34.23%. Officials then expect to run an $11.3 million deficit next school year, with reserves dropping to 26.3%. If changes aren’t made, the district is projecting that it could run out of money by the 2029-30 school year.
Westover said at Thursday’s meeting that a $9 million reduction in expenditures is just the “bare minimum” of what the district needs to do to tackle this issue.
“Nine million doesn’t fully address the imbalance, but it’s significant enough to allow reserves to sustain us for a bit longer,” she said.
Mountain View Whisman’s budget woes come as Santa Clara County overall has been seeing slower property tax growth, fueled by persistent issues in the commercial real estate market. This year, the county saw its property values grow by the smallest amount since 2012, with Mountain View having the lowest growth of any city in the county.
According to Baier, the district has not experienced such a significant drop in assessed value growth in more than a decade.
“We have not grappled with that before, and that is the biggest driver that’s going on here,” Baier said. “I want to focus on programs that are good for students and not necessarily convenient for the adults that serve the students, so that’s why we have Orenda here.”
School board, community members weigh in
After hearing the staff presentation, board member Devon Conley said that the examples of how the district might reduce costs, including the closure of school sites, has scared a lot of people in the community.
“While I appreciate the gravity of the situation, I also think there is real power in focusing on [asking], ‘What are we prioritizing?’” Conley said. “What is most essential and most impactful to our children every day, and let’s make sure that we are preserving those really important things.”
While district administrators are projecting a relatively bleak financial picture, one public commenter noted that in the past, Mountain View Whisman has frequently under-estimated its revenue growth, only to see property values – and the accompanying tax revenue – soar.
“For at least the past seven years, we’ve been presenting multi-year projections that always indicate oncoming doom, and yet, thankfully, that has not come,” Lilian Good said. “These repeated inaccurate projections of financial catastrophe indicate a problem with how we’re predicting things.”
In previous years, the district has typically taken a conservative approach to its budget, often projecting 2-3% annual growth in assessed values, only to see the actual figures come in much higher.
However, administrators say that this time is different. In June, the district’s budget assumed that assessed values would grow 3% this school year. Administrators have now had to revise that down to 2.34%, based on updated figures from the county.
Board member Lisa Henry acknowledged that she’s heard that “the sky is falling before, and it hasn’t fallen.” However, now, she believes the district’s financial situation is in a place where it needs to be addressed.
Let’s think this through: how is a 2.34% property tax increase possible? I do not think that is mathematically possible. It looks like an error in the formula that is now leading the school district to cut the budget.
First, everyone gets an annual 2% property tax increase, per Prop 13. If the real estate market is heading down then there are some homeowners – recent buyers only – who will temporarily get a lower tax bill. But even if a market drop happens, only recent buyers would see a slightly reduced tax bill. Anyone who has owned the property for more than a few years would still move ahead with their annual 2% tax increase.
Where does the additional 0.34% come from and how are we forecasting this? That’s from current year’s sales and reassessments, right? Any time a home sells, the new owner will be paying higher taxes, often several times higher. A home that paid a tax of around $3000 per year might sell and start paying $30,000 per year. This effect does not lift the city-wide taxes paid by only 0.34%! Open up Zillow and click on “recently sold”. You can get a sense of how many homes sell in a year. Each sale also means a lot higher property taxes. Depending how long the previous owner held the home, the new tax could be 2x, 5x or 10x higher. These sales add up to way more than 0.34% increase in the tax base.
Please, let’s take apart that forecasting formula before we start cutting school budgets! I think there is an error.
Some commercial properties were assessed a lower value, dragging down taxes.
However if looking over 10 years, the total mt view taxes paid is over 100% increase, while inflation was 37%.
Make a story about that instead of one your blip.
Mountain View has some of the most valuable real estate in the country, yet our schools are laying off staff because of budget shortfalls. That’s Prop 13 at work—school funding depends on property turnover, not actual property values.
There are ways to reform this while still protecting seniors on fixed incomes. Worth discussing instead of accepting these cuts as inevitable.