The Sulphur Springs Union School District is one of two districts in the Santa Clarita Valley projecting a budget surplus for 2018-19, according to its recently adopted budget.
The district expects to have a net surplus of $257,000 for the 2018-19 school year after it accounts for the $59.1 million it made in revenue and the $58.4 million it will spend, according to the budget the district governing board adopted Wednesday.
However, the forecast for the horizon doesn’t indicate the surplus will last. Rising costs and steady revenue are expected to put the district in deficit spending to the tune of $1.9 million in 2019-20, and $2.4 million in 2020-21.
“We’ll continue to take steps to address this,” said Michele Gookins, assistant superintendent of business services.
The district’s rising contributions to the State Teachers Retirement System and the Public Employee Retirement System funds are among the reasons for the rising costs, the budget reads.
The contributions will rise by a steady 2 percent to 3 percent each year through 2020-21, which equates to a combined cost of more than $16.6 million in 2018-19; $17.6 million in 2019-20; and $18.3 million in 2020-21.
On the bright side, “The district recognizes the possibility of future growth due to residential development within the district’s boundaries,” the budget notes, leaving the opportunity for more state funding if the district can obtain a higher average daily attendance in future years.
The last time the district anticipated an increase in enrollment, the growth failed to materialize and necessitated “deep budgetary cuts,” the budget states. This has led the district to be cautious with its projections, which is why it will project a sustained enrollment figure until actual enrollment shifts occur.
While the district’s ending fund balance is projected to decrease by more than $1.9 million in 2019-20 and $2.4 million in 2020-21, according to the general fund projections, Sulphur Springs is one of the few school districts in the SCV with an inflating reserve for economic uncertainties.
Los Angeles County and the state continue to reinforce the need for reserves over the minimum requirement, the report states.
“The experience of the most recent recession has clearly demonstrated that minimum levels are not sufficient to protect from severe disruption in an economic downturn,” the budget report says, which is why the district adopted a policy in 2017 calling for a combined unassigned fund balance of 10 percent to protect the district against unforeseen circumstances.
This year’s budget achieves the 10 percent unassigned combined fund balance, according to the budget narrative, and the district’s reserve for economic uncertainties will increase by nearly $50,000 in each year until 2020-21.
Due to the fact that the state had adopted its budget hours before the Sulphur Springs district meeting, the board expects to reconvene in August for a 45-day revise, which will include the proper updates, Gookins said.
“A budget is intended to be a living document; therefore, revisions will be presented as new information is known,” the budget report states. “As variables change through legislative acton, or economic turnover at the state or local level, the projections will be analyzed and adjusted as appropriate.”