SAN MARCOS – A budget report about city schools by an outside consultant, released in January, has resulted in inaccurate conclusions about the district's financial health, district officials say.
The report, by School Services of California Inc., was done at the request of former Superintendent Ed Brand, who resigned in August. It concluded that the San Marcos Unified School District faces “several major fiscal challenges in the years ahead,” and recommended that the district review how its teachers are compensated.
It also said the district, beginning in 2007-08, will have to show the costs of its retiree benefits on its financial statements under new accounting rules issued by the Government Accounting Standards Board. The report said those costs could hurt the district's credit rating if left unfunded.
Under the existing contract, teachers pay in San Marcos Unified must rank fourth of 11 unified districts in the county. The other districts include San Diego, Poway, Vista and Coronado. All increases in health benefits for San Marcos teachers and family members are automatically covered.
The School Services review has become an issue in the upcoming school board election. Some parents have referred to it to express concerns about the district's financial future, or warned that the district could go bankrupt in a few years and need help from the state.
Interim Superintendent Kevin Holt, however, said that while the report raises valid concerns about the cost of teachers' salaries and health benefits, it doesn't say the district is in debt or facing bankruptcy.
This week, Holt sent trustees, district managers and the media a copy of responses to questions by John Gray, School Services of California's associate vice president, who wrote the report. Gray didn't return phone calls this week.
In his responses, Gray said his review didn't conclude the district would be bankrupt in three years or “at any point in the future, particularly if the district implements the recommendations in our report.”
“Our review did not disclose evidence of excessive debt, impending crisis, or fiscal irresponsibility,” Gray's response said.
Gray also said the district's reserves exceed state standards and are above the 3 percent of expenditures requirement.
Gray urged the district to review total increases in compensation, instead of addressing salary and benefits separately.
The report's conclusion paints a gloomy future if no changes are made: “While there have been years where the formula was within the district's ability to pay, escalating benefit costs and bleak revenue forecasts mean that cuts will be required that will impact the quality of the district's educational programs, absent revisions in the formula.”
Holt said the report was done as a tool for negotiations between the district and its two employee associations, and could be misinterpreted by people who are not familiar with school finances. The report uses bar graphs to compare how much the district spends on salaries and benefits against 20 other districts in the county, including Escondido Union High, Poway Unified, San Diego Unified and Bonsall Union Elementary. The report found that San Marcos spends more on health and welfare benefits than most other districts, some of which have caps on the cost of health benefits.
Kathy Rallings, a chapter services consultant with the California Teachers Association, said the report is only based on one year's data and doesn't show the full picture. She said she has looked over five years of San Marcos' budgets and found the district typically ends the year with about $17 million left over, including its reserves.
“The facts that we're seeing is that the district is in excellent financial shape,” Rallings said yesterday.
She said it doesn't make sense to compare San Marcos Unified with elementary or high school districts, which serve a different population of students.
The San Marcos district, Rallings said, has sustained the fourth-place salary ranking and full-benefits package for at least 20 years and there isn't any hard data that show there's a problem with the formula.
“If we could see solid evidence that this was causing true problems in the district financially, we would be more than willing to work with the district to find solutions,” Rallings said.
The budget review says that when the current teachers contract expires in June, the salary formula and the practice of paying for all increases in health benefits needs to be re-evaluated.
Holt said the district has been negotiating with its labor groups about sharing the increased health care costs.
Rallings said last year, the teachers union did propose a self-funded benefits package that would have saved the district $2 million. A self-funded plan allows the district more control over how health care dollars are spent. She said Brand rejected the proposal with no explanation. She said Brand had wanted employees to pay out of their paychecks for medical and dental benefits, but the union wanted a systemic change that would offer a long-term solution and not just shift costs to teachers.
Linda Lou: (760) 737-7574; linda.lou@uniontrib.com
