Capistrano Unified's Fiscal Solvency at Stake, Report Says

The financial outlook for continues to be dire, and that’s before the state possibly pulls the trigger on mid-year cuts.

The Board of Trustees approved a report 5-2 with trustees Ellen Addonizio and Sue Palazzo in dissent, indicating that the district may not be able to maintain fiscal solvency this year or in the next two years to come.

“We’re still in that same position of having quite a bit of ambiguity,” Ron Lebs, deputy superintendent of business services, told trustees. “It seems every report I’ve given since coming to Capo [three years ago] has involved ambiguity and uncertainty.”

Officials are scheduled to announce by Thursday whether the automatic cuts the Legislature built into the budget in June will kick in, now that the rosy projections on which the budget was based never materialized.

K-12 education is scheduled for a hard hit – as much as $1.1 billion – if tax revenues fall $2 billion short. The Sacramento Bee has reported that the state is already $3.7 billion behind.

For Capistrano Unified, mid-year cuts could mean the trustees would have to slash $14.1 million from this year’s budget, Lebs said. Without such drastic action, “we won’t make it through the year.”

However, the report did not factor in mid-year reductions into its bottom line. It did account for and instead put that money in county coffers.

The money grab, however, is more of a cash-flow problem than permanent red ink for the district because the state is supposed to make the district whole, Lebs said. The problem is, the state won’t send that money to Capo until July and August, after the district closes the books on 2011-12.

“We didn’t reduce revenues. It’s just a timing issue,” said David Carter, executive director of fiscal services.

Trustee Anna Bryson said she does not have confidence that the state will ensure the district gets its full share of property-tax dollars.

“We have no guarantee they’re going to backfill us this year. … The people in Sacramento, the majority does not care about the children of Orange County, which I find infuriating,” Bryson said.

If the county follows through with its plans, the district will be $21.3 million short by the end of the year, Lebs said. To address that, he is working on a plan to do a cross-fiscal-year loan, he said. The school district is already borrowing $75 million this year in bridge financing that must be repaid in full by April.

“That’s a significant challenge for us,” Lebs said.

Trustee Lynn Hatton said she’s ready to lead the charge up to state Capitol and give the politicians there a piece of her mind. “I feel we talk about it here, but that’s not getting up to Sacramento.”

Going beyond this year’s predicament, Lebs said the district is facing a $25 million shortfall in the 2012-13 school year and another $3.5 million the following year.

But it could get even worse, he said. There’s talk of making the possible mid-year cuts a permanent reduction to schools, not a one-time occurrence as currently written into the budget. If the state also eliminates the district’s cost-of-living adjustments built into the budgets each year, the consequences could be “pretty grim,” Lebs said.