LTUSD told to take a "pause" on spending and plan on major budget cuts

SOUTH LAKE TAHOE, Calif. - The Lake Tahoe Unified School District received a message last night: Take a pause and don't spend any more money until the two-year budget can be completed. The budget must include major cuts in expenses.

After scheduling a special board meeting on May 22 to discuss implementing a sustainability plan for energy efficiency projects at all LTUSD buildings, the El Dorado County Office of Education (EDCOE) sent a letter to LTUSD Superintendent Dr. James Tarwater and LTUSD Board President Larry Reilly, voicing their concern of a $9.8M expenditure on the energy plan.

EDCOE and Dr. Ed Manansala, County Superintendent of Schools, are responsible for reviewing the budgets, interim reports, audits, and disclosures of collective bargaining agreements for schools in their area, of which LTUSD belongs.

They also are responsible for any other reports, presentations or studies to determine whether or not a district can meet its financial obligations in the current and two subsequent fiscal years, according to Robbie Montalbano, EDCOE Deputy Superintendent.

In that letter, and again during Tuesday's meeting, Montalbano told the LTUSD Board, that, based on their review of the 2018-2019 second interim budget report and multi-year projection, and with the recent collective bargaining agreements approved on May 14, 2019, the district cannot afford to move forward with the energy sustainability plan.

In a prior letter, Montalbano told Dr. Tarwater and Reilly that the LTUSD "fiscal condition is dependent upon significant expenditure reductions in the 2019-20 and 2020-21 school years."

She said the District needs to make substantial cuts. As it stands now, their reserves fall below the required state minimum in both 2019-20 and 2020-21 plus they now have the added expense of new teacher pay agreements in place.

The district’s multi-year projection indicated the need of $1.1 million dollars in on-going reductions in 2019-20 before the settlement was finalized in order to maintain the minimum reserve of three percent in future budget years

LTUSD Board President told South Tahoe Now, "There will be cuts, but how much is unknown." He said he wants to be cautious and that he, staff and the Board will be working to make the needed cuts. The current budget development process is almost complete but on-going budget adjustments still needed to eliminate future deficits and cover for salary settlements. There will be a public hearing on June 11 on the budget, and its adoption scheduled for June 25.

EDCOE has until the beginning of October to approve, disapprove or conditionally approve the budget.

South Lake Tahoe isn't alone though as many other school districts are facing budget cuts as they see what their funding will be from the State of California.

Terri Ryland with School Business Consulting gave a presentation Tuesday, outlining the Governor's budget and how it affects LTUSD. There is no influx of new students expected in South Lake Tahoe and enrollment is expected to remain even.

Even districts with growth are having to cut the budget to cover ordinary, on-going cost increases," said Ryland. "Even without salary increases, the District had to cut the budget to reduce the structural deficit. Salary increases exacerbated deficit spending and additional budget reductions were needed."

She said that in a small district like LTUSD it only takes a few changes to materially impact the budget. A surprise in enrollment, special education, state revenues, or condition of facilities has to be handled from the savings account.

The salary increases last month added $600K to the 2018-19 budget and $1.2M to 2019-20 for on-going $1.8M additional expenditures.

As long as the District does not approve the energy savings plan or any other major expense they are not in jeopardy of being issued a "Lack of Going Concern." If they spend the money, EDCOE could step in to ensure that the district meets its financial obligation.